What the Quebec budget means for the innovation economy

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MONTREAL — “Quebec is cutting checks to millions of its citizens.

This is the title that the Coalition Avenir Québec government of Premier François Legault hopes to resonate with Quebecers from its 2022-2023 budget. And indeed, the plan to send an “income support payment” of $500 to 6.4 million eligible Quebecers “to offset the expected increase in the cost of living in 2022”, at a total cost of 3 .2 billion, is among the first items in the budget.

There’s also more good news: the province’s real GDP grew 6.3% after shrinking 5.5% in 2020, with the government forecasting growth of 2.7% in 2022 and 2. 0% in 2023.

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However, its reception by Quebec startups and scale-ups is likely to be colder. “It is indeed an electoral budget drawn up for the [October] elections,” said Pierre-Philippe Lortie, director of government and public affairs at the Canadian Council of Innovators. “There’s not enough to chew on if I was an entrepreneur in the tech or scaling industry.”

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

The big picture

the government projects a deficit of $6.5 billion for 2022-2023, significantly lower than the $8.5 billion it projected Last year. It projects revenues of $138.5 billion and expenditures of $136.6 billion. 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 for Generations Funddedicated to paying down the province’s debt.

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Subject of discussion

The Government of Quebec sends checks for $500 to millions of citizens. Aside from this obvious nod to the looming October election, critics say the 2022 budget will do little to ease the province’s chronic labor shortage, which is sorely felt. in its technology sector.

“The budget I am tabling today is presented in a context of great uncertainty: it is unclear 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. noted Finance Minister Eric Girard in prepared remarks. The war in Ukraine “will add to inflationary pressures already present,” the budget notes, adding that the resulting increase in oil prices will have a negative impact on the province’s trade balance.

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Immigration Support

The province, mired in a prolonged labor shortage, commits to providing $290.2 million to better integrate immigrants into the labor market. This includes $198.3 million for French language learning support for newcomers, $11.9 million to expedite the processing of immigration applications and $80 million to attract immigrants to different regions. (Currently the large majority immigrants to Quebec settle in the Montreal area.)

Nicole Martel, CEO of the Association québécoise des technologies, which represents 500 Quebec tech companies, said The logic she is disappointed with Quebec’s budgetary approach to immigration. “Quebec really needs to attract more immigrants, and what we have here is about $12 million over three years to process more immigration applications. We are not talking about promoting Quebec internationally, bringing qualified workers here to meet the province’s glaring demand on the labor market,” said Martel.

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Using technology to catch up with Ontario

The budget reflects the will of Legault long term obsession with the productivity gap between Quebec and Ontario. “Greater entrepreneurial dynamism will be…needed to stimulate the creation of new innovative businesses. In addition, Quebec companies 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 business acquisition of new technologies, $11 million to increase exports and promote assets of Quebec and $57.5 million to contribute “to entrepreneurial dynamism”.

It also doubles its investment and innovation tax credit and extends it for one year, until January 1, 2024. It says the change will provide more than “$155 million in additional liquid assets to more than 10,000 businesses.” by 2026-2027. “The credit aims to help Quebec catch up with its neighbour. “In 2019, investment in machinery and equipment in Quebec lagged 26% per job in the private sector compared to Ontario, while for investment in information and communications technology, the gap was 44%,” the budget notes.

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Martel welcomed the expansion and extension of the tax credit, but said the credits do not apply to monthly software-as-a-service payments, which corresponds to the number of Quebec companies that acquire new technologies. . “I find that the budget is very timid for marketing. It does not meet the need. Eight out of 10 Quebec companies sell to the United States. The pandemic has given Quebec tech companies a boost, but the lack of government support will have an effect on what Quebec companies can do to attract American customers.

Martel and Lortie said they were encouraged by the government’s five-year investment of $1.3 billion in the Quebec Research and Innovation Strategy, the program designed to help companies develop and market their products. “That means they walk on foot, and we’ll see how they spend it over the next five years. Because it’s not a lot of money when you consider it goes from the R&D stage to commercialization,” Lortie said.

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Climate change

The Government of Quebec is increasing spending on its Plan for a Green Economy, a $4.5 billion carbon reduction plan introduced in 2020, $1 billion. initiative Goals reduce greenhouse gas emissions by 37.5% below 1990 levels by 2030 and achieve carbon neutrality by 2050.

The government is spending an additional $357 million over five years on other environmental initiatives, including $61 million to remediate contaminated areas and rehabilitate land, $152 million to boost 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 earlier than BC’s commitment.)

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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 deliver “more intuitive, timely and easy-to-use health care and services for people.” the public”. Lortie said the funding will help the province’s medical technology sector; Medical equipement to have annual sales of $2 billion in Quebec alone, according to 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 higher education and graduation.”

What is missing

Before the budget, the CCI called for the end of refundable tax credits for foreign gaming and ICT companies, affirming that they effectively facilitate the exodus of profits and intellectual property out of the province. There have been increasing calls to recover credits from the province, when there was no such measure in the budget. “These credits were needed to create the ecosystem 25 years ago, but it needs revamping,” Lortie said. “But as you can see, it’s a political potato that no one wants to touch.”

This section is powered by The logic. The Logic is Canada’s leading technology and business newsroom. For more information, visit thelogic.co.

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