Shooting on your own net

Ever played a hockey game where one of your teammates gets confused and shoots on your own net, but the puck hits the goalpost and doesn't go in? I had a similar feeling as I read the Quebec election results on Monday night.

Ever played a hockey game where one of your teammates gets confused and shoots on your own net, but the puck hits the goalpost and doesn’t go in?

I had a similar feeling as I read the Quebec election results on Monday night.

Can you imagine the economic carnage if we were forced to spend the next five years reading about Jewish doctors being fired from Montreal hospitals and wondering when Premier Pauline Marois would feel lucky enough to launch a referendum on independence? The mind boggles at the impact on Quebec business confidence, investment, job creation and net provincial migration.

But while the Quebec economy would have been the main victim, the collateral damage in the rest of Canada would have been sizeable too.

Quebec represents about 23 per cent of Canada’s population and 20 per cent of our economy. It is hard for Canada to do well if a fifth of the national economy is facing tough sledding. Not only do companies in the rest of Canada have fewer business opportunities in Quebec, but the slower Quebec economy negatively affects federal tax revenues as well as causing higher equalization payments and program spending.

Winning a hockey game takes more than merely not scoring on your own goal, of course. The challenge for Quebec is now to achieve faster growth. Unfortunately, the Parti Quebecois and its election platform were not the only economic problem facing Quebec. The province’s political consensus is more solidly aligned behind big government and big tax policies than anywhere else in Canada.

In fact, over the last decade Quebec’s government – under both Liberal and PQ leadership – has even managed to make Ontario’s economic policy look good. And that hasn’t been easy.

The result of these choices shows up in the numbers. Not only has Quebec persistently lagged the Canadian average on key economic statistics, it has also lagged Ontario. This is an importance comparison, because both provinces share roughly similar geographic positions, large populations and have big manufacturing sectors.

In 2012, according to economists at one of the big banks, Quebec’s economic output per person was 12 per cent lower than Ontario’s. Ditto for its personal disposable income per person.

One per cent fewer of Quebec’s population was working, which is a lot of people. Looking forward for 2014 and 2015, economic growth is forecast to be roughly a point lower than Ontario’s each year.

About seven percentage points more of Ontario’s economy is engaged in international trade than Quebec’s. Net provincial government debt is around 50 percent of gross domestic product in Quebec, versus less than 40 percent in Ontario (the gap was even bigger before Ontario added about 10 points of debt over the last five years from its big deficits).

On the tax front, Yukon’s Department of Finance reports that Quebec’s provincial income tax rate for people making less than $40,000 per year is 16 per cent. In Ontario, it is 5.05 per cent. For people making $100,000, the figures are 24 per cent and 11 per cent respectively.

Quebec’s corporate tax rate is slightly higher, and its small business rate is eight per cent versus just four per cent in Ontario. Quebec’s sales, tobacco, gas and diesel taxes are also all higher.

I should also mention that Quebec has had a stubbornly persistent deficit for the last five years.

The province is in a tough situation. It risks a vicious circle where high taxes discourage economic activity, which in turn hurts tax revenues and pressures the government to keep taxes high.

Quebec’s new premier, Philippe Couillard, wants to boost growth a number of ways, including pushing northern resource development while cutting spending and taxes. This is all easier to say than to do.

Economic growth is not a zero-sum game. All of Canada benefits when all of our regions are doing well. This creates more jobs, more business opportunities and more tax revenues for government programs.

We should wish the new Quebec government well in its efforts to improve the performance of Quebec’s economy. Team Quebec hasn’t won the game yet, but at least now it is shooting the puck at the goal in the right end of the rink.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Channel 9’s Yukonomist show or Twitter @hallidaykeith

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