QUEBEC—Premier François Legault wants to wean the province off the equalization payments Ottawa sends to “have-not” provinces — including Quebec.

“It’s embarrassing,” Legault said Monday after Quebec Finance Minister Éric Girard presented his first budget update showing a surplus of about $4.5 billion for the current fiscal year.

Legault, who heads Quebec’s first Coalition Avenir Québec (CAQ) government, said the province is lucky to have $11 billion a year in equalization money, but “it is not ideal when we talk to Ottawa to have this economic situation.”

The premier admitted that getting Quebec off equalization payments “can’t be resolved overnight,” projecting it would take 17 years. “(But) we have to start,” he said.

Legault’s plan to make Quebecers richer includes more education and private-sector investments, along with greater use of robots, information technology and artificial intelligence.

“We are creative and have excellent schools and universities,” the premier said.

Recalling campaign promises of tax breaks, better care for seniors and the rebuilding of Quebec’s crumbling schools, one reporter described the government’s budget update as “a cold shower.”

“What we’ll do is what we said,” Legault said, including spending announcements and tax-relief measures, which will only appear in the spring budget.

Among them are pledges to: lower local school taxes by about $700 million; build a new generation of seniors’ residences; and offer kindergarten for children aged 4 across the province. Legault also said a major revamp is planned of the province’s “Green Fund” — financed by a modest 0.9-cent-a-litre carbon tax — to help pay for public transit.

Legault said new tax credits announced Monday for low-income seniors and families with more than two children are “over and above” the CAQ’s campaign promises.

The family-allowance increases were to begin only in the coming fiscal year, he said, but they’ve been brought forward to Jan. 1.

The $200 tax credit for seniors 70 and over whose yearly income is below $22,500 was not part of the CAQ platform, but Legault said he came to understand while he was campaigning that low-income seniors needed extra help.

“It might look like a small amount, but it is important,” Legault said. “I think it’s a start.”

Legault said Quebecers suffer from a wealth gap: They earn about 18 per cent less than residents of Ontario and other provinces.

In presenting his budget update, Girard said the new government would gradually fulfil its election promises over its four-year mandate, which include reducing the daily fee parents pay for daycare to a uniform rate of $8.25, indexed to inflation, and reducing local school taxes. The Liberal government increased daycare fees to $22.15 for better-off parents.

Girard said the $4.5-billion surplus is really worth $1.65 billion, after $2.85 billion is deposited into Quebec’s Generations Fund to offset the province’s gross debt, estimated to reach $204 billion by March 31, 2019.

Girard inherited a solid financial position from the outgoing Quebec Liberal government, thanks to unexpectedly high growth of 2.8 per cent in 2017 and 2.5 per cent in 2018. But the minister’s projection for 2019 is a more modest 1.8 per cent, with rising inflation. The budget update identifies “escalation of trade tensions between the United States and its trading partners as the main risk to global trade.”

Girard offered only modest returns in his budget update, totalling $3.3 billion over the next five years.

Starting Jan. 1, Quebec’s family allowance will increase by $500 a year for the third and fourth child, up to age 18. For a Quebec couple with three children and a combined income up to $100,000, family allowance payments would rise to $5,942 a year.

The refundable $200 tax credit for low-income seniors over age 70 will be retroactive to 2018, and increases in daycare charges for 2019 will be frozen at the 2018 level.

Together, these benefits for families and seniors will cost the Quebec treasury $1.7 billion over five years.

As well, matching the tax writeoffs for business investments announced by federal Finance Minister Bill Morneau on Nov. 21, Girard unveiled his five-year, $1.6-billion plan to offer Quebec businesses that invest in computer hardware, manufacturing and processing equipment, clean-energy generation and intellectual property a 100 per cent writeoff on their provincial corporate income tax. In addition, the companies can deduct another 30 per cent from their Quebec income taxes next year, for a total writeoff on such investments of 130 per cent.

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Unlike other provinces, Quebec levies its own corporate and personal income taxes.

Girard said he had no choice but to harmonize Quebec’s tax credits with measures announced in the federal economic update.

Quebec has $12.8 billion deposited in its Caisse de dépôt et placement du Québec to offset the provincial debt, while earning interest on Caisse investments. Girard said he’ll use $8 billion of that money to pay down some of the debt in case a market correction lowers the amount held in the Caisse. That will mean $332 million a year less in interest payments, Girard said, or $1.4 billion over five years that the government can reinvest in education and other priorities.

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