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### Viewing cable 05OTTAWA594, THE POLITICS OF CANADA'S BUDGET: THE RATTLING OF

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05OTTAWA594 | 2005-02-25 18:02 | 2011-04-28 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ottawa

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 02 OTTAWA 000594

    SIPDIS

    SENSITIVE

    E.O.  12958: N/A
    TAGS: PGOV PREL CA
    SUBJECT: THE POLITICS OF CANADA'S BUDGET: THE RATTLING OF
    SABRES

    REFTEL:   A. Ottawa 375
              ¶B. 04 Ottawa 02837

    ¶1. (SBU) SUMMARY: On February 23, the Martin Government
    tabled its long-awaited 2005-2006 Budget.  The first
    "minority government" budget in more than twenty years
    provides for billions in spending across a broad spectrum of
    policy interests.  In addressing some of the oft-professed
    key interests of the Conservative Party (tax cuts and
    defense spending) and many of the left-of-center New
    Democratic Party's social policies, the federal Liberals
    have virtually assured safe passage of their budget in
    Parliament, thereby protecting the minority government from
    the latent threat of a no-confidence vote.  The fiscal
    implications of the budget will follow septel. END SUMMARY

    ¶2. (SBU) On February 23, Finance Minister Ralph Goodale
    tabled the Martin Government's long-awaited 2005-2006
    Budget, the first "minority government" budget exercise in
    more than twenty years.  The 400-plus page document doles
    out billions for a broad spectrum of policy programs, from a
    substantial increase in the defense budget to tax credits
    for care givers.  It also addresses at least some key
    interests of the official opposition Conservative party (99
    of 308 seats) and the left-of-center New Democratic Party
    (19 seats), thereby virtually assuring safe passage in the
    House of Commons.  This should extend the shelf life of the
    minority government and was probably carefully calculated by
    the Liberals to give the electorate a chance to sample the
    benefits of the new spending before an election is called.
    More importantly, in funding the pet projects of both the
    Conservatives and the NDP, the Liberals have marginalized
    their political archrivals in the critical province of
    Quebec, the anti-federalist Bloc Quebecois (54 seats).

    ¶3. (SBU) The government adeptly orchestrated a dramatic run-
    up to the budget speech, featuring choreographed leaks and
    announcements that provided a fairly accurate advance
    picture of the document's content.  Despite the fact that
    Min Fin did consult with them (as per Ref A, Ottawa 375)
    Opposition parties lamented the government's lack of
    consultation and warned that the Liberals should not take
    their votes for granted.  Though post-Budget Day media
    coverage criticized the budget as a document designed to
    attract popular support through social program spending, the
    personal and corporate tax cuts also prompted Conservative
    Leader Stephen Harper to remark "I note...the sudden
    occurrence of a range of interesting Conservative
    priorities."  National media also commented that the budget
    was an "election budget" that the Liberals could easily use
    as the basis of a campaign if there is an election in the
    near future.  Most commentators agree that the document was
    designed to spread enough money around enough programs to
    ensure the Opposition would not have serious grounds for
    complaint, which became evident in the first few minutes of
    Conservative Leader Stephen Harper's official response.

    ¶4. (U) Finance Minister Ralph Goodale announced spending in
    the following areas: Fiscal Management (savings through
    efficiency); Social Foundations (health care, etc);
    Productive Economy (personal and corporate tax cuts);
    Environment and Communities; and Global Responsibilities
    (defense spending and foreign aid).  Details (covered in
    Septel) include; an increase in the amount basic personal
    exemption after five years, cuts in corporate tax rates and
    other business measures, a national child care initiative,
    tax relief for care-givers, money for greenhouse gas
    reduction, money for renewable and wind energy research,
    increased international aid money, and a boost for the
    Canadian armed forces.  Given the varied list of spending
    areas in the budget, the Opposition is finding it difficult
    to field substantial complaints or protests beyond expected
    requests for more spending or more cuts and vague demands
    for specifics and details that are never included in the
    budget speech.

    Conservative Party - Won't Oppose

    ¶5. (SBU) Though Conservative Leader Stephen Harper invoked
    the traditional litany of Conservative complaints against
    the Government in his "rebuttal," he recognized that
    Canadians did not want an election and said the
    Conservatives would not force one over the budget.  It would
    be difficult for the Conservatives to take a more aggressive
    path in any case.  By funding two of the Conservative
    Party's most cherished pursuits -- income and corporate tax
    cuts and an increase in the defense budget -- the Liberals
    cut into the Conservatives' prospective elections campaign
    plank.  Harper vehemently denies media rumors that a back-
    room deal had been reached with the Liberals before the
    budget, and is quick to spin the document as a reaction to
    pressure placed on the government by the Conservative Party.
    (COMMENT: Conservative House Leader Jay Hill told us last
    week the party's polling numbers were no better now than at
    the time of the election and the Conservatives are looking
    to their very first policy convention in March to better
    define themselves and their programs for the electorate.
    END COMMENT.)

    NDP - Hijacked Policies

    ¶6. (SBU) The small New Democratic Party stands closest to
    the Liberals on social issues and thus is deemed to
    constitute the greatest "threat" to the left wing of the
    Liberal Party.  The Liberals, eager to be perceived as a
    more capable and distinct entity on such issues such as
    municipalities, child care, income tax cuts and
    environmental spending, featured these issues prominently in
    the budget.  Like the Conservatives, the NDP would be hard
    pressed to lodge a complaint with any credibility.
    Moreover, with two other high-profile NPD priorities also in
    present in the House -- same-sex marriage legislation and
    the government's announcement that Canada will not join the
    U.S. missile defense program -- the NDP is arguably in the
    weakest position to posture for an election, even if it had
    the electoral muscle to do so.  As it will not be able to
    support the "token" Conservative amendment, it may well
    claim responsibility for forcing the Liberals to support
    "its" social projects and vote to pass the budget.

    Bloc Quebecois - Marginalized

    ¶7. (SBU) Bloc Quebecois MPs told us earlier that the Bloc
    would be looking for specific items in the budget, noting
    that their primary concern would be whether the budget would
    address the so-called "Fiscal Imbalance."  The "imbalance"
    (ref B) is the perceived mismatch between federal and
    provincial constitutional responsibilities and their
    respective taxation powers.  With 54 seats, the separatist
    Bloc has more weight than the NDP, but not enough to sway a
    vote without significant Conservative support.  As the
    Conservatives have said they intend to support the budget,
    the Bloc will be stuck, unable to make their pitch to have
    the fiscal imbalance addressed. Bloc leader Gilles Duceppe
    denounced the budget as failing to take into consideration
    the needs of Quebec and, specifically, for not addressing
    the fiscal imbalance.  The Bloc Quebecois, touted in the
    media has having reached its high water mark in the 2004
    elections, remains very confident in its electoral chances
    and would not shy away from an early election.

    ¶8. (SBU) COMMENT: Just prior to the budget speech, some
    polls showed the Liberals with a slight rise to the critical
    "majority government" (40 percent) range for the first time
    since the June 2004 election.  However, the pundits (and
    many of our contacts in Parliament) are not so sanguine and
    say that Canadians are not in the mood for a snap election.
    With this in mind, and taking into account Canada's eight-
    year run of budget surpluses, Liberal tacticians sense that
    their gambit of buying off the Conservatives and the NDP
    opposition will gain them time which they need as they look
    ahead to a potentially divisive leadership convention in
    early March, challenges to their decision not to participate
    in missile defense, and the ongoing same-sex marriage issue
    as it makes its way through Parliament. End Comment

    CELLUCCI

`