Québec Budget 2017-2018 – Overview

Carlos J. Leitão, Minister of Finance for Québec, tabled in the National Assembly his fourth budget, which he himself labeled as a budget of hope. It is, in fact, Mr. Leitão’s third consecutive balanced budget. The 2017 Québec Economic Plan tabled reflects the surpluses announced in late 2016 and will bring economic vitality, a contrast to the austerity measures that have characterized the current government of Philippe Couillard. In fact, spending will increase to 2.5% this year and will benefit public transit, regional economic development, health and education.

In 2016, Québec’s economic growth stood at 1.7%, and Mr. Leitão is targeting similar growth for the year ahead. The control of public finances, combined with this growth, is allowing the government to present a budget that is at once prudent and ambitious.

The average Quebecer has not been let down by this budget. The minister has announced an overall reduction in income tax for all taxpayers. This measure may, however, appear modest, as it translates into a reduction in personal income tax of $55 per person, or $110 per household, for this year. In addition, the minister announced that all taxpayers earning $134,000 and less will not have to pay the health contribution for 2016. This retroactive measure will see those affected recuperate an amount of $200. The government had already announced the abolition of this tax effective January 2017.

Notably absent was the environment, which saw few new measures in this budget, with the exception of those involving public transit. Nor does the natural resources sector play much of a role in this budget. There are some measures that will affect the mining sector and Plan Nord, but we’ve seen more ambitious plans for both in the past.

In short, Mr. Leitão has presented a positive portrait of Québec’s finances, but he has also cautioned that prudence is needed. The investments made possible by this largely favourable economic situation essentially aim to offer more services to citizens in key sectors such as health and education, not to mention public transit, which is the true star of this budget.

Health and Social Services

For the 2017-2018 budget, health spending will increase by 4.2%, compared to 2.4% in the previous budget. This increase signifies an era of reinvestment in health. The Québec Economic Plan sets out additional investments of $772 million in 2017-2018 and almost $1.2 billion in 2018-2019 for this sector. These investments are broken down as follows:

Québec has also secured an envelope of $25 million from the federal government for 2017-2018 to train specialized nurse practitioners. In addition, the Ministère de la Santé et des Services sociaux has undertaken major work to establish the terms of application of patient-based funding and define the conditions for implementing this initiative through three channels:

  • Clinical activities
  • Financial resources
  • Human resources

For the purposes of those activities, an amount of $100 million will be drawn from the Provision of the Ministère des Finances to modernize information systems in the health care sector.

Research and Innovation

The Minister of Economy, Science and Innovation will soon announce a new Québec research and innovation strategy. The strategy, which will see an investment of more than $830 million, will encourage businesses to:

  • Invest in research and development;
  • Innovate in products, services and processes;
  • Invest in leading-edge machinery and equipment, including information and communication technologies;
  • Promote the education and training of human capital.

This strategy will apply to many activity sectors. Of the $830 million set aside for the strategy, $180 million will go to Québec Research Funds to encourage research and innovation in higher education establishments.

An envelope of $305 million will be used to encourage innovation and a new generation of scientists. An initial portion of $115 million will support research organizations (Génome Québec, National Optics Institute, industrial research sectoral groups, and the Computer Research Institute of Montréal). The other portion of $190 million will more directly target innovation and the next generation of scientists, including $60 million to accelerate the transfer and marketing of innovations.

Another $100 million will be invested into the creation of an artificial intelligence super-cluster. One of the objectives is to make Montréal a world-class centre of excellence in artificial intelligence.

The life sciences sector is also targeted by this strategy, with more than $150 million earmarked to promote development initiatives in this field. More than $117 million will be added to the $33 million already announced for life sciences in the previous budget. This amount will aim to:

  • Increase investments in research and innovation;
  • Promote the startup of innovative companies and support their growth;
  • Attract new private investments;
  • Further integrate innovation into the health and social services network;
  • Finance life sciences initiatives.

Other activity sectors will benefit from this strategy, including:

  • The promotion of research by encouraging access to data;
  • An additional $125 million to promote the development of the innovative manufacturing sector;
  • Close to $46 million to stimulate innovation in the forestry sector;
  • $22 million to promote maritime research;
  • Support for mining research;
  • Promotion of public policy research.

