According to political strategist Fred Delorey, the NDP is rumoured to have borrowed an amount approaching the legal campaign spending cap of $35.8 million. Even if the party is only sitting on half of that balance in debt, it is in serious trouble. If the loan isn’t paid off in full within three years, the NDP and whoever financed them could be breaching the Canada Elections Act and face serious sanctions. If the debt isn’t paid off in time, it will be deemed a political contribution by the financier. It is illegal for any one person to contribute more than $1,775 annually to a federal political party, and it is illegal for a bank to contribute to a political party at all. This is a bizarre and unprecedented financial mess, and it’s hard to see how the party or the financiers will be able to extricate themselves from it.
The federal NDP may earn the dubious title of becoming the first major political party in Canadian history to declare bankruptcy. Being uncharted waters, it’s tough to speculate what that may mean. Could funds be seized from riding associations to put toward the central party’s debt once the central organization becomes insolvent? Could charges be laid under the Canada Elections Act against the lenders and those who sought the financing? Canada’s party finance rules are stringent and strictly enforced.
The only major physical asset the NDP owns is the Jack Layton building in Ottawa, where their party headquarters is housed. Unfortunately, the party took out a $12 million mortgage on the building in 2019, and likely hasn’t paid that down to the point of gaining any significant equity in the building. To lose the building named after their most popular leader they have had in generations would deal a terrible psychological blow to the remaining supporters of the party.
Ironically, losing a symbol named after the late Jack Layton may facilitate what will likely have to be the rebuilding of the party from scratch. They will need a fresh start and a new brand, and sentimental connections to the defunct former entity could hinder drawing support to a new social democratic party of some sort.
The NDP is also unique among Canadian parties in that the provincial wings of the party are directly intertwined with the federal one. If someone buys a membership in the B.C. NDP, for example, they automatically become members in the federal party. While the provincial parties won’t be on the hook for the debt of the federal party, they could lose the centralized nature of their organization and may need to break into 10 new, totally independent entities. This won’t break the provincial parties, but it will complicate their local political efforts.
The mess the NDP is in can be partially attributed to the Canadian system of reimbursing campaign expenses for parties. Becoming dependent on those funds allowed the NDP to extend itself more than it should have. This should be fodder for legislative reform, but that’s unlikely as the Liberals and Conservatives are both beneficiaries of the system.
If the federal party becomes defunct, some sort of entity will rise to fill the void. It will have lost generations of political history and capital, though, and it will likely take several election cycles for a new party to become a factor federally again.
