BLIND TRUSTS WON’T FIX THE PROBLEM
Quality of policies and laws is the real issue, Terence Corcoran writes.
Morneau’s tax reforms, a shambles from the day they were announced, have now been turned into a major policy bungle and a political setback for the Trudeau government.
When Prime Minister Justin Trudeau accused opposition leaders of engaging in “gutter politics” by attacking Finance Minister Bill Morneau over his personal financial affairs, opposition leaders scoffed. But on this the prime minister was mostly right.
The weeklong assault on Morneau over his alleged ethics failures, his apparent conflicts of interest and his supposed use of a “loophole” in federal ethics rules, boils down to a classic political battle with much hyperbolic posturing and little real substance.
The soap opera came to a head Thursday afternoon when Morneau was forced to descend into the gutter to more or less admit that some things should have been done differently and he will now fix the problem by transferring his holding of about one million shares in Morneau-Shepell Inc. (worth $20-million on the market today) into a so-called blind trust from where they will then be sold.
Before getting to the emptiness of the ethics issues, it must be acknowledged that Morneau brought this manifestation of class warfare on himself. For months, as part of his tax reform campaign, he portrayed himself as the defender of the middle class and oppressor of the filthy rich who were using private small business corporations to shelter part of their incomes from tax.
Morneau’s tax reforms, a shambles from the day they were announced, have now been turned into a major policy bungle and a political setback for the Trudeau government. Worse, to offset the political damage, the government announced plans to lower the small business tax rate to nine per cent, a move many economists believe adds more distortion to an already blotchy tax system.
For all this, Morneau deserves to be politically embarrassed. But the blind trust ethics flap, which some say could unmake his political career, looks more like the usual overwrought moralizing by opposition and media actors who congenitally believe that anyone with money is not to be trusted and may be out to fluff his own financial pillows rather than serve the public interest.
But really, does anyone truly believe that Bill Morneau helped orchestrate a small business tax reform with a view to benefiting a company founded by his father 50 years ago and now traded on the stock market?
Let’s begin with the “blind trust” concept, portrayed by all as the highest bulwark against political corruption. Politicians with financial and investment assets are required under federal ethics standards to put such assets into a trust. According to the Office of the Conflict of Interest and Ethics Commissioner, the politician’s assets are then locked in the blind trust where a trustee is “empowered to administer the assets of the trust without any input from the trust’s beneficiary, and may not provide the beneficiary with any information about the day-today operations of the trust.”
Very upright and seemingly solid. It sounds like an unbreachable wall that will protect Canadians from self-serving politicians. But mostly the blind trust concept is meaningless as a neutralizer of conflict.
Conservative finance critic Pierre Poilievre said Morneau “hid” his Morneau Shepell shares in a private corporation rather than hold them in a blind trust. Hardly. That Morneau owned shares in his family’s company could scarcely be a surprise to anyone. It’s worth noting, as well, that Morneau’s shares in the company — worth about $20 million — compare with Morneau Shepell’s total market capitalization of about $1 billion. It also appears Morneau once held $40 million in shares, which means that all through the time he is said to have been orchestrating a tax game to benefit Morneau, he had been selling shares. Some smart player.
The other day reporters cornered cabinet ministers to ask them if they had transferred their wealth into blind trusts — as if such a transfer neutralized any possibility of conflict. When a trustee takes over the blind trust, it is highly unlikely that he or she would suddenly begin liquidating assets and re-investing in a whole new set of assets.
If Morneau had transferred his Morneau Shepell shares into a trust upon taking office, two conclusions could be drawn. The blind trust would continue to hold the shares, and it would be foolish to suddenly assume that any hypothetical conflict had been neutralized.
All the politicians who have moved their assets into blind trusts, including Prime Minister Trudeau, can be relatively safe in assuming that their assets are more or less what they were when the trust was established. Conflict risks still exist; it just means that the public does not know either.
Another question: Is zero conflict of interest the highest standard to which Canadians should hold their federal politicians? It would be better to remain focused on the quality of their policies and the laws they pass. Whether they might somehow benefit personally, no matter how directly or remotely, is a side issue and possibly irrelevant if the policy is a good one.
If, on the other hand, Canadians want to monitor the personal financial affairs of their politicians, total disclosure would be the best option. As Morneau has learned, the blind trust model doesn’t really do the job — for politicians or Canadians. Better in the open than in the gutter.