The Election Fund of the Generations Fund | Elections Quebec 2022
The Generations Fund, “Quebecers' woolen sock”, has existed since 2006.
We did not talk about the Generations Fund at the TVA debate on Thursday evening. However, it fully concerns you. It's YOUR fund, it's YOUR money. It is part of your taxes that goes into the Generations Fund. And, therefore, it is with part of your money that a party like the CAQ wants to finance its possible tax cut.
Let me explain. The CAQ has chosen to seek 39% of payments from the Generations Fund to finance its tax cut over the next four years, if it is returned to power on October 3.
However, the sums paid annually to the Generations Fund come from six specific sources, what we call dedicated revenue, sums that are specifically collected to go into the Generations Fund. In 2022-23, for example, the planned payments come from the following sources:
- water-power royalties from Hydro-Québec and private producers: $870 million
- revenue from indexation of the price of heritage electricity: $535 million
- additional contribution of $215 million per year from Hydro-Québec
- mining revenues collected by the government: $484 million
- $500 million from the specific tax on alcoholic beverages
- income from unclaimed property: $55 million
It is important here to clearly understand that even if the hydraulic royalties are paid by the industries, it is always the end consumer who finds himself paying all the additional taxes imposed. A company that has to pay a tax on the water it collects will add it to the price of the bottle of water it will sell you. It's a principle in economics that everyone understands, especially the experts at the Ministry of Finance in Quebec.
It's the same principle, by the way, with carbon taxation . An oil company, whose fuel is taxed by a government, will directly, without flinching, pass on the bill to you. You are the final consumer.
So whether it's water-power royalties, the indexation of the price of heritage electricity or the tax on alcoholic beverages, you, Quebec taxpayers, pay a part, in fact, of the installments that are made in the Generations Fund. And so, by taking 39% of the payments provided for in the Generations Fund, a possible second CAQ government would finance its tax reduction with a portion of your taxes.
It is surprising that the Generations Fund was not one of the many topics discussed at the TVA debate on Thursday evening. At Economy Zone we often talk about it because it is totally in the public interest. Did you know, but the planned reduction in payments to the Generations Fund represents 27% of the value of the CAQ's commitments in its financial framework. That's $8 billion while commitments total $29.6 billion.
The CAQ is not left out. Québec solidaire is taking the liberty of announcing a balanced budget as of next year by ceasing to put money in the Generations Fund. The prize pool is splendid for QS: that's nearly $22 billion that the party wouldn't need to inject into the Fund over 5 years. Nice nest egg! That's 40% of the value of its commitments, which amount to $55 billion.
The Parti Québécois would seek approximately $2.5 billion per year in payments to the Generations Fund, a reduction of 50 to 60% of the payments provided annually. Here is a prize pool of $10 billion, which represents 19% of commitments.
Is it acceptable that a large number of financial executives are suddenly relying on a drain on the Generations Fund? Is it very serious to finance its commitments by seeking 19% to 40% of the necessary money from the Generations Fund, without any public, broad debate, argued in parliamentary committee?
Party commitments – financial executives
Minister of Finance for four years, Eric Girard plans to change the law on the Generations Fund to integrate new debt reduction targets and new ambitions for Québec's indebtedness.
While waiting for this reform, the Generations Fund looks like a dish of candy into which several politicians have decided to dive to carry out their electoral campaign this year.
Whatever say, whether you are for or against the objectives of the Generations Fund, this tool was created with the objective of reducing the long-term debt so as not to leave future generations with too much of a debt.
< p class="e-p">Much has been made, and rightly so, of the error of the PLQ in its calculation of the debt. That's a $16 billion mistake. But the PLQ invites the National Assembly to a debate on the targets, once the net debt has fallen from 38% to 32%. It will take longer than expected, ultimately, due to the PLQ's miscalculation. But note here that the PLQ did not give in to the temptation to bathe in the billions of the Generations Fund. That would have been so handy!
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All financial executives have been disclosed. The only framework that does not provide for a return to balanced budgets, a path to get there, is that of the Liberal Party of Quebec. This is a surprising finding after Philippe Couillard's mandate between 2014 and 2018, when it was so important to clean up public finances, between budgetary rigor and austerity.
Québec solidaire is the champion of spending and revenue while the party is counting on tax increases and the end of payments to the Generations Fund. The level of government spending, under a government led by Québec solidaire, would increase from $138 billion this year to $169 billion in 2026-27, an increase of more than 22%.
The Conservative Party of Quebec is the champion of budget cuts with a level of spending that will only rise to 148 billion within 4 years, an increase of only 7%.
Based on the 2022-23 pre-election report's projected spending level of $138.3 billion, here is the growth in planned spending by parties in their respective fiscal frameworks over an entire term, until 2026-27:
- QS: + 22.2%
- PQ: + 19.9%
- PLQ: + 18, 7%
- QAC: +16.6%
- PCQ: +7.1%
Furthermore, the gross debt, which represents 42.1% of GDP for 2022, would continue to rise if Québec solidaire took power. It is the only party to increase the debt to GDP ratio due to a sharp increase in infrastructure investment. Here is the data on the gross debt compared to the gross domestic product in 2026-27:
- QS: 44%
- PLQ: 40.2%
- PQ: 39.4%
- CAQ: 35.9%
- PCQ: 34.3%
Good end of campaign!