Freeland Resigns; Trudeau Holds On; Fall Economic Statement Tabled

After the surprising resignation of Finance Minister, Chrystia Freeland, citing fundamental differences between her and Prime Minister,  Justin Trudeau has managed to hold onto power.

It is rumoured that the Prime Minister considered resigning following Freeland’s exit. At least three Liberal MPs are publicly calling for Trudeau to resign. However, Trudeau appears to have held his caucus together for now.

The House of Commons is scheduled to rise December 17 for its winter break until January 27, 2025.

Instead of having someone read an accompanying speech on the Fall Economic Statement (FES) in the House of Commons, the Liberals chose instead to simply table it in the House.

Freeland revealed in her resignation letter that Trudeau had asked her to step down as Minister of Finance and take a different portfolio. Instead, she resigned as Minister of Finance and from Cabinet, stating the threat of tariffs from President-elect Donald Trump requires:

“keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war. That means eschewing costly political gimmicks, which we can ill afford and which make Canadians doubt that we recognize the gravity of the moment.”

The reference to “costly political gimmicks” is regarding the government’s recently announced two-month GST/HST pause and $250 benefit cheques for those making less than $150,000/year.  However, the government’s mini-budget contained no funding for the latter.

Freeland’s resignation followed recent news that federal Housing Minister Sean Fraser was stepping down and would be leaving Cabinet and not seeking re-election. As one of the government’s top performers, Fraser’s departure appears unconnected to Freeland’s. He stated he is seeking to spend more time with family. Fraser’s role as Housing minister remains unfilled for now.

Including Freeland, there are now nine Ministers who have announced they are stepping down or not seeking re-election.

The Prime Minister tapped his lifelong friend Dominic Leblanc to add Finance to his Public Safety role. Meanwhile two Ministers – Anita Anand and Ginette Petitpas Taylor – continue to carry double portfolios in the wake of other resignations.

The events today have set off a renewed leadership crisis for the Prime Minister within the Liberal Party. The drumbeat of events assailing the Prime Minister will continue in the weeks ahead. He still has several year-end events to navigate, including a by-election in Cloverdale-Langley City, British Columbia tonight; a major fundraising event for Liberals donors; and the Liberal Holiday Party for staff and supporters.

Trudeau has until the House of Commons resumes sitting in late-January to rally the Liberal caucus and party behind him and get ready to face an election in 2025 under his leadership. Or he can follow in his father’s footsteps and take ‘a walk in the snow’ and then resign.

Fiscal Situation

The update revealed a much higher-than-expected budget deficit of $61.9 billion for 2023-24, surpassing the budget plan of $40 billion in April, the estimate of $46B from the Parliamentary Budget Officer, and the Bank of Montreal’s projected deficit of $55.8B.

Defence Spending and Border Security – A Response to New U.S. Pressures

Given the increased importance on border security from incoming US President Donald Trump, and the subsequent meeting between President Trump and Prime Minister Trudeau at Mar-A-Lago recently, the government has been signalling for a few days that increased spending on border security would be contained in today’s FES.

The FES notes that the government has spent $1.9 billion in the past six years on border security measures, trying to provide a proof point to our American neighbours. It also provided an additional $1.3 billion over the next six fiscal years for Public Safety Canada, the Canada Border Services Agency, the Communications Security Establishment, and the Royal Canadian Mounted Police.

Regarding defence spending, one of President Trump’s other primary complaints against Canada, the FES also went out of its way to note that the government is planning to meet the 2% NATO target by 2032, and rehashing what it believes are its greatest hits.

As part of this target, the FES looks at defence spending through the lens of “boosting Canadian defence production” but provides little detail other than “sourcing from Canadian suppliers…improv(ing) procurement systems (and) strategic partnerships with industry and supporting Canadian defence innovation.”

We expect a fair number of questions to be raised in the coming days from those in the defence and foreign policy space on what this means in practice.

Opposition Reaction

Conservative leader Pierre Poilievre critiqued the government on taxation, spending, housing, crime and the state of the nation’s finance to frame the Conservative argument that the Liberal government is “out of control.”  He also called on the Prime Minister to table the Fall Economic Statement and call a vote on it this evening which, if held, would be a vote of confidence. This means if the government is defeated, there will be an election.

Similarly, Bloc Quebecois leader Yves-François Blanchet called on the Liberals to resign and call an election, saying “Trudeau’s government is over.”

However, NDP leader Jagmeet Singh took the position that Trudeau should resign but notably did not call for election.  His position would mean a Liberal leadership race.

While there is no mechanism for the opposition to force an election before Parliament resumes in late January, the NDP appears to remain open to maintaining confidence in the government and avoiding an election in the short-term.

What is being monitored closely is whether the Liberal leader can maintain the confidence of his own MPs and caucus, something that is uncertain after Freeland’s sharp break with Trudeau.