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Fall fiscal update: Tightrope politics

Written by

Andrew Richardson

And the fine art of not falling off the steep edge of a political cliff.

Wednesday’s fall fiscal update presented by Canada’s Minister of Finance Bill Morneau lacked major surprises entirely by design. On one side, the government faces an increasingly uncertain business investment environment, and on the other is their political brand as champions of the middle class, who are willing to invest when necessary. With an election less than a year away, what does this mean for Election 2019 and those looking to engage with the government leading up to it?

Minister of Finance Bill Morneau unveiled the government’s fall fiscal update today in the House of Commons, announcing that the government sees the Canadian economy as strong heading into the New Year. While the update did little in the way of making new, substantive spending promises, the government did announce some targeted measures to ensure Canadian industry remains competitive in an increasingly challenging investment environment.

The contents of the fall fiscal update were largely unsurprising given that the government had signaled most of its contents in previous weeks, but what was even more predictable is that the Liberal government is using this opportunity to position itself as a strong steward of the economy going into the next federal election in October 2019. The Trudeau government has long relied on messaging that it is a champion of the middle class and it therefore cannot risk compromising that narrative so close to the next election.

Therein rests the biggest challenge for the government. President Trump and the Republican-controlled Congress in the United States have implemented tax changes that have boosted American economic competitiveness and industry in Canada has been clamouring for similar tax changes here at home. And Canada is still in a relatively unstable international investment environment with an American government that seems single-minded in its efforts to attract business at the expense of all others.

Conversely, the Prime Minister and his government know that they cannot be seen to be spending too much money to appease titans of industry, leaving them vulnerable to accusations of being out of touch with the needs and expectations of average Canadians.

This government and its strategists understand that fights are best fought on battlefields of your own choosing, and the government is doing its best to define the political and economic landscape in terms that will best position them for the next election.

Back to today’s fall fiscal update and why the government is not budging much on industry demands for greater tax cuts, and sticking to their message that the economy is strong, stable, and headed for even greener pastures. Simply put, today’s series of announcements are a first step in a longer process of defining the economic ground on which Prime Minister Trudeau will defend his government during the next election.

This is why Minister Morneau is introducing measures to allow Canadian firms to deduct capital spending at increased rates rather than a broad-strokes corporate tax cut. It’s a measure that walks a tight rope between ensuring a stable, competitive economy and safeguarding the Liberal Party’s brand as middle-class champions.

This delicate balancing act is also apparent in the government’s plan to assist the newspaper industry. While the government cannot be seen to be helping the press in any way that it puts the media’s partisan neutrality into question, they are still facing a situation where a weakened industry provides sufficient value to liberal democracy to make the effort worth the political risk.

The Prime Minister and his government seem to be perfectly aware that the best-laid plans are often undone and that it is best to chart a balanced course. Those looking to engage with the government in 2019 must be prepared to either play within the government’s careful balancing act, or risk being left in obscurity until the electoral dust settles.

For more insights and in-depth analysis of Canada's political landscape, reach out to our Public Affairs and Government Relations experts.

——— Andrew Richardson is a former Manager, Political Insights and Strategy at NATIONAL Public Relations


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