20000315

Expectations high before Quebec budget

QUEBEC CITY: When Quebec Finance Minister Bernard Landry rises in the legislature on Tuesday to unveil his new budget, expectations will be high as tough economic times and political uncertainty appear a thing of the past.

"It is easier to have money than not having any. Any household would tell you the same," Landry told reporters on Monday.

The minister has hinted that he could slash income taxes in North America's most tax-burdened region while boosting health and education spending and using a hefty budget surplus -- the first in 40 years -- to erase hospital and university deficits.

"The government has itself boosted expectations and raised the stakes," Clement Gignac, National Bank Financial chief economist, said.

Analysts said that the province's strong growth, coupled with newly balanced books and a Quebec separatist movement on the back burner, was boosting market confidence in Quebec.

"For the first time in 13 years, Quebec's economy is set to grow stronger than the Canadian average," Gignac said, forecasting a growth of 4.3 percent in 2001 versus 4.1 for Canada as a whole.

The mainly French speaking province, which reported a zero deficit last year after five years of severe budget cuts, is expected to post a surplus of at least C$500 million ($345 million) in fiscal 2000, ending on March 31, after strong retail sales over Christmas and economic growth of 3.7 percent in 1999.

Montreal newspaper Le Devoir reported over the weekend that the budget surplus could reach as high as C$1.4 billion and analysts feel that this brighter scenario is the most likely.

"It is plausible that we are heading toward a C$1 billion budget surplus for fiscal 1999-2000," Gignac said.

He added that the actual budgetary leeway for Quebec would likely reach C$2.5 billion, including C$1.5 billion coming from already announced financial transfers from the Canadian government.

"We think they could use this money over two or three years," Gignac said.

Landry said in December that he expected to cut personal income taxes by at least C$500 million in fiscal 2001. And he said last week that he would probably deliver more than what he promised in terms of tax cuts and tie income tax levels to inflation -- matching a move announced last month by the federal government.

"If we can do better, we will do," he told reporters in Montreal.

Gignac said financial markets hoped Landry would slash income tax by C$1.7 billion in fiscal 2001, or at least C$3 billion-C$4 billion over the next three years, in a drive to reduce a C$5.8 billion tax gap with rich neighbour Ontario.

Quebecers currently shoulder the heaviest tax burden in North America.

Landry, who is also deputy premier of the province of 7.4 million people, is set to raise spending in the ailing health sector by at least C$500 million.

Only one thing won't be on the minister's mind -- addressing the C$100 billion provincial accumulated debt. The minister said it was about time Quebecers got some relief after six years of sacrifices.

"People would rather see us put money in health, education and tax cuts rather than send it to New York or Boston to pay off creditors," Landry said last week.-Reuters