Education

Academic success is one of the key elements of this budget. Investments of more than $3.4 billion over the next five years are planned to promote academic success, from early childhood to university. The Québec Economic Plan thus includes additional investments of:

  • $130 million for educational success starting in early childhood;
  • $1.8 billion to enhance support for students throughout their school path (elementary and high school);
  • $1.1 billion for higher education to enhance the quality of training and increase the higher education graduation rate;
  • $363 million to better financially support students.

Provision is also made for an additional $1.1 billion in investments in educational infrastructure. These monies will bring the level of infrastructure investments to $2.0 billion for 2017-2018 and to $2.3 billion for 2018-2019. The new initiatives set out in the Plan are intended to offer young people innovative, healthy and safe schools and to enhance digital technology infrastructure.

It should also be noted that the government has announced the creation of an additional envelope, in the amount of $50 million, to finance still more projects and sports and recreational facilities, particularly at a municipal level.

Labour

This budget contains a number of measures that target the development of the Québec workforce. These measures were inspired by solution options identified during February’s Rendez-vous de la main-d’oeuvre. The Economic Plan provides for investments of close to $290 million over five years to apply these measures, including:

  • $10 million to promote trades that are in demand;
  • $27 million to support businesses in workforce management;
  • $179 million to provide greater support for labour market integration of immigrants;
  • $72 million to support ongoing training and skills development for workers.

Entrepreneurship

A pillar of the Québec Economic Plan, entrepreneurship contributes to the creation of jobs and wealth, the dissemination of innovation, and the stimulation and diversification of Québec’s regional economies. For this reason, the budget provides for measures totalling more than $440 million to support entrepreneurship and ensure funding for growing businesses over the next five years, namely:

  • Immediate actions to support entrepreneurship ($8 M);
  • Additional support for the upcoming entrepreneurship action plan of $70 million over five years;
  • $10 million to develop entrepreneurship among young people;
  • $26 million for investment funds that contribute to the startup and growth of Québec SMEs;
  • $50 million to foster the co-operative buyout of businesses;
  • An additional $3.3 million to encourage the creation of social economy hubs.

Aboriginals

Many government departments and bodies are developing social affairs policies that virtually all contain measures addressing First Nations and Inuit peoples.

To optimize the positive effects of this support, the government is undertaking an integrated approach in its creation of the Government social development action plan for Aboriginals.

This plan will support initiatives with the goal of:

  • improving services, particularly health, social, education and justice services;
  • raising Quebecers’ awareness of Aboriginals’ realities and promoting living together;
  • developing community action and civic engagement;
  • encouraging dialogue and research;
  • promoting Aboriginal culture and languages.

The government is announcing $60 million in financial support over the next five years, in addition to the $71.4 million already available. This $131.4 million envelope will allow all the departments and bodies concerned to expand support services for Aboriginal communities.

In addition, to enable the government to uphold its commitment to the social and economic development of Aboriginal communities, the Québec Economic Plan provides for new investments totalling $135 million over the next five years. This amount will go toward:

  • supporting economic development projects;
  • investing in community infrastructure;
  • supporting costs related to community consultations;
  • encouraging social development;
  • helping community organizations;
  • providing loan guarantees to help Aboriginal promoters finance their projects.

Approximately $50 million from Aboriginal communities will be added to the amount provided by the government, for a total of over $185 million invested in various economic and community projects.

Justice

As part of The Québec Economic Plan – March 2017, the government is significantly enhancing the plan for the compensation of crime victims to ensure that it is more equitable and meets the Québec Ombudsman’s recommendations. These changes notably include:

  • reducing timelines for the processing of requests;
  • improving the quality of support, information and other services;
  • offering temporary measures once eligibility is established;
  • ensuring that a greater number of requests are accepted (for example, requests submitted past the deadline due to situations such as a delayed realization of the act in question or the murder of a child by one of its parents).

