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After the Federal Budget: 7 things to expect in the next 6 months

By David Gourlay

/ Posted in Government Relations

inside parliament in OttawaLast week, the Trudeau government presented its second Budget, shedding new light on the economic priorities announced a year ago, notably infrastructure, innovation and health care.

As the Liberals sell their Budget across Canada, they look toward the halfway mark of their mandate this fall. Argyle’s experts on the ground in Ottawa have identified seven things to watch over the next six months.

 

1. THE BATTLE OF THE BUDGET

The Minister of Finance, Bill Morneau, presented Budget 2017 on March 22nd, building on the government’s 2016 initiatives in infrastructure, funding for innovation and skills, and health. This Budget included a new investment of $7B over 10 years to create 40,000 new childcare spaces.

 

As Ministers crisscross Canada and Liberal MPs sell the Budget in their ridings, the official opposition is talking about why the Budget falls short of expectations. Interim Conservative leader Rona Ambrose commented that the Budget failed to resolve uncertainty about taxation on wealth creators, and provided insufficient support to small- and medium-sized businesses in Canada, all of which risks a “brain drain” to the U.S. Meanwhile, the NDP, in the midst of its own leadership campaign, criticized the Budget for a lack substance on progressive priorities, particularly in social housing and health care.

 

By mid-April, Budget 2017 will be debated in the House and passed and then the Budget Implementation Bill will kick-start various programs and initiatives announced by the Trudeau government.

 

2. SPRING IS BY-ELECTION SEASON

On April 3, there will be five by-elections; two in each of Ontario and Alberta, and one in Québec.  We don’t anticipate major surprises since these seats are all in stronghold Liberal or Conservative ridings and won’t change the balance of power in the House of Commons. Nevertheless, it will be interesting to follow the voting trends in each by-election and determine if the Trudeau Liberals are sent any signals by voters as they approach the halfway mark in this term.

 

3. CANADA – U.S. RELATIONS

Perhaps the most important file to follow for the moment is the state of the relationship between Canada and the United States.  The rise of American protectionism and the unpredictability of the Trump administration have already led the Trudeau Liberals to shuffle the Cabinet to build a stronger team on U.S. files such as the economy, trade and foreign relations.

 

The Budget’s “go-slow” approach to any changes to personal or corporate taxes also reflected uncertainty south of the border, taking a wait-and-see approach to U.S. tax changes rather than taking a proactive Canadian approach. The government must ensure Canada remains competitive.

 

A recent visit by the President to Detroit and the heart of the American automotive industry highlighted the Administration’s focus on deregulation and protectionism to ensure these employers focus on American jobs. With the two governments misaligned on climate change, this could impede joint progress toward limiting greenhouse gas emissions in the transportation sector. There is also great concern over Canada’s role and place in a potential renegotiated free-trade agreement with the United States, given that President Trump wishes to review NAFTA.

 

Key sectors that are influenced by this uncertainty include forestry, agriculture, and automotive industries.

 

4. CONSERVATIVE AND NEW DEMOCRATIC LEADERSHIP RACES

On May 27, 2017, the Conservative Party of Canada will elect a leader to succeed former Prime Minister Stephen Harper. His or her biggest challenge will be to keep the Party united and quickly put in place a campaign readiness team for 2019. The challenge is steep: the new leader will draw swift comparisons to both Mr. Harper and Mr. Trudeau, and must also match or better the performance of interim leader Rona Ambrose.  The new leader will face near-certain division, given the policy and values schisms between the 14 leadership rivals. A unified party and strong early performance will be important to public opinion.

 

The Conservatives are not alone in selecting a new leader. This October, the New Democrats will elect a leader to succeed Thomas Mulcair. The biggest challenge will be to bring back disappointed voters who left the Party for the Liberals in the 2015 election. New Democrats risk extended third-party status unless they can set themselves apart on key issues for Canadians.

 

5. GENERAL ELECTION IN BRITISH COLUMBIA

On May 9, 2017, British Columbians will go to the polls as Premier Christy Clark seeks re-election. A key provincial election can have an impact at the federal level, particularly as the premier and her rivals will seek to demonstrate how they are standing up for BC’s interests — which often means standing up to Ottawa.

 

The Clark administration has had a tumultuous term addressing key challenges on ethics and economic struggles in the province. It will be interesting to see if the Liberal government, in power since 2001, will yet again secure the confidence of the voters.

 

6. CABINET SHUFFLE AND SPEECH FROM THE THRONE?

Parliament Hill in OttawaSince we are approaching the mid-mandate timeframe, Prime Minister Justin Trudeau may want to use the summer to shuffle his Cabinet and refocus the government on its pre-election priorities. At the same time, he could reward strong performers among his Ministers and MPs, showcasing those who will play key roles in the run-up to 2019.

 

This thinking will take into account the leadership results of the two main opposition parties and their own re-election preparedness.

 

We anticipate a Speech from the Throne to open the new parliamentary session in September 2017. This will set a tone for the late 2017 and Budget 2018, identifying key priorities and investments to bolster the middle class and deliver on infrastructure programs in cities across Canada, among other priorities.

 

7. A QUESTION OF PRIORITIES

 

The next few months are critical to the Trudeau Liberals, who will be judged by voters on the state of several significant priorities.  Some key questions are:

  • Will we see more construction sites following promised funding for infrastructure?
  • Will the government finally legalise marijuana, and how will this be administered?
  • Will the celebration of Canada’s 150th birthday set a unifying, positive tone across the country?
  • Will there be clear evidence that Canadian families are benefiting from Liberal policies and programs?
  • Will deficit financing make the economy grow as planned?
  • Will the unique health agreements with provinces be seen to be successful in improving health care in Canada?

In short, the first 18 months of Mr. Trudeau’s government have featured an initial change in tone, an image overhaul of official Ottawa, and the pursuit of Liberal promises and priorities. The Trudeau government now enters a crucial phase of this mandate, in which it must demonstrate tangible results for Canadians.

Argyle’s government-relations team is close to the ground in Ottawa, monitoring the developments and engaging directly with decision-makers. Please let us know how we can help you. We are available to discuss our insights to how change in Ottawa affects you and your business. Please call us at 613-416-0010, ext 259, or email David Gourlay at dgourlay@argylepr.com.

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