As Parliament resumes, Liberals prepare to “Meet the Moment”
In a speech to Liberal caucus Friday, Prime Minister Justin Trudeau challenged his team to “meet the moment” with the return of the House of Commons after a six-week holiday break. There are a lot of moments to meet with high interest rates, inflation, and talk of an impending recession continuing to dominate conversations since Parliament rose for the winter break in December.
The Trudeau government will seek to demonstrate leadership on the economy, while continuing to deal with an increasingly unstable world. For those working closely with the Premiers and Prime Minister, many hours were devoted to bilateral discussions on “fixing” healthcare. A new deal on healthcare may be the first big announcement for the Liberals in early February 2023, but Justin Trudeau and his team need to tread carefully on how this deal is sold with some early messaging missteps starting to hamper Trudeau, in particular.
While the private delivery of healthcare in a public system is nothing new for most provinces and territories, how the federal Liberals respond to Doug Ford’s recent announcement on patients being sent to private clinics (and using public funding) to deal with issues like hip and knee replacements, will be critical. Many Liberals have felt the Prime Minister’s comments last week on the delivery of public healthcare through private means, crossed a political line and could harm the public delivery of healthcare and their electoral chances.
Heading into 2023, the Liberal-NDP agreement on confidence and supply agreement remains stable. The reality is that Jagmeet Singh and his party cannot afford to face an election right now. Incremental concessions by the Liberals on dental care and other issues are likely to keep the agreement intact. Election talk is further muted by polls showing Trudeau and the Liberals remain behind the Poilievre Conservatives by between 3 to 7 per cent.
In addition to negotiating a new deal on healthcare, the Liberals began a deliberate offensive against use of the notwithstanding clause by provinces, a practice which has accelerated in recent years. In English Canada, this shores up left-of-centre supporters opposed to moves like Doug Ford invoking the clause during labour negotiations. However, it is in Quebec where the fight is likely to be most profound, as provincial governments of all stripes have defended the clause as a critical tool to protect Quebec’s culture and values. This defence of minority rights in la belle province both solidifies Liberal support on the Island of Montreal while potentially fragmenting the nationalist vote.
Since his leadership victory in September, Pierre Poilievre and the Conservatives tried to stake out political territory by focusing on affordability and cost-of-living issues. Organizationally, they remain in rebuilding mode, addressing campaign infrastructure that atrophied over the last seven years in opposition. The Conservatives typically enjoy a strong advantage in quarterly fundraising numbers, but the remarkable instability of three interim leaders and three permanent leaders in seven years has left Poilievre and the Conservatives with the task of putting the party on a strong structural footing before the next election.
Where We Left Off
Two major pieces of legislation were introduced in the last two months of the session to address the rising interest rates and inflation causing significant issues for the Canadians. The first, the Cost of Living Relief Act (Bill C-31) received Royal Assent in November and included two measures to attempt to address cost of living issues in low-income families:
- A one-time payment of $500 for families making under $35,000 and renters making under $20,000 who pay at least 30 percent of their net income towards rent, and
- the Canada Dental Benefit, which provides a maximum of $650 for children’s dental care under the age of 12.
The second was the Fall Economic Statement Implementation Act (Bill C-32) which passed a number of initiatives announced earlier in the fall by Finance Minister Chrystia Freeland, including:
- Permanently eliminating interest on Canada Student Loans and Canada Apprentice Loans,
- Imposing the Canada Recovery Dividend as proposed in the 2021 Liberal platform, a one-time, 15% tax on taxable income above $1 billion of banking and life insurer groups,
- Establishing the Tax-Free First Home Savings Account, to allow prospective first-time home buyers to save up to $40,000 tax-free toward their first home starting in mid-2023, and
- Attempting to limit house flipping by ensuring that profits from “flips” held for less than 12 months are fully taxed, starting in 2023, with certain exceptions (e.g., death or divorce).
Several controversial bills will resume debate. Bills C-11 (Broadcasting Act Amendments), C-18 (making internet companies to pay for news), and C-21 (Firearms Act amendments) have been highly contentious in both the House of Commons and Senate.
Opposition parties will continue to highlight issues such as the government contracts to consulting firm McKinsey and the cost to produce the ArriveCan app, the recent book by former Finance Minister Bill Morneau, criticism from former Sports Minister Kirsty Duncan, and the consultant choices of Trade Minister Mary Ng and Housing Minister Ahmed Hussein until something more interesting hovers into view.