To this end, additional appropriations of nearly $54 million will be granted to the Ministère de la Justice over the next five years, as follows:

  • $6.1 million in 2017-2018, drawn from the Contingency Fund;
  • $12.8 million in 2018-2019;
  • $12.5 million in 2019-2020;
  • $11.2 million per year, beginning in 2020-2021.

These amounts will notably enable the Commission des normes, de l’équité, de la santé et de la sécurité du travail to bring new employees on board as of 2017-2018 in order to further support victims and improve the quality of the services offered.

Public Transit

Public transit and sustainable mobility will benefit from a financial contribution of nearly $1.5 billion over the next five years. The Montréal region will receive support for three major transportation projects that will contribute to reducing congestion on the city’s main road networks. These projects are:

  • Implementation of the Réseau électrique métropolitain (REM)

The REM will cover a 67-kilometre area and include 27 stations. The project, estimated to cost $6.04 billion, will begin this fall, and the first trains will be in operation by the end of 2020. To carry out the project, the Caisse de Dépôt et de Placement du Québec Infra (CDPQ Infra) will create a project company (Projet REM Co). CDPQ Infra will finance 51% of the REM, with the governments of Québec and Canada financing 49%. The REM will also be assisted by a contribution from Hydro-Québec for the electrification of the system. In addition, the Minister of Finance has set aside a reserve of $221 million in the Québec Infrastructure Plan (PQI) for associated investments such as bus terminals. In the coming months, the government will also table a bill to permit the construction of the REM that will notably focus on private lands and the implementation of development royalties.

  • Extension of the blue subway line

To improve accessibility to the system in the north-eastern area of Montréal, the 5.5 km extension of the blue line, once completed, will see the subway system gain 80,000 users. The government has set aside monies in the 2017-2027 Québec Infrastructure Plan to cover Québec’s portion of the financing for this project.

  • Creation of the Autorité régionale de transport métropolitain (ARTM)

The Québec Economic Plan tabled by Minister Leitão outlines support for the ARTM by allocating additional financing of approximately $1 billion over five years, including $587 million to support the implementation of the REM.

The Québec City region has also received its share of funding: effective immediately, the government has set aside in the PQI 2017-2027 the monies needed to introduce rapid bus service (SRB) between Québec City and Lévis. The exact amount remains to be confirmed, and a contribution from the federal government will be requested by the Québec government. In addition, the government will allocate an additional $56 million in funding to draw up the plans and receive quotations, as well as prepare the business case, beginning this year.

With respect to Québec as a whole, Mr. Leitão plans to spend $333 million more over the next five years to support public transit in the various regions of the province. This amount is in addition to the $1.2 billion already budgeted and will increase assistance to improve service, increase support for accessible transportation and increase support for regional public transit. Beginning this year, the Programme d’aide au développement du transport collectif will receive an additional envelope of $17 million to enhance the service offering.

In order to support the transition to a low-carbon economy and the government’s objectives in the area of transportation electrification, the government will invest close to $85 million in a variety of actions. Most of this amount, or almost $69 million, will be put into the Roulez vert program, which enables buyers of electric vehicles to obtain a rebate of up to $8,000.

In the coming year, the government will also table a sustainable mobility policy covering the movement of people and merchandise as well as all modes of transportation.

As part of its efforts to increase international action and promote Québec abroad, the government is planning to deploy the international component of its key priorities. It should be noted that in the investment announced, an amount is set aside for activities with a strong potential for spinoffs in transportation electrification.

Infrastructure

Between now and 2027, the government is planning investments of $91.1 billion in the Québec Infrastructure Plan (PQI), with 46.5% of this amount allocated as a priority to regular investments and maintenance of assets, and 39.6% going to the addition, improvement and replacement of infrastructure.

