“Healthy tensions”: Prime Minister’s Office, Finance Minister at odds over spending
Relations between the Prime Minister’s Office and Finance Minister Chrystia Freeland have chilled as tensions grow over the push for politically strategic spending measures such as the GST holiday, multiple sources say, risking the minister missing her pledge to keep the deficit at or below $40.1-billion.
The sources say the idea for a sales-tax break on items such as toys, video games, Christmas trees and alcohol was driven by the Prime Minister’s Office (PMO), as was the pledge to send $250 benefit cheques to working Canadians who earned an income of up to $150,000 last year.
The Finance Department viewed the $6.28-billion plan as fiscally unwise, with one source saying Finance officials described the GST holiday as making little economic sense. The sales-tax break has passed in the House of Commons, but the future of the $250 rebate remains unclear, with opposition parties making support for it contingent on it going to more people.
The Globe and Mail spoke to 10 government insiders, high-ranking Liberals and former senior Finance Department officials. The Globe is not identifying the sources who were not authorized to speak publicly about the tensions between Prime Minister Justin Trudeau’s office and Ms. Freeland and her department.
Five senior Liberal Party veterans and three political staffers confirmed that tensions have risen between Ms. Freeland’s office and the PMO over spending. Two of them said it is more pronounced since the summer, but a third source said they couldn’t characterize just how serious the divisions were. Others described the relationship as “healthy tensions” between the Finance Minister and PMO, and noted that it’s common across governments.
the PMO, one senior Liberal said the current dynamic appears to be similar to what happened with Ms. Freeland’s predecessor, Bill Morneau, before he departed the government in 2020. Mr. Morneau quit amid a public rift with Mr. Trudeau and his office following months of behind-the-scenes pushback from the former finance minister on the level of pandemic spending.
None of the sources are suggesting, however, that the current tensions would lead to the same result as Mr. Morneau. Ms. Freeland has insisted that she intends to stay around and run in the next election. She has denied suggestions that she has been looking for work in the private sector.
The sources said Mr. Trudeau’s office has given internal direction for an aggressive and possibly costly policy agenda that delivers relief and support to Canadians facing waning purchasing power as a result of inflation. The push for greater spending is being resisted by Ms. Freeland in part because the plan risks blowing past the spending targets she has already set publicly for the government, according to the sources.
Ms. Freeland pledged a year ago to keep the deficit capped at that no more than $40.1-billion, a fiscal guardrail seen as an effort to quell fears that continued high government spending would fuel inflation.
However, one of the sources, a senior government official, said while the government is focused on investment, Mr. Trudeau, just like Ms. Freeland, has no plans to spend to the point of triggering an interest rate hike or inflation. They said the government is trying to give Canadians as much support as possible within those limits.
Mr. Trudeau and Ms. Freeland work as a team, the official said, adding the current tension is no different than the normal push and pull between Finance and the PMO.
Many experts, including Parliamentary Budget Officer Yves Giroux, believe Ms. Freeland won’t meet her promised deficit target set out in the spring budget. Mr. Giroux said the fiscal deficit is expected to come in at $46.4-billion in 2023-2024.
The final tally of the last year’s deficit will be confirmed when Ms. Freeland’s delivers her fiscal and economic update on Monday.
Three of the Liberal sources also cited recent senior staff changes as contributing to the tensions. Ms. Freeland lost her chief of staff, Andrew Bevan, this fall after only a year in the job when he was appointed the Liberal’s national campaign director. Mr. Bevan, chief of staff to former Ontario premier Kathleen Wynne, has a long history with Mr. Trudeau’s senior team and is close with his chief of staff Katie Telford.
In Mr. Bevan’s wake, Ms. Freeland’s deputy chief of staff, Shannon Zimmerman, has taken over the top post. She is a long-time Liberal staffer but does not have significant experience in the private sector or in senior levels of government. Sources say she also does not have the same clout within the PMO.
The Globe and Mail reported in July, citing government sources, that Ms. Telford and other PMO officials viewed Ms. Freeland as ineffective in selling the government’s economic policies, which have come under assault from Conservative Leader Pierre Poilievre.
The Prime Minister acknowledged after the Globe report that he has held talks with Mark Carney, the former governor of the Bank of Canada and Bank of England, to join the government. Mr. Carney, seen as a potential successor to Mr. Trudeau, has so far not taken up the offer.
In September, Mr. Carney was tapped by Mr. Trudeau to chair a task force to help develop ideas for long-term economic growth and productivity. He was also asked to beat the fundraising drums for the Liberal Party, which has placed a distant second in fundraising efforts by the Conservatives.
Ms. Freeland’s fiscal update is expected to include new border-security spending in response to president-elect Donald Trump’s promise to impose 25-per-cent-tarrifs on products from Canada and Mexico until they take sufficient action on illegal crossings and drugs.
The fiscal update has been delayed because the House of Commons has been gridlocked since Sept. 26 as opposition parties demand the government hand over unredacted documents related to misspending at a green technology fund to the RCMP.
This article was first reported by The Globe and Mail
