MONTREAL — “Québec is resilient and confident.”
Such is the theme for Quebec Finance Minister Eric Girard’s 2021 budget, spelled out for the public Thursday after a year when more than 10,600 Quebecers were felled by COVID-19 and the province’s real GDP shrank by 5.2 per cent. Girard finds optimism in the province’s vaccination drive, its “sustainable shift” in areas of telemedicine, as well as the province’s near-term outlook, in which economic activity is expected to rebound by 4.2 per cent this year.
To fuel the province’s innovation economy, this year’s budget includes money to address the IT labour shortage, a boost for the battery industry and hundreds of millions in new funding for research centres. Here’s what you need to know:
Talking Point
This year’s pandemic budget includes a cut to the corporate tax rate for small and medium enterprises, measures to address Quebec’s chronic labour shortage—especially in information technology—and hundreds of millions in new funding for research. It also singles out the province’s growing battery industry, hoping to catalyze its “significant global development possibilities.”
The big picture: The 2020–2021 budgetary deficit remains at its November 2020 level of $15 billion, with the government projecting a decrease to $12.3 billion in 2021–22 and $8.5 billion in 2022–23. The government expects to return to balanced budgets by 2027–28. Quebec is spending $10.3 billion over five years on its health-care system, including just over $7 billion to address issues directly related to the COVID-10 outbreak. It is spending an additional $2.2 billion to increase productivity and stimulate business investment, which it sees as key to the province’s economic recovery. It is also pinning its hopes for a return to balanced fiscal normality on a bullish return of household spending, anticipating it will grow by five per cent in 2021 and 4.3 per cent in 2022.
Education: Quebecers aged 15 to 24 were particularly hard hit by the pandemic, with unemployment jumping 4.7 percentage points over a year to 11.7 per cent in February, according to Statistics Canada. The government will spend $1.46 billion over six fiscal years on education, including $668.6 million for “student retention and graduation in higher education,” and aims to increase the secondary school graduation and qualification rate from 83 per cent in 2020 to 84.5 per cent by 2022–23. The province will also spend $10.6 million over two years on “continuing the digital shift through artificial intelligence,” which it said has “promising prospects” when it comes to student retention. The budget also proposes a temporary 25 per cent increase in the basic rates of the tax credit for on-the-job training. Further, the province’s infrastructure plan allots more than $27 billion over 10 years on education and higher-education networks.
Small- and medium-sized business relief: The government will accelerate businesses’ acquisition of new technologies through $289.5 million in funding, and will reduce the small- and medium-business corporate tax rate from five per cent to match Ontario’s pre-budget level of 3.2 per cent. The budget further allocates $472.9 million to support worker training and requalifying and encouraging immigrants to enter the labour market. “This is a good budget because it lets small- and medium-sized businesses be part of the relaunch regardless of location or sector. The lowering of the tax rate to Ontario levels for these businesses will ensure that they will reinvest in machinery and productivity,” said Canadian Federation of Independent Business (CFIB) vice-president François Vincent.
Digital productivity: To address Quebec’s labour shortage, which continued largely unabated in certain sectors despite the pandemic, the government is relying in part on digital transition to wring out productivity gains. (The province’s productivity continues to lag Ontario’s.) The budget earmarks $116.5 million on a longer tax holiday for major investment products, which will apply to all large digitization projects, regardless of sector. “The shortage is the number one issue after COVID. We did a survey recently that said 25 per cent of Quebec’s small- and medium-sized businesses refused contracts because of the labour shortage,” Vincent said.
The IT crowd: The province estimated it will need an additional 10,000 information technology workers a year for the next five years. The government allotted over $450 million in the last year to address the province’s IT labour shortage, introducing $181.4 million in new spending in this budget. “For scaling technology companies, the ability to recruit highly-skilled talent is the most important factor for success. Quebec’s ‘scale-up’ companies are expecting to increase their workforces by 25 per cent this year, which is why Innovators called for a provincial talent strategy that increases the pool of skilled workers in Quebec. We are pleased to see the government addressing the serious talent crunch high-growth companies in Quebec are facing with measures that focus on upskilling and retraining workers for the modern digital economy,” said Pierre-Philippe Lortie, the Council of Canadian Innovators’ director of government and public affairs for Quebec.
Electrifying Quebec’s battery industry: Quebec will spend $167.4 million over five fiscal years on sectors with “significant global development possibilities,” including its growing battery sector. The province is home to one of North America’s largest hard-rock lithium deposits, as well as Lion Electric, which is producing vehicles for companies including Amazon. The government is putting $15 million toward battery development and recycling R&D.
Doubling a digital-tax credit: The government has doubled its C3i investment and innovation tax credit, introduced in last year’s budget to aid businesses in acquiring new technology, digital transformation, modernization and automation. The increase, which will expire at the end of 2022, covers as much as 40 per cent of investments in eligible expenditures relating to manufacturing and processing materials, computer materials and management software. The government says the credit will cost nearly $290 million over five years and aid more than 10,000 businesses in the province.
Manna for entrepreneurs: The province has earmarked $217.9 million in investment over six fiscal years in research infrastructure and centres and to support “innovation in strategic centres.” There is an additional $29 million in part to set up Quebec’s “innovation council” to support Quebec’s chief innovation officer—both of which were announced last December—and to simplify the university R&D tax credit. Going forward, companies will no longer have to wait for a favourable decision from Quebec’s tax-collection authority in order to apply for the university R&D tax credit.
Artificial intelligence: The Quebec government is pledging a $38.4-million investment to further the setting up of biological laboratories, supporting the development of quantum computers and acquiring computer equipment to increase calculation capacity for the province’s research community. There is an additional $20 million for the Centre de Recherche Informatique de Montréal, the city’s applied research centre in IT, as well as $27.5 million to the province’s cybersecurity program, which aims to make the province’s small- and medium-sized IT businesses more competitive.
Connecting Quebec: Through its Volet Éclair program, the government aims to provide 116,000 new homes, along with target-sector businesses and organizations, with high-speed internet by the end of 2022. This involves spending of nearly $1.3 billion over two years. The federal government recently committed $413 million to the province for high-speed internet infrastructure. (By comparison, Ontario’s recent budget pledged $2.8 billion in new broadband-infrastructure funding.)
