Quebec budget 2024-2025 highlights: Quebec’s time to make hard choices

On March 12, 2024, Finance Minister Éric Girard presented the Quebec Budget 2024-2025. Unveiled under the theme Priorités Santé Éducation, this important exercise comes at a time when Quebec is facing an increasingly delicate budgetary situation. While government spending has risen considerably, government revenues are not growing as fast. After the good years, when it was easy to be generous, the Legault government must now make some tough choices. These include postponing the return to balanced budgets, capping spending in most ministries and making it extremely difficult to launch new projects.

Some highlights of the Quebec Budget 2024-2025 that could be of interest to the auto care sector are outlined below.

Economic forecasts

Today’s budget confirms that Quebec’s economic slowdown is set to continue in the year ahead. Québec does not officially anticipate a recession, but its economic growth forecasts remain low, at 0.6% for 2024 and 1.6% for 2025, which remains well below spending growth. The budget also includes contingency provisions of $7.5 billion over five years. While the government claims to be acting prudently, the fact remains that this exercise reflects a certain nervousness for the year ahead.

Reduction of subsidies to buy EVs

The government is announcing that, as of January 1, 2025, the maximum rebates for the purchase of electric vehicles will be $4,000 for new all-electric or fuel cell vehicles, $2,000 for new plug-in hybrid vehicles under $65,000, $2,000 for used all-electric vehicles and 1,000 for electric motorcycles. Rebates for the purchase of electric vehicles will be gradually reduced, and will cease to be available for vehicles registered on or after January 1, 2027. These vehicles will also continue to be eligible for the $5,000 federal rebate until March 31, 2025, or until funds run out. The money freed up will be used to fight climate change.

Taxes

After announcing a tax cut in the last budget, the current fiscal year sees no further significant reductions in the tax burden for individuals. Tax rates, like the QST, remain unchanged. The budget presented by Québec does not include any tax cuts for businesses.

Education

In its budget, the government has earmarked an additional sum of nearly $819 million over six years to promote the educational success of young people. According to the government, this investment will support student success, ensure the attraction and retention of school personnel, support education partner organizations and accelerate the maintenance of school buildings. Measures will also enable us to better support students in difficulty, consolidate educational activities for students, make part-time positions more attractive, retain more experienced workers in the education network and support important partners such as Le Club des petits déjeuners, La Cantine pour tous and AgrÉcoles.

Economic development

The government plans to invest $443 million to support strategic sectors of the economy. These funds will be used to set up industrial laboratories in innovation zones, ensure the growth of Quebec’s aerospace sector, pursue the development of the aluminum sector, promote the adoption of new technologies and research, support entrepreneurship and takeovers, and recapitalize the Capital ressources naturelles et énergie fund. The budget also includes initiatives totaling $126 million over three years to increase the available workforce and productivity in the construction industry. A further $400 million is earmarked to promote the economic and social integration of immigrants.

Government spending review launch

The government is taking advantage of the budget to announce that, as early as spring 2024, it will initiate a review of all its spending. To this end, one review will cover tax expenditures related to the personal and corporate tax systems, as well as the consumption tax system. Another review will cover spending by government departments and agencies. The first actions arising from these two reviews will be incorporated into the plan to return to balance to be presented when the 2025-2026 budget is published.

Preliminary analysis of the Quebec budget 2024-2025

While Quebec remains in relatively good financial health, today’s budget augurs more difficult times ahead. On the budgetary front, Quebec is unable to contain the growth in government spending, which is rising steadily under the pressure of wage increases for government employees.

This year, the government can count neither on the strength of economic activity, which is expected to remain weak, nor on an increase in revenues to soften the blow. On the contrary, the trajectory of government revenues is downward, due in particular to the drop in dividends paid by Hydro-Québec, but also to the general decline in own-source revenues. As a result, rather than shrinking, Quebec’s deficit will grow significantly, peaking at $11 billion in 2024.

We’re not yet sounding the alarm, but the fun is definitely over. As a result, the budget presented today contains few new announcements or new projects compared with previous years under Minister Girard, and is more akin to a business-as-usual budget. Faced with this precarious budgetary situation, the Legault government is aware that its room for maneuver is more limited than ever. While it has opted to preserve health and education, the government’s other portfolios are facing a significant slowdown in spending growth. The government is also forcing public companies to make a considerable effort to optimize their spending. An in-depth review of all government spending will also be launched this year, officially to improve efficiency.

These announcements inevitably augur difficult choices ahead, as Quebec society, having returned to an expanded welfare state, faces new problems such as inflation, longer queues for childcare places and a housing crisis. In this respect, today’s budget includes very few new investments.

Consequently, even if this budget appears, on the whole, to be a prudent response to the current budgetary situation, the fact remains that it is likely to leave a number of people dissatisfied. Quebecers will probably have to get used to a less generous government than in the past.