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ontarionewswatch.com NEWSROOM

The ONW Salon: Morneau's Fiscal Update

Susanna Kelley (Moderator): The Liberals are indexing the Child Benefit to inflation as Canada's economy booms. Can the good news change the channel for Finance Minister Bill Morneau, who has been forced to say he would put his assets in a blind trust to quell a political firestorm? Richard Mahoney, Will Stewart and Tom Parkin debate.

 

Tom Parkin:

To change the channel from Morneau’s conflict of interest the Liberals have already handed out an $855 million business tax cut and are now adding millions more to the Child Benefit program.

Will bribing voters with their own money create enough buzz to squelch stories about Morneau’s conflict? It’s impossible to say—but let’s hope so, because rumour has it the next step is dropping cash from helicopters!

What we need to keep our eyes on is the fact that Morneau continued to control one million shares of Morneau Shepell even as he introduced Bill C-27, a bill that could help the company.

That shouldn’t have been possible, but Morneau exploited a loophole in the Conflict of Interest Act that Commissioner Mary Dawson wanted to close years ago. Because Morneau held his $20 million in shares through a corporation, he wasn’t required to divest the shares or put them in a blind trust.

The key issue of the conflict is Morneau’s interest in Canadians' pensions—specifically, his interest in pushing workers out of defined benefit plans and into “target” pension plans.

Even Morneau has acknowledged that defined benefit plans are “are superior for the employee.” Because they are more stable, an actuarial report is only required every third year. That actuarial work is one of the major services of Morneau Shepell.

Target plans, because they are more unstable, require three times the actuarial work. Reports need to be done every year to determine how contribution rates must be adjusted to keep contributors on target.

In a 2013 speech to a Public Policy Forum conference, Morneau summed-up by telling the room there should be “legislation enabling Target Benefit Plans and Shared Risk Plans in all Canadian jurisdictions.” At that time he was executive chair of Morneau Shepell and spoke only for his company—it was a representation of interests, not a conflict.

But now he’s a minister and represents Canadians. Yet last year Morneau, while he maintained $20 million in Morneau Shepell stock through a loophole, tabled Bill C-27, which creates a framework for federal employers to push workers out of defined benefit pension plans and into transfer plans. When the bill was tabled there wasn’t even a press release. There were no consultations with worker representatives.

Whether Morneau’s recent money announcements can misdirect voters from his interest in C-27 remains to be seen. But with the Sears situation raising even more issues about pension security, it looks doubtful.

 

Will Stewart:

Well first I think we should be honest with the readers about what they saw on Tuesday. It was not a "Fiscal Update". It was the latest in a stream of announcements to address a terrible set of facts and news stories directed squarely at the Finance Minister himself through self-imposed actions. This was a public relations exercise, not an exercise in informing Canadians about the state of the country's books.

And don't just take my word for it. Chris Hall from CBC News and other reporters said critics saw this more of a prescription for what ails the government than what is good for the economy. This is the type of announcement that tries to fool Canadians into looking at something else.

How do they do it? With your own money! This is the type of cynical politics that makes voters believe that governments and political people are less than truthful in campaign promises.

To build on what Tom articulated above, the issue of Morneau's private holdings is one of national interest. Perhaps even more telling is that we were all told that his assets were in a blind trust. His own company confirmed that. Turns out, that wasn’t true!

Perhaps another broken promise to be added to the list of "only $10 billion deficits a year" and "we will balance the budget by 2019."

Both are promises that the government hopes you will forget as they say this week "the deficit will be smaller! You’re welcome, Canada". Well, it’s still much larger than they promised and they are spending more. Far from having a balanced budget by 2019, they have no plan to balance it.

The announcements this week will add $100 billion to the debt. We toss around big numbers quite a bit, but to put it in perspective: If Morneau were to spend $1 every second, every minute, every day for the next 300 years, he still wouldn’t make it to $100 Billion. That is the cost of turning the page on the government's current scandal.

 

Richard Mahoney:

It is always great fun to watch my friends Will and Tom run away from the battle of ideas, and the news of Tuesday's fiscal update, and head straight towards another topic altogether, that of the Minister's conflict screen, the advice he got on it, and how he handled it.

As titillating as that is for Opposition politicians, it is not something that helps the average Canadian deal with the challenges of getting by every day. But I suppose if you were an Opposition politician, you'd want to chat about those things, and not about some of the important news and relevant issues from the fiscal update.

One of this government's most important achievements is the Canada Child Benefit. This benefit, delivered through the income tax system, has already removed almost 300,000 Canadian children out of poverty, according to some estimates. Yesterday's update builds on that success by indexing that benefit to inflation, so that benefit keeps pace with rising costs for families.

Tom does not mention this, which is interesting, given that this is probably the most important new social program, already with the best outcomes, in decades of Canadian policy making. Will focuses on debt and deficit, which is interesting for two reasons.

First of all, this benefit has played a massive role already in stimulating the economy, according to the Governor of the Bank of Canada, appointed by one Stephen Harper.

Secondly, the Conservatives themselves took Canada into deficit from a surplus with their cuts to the H.S.T., and added billions of dollars to Canadian debt load. I guess that was a good idea then, but now that a government move actually helps families out of poverty, and creates economic growth well beyond what Canada had in the Harper years, it seems that investing in the economy and those Canadians working hard to get ahead and join the middle class is not such a good idea.

 

Tom Parkin:

Sadly, it is not Will or me who is running away from the news.

