In Question Period today in the House of Commons, the questions were relentless. Why did Finance Minister Bill Morneau not place his considerable wealth in a blind trust as every other wealthy cabinet minister has done in the past and is only doing it now?
And when Question Period ended, the Commons went to a recorded vote. The vote was on a Conservative motion that said the Finance Minister was in a conflict of interest, because his family firm Morneau Shepell must have benefited from government policy while he still owned shares.
But Bill Morneau wasn’t in the House of Commons for any of that criticism. He was preparing to present his fall fiscal update when the financial markets closed at 4:00pm.
What did the Fiscal Update Announce?
And while he was waiting he must have been smiling. Because Morneau told the Commons that Canada’s fiscal outlook had improved by $8.5 billion, since his budget last March.
What’s more, the improved fiscal position means more money for the middle class, and those working hard to join it.
The Canada Child Benefit will increase by $200 for a family with two children next July. In 2019, the year of the next federal election, they will get $500 more than they do now.
The small business tax, which was 15 per cent in 2015 at the time of the last election, will drop to 9 per cent in 2019. Oh yes, that is the year of the next election.
The Government has been criticized for running deficits of close to $30 Billion for the past two years. Well this year, the deficit fell from a projected $28.5 billion in the spring budget to a projected $19.9 billion.
Now the projection is that by the fiscal 2022-2023 the deficit will have shrunk to $12.5 Billion. And the important debt to GDP ratio will fall from 30.5 per cent to 28.5 per cent.
How will it play out?
It is a rosy forecast but how will it play out? Well there are some pitfalls.
As the economy improves and inflation looms the Bank of Canada will have to respond by raising interest rates. And as interest rates go up, the Government’s cost of borrowing will go up, and the deficit will start to climb just to service the debt.
Add to that the uncertainty of the NAFTA negotiations and the economic impact of cancelling the treaty would have, there are potential storm clouds hovering over the financial future.
But for now, it was a good day for Bill Morneau. Not only did the Liberals use their majority to easily defeat the conflict of interest motion, as the Minister himself said, “it is a very good fiscal update.”
Don Newman is Senior Counsel at Ensight, a Member of the Order of Canada, and a life-member and past president of the Canadian Parliamentary Press Gallery.