Because the Pauline Marois government called the 2014 election before its budget was adopted, a new one had to be passed promptly by the incoming government. New Finance Minister Carlos Leitão presented his budget June 4. He had the difficult task of addressing the ever-growing deficit, expected to reach $5.7 billion if nothing were done.

Unfortunately, like many before him, he seems to believe that state intervention creates wealth. Among other items, there will be a resurrection of the Plan Nord (massive government funding of infrastructure to exploit natural resources north of the 49th parallel) and the implementation of a maritime strategy, favoured by the Coalition Avenir Québec (CAQ). The government hopes that allocated funds will increase cruise ship traffic to Quebec City and develop a ‘high value-added hub’ in the Montérégie region.

The government hopes to partly finance these projects by intensifying its fight against under-the-table work.  Some measures include a compulsory certification from Revenu Québec (which collects tax money) of construction businesses and more inspections during evenings and weekends and in businesses susceptible to fraud, such as financial markets and housing.

As an economist, Leitão should have been aware that undeclared work is the symptom of an insidious disease: government hyper-intervention. Indeed, the Montreal Economic Institute noted years ago that heavy regulations, forced unionization and hyper-compartmentalization in construction (26 trades versus six in Ontario) all contribute to higher costs and encourage people to find illicit ways to save money. In other words, raising awareness among construction workers about the benefits they lose when working ‘illegally’ is futile, since not declaring their hours allows them to pay less tax.

Fortunately, the budget contains genuine measures that could help decrease spending and balance the budget by 2015-16 as the government claims it will. One initiative will create a permanent working group that will thoroughly review all government programs and question their pertinence and efficiency.

Another initiative would cap consolidated spending. Sweden, Denmark, Switzerland and Austria have all capped their spending for a given period of time. The capping can be global, as in Switzerland, or for five major sectors, as in Austria. Either way, it can potentially tame the Leviathan a little.

However, the government’s 2015-16 time frame for balancing the budget is a bold undertaking, according to Moody’s. The agency notes the balanced budget depends on revenues saved by the aforementioned working group, which doesn’t yet exist, and on capping spending, which has run wild in the past few years.

Only time will tell whether Quebec will be able to balance its budget. But if it’s done through spending cuts, be ready for 2003-style public disturbances from unions, when then-premier Jean Charest promised his “state re-engineering.”