But I will say this: whenever there is scandal for the Liberals they almost always try to distract with a dose of progressive politics. This is no exception.

The indexation of the Canada Child Benefit and enriching the Working Income Tax Benefits are progressive moves. That is why candidates in the recent NDP leadership race put forward these ideas.

If only we could get a sustained progressive government, rather than these doses of distraction. Somehow, with Liberals, scandal is the cost of a couple progressive moves.

Yet the Liberals' seek to dig in on defending Morneau's loophole and weak pension protection. This is a big issue.

On Tuesday the NDP put a motion to the Commons to end the Morneau loophole - the Liberals voted against it.

Soon, the NDP will put forward legislation giving workers the protection of being secured creditors if their employer goes bankrupt. By the way, the NDP put forward a similar bill in 2009 after the Nortel employees lost their savings.

The bill didn't pass then, and it looks like it won't pass now. On Tuesday, as NDP Pension Critic Scott Duvall was calling for secured creditor status for workers, Minister Navdeep Bains was offering nothing to Sears workers except his hope and prayers.

People plan and save to build retirement security. When Liberals table Bill C-27 and won't amend laws to make workers secured creditors, they put those plans and savings at risk. When it comes to spending more money to get themselves out of a crisis, the Liberals are all-in. When it comes to passing laws to stop retirees from being put in a financial crisis it's crickets.

 

Will Stewart:

Richard, in true Liberal Party of Canada fashion, accuses Tom and I of focusing on the negative. The underlying message of Richard's unfounded accusation is that if you don't agree with the Liberal policy, you are somehow less of a Canadian and, by insinuation, simply not relevant to the Canadian discussion.

The reality is that this publicity stunt at the cost of the taxpayers is articulated in almost all of the coverage of this issue in major newspapers, television, and beyond. Everyone, except for perhaps the Liberals themselves, sees that.

The government has called small business owners tax cheats, while their finance minister sets up numbered corporations in Alberta (a province he does not live or work in) for the purpose of avoiding taxes.

The government wanted to increase taxes on employee discounts to grab more money from the working Canadians they profess to help while their finance minister forgot about a villa he owns in France inside a corporation he also owns which allows him to avoid inheritance taxes.

And this week, the government wants to get more tax dollars for people who suffer with diabetes while the finance minister bristles at reporters when asked about what other assets might be hidden in some of his eight numbered companies. If that is the debate on ideas that Richard would like to have then, sure, let’s have it, but I don't think he can accuse us of not "wanting to help the average Canadian."

Harper left a balanced budget and a healthy middle class. The Liberals promised small deficits with a return to balance by 2019. Those are the facts, despite what Richard indicates. It is in black and white, and written by the Liberals themselves. They have abandoned all of that.

The cost of the finance minister's forgotten villa will be felt for generations to come with this update. The irony is that they are seeking more and more ways to get more and more money out of the working families they say they represent and when they spend that money, as well as money they don't have, on Canadians, they expect to be thanked and idolized for giving a small part of it back to the same families that paid it.

And we have not yet explored the rest of Morneau's hidden assets, nor have we discussed the PM's own inherited wealth inside multiple numbered companies. What will be the cost of solving those scandals to taxpayers? I am sure we will find out in the next budget.

 

Richard Mahoney:

So I guess the answer to our moderator’s question about the update is that it doesn’t change the channel for Tom and Will. As challenging as the issues around Mr. Morneau’s wealth have been, I think most people would agree that measures this government brought in 2016, such as the Canada Child Benefit, are more important to most Canadians than the wealth of the finance minister. The important thing is that these investments have made a difference in people’s lives.

When the Canada Child Benefit was first introduced in July 2016, the extra money in parents’ pockets had an immediate effect on consumer confidence and economic growth. If you don’t believe me on this issue, ask the Governor of the Bank of Canada.

Canada has the fastest growing economy in the G7, a big change from the Harper days, and the Trudeau government is re-investing the benefits of that growth back into the people who contribute most to that success.

Because of Canada’s strong economic growth, the government’s bottom line is better, and they can now do more to help the middle class and those working hard to join it, with lower taxes on small business, more support through the Canada Child Benefit, and an enhanced Working Income Tax Benefit, as Tom points out. A little over two years ago, it was the NDP leader and the Conservative leader who were saying we have to balance the budget. Canadians rejected that idea, voted for a party that promised to stimulate the economy and now the results are clear.

The move to index the Canada Child Benefit to inflation has been brought in two years ahead of schedule. For a single parent of two children making $35,000, a strengthened C.C.B. will mean $560 more next year, tax free, for a family’s groceries, books, skating lessons or some warm clothes for the winter. (Winter is coming!)

Given the results to date, we can expect these measures will also help stimulate growth and create jobs, continuing the benefits seen to date. I am sure we all hope that is the case, whatever our politics are, and no matter what issues we choose to focus on in the daily cut and thrust of Canadian politics. Who is up and who is down in the House of Commons each day might excite some folks who want to gain party advantage, but it is measures like these that make the difference in people’s lives.

 

Richard Mahoney is a lawyer with deep experience in politics and governance.  He is a former senior advisor to the Rt. Hon Paul Martin, a former Campaign Chair and President of the Ontario Liberal Party. Will Stewart is Managing Principal at Navigator, served as Chief of Staff to several Ontario Ministers and often appears as a national affairs commentator.  Tom Parkin is a veteran NDP strategist, columnist and a frequent commentator on national issues. 

 

 

Posted date : October 25, 2017
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