Notably, public transit will receive 7.7% of the investments, or nearly $7.1 billion, including $825 million for fiscal year 2017-2018. Over time, the Québec road network will benefit from close to 20% of the investments allotted via the PQI. The following are the key sectors that will benefit from the amounts assigned to the PQI for 2017-2027:

Alcoholic Beverages

The alcoholic beverage sector is growing fast, as is its importance in the Québec economy. The government demonstrated this in its Québec Economic Plan tabled: $9.2 billion will be invested over five years to accelerate the development of this sector. As such, the government plans to:

  • support the development of the distilling industry by allowing holders of distiller permits to sell and hold tastings of their products on the premises where the products are produced. The Programme d’appui au positionnement des alcools québécois in the network of the Société des alcools du Québec (PAPAQ) will also be enhanced this year to extend it to products produced by small scale holders of permits authorizing distillation, and to products made by distiller’s permit holders;
  • adapt the way the brewing industry is regulated by making it easier to hold events for introducing and discovering beer, and by authorizing small-scale beer producers to sell directly to meeting permit holders;
  • support the marketing initiatives by the alcoholic beverages sector through a contribution of $4 million to implement the Programme d’appui aux initiatives de commercialisation du secteur des boissons alcooliques. This program will provide financial assistance for promotional or commercial activities intended to promote Québec products.

The government is also aiming to deploy a project to modernize the RACJ. The project will be rolled out in three phases, the first of which should be set in motion this year.

Mining Sector and Plan Nord

To promote the development of new initiatives as part of the Plan Nord, the government will inject $45 million into projects such as the improvement of the telecommunications network in the Basse-Côte-Nord region, the installation of greenhouses in the North, and contributing to the construction of the Institut nordique du Québec scientific complex.

In 2017-2018, the Société du Plan Nord will receive close to $72 million to support new initiatives and create a favourable environment for developing the territory, showcasing its wealth and making its communities flourish.

The mining sector is one of the cornerstones of development in Northern Québec, and support for the development and acquisition of new technologies is essential. To help COREM carry out its mission, the Québec Economic Plan provides funding of $6 million. In addition, $6 million more will be allocated to encourage exploration in the Plan Nord territory. The mining tax regime will be modified with the arrival of two appropriations to encourage mining development in northern Québec. The increased rate of the tax credit relating to resources for eligible expenses in the Near North and Far North will now apply to the entire Plan Nord territory. In addition, to encourage consultation of the communities involved, the budget tabled by the Minister of Finance makes provision for an allocation to be introduced in the mining tax regime to consult communities.

Financial Sector

By acting as an intermediary between savers and entrepreneurs, the financial sector contributes to Québec’s economic development.

  • In 2015, the financial sector had 150 000 employees, representing 4.3% of Québec’s jobs and contributing to 6.4% of the province’s GDP.

To promote the development of this sector, which is important for Québec’s economy, and to improve the regulatory oversight that financial services corporations must deal with, the Québec Economic Plan provides for:

  • creating a centre of excellence in financial technologies
  • a five-year extension of tax measures for new financial corporations
  • ongoing improvement of the financial sector oversight.

Centre of excellence in financial technologies
The financial sector is currently experiencing a period of significant technological advances. Increasingly, financial corporations are integrating information technology into their business models to meet the needs of consumers who quickly adopt new financial technologies (fintech).

To support the development of Québec’s financial technology industry, the Québec Economic Plan is announcing $1.5 million to be allocated to Finance Montréal over two years for the creation of a centre of excellence for these new technologies.

Québec’s information technology stands out internationally, particularly through its world-class expertise in artificial intelligence. The financial sector’s interest in the development of technological solutions is strong and represents a significant opportunity for Québec.

The mission of the centre of excellence for financial technologies will be to:

  • participate in the development of Québec’s financial technology ecosystem based on a vision shared by the sector’s different stakeholders;
  • adequately support companies operating in this sector or that want to contribute to its growth.

In addition, Finance Montréal will have a mandate to bring in government, institutional or private investors to help finance the centre of excellence.

Five-year extension of tax measures for new financial corporations
Financial sector start-ups face significant competition and strict regulatory demands, which can hinder their growth.

To maintain the government’s support of the creation of new corporations in this sector, the Québec Economic Plan provides for an extension until December 31, 2022 of:

  • the refundable tax credit relating to a new financial services corporation;
  • the refundable tax credit for the hiring of employees by new financial services corporations.

Ongoing improvement of the financial sector oversight
Finally, the Québec Economic Plan also provides for the following improvements to maintain efficient oversight of the financial sector in Québec:

  • updating the regulatory oversight of insurance;
  • maintaining a strong securities regulator.
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