Finally, Prime Minister Trudeau will be required by law to call a number of by-elections over the next few months, including for Calgary-Heritage, AB; Winnipeg South Centre, MB; Portage-Lisgar, MB; and Oxford, ON. While these are all safe seats for the incumbent parties (3 Conservative, 1 Liberal), an upset is possible.
Key Issues to Watch
The Bank of Canada expects price pressure to significantly ease with Consumer Price Index inflation reaching 3.6% in 2023 and 2.3 in 2024 (down from 6.8% in 2022). Just days ago, the Bank also raised the overnight rate by 25 basis points to 4.5%.
While the Liberals have said they are “committed to fiscal prudence” in the upcoming budget to avoid undercutting the fight against inflation, they made the same claim in the 2022 Fall Economic Statement, a claim that Parliamentary Budget Officer Yves Giroux said was “not keeping one’s (fiscal) powder dry.”
Questions remain around where the rate of inflation ends up. If it is on a steeper downward trajectory, the government might have more room than originally expected to spend without stoking price growth. This could come in handy to support Canadians in a period where the country “cannot avoid the global slowdown to come,” as Minister Freeland wrote in the Fall Economic Statement. In its latest Monetary Policy Report, the Bank of Canada forecasts the Canadian economy will grow by only one percent in 2023 and 1.8 percent in 2024. With such low growth numbers, the possibility of a recession cannot be discounted.
Amid growing uncertainty that is shaking the confidence of businesses and consumers, the Canadian labour market has remained remarkably strong with a low unemployment rate (5% in December) and high job vacancies (850,300 in November). The resilience of the labour market going into 2023 could help lessen the negative effects of slow or even negative economic growth, if low unemployment rates continue.
Furthermore, geopolitical issues, especially Russia’s continued illegal invasion of Ukraine will continue to have impacts on areas such as supply chain, inflation, and the cost of food around the world. Canada is not immune to these issues, and the government’s support for Ukraine (most recently with Defence Minister Anita Anand announcing the provision of four Leopard-2 tanks to Ukraine, along with the purchase and donation of 200 lightly armoured vehicles) means that decision-makers in Ottawa will keep a close eye on the global situation.
Healthcare remains a top-of-mind issue for Canadians. Challenges in hospitals overflowing with patients, respiratory viruses in children, and post-COVID staffing levels have impacted the delivery of healthcare across Canada. Canadians want their federal and provincial leaders to find solutions to these problems.
The long-term funding of healthcare is a perennial issue. Canada’s Premiers launched a campaign in October calling for a significant increase to federal transfers for health from 22% to 35%.
Healthcare “innovation” to decrease waiting lists and deliver much-needed services is also top of mind. For example, Ontario Premier Doug Ford recently announced that certain procedures will be performed in private clinics, using public healthcare dollars. While this form of healthcare delivery is not unusual for those living in Alberta and Quebec, it represents something new in Ontario. Ford’s proposed reforms received an early green light from Prime Minister Trudeau, who said that these innovations are necessary. However, given Liberal caucus backlash in Ontario, Trudeau may face internal pressure to start changing his narrative on this issue.
A First Ministers’ meeting will be held on February 7th, where it is widely expected that a new healthcare funding deal with the provinces and territories will be announced.
Provincial Nomineee Program Allocations for Immigration
Another federal-provincial fight over immigration nominee spaces and the ability of provinces to select permanent residents appears to be brewing. Ontario’s Labour Minister, Monte McNaughton, has repeatedly called for a doubling of provincial nominee program (PNP) spaces and his calls have been reiterated by the Premiers of Saskatchewan and Manitoba.
Given that the federal government gives a virtual pass through the program to anyone endorsed by the province, these spaces are highly coveted by multiple industries who are experiencing ongoing labour shortages post-COVID, including construction, healthcare, supply chain, and hospitality and cite the lack of available labour as a key barrier to growth.
In the upcoming session, Immigration Minister Sean Fraser is expected to announce how many spaces each province will get. We will see if the allocation decisions made by Minister Fraser satisfy the provinces and if this decision will improve or create additional tension between Ottawa and the Premiers.