Yesterday’s Speech from the Throne marked a significant change of direction for the Government. Less evident is the highly tactical, transactional focus of previous priority setting throne speeches, intended to appeal to various segments of the population. The government now seems to be signalling it is prepared to follow a longer term approach – some might argue a more visionary approach – as it unveils a longer term economic policy agenda. The speech was much more detailed and comprehensive than any the government has put forward previously.
Yesterday’s speech:
- Commits to completing the 2nd year of the stimulus spending plan announced in last Budget;
- Positions a new focus on productivity/innovation and creating a positive investment climate as ways to address deficit; and
- Pre-positions a major review of federal spending by announcing an across-the-board public service spending freeze.
The Prime Minister is still keenly aware that he is governing in a minority, but he has judged the public mood to be ready for a serious discussion about the future and how to manage the growing public deficit. Public concern about prorogation undoubtedly played a role in that calculation.
By talking about frugal management, productivity and innovation, the government is attempting to tap into the public’s desire for a plan to tackle the deficit, without getting into the politically difficult specifics of what programs will be cut. Taking a page from the Paul Martin/Jean Chretien playbook from 1994/5, the Prime Minister is building a narrative and creating time for the public to ‘buy-in’ before announcing where and when the cuts will come. While there will be great debate as to whether a federal spending freeze amounts to an actual spending cut, politically, this is a wise and even cunning tactic, as it is difficult for the opposition to criticize without specifics on spending cuts. And it delays the pain, in the event an election is triggered before the 2011 budget. The government was also careful to avoid a battle with the provinces by clarifying that there will be no cuts to transfer payments for health and education.
Focusing on long term productivity, innovation, and creating an attractive investment climate will be difficult for the Liberals to criticize as they have long contemplated making productivity a main budget pillar, most recently in Paul Martin’s first budget in 2004, but backed down when extensive focus group testing showed poor receptivity amongst key demographics. In short, it couldn’t be sold. But that was then and now the Prime Minister thinks the post-recession public is ready. And he is undoubtedly emboldened by Michael Ignatieff’s recent economic speeches that have called for similar efforts.
That said, the government will also try to sell productivity differently by localizing it with references to creating jobs for families. The risk of course, is the opening this type of economic plan provides for Jack Layton to paint it as ‘pro-business’ and ‘laissez faire’. Most moderate commentators will likely seize on the significance of the coming spending cuts and the government’s commitments on productivity/innovation, as evidence that an era of smaller government and a bigger role for business may be upon us.
While there will be much to cheer for if creating ‘winning conditions’ for Canadian business becomes the next agreed-upon national project, it remains to be seen whether a minority government distracted by the constant threat of an election and already focussed on managing the massive stimulus expenditure program and reviewing government-wide spending, will have anything left in the tank to tackle the difficult tasks of increasing productivity and innovation. Moving the needle in impactful ways on regulatory modernization and building competitive tax and investment structures are serious challenges that require sustained effort and attention, and support from provincial partners. Many in the PMO are probably hoping the economic growth witnessed recently continues unabated over the next year, requiring fewer cuts to be necessary.
It warrants mention that the Prime Minister’s Chief of Staff, Guy Giorno, worked for former Ontario Premier Mike Harris on an ‘innovation’ agenda articulated in a policy document called Roadmap to Prosperity.
Key Points of Interest
As mentioned previously, the Throne Speech was more specific than its predecessors. Key policies that were articulated, that will be further fleshed out in tomorrow’s Budget, include:
- Reconfirmation of continued adherence to the previously announced corporate tax cut schedule;
- A promise to ‘open Canada’s doors’ to foreign investment in satellite and telecom via changes to foreign ownership restrictions;
- Regulatory reform on environmental assessments for oil, gas and uranium projects;
- A new national Digitial Economy Strategy and a “bolstered” Science & Technology Strategy aimed at product commercialization.
- A commitment to table legislation on intellectual property and copyright, and to re-table food, drug & consumer product safety legislation from the previous Parliament.
Next Steps:
The various votes on the Throne Speech and the Budget will take place on successive days between March 8 and 10th. There are three separate votes and all are considered matters of confidence. FH does not expect the opposition to attempt to defeat the government on either the Throne Speech or the Budget for the following reasons:
- All three opposition parties would need to vote against the government and recent polls show the Bloc and the NDP might lose seats
- NDP Leader Jack Layton is undergoing cancer treatment
- A substantial number of MPs from all parties who were first elected in 2004 will see their pensions vest in June, and would lose their benefits if they lost a spring election prior to that
- The Liberals are still smarting from the public reaction to their 2009 efforts to defeat the government, and are convinced it is in their best interests to wait.
The full text of the speech is available here. Fleishman Hillard will continue to monitor developments and will follow up today with additional analysis of Budget 2010.
