MONTREAL — “Quebec cuts cheques to millions of its citizens.”

Such is the headline Premier François Legault’s Coalition Avenir Québec government hopes will resonate with Quebecers from its 2022–23 budget. And indeed, the plan to send a $500 “living support payment” to 6.4 million eligible Quebecers “to offset the expected rise in the cost of living in 2022,” at a total cost of $3.2 billion, is among the first items in the budget. 

There are other topline bits of good news, as well: the province’s real GDP grew by 6.3 per cent after shrinking 5.5 per cent in 2020, with the government projecting 2.7 per cent growth in 2022 and 2.0 per cent in 2023. 

Its reception among Quebec’s startups and scale-ups, however, may be cooler. “This is definitely an electoral budget written for the [October] election,” said Pierre-Philippe Lortie, director of government and public affairs at the Council of Canadian Innovators. “There’s not enough to chew on if I were an entrepreneur in the tech or scale-up industry.”

Here is a look at what the budget means for the innovation economy.

The big picture

The government projects a $6.5-billion deficit for 2022–23, notably lower than the $8.5 billion it projected last year. It expects revenues of $138.5 billion and $136.6 billion in expenditures. The province’s gross debt will be $215.3 billion by the end of March, or 43.1 per cent of GDP. The budget also includes $3.4 billion to the province’s Generations Fund, which is dedicated to repaying the province’s debt.

“The budget I am tabling today is being presented in a context of great uncertainty: we do not know how the pandemic may evolve, inflation is currently high and central banks are tightening their monetary policy. Added to this is the tense geopolitical context, marked by the Russian invasion of Ukraine,” said Finance Minister Eric Girard in prepared remarks. The war in Ukraine “will add to the inflationary pressures already present,” notes the budget, adding that the resultant increase in oil prices will have a negative impact on the province’s trade balance. 

Support for immigration

The province, mired in a protracted labour shortage, is pledging $290.2 million to better integrate immigrants into the job market. That includes $198.3 million for French-language learning support for new arrivals, $11.9 million to expedite the processing of immigration applications and $80 million to attract immigrants to different regions. (Currently, the vast majority of immigrants to Quebec settle in the Montreal area.)

Nicole Martel, CEO of the Association québécoise des technologies, which represents 500 Quebec tech-sector companies, told The Logic she’s disappointed in Quebec’s budgetary approach to immigration. “Quebec really needs to attract more immigration, and what we have here is about $12 million over three years to treat more immigration applications. We don’t talk about promoting Quebec internationally, to bring skilled workers here to fill the province’s screaming demand in the job market,” Martel said.

Using tech to catch up to Ontario

The budget reflects Legault’s long-running obsession with the productivity gap between Quebec and Ontario. “Greater entrepreneurial dynamism will … be needed to stimulate the creation of innovative new businesses. In addition, Quebec businesses will have to intensify their presence on export markets in order to accelerate their development,” reads the budget. 

The government has earmarked $224.2 million to stimulate investment in new technologies, including $155.7 million to accelerate new-technologies acquisitions by businesses, $11 million to increase exports and promote Quebec’s assets and $57.5 million to contribute “to entrepreneurial dynamism.”

It is also doubling its investment and innovation tax credit, and extending it by a year, to Jan. 1, 2024. It says the change will provide over “$155 million in additional liquid assets to over 10,000 businesses between now and 2026–27.” The credit is meant to help Quebec catch up to its neighbour. “In 2019, investment in machinery and equipment in Quebec lagged 26 per cent per private-sector job behind Ontario, while for investments in information and communication technologies, the gap was 44 per cent,” notes the budget. 

Martel welcomed the tax-credit expansion and extension, though said the credits don’t apply to monthly software-as-a-service payments, which is how many Quebec businesses are acquiring new tech. “I find the budget to be very timid when it comes to commercialization. It doesn’t meet the need. Eight out of 10 Quebec businesses sell to the U.S. The pandemic has given Quebec tech companies momentum, but the lack of support from the government will have an effect on what Quebec companies can do to attract U.S. clients.”

Both Martel and Lortie said they are heartened by the government’s five year, $1.3-billion investment in the Québec Research and Innovation Strategy, the government’s program designed to aid companies develop and commercialize their products. “It means that they walk the walk, and we’ll see how they spend it in the next five years. Because it is not a lot of money if you consider that it goes from the R&D stage to commercialization,” Lortie said. 

Climate change 

The Quebec government is increasing its spending on its Plan for a Green Economy, a $4.5-billion carbon-reduction plan introduced in 2020, by $1 billion. The initiative aims to reduce greenhouse gas emissions by 37.5 per cent below 1990 levels by 2030, and achieve carbon neutrality by 2050.

The government is spending a further $357 million over five years on other environmental initiatives, including $61 million to reclaim contaminated areas and rehabilitate land, $152 million to stimulate the energy transition and $143 million to support sustainable practices. (Quebec previously announced it would ban the sale of gas-powered cars by 2035—five years sooner than British Columbia’s pledge.)

Digital shift

The government has pledged $131.9 million over five years for digital transformation and an additional $788.9 million to modernize the health system and bring “more intuitive, timely and easy-to-use health care and services for the public.” Lortie said the funding will aid the province’s medtech sector; medical devices have yearly sales of $2 billion in Quebec alone, according to the industry group Medtech Canada. 

The government is further investing $158.2 million over five years to support digital learning and $1.2 billion over five years “to improve access to and graduation from higher education.”

What’s missing

Prior to the budget, the CCI called for an end to refundable tax credits for foreign gaming and ICT companies, saying they effectively facilitate the exodus of profits and intellectual property from the province. There have been growing calls to claw back the credits in the province, yet there was no such measure in the budget. “These credits were necessary to create the ecosystem 25 years ago, but it needs to be revamped,” Lortie said. “But as we can see, it’s a political potato that no one wants to touch.”