Trudeau to Focus on Economic Agenda in 2018

The ghost of Morneau's tax travails will most likely continue to haunt Liberals in the coming year
December 20, 2017 Last Updated: December 20, 2017

OTTAWA—Justin Trudeau’s Liberals are ushering out 2017 the same way they rang it in: in the midst of controversy over ethics and alleged elitism.

But as much as the prime minister doubtless wants to turn that page, government insiders say he has no intention of hitting the reset button in the new year.

He won’t shuffle his cabinet or prorogue Parliament and come back with a throne speech laying out a new agenda for the second half of his four-year mandate—the traditional ways governments try to signal a fresh start.

Rather, 2018 will be devoted to delivering on the agenda the Liberals were elected on—“a year of relentless implementation,” in the words of one insider, who spoke strictly on background.

In other words, a continued focus on spurring economic growth and job creation to ensure a more comfortable future for the middle class “and those working hard to join it,” as the Liberals never tire of saying.

That means a budget that once again emphasizes investments in infrastructure and preparing Canadians for a changing economy, where advances in artificial intelligence and other technologies threaten traditional jobs.

It means getting the infrastructure bank, created this year, up and running and leveraging private capital for projects that governments alone can’t afford.

It means hosting a G7 leaders’ summit in June that focuses on “investing in growth that works for everyone,” preparing for the jobs of the future, and advancing gender equality, among other things.

And it means hosting for the first time both the Fortune Global Forum, a prestigious invitation-only gathering of the world’s business elite, and the companion Most Powerful Women Summit.

All of it is aimed at perpetuating the good economic news that dominated 2017: fastest growth among G7 countries, more than 400,000 jobs created, lowest unemployment rate since 2008.

That’s the kind of positive results the Liberals contend can be felt by real people. And it’s why they believe they’ve been able to weather storms over ethics, reneging on Trudeau’s signature promise to reform the electoral system, small business tax reform, and Canada Revenue Agency crackdowns on diabetics and others—despite the best efforts of Conservatives and New Democrats who’ve been relentless in their pursuit of anything that suggests Trudeau and his ministers are wealthy elitists out of touch with the very middle class they profess to champion.

Ammunition for the opposition

On that score, the Liberals have handed the opposition parties and their newly minted leaders plenty of ammunition throughout the year, starting with the revelation that Trudeau and his family vacationed last Christmas on the private Bahamian island owned by the Aga Khan, multi-billionaire philanthropist and spiritual leader to the world’s Shia Ismaili Muslims.

Federal ethics watchdog Mary Dawson investigated, and almost a year later, on Dec. 20, released a report concluding that Trudeau’s vacation broke conflict of interest law that prohibits a minister or any member of their family from accepting gifts or “advantages” that could reasonably be seen as influencing government decisions. Dawson also concluded that Trudeau broke the ethics code when he travelled on the Aga Khan’s private helicopter.

The Liberals’ image as champions of the middle class took another self-inflicted hit in the summer, when Finance Minister Bill Morneau announced tax reform proposals he maintained were aimed at stopping the wealthy from using incorporation of their small businesses to gain unfair tax advantages.

The badly communicated plan backfired, triggering an avalanche of criticism from doctors, lawyers, accountants, farmers, and shopkeepers, who resented the implication that they were tax cheats, and pushback from premiers and even some Liberal backbenchers. Morneau ended up scrapping some proposals and softening others.

The furor drew attention to Morneau’s own personal wealth and the fact that upon his appointment to cabinet he did not divest or put in a blind trust some $20 million worth of shares in Morneau Shepell, the giant pension management and human resources company founded by his father.

Dawson is now investigating whether Morneau was in a conflict of interest when he introduced pension legislation that may have benefited Morneau Shepell and the value of his shares.

The ghost of that controversy past will almost certainly continue to haunt Trudeau in the new year, when Dawson or her successor—assuming Dion chooses to continue the investigation—finally rules on the matter.

Moreover, legislation to implement the small business tax reform may run into a brick wall when it gets to the independent-minded Senate, where a committee has already urged the government to scrap even the watered down proposals.

Conservative Leader Andrew Scheer during question period on Dec. 12, 2017. The Tories successfully pressured the government to walk back its controversial tax reform proposals. (The Canadian Press/Sean Kilpatrick)

Conservatives lead briefly in polls

Morneau’s tax travails and personal finances combined to make the last half of 2017 the most challenging time yet for Trudeau’s two-year-old government. And public opinion polls briefly reflected the parliamentary turbulence, showing the Conservatives closing the gap with—or even surpassing—the Liberals for the first time since the 2015 election.

Yet when the public mood was actually tested at the ballot box in a series of byelections this fall, the Liberals managed to easily hold onto safe seats and snatch away two Conservative seats in the midst of the controversy. And by year end, most polls suggested the Liberals had rebounded back into a relatively comfortable lead.

“I think for the most part, the Liberals are benefiting from broader conditions that often benefit majority governments: rookie opposition leaders and a generally healthy economy with relatively low levels of unemployment,” says University of Waterloo political scientist Emmett Macfarlane.

“And so where there have been controversies, they aren’t necessarily sticking.”

That said, Macfarlane says Andrew Scheer’s Conservatives “have arguably made the most of what they’ve been given,” successfully pressuring the government to walk back its tax reform proposals.

He says his polling has found the Conservatives are gaining traction with working class Canadians who are pessimistic about their own personal economic circumstances, no matter what the national statistics show; negative about the current direction of the government; and hostile to immigration, free trade, and so-called elites—the same kind of constituency that fuelled Donald Trump’s presidential victory in the United States.

That may help explain why the Liberals are planning to double down in the coming year on investing in “growth that works for everyone” and delivering results that existing and aspiring middle class Canadians will feel in their pocketbooks.

Those best-laid plans could be upset, however, by circumstances beyond the government’s control. There could be, for instance, economic repercussions if Trump were to follow through on his repeated threats to terminate the North American Free Trade Agreement or if tensions over North Korea’s nuclear threat were to boil over.

And then there’s the unfinished ethics investigation into Morneau. As the pre-election campaign inevitably ramps up over the course of the year, opposition parties can be expected to pounce even more aggressively on anything that undermines the credibility of the very minister the Liberals are counting on to deliver their all-important economic message.

From The Canadian Press