•Repeal the Wetlands Policy since it encroaches on private property rights.
Canada/Quebec Divorce to Cost Quebec $143.9 Billion
Contact: Robin Richardson (604) 688-0221 ext. 305
or (604) 388-4274
Release date: May 9th, 1995
Ottawa>>> According to a new study released by The Fraser Institute entitled The 1995 Public Debt of an Independent Quebec, Quebec's share of Canada's federal debt, after allowing for assets such as land, buildings, securities, bank deposits and equity in crown corporations, was $143.9 billion as of March 31, 1995. This amounts to $19,767 for every man, woman and child in Quebec or $79,068 for a family of four.
"As Quebecers consider whether to separate from Canada, they should know the financial obligation they would be expected to assume," said Robin Richardson, Director of The Fraser Institute's International Centre for the Study of Public Debt. "Quebecers have been seriously misled by the 1991 Belanger-Campeau Commission which, when updated and compared with The Fraser Institute study, shows a $102.6 billion Separation Obligation to Canada. This $41.3 billion difference needs to be reconciled before the coming referendum in order that Quebecers have a correct understanding of the financial costs of a collective decision to divorce Canada."
"It would be in the best interest of an independent Quebec to pay off both interest and principal over, for example, a 25-year period so that future generations of Quebecers would have no financial obligation to Canada," Mr. Richardson recommended. "The difference between interest only and interest plus principal on an independent Quebec's $143.9 billion Separation Obligation, amortized over 25 years at 10 per cent interest per year, is $1.5 billion per year. This obligation would be well worth assuming in order to eventually be free of annual payments to the rest of Canada which would otherwise continue forever."
"Quebec's $143.9 billion Separation Obligation to Canada is a minimum estimate since it could be increased substantially by environmental cleanup costs and aboriginal land claims, " Mr. Richardson observed. "We urge the government of Canada to lift the veil of secrecy over aboriginal land claims and provide full disclosure to the Canadian public as to the potential future costs of these items. Quebec should accept its full obligation for its share of all of Canada's environmental cleanup obligations and aboriginal peoples if it chooses to separate from Canada."
Other costs of separation identified in The Fraser Institute study include:
(1)Taxes would be as much as 25.7% higher for Quebecers if Quebec's transition to independence required a balanced budget. Taxes would increase overall by 6.6% if the new government of an independent Quebec were to allow its current deficit and share of the federal deficit to continue.
(2)If Quebecers continue to pay their new national government in Quebec City the same amount of tax that they presently send to Ottawa and continue to run a budgetary deficit, the services they would receive for federal programs they currently enjoy, would be cut by 45.2% or by $16.8 billion from current levels.
(3)These cuts in existing program expenditures amounting to $16.8 billion are well beyond the $800 million of estimated savings from eliminating duplication and overlap of services.
(4)The deficit of the government of an independent Quebec would be from $19.0 billion to $25.8 billion (or between 10.6% and 14.5% of GDP) depending on whether or not the new country experienced a post-separation recession as some studies predict.
(5)An independent Quebec would have an all-government net debt-to-GDP ratio of 139.7%, compared with a Quebec as a Canadian province net debt-to-GDP ratio of 120.4% as of March 31st, 1995. This measure of debt includes all levels of government in Quebec.
(6)The debt burden of an independent Quebec would be more severe than that of any Canadian province except Newfoundland and more severe than that of any OECD country, including Belgium, Ireland and Italy.
(7)Based on The Fraser Institute's SIC List (SIC=Severely Indebted Category) of the world's most severely indebted economies, an independent Quebec would be the 21st most severely indebted country in the world with a government debt burden just behind Liberia and just ahead of the Syrian Arab Republic.
(8)Taking all levels of government into account, total debt charges at current interest rates would be an estimated $24.7 billion as of March 31st, 1995 for an independent Quebec compared with $19.0 billion for Quebec within Confederation. This 30% increase in debt charges will pose a significant financing challenge for an independent Quebec. If interest rates increase, the debt service burden will be even greater.
(9)A final potential consequence of Quebec leaving the Canadian Confederation may be an unwillingness of foreign and domestic investors to lend money, not only to Quebec, but also to the rest of Canada. The negotiations leading to separation would dispel whatever government debt illusion may have existed on the part of investors in Canadian and Quebec government bonds as to the severity of the debt burden facing Canadians and Quebecers as well as the impossibility of servicing this debt while maintaining government services without unprecedented tax increases and/or further borrowing.
This study is available in French or English from The Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, BC V6J 3G7 or can be ordered by calling Beverley Horan at (604) 688-0221 extension 316 or TOLL FREE at 1-800-665-3558. The Fraser Institute is hosting two conferences entitled Divorcing Canada: Can Quebec Afford to Go It Alone? in Toronto on May 10th and in Montreal on May 11th to discuss and consider the implications of Quebec separation.