Dirigisme is still alive and well in Quebec

To read some of the spin on the Quebec budget tabled last week, you would think the province was on the verge of a “fiscal spring” in which it finally gets its finances in order and abandons its interventionist ways. The first budget of the newly elected Liberal government has been described as “responsible,” “tough” and even “harsh.” But while something clearly had to be done given how far previous governments had let things slide, there are still plenty of signs that dirigisme is alive and well in la belle province.

Take the government’s confirmation on June 2 of a $450-million investment of taxpayer money in the proposed McInnis cement plant in Port-Daniel in the Gaspé region. Investissement Québec is lending $250-million to the project and contributing $100-million in equity, and the Caisse de depot et placement is putting up another $100-million. The plant will also enjoy lower Hydro-Québec rates than those paid by existing cement plants.

Now, granted, the current government inherited this project from its predecessor. But it is defending it as if it had come up with the idea itself, touting the substantial economic benefits for the region and the 200 direct jobs that will be created once the plant begins production. The company expects another 200 indirect jobs to result from the project.

Any way you slice it, $450-million is a lot of money for a mere 400 permanent jobs, especially when other cement plants in the province are apparently running at just 60% capacity. In fact, Holcim Canada announced in March that it was suspending a $250-million renovation project at its Joliette cement plant specifically because of the anticipated Port-Daniel project.

Not to worry, though: Minister of the economy, innovation and exports Jacques Daoust indicated that he is willing to have Investissement Québec also extend a helping hand to modernize the province’s existing cement plants.

There’s also the matter of lowering taxes for small manufacturers from 8% to 4%. This sounds like good news – and it is good news for those companies affected – but it’s a very narrow cut. The government justifies it by the need to boost manufacturing exports, but is this really a good reason to give preferential treatment to small manufacturers compared to, say, small service providers? Manufacturers based outside big cities will also get a little something extra, as they will now be able to claim certain transportation tax write-offs.

The budget received a lot of praise from commentators critical of government picking winners for “slashing” some 30 business tax credits by about 20%, but even this does not represent a radical rethinking of the role of government. None of these credits was eliminated; there’s just a slightly smaller pile of tax money to distribute this time around. When things look a little less desperate, will those credits be boosted right back up again as they were back in 2005, two years after having been similarly reduced by the Charest government?

The budget’s spending growth targets of 1.8% this year and 0.7% next year are aggressive. Let’s hope they are met. But Quebecers have been seduced before by governments promising to get their finances in order, only to be disappointed when those promises were not kept. Indeed, if we had just limited spending growth to the same rate of growth as the economy for the past decade, we could have run a $15-billion surplus last year instead of a $3-billion deficit.

In many ways, Quebec is continuing its long tradition of dirigisme, which dates back to Jean-Baptiste Colbert, Louis XIV’s minister, who appointed Jean Talon the first Intendant of New France in 1665. Following Colbert’s example and instructions, Talon intervened widely – according to the Statistics Canada website, “his influence touched every facet of government, and of the day-to-day lives of colonists,” from bridge building to chimney sweeping, from shipyards to shoe factories.

Hopefully, the promised review of programs and assessment of Quebec’s taxation system will chip away at this interventionist tradition and bring about some restructuring of the province’s public finances. But there are good reasons to take Treasury Board president Martin Coiteux at his word when he says that the government is not trying to reduce the size of the state.

Youri Chassin is Economist and Research Director at the Montreal Economic Institute and the author of “The $15-Billion Quebec Surplus That Might Have Been.” The views reflected in this op-ed are his own.