Liberals eye populist shift in pre-election spending plan
It all seemed so straightforward last summer.
Sensing a souring of public opinion around the sanctimonious tone of their progressive agenda, and approaching an election year, the Liberals started sharpening their emphasis on pocketbook issues.
First, there was the August cabinet shuffle, then the growing focus on middle-class rhetoric throughout the fall. When members of Parliament returned from their Christmas break, all three parties turned their attention to needling each other on how best to help Canadians improve their standard of living.
The Liberals were taking every opportunity to tout their approach to economic growth: spending on social programs and infrastructure, while simultaneously pumping up Canada’s corporate profile at home and abroad. Enter the SNC-Lavalin controversy. Just days before the Liberals’ preelection budget, half of their storyline on economic growth is suddenly in upheaval, the Liberals’ embrace of corporate champions now fraught with suspicion.
This will no doubt encourage a more populist approach from a government that has spent billions of dollars on a strategy of picking winners, and ensuring they kept on winning.
The Liberals started up the Invest in Canada hub to promote Canadian competitiveness and bring in foreign investors. They developed so-called superclusters of business innovation to augment and encourage growth in promising sectors, at the cost of almost $1 billion. They lent Bombardier Inc. $372.5 million during a time of financial trouble.
And they set up the $35-billion Canada Infrastructure Bank to attract big private-sector money to infrastructure ventures that would normally have to be fully funded by government or put off for another day.
The first, and so far only, deal the infrastructure bank has approved was a low-interest $1.3-billion loan for the REM light-rail project around Montreal — a project led by Quebec’s Caisse de dépôt et placement and in which SNC-Lavalin is a key participant.
But as the political crisis that has torn apart the Liberal cabinet shows, an unabashed championing of corporations can come at a cost. Public policy interests are not at the heart of any corporate strategy. Only some of their interests are shared. And as we see, government compromises made for one company can hurt Canada’s reputation more broadly.
So next week’s budget, by political necessity, will focus not on corporate welfare but on human capital, the other side the Liberals’ economic growth formula. There will be lots of talk about bolstering the middle class, as well as in- vestment aimed at alleviating Canadians’ angst around disruption in the workforce.
With an eye on France, the U.S. and other parts of the world where that angst has boiled over into anger and protest, Finance Minister Bill Morneau will tilt heavily toward announcements that are far less corporate than Liberal budgets of the past.
Housing and pharmacare will figure prominently.
And on Thursday, the minister dropped heavy hints that a key budget highlight will be a program to support workers who take time off for retraining and skills development in the hopes of being better prepared for an evolving workforce. It’s people-oriented, futurefocused, and while the private sector will no doubt appreciate the government’s helping hand, it avoids any kind of picking of winners or partnering with marquee companies.
There’s also, as always, the possibility of a budget wild card. While the Liberals’ embrace of corporate champions may be fraught, changing the channel with great gobs of cash is always an option on the mind of any political strategist.
The government’s fiscal position makes this possible. Tax revenues are gushing into the federal coffers, rising at twice the pace of spending, and far outpacing anything the gov- ernment expected last year at budget time. For the fiscal year to date, the government is in a small surplus position, compared to a $9-billion deficit at this point a year earlier. With a period of economic slowdown in the offing, an election on the horizon and a political crisis swirling, the temptation to spend that dividend is large.
Next Tuesday is the Liberals’ last major chance to stake their fiscal and economic strategy before their platform and the next election campaign. A pre-election budget is destined to focus more on people than corporations, and given the SNC-Lavalin tumult, perhaps this is fitting.
Heather Scoffield is an economics columnist based in Ottawa. Follow her on Twitter: @hscoffield