(Quebec) Quebec will give priority to “strengthening” the health system and economic recovery in its budget, which will be tabled on March 25, says Finance Minister Eric Girard. A novelty will appear in the liabilities column: he agrees with the Auditor General and recognizes the existence of a hidden debt of $ 12.4 billion.
Posted on March 9, 2021 at 10:31 a.m.
Updated at 4:13 p.m.
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Quebec expects to end this fiscal year with a deficit of $ 15 billion due to the pandemic. The next budget that Eric Girard will table for the year 2021-2022 should be in the red of 8.25 billion, according to the forecasts filed last fall. The minister did not want to confirm that this will be the amount entered in his fiscal year of March 25.
“We are in the context of a pandemic, there is a great deal of uncertainty. I would tell you that what we see overall is that the economic situation in 2020 is a little better than expected and expectations for 2021 are rather positive due to the evolution of the vaccination, the plan fiscal stimulus from the US federal government. We can see overall that there is cautious optimism about 2021, ”said Minister Girard at a press conference on Tuesday.
Quebec wants to return to a balanced budget within five years, in accordance with the law. He must chart the road to get there in his March 25 budget.
“In the very short term, there is no question of reducing expenses. We are in a pandemic, we are making colossal efforts at the level of health and we will continue, ”said the government treasurer. The priority of the budget will therefore be to “strengthen the health system”. “Then there is supporting Quebecers, businesses, and relaunching the economy,” he added.
Eric Girard also announced that the government will stop breaking an important accounting rule that has the effect of underestimating Quebec’s debt. He thus complies with the arguments of the Auditor General of Quebec, who denounces the government’s accounting practice since 2013.
Net debt on the books will be revised upwards by $ 12.4 billion with this decision. The minister made it clear that “11 of the 12 billion precede the coming to power [du] government ”caquist.
For years, the Auditor General has accused the government of not respecting “Canadian accounting standards for the public sector”. “The consolidated financial statements do not give a fair picture of the government’s financial situation,” wrote Auditor General Guylaine Leclerc in a recent report.
Eric Girard’s decision comes 24 hours before the tabling in the National Assembly of a new report on this issue by Mr.me Leclerc.
The Auditor General made an outing on this subject during a visit to a parliamentary committee on February 19. “It’s more than a debate of accountants. It’s as if we were saying when we received our credit card statement: my debt is only the minimum amount to pay, compared to the total amount of the statement, ”she said.
Until now, the government refused to count immediately the infrastructure subsidies that it undertakes to pay to some of its organizations or to municipalities. Rather than counting the money promised in the year of the commitment, the government entered it in annual installments over several years. This practice contravened accounting rules, which provide that all transfers must be recorded as soon as they are authorized. It also had the effect of underestimating the government’s debt.
> To read also: A hidden debt of 12 billion
The VG illustrates in its report “the problem of inadequate accounting of certain subsidies with an example of everyday life”.
“Imagine a parent who buys a car for $ 21,000 and donates it to their child who has left home. The parent finances it over seven years from a bank at the rate of $ 3,000 per year. If, the day after the purchase, he returns to the bank to have a portrait of his financial situation, it is obvious that his file will present a debt amounting to $ 21,000, even if the car no longer belongs to him. following his donation. Providing some government grants is in substance similar to buying a car for your child, although the government owes a debt to the grant recipient rather than to the financial markets (the banker’s equivalent). in the example above). Yet its current accounting treatment is to recognize only the payments it has to make over the next year. If we applied this reasoning to the example of buying the car, only a debt of $ 3,000 would appear on the buyer’s credit report, which would not represent his real financial situation. ”
For the VG, “the accounting treatment used by the government does not show in its financial statements the effect of the decisions it has taken with regard to the granting of subsidies since a net debt and accumulated deficits of nearly $ 12 billion are not reflected ”. Eric Girard now gives him reason.
“It’s the right thing to do. We recognize the Auditor General’s point of view and we will make the change, ”he said. “With the evolution of the accounting of public entities, the evolution of interpretation by independent firms, I think that the point of view of the Auditor General took more and more the upper hand. We were the only province in Canada to interpret the accounting standard this way. ”
Thus, 12 billion is added to the net debt. It will exceed 200 billion, whereas the government forecast that it would reach 189.4 billion on March 31st.
Since net debt is the measure used to compare the level of indebtedness in Canada, we will now have a more accurate picture of Québec’s indebtedness situation compared to the other provinces.
Minister Girard points out, however, that this accounting change has “no impact on the gross debt of the government, on its borrowing programs and on the assessment of the credit rating by the rating agencies”. Critics of the VG were “well known to rating agencies,” he argued.
Meanwhile, in Ottawa …
On the Ottawa side, we have not seen a budget for almost two years now, and Prime Minister Justin Trudeau remained evasive when asked to provide information on the expected date of the tabling of the fiscal year. financial.
“We will announce the date of the next budget in due course. […] We have made significant investments for families, workers, small businesses, and we will continue to do absolutely whatever is necessary to get through this pandemic, for as long as necessary, ”he said on Tuesday.
The daily The Globe and Mail reported Monday that the Liberals would not table the budget in March. This will be the first fiscal year signed by Chrystia Freeland, who succeeded Bill Morneau as head of the Department of Finance last August.
With the collaboration of Mélanie Marquis, La Presse
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