Mark Carney’s blueprint for revitalizing the economy, released as the Liberal leadership contest enters its final weeks, can’t help but disappoint voters hoping for a shift away from the high-spending, big-debt approach of the Trudeau years.
Carney’s outline does pledge to alter the accounting process. In place of one big pie to divvy up among myriad supplicants, the former central bank governor would split the pot in two. More effort would go into controlling “operating” spending, which covers ongoing expenses such as pensions, benefits, payrolls, equipment and the like. Spending on capital costs, used to build railways, ports, transport routes and major infrastructure projects, would continue to balloon.
Carney promised to balance operating spending within three years, but immediately undermined his ability to do so by promising no change to some of the biggest outlays. Transfers to provinces will remain untouched. Transfers to individuals will remain sacrosanct. He would “initially” put a cap on the civil service, which has swollen by 40 per cent under Trudeau — meaning an extra 110,000 generous salary and benefit packages to be paid — but how long the cap would remain is not specified. Nor does he say what he’d do about the $18 billion spent on outside consultants and contractors despite all the added bureaucratic brainpower.
There’s little disagreement that Canada’s infrastructure needs serious upgrading to attract investment, especially given the new dangers emanating from Washington, but Carney’s figures are the sort Canadians have come to dread during nine years in which federal debt doubled, building a mountain of financing charges in the process. To “become carbon competitive and achieve Net Zero” alone, he says, the country would need to spend $2 trillion by 2050, or about $80 billion a year, four to eight times current spending.
To find the money for that level of spending — the Carney camp, like Trudeau’s Liberals, refers to it as “investment” — voters are promised “a more efficient and effective government — one that delivers better results while spending responsibly.”
A Carney government would “focus first on reining in wasteful and ineffective government spending,” “review our spending with an emphasis on outcomes and technology to reduce inefficiencies,” concentrate on “maximizing the outcomes achieved, while minimizing the dollars spent,” and ensure “responsible financial management while making wise, long-term investments to build for Canada’s prosperity and future.” All echo pledges regularly offered by Trudeau and former finance minister Chrystia Freeland even as spending and debt soared out of control, with promised “fiscal anchors” abandoned along the way.
Carney says he’d raise cash for the mammoth rebuilding project by using tax dollars as seed money to entice private capital, hoping that for every dollar kicked in by Ottawa, $3 or $4 could be recouped from outside sources. “A Mark Carney-led government will focus on ensuring that government capital investment dollars catalyze multiple times their value in private investment,” he pledges. As a two-time former central bank governor and experienced financier, it’s an area in which he has knowledge and experience, but it’s also something Ottawa has already tried out numerous times, with limited success.
Former prime minister Stephen Harper’s “public-private partnership” program committed $1.3 billion to 25 “large or complex infrastructure projects” before Trudeau’s Liberals mothballed the scheme on the pretext that it had “fulfilled its mandate.” In its place they launched the Canada Infrastructure Bank, with $35 billion kicked in for much the same purpose. The CIB led a troubled life, struggling to find suitable projects to the point that the House of Commons transport committee in 2022 recommended it be shut down. Freeland subsequently unveiled the $15 billion Canada Growth Fund to “bring to Canada the billions of dollars in new private investment required to reduce our emissions, grow our economy and create good jobs.”
Whether Carney would keep both funds or add another isn’t clear, but the idea mirrors one adopted by Rachel Reeves, Britain’s Chancellor of the Exchequer and a Carney favourite. Soon after Labour came to power last year, Reeves launched a $10.4 billion (7.3 billion pounds) National Wealth Fund charged, using much the same language as Carney, with “public, private risk-sharing, providing private investors with the confidence needed to fund the technologies and infrastructure needed to drive growth and create new jobs.”
Carney’s enthusiastic support of Reeves at a Labour party conference was seen as crucial to reassuring voters she could be trusted with the economy. The going hasn’t been easy, however. Her first budget in October included $57 billion a year in new taxes, more than half of which would hit small businesses via a sharp hike in insurance premiums paid on behalf of workers. It also contained a tax hike on capital gains from stock market shares, and a change in inheritance tax laws that farmers say will make it harder to keep family farms in the family. Labour’s popularity has taken a pummelling in its short time in office, with Reeves identified as the most unpopular member of Cabinet. Grocers warned last week that, due to the extra taxes, food prices are likely to rise about 5 per cent.
In “Value(s)” his 2021 book on “Building a Better World for All,” Carney heaped high praise on Canada’s carbon tax, calling it “a model for others.” Regular annual increases in the levy would (once again) “give Canadians and Canadian businesses the certainty they need to make the investments to set our economy on a sustainable path to a competitive and greener future.”
While he now says the tax has become “too divisive” and would be scrapped in favour of shifting costs onto the biggest emitters, he remains determined to put carbon reduction at the centre of government decision-making. His campaign lays out a lengthy list of proposals, including a “carbon border adjustment mechanism,” an “efficiency mandate” on certain industries, green bonds to expand EV charging stations, requirements for “climate risk exposure” by Canadian firms and a host of incentives and subsidies to encourage energy efficiency among homeowners.
“Value(s)” makes clear he sees climate change as the overriding issue of the day, one to be prioritized even as Canada struggles against an antagonistic Washington. Which leaves us to wonder where the economy stands in this: is the emissions challenge something to be addressed on the road to reviving the economy, or is the economy something that has to be manhandled into serving the masterplan of reducing emissions?
National Post