Liberal Party leadership candidate Mark Carney delivers remarks at the still-under-construction Gordie Howe International Bridge in Windsor, Ont., on Feb. 5.Carlos Osorio/Reuters
There are different types of messaging in politics, including verbal and non-verbal.
Liberal leadership candidate Mark Carney excels – strangely enough for a former central banker – at the non-verbal kind. He projects relaxed competence. Nothing seems to ruffle him. That is an attractive quality in a leader, especially in times as ruffling as these.
Mr. Carney’s verbal messaging needs some work. The few speeches he has given since launching his campaign to succeed Prime Minister Justin Trudeau have not exactly been barn burners. And when it comes to policy pronouncements, he has been all over the map.
Part of Mr. Carney’s messaging problem appears to be the result of his laboured French. In his second language, he is more succinct, providing simple yes or no answers to many questions. But this seems to be a result of a lack of French vocabulary. By oversimplifying, he sometimes appears to contradict what he has previously said, elsewhere, in English.
On fiscal policy, Mr. Carney’s messaging has been outright confusing. He has pitched an alternative definition of the federal deficit and proposed a major overhaul in the way Ottawa classifies and organizes expenditures, vowing to invest more while spending less.
“A Mark Carney-led government will balance the operating budget in three years,” according to a background document released by his campaign. “At the same time, we will run a small deficit on capital spending that aligns with our fiscal capacity, recognizing that current capital spending is estimated to be approximately 1 per cent of GDP.”
The nicest thing that can be said about this idea is that it is creative. But politicians do not get to create their own accounting rules. Governments in Canada adhere to reporting standards developed independently by the Public Sector Accounting Board (PSAB), and which are broadly aligned with standards followed in other developed countries.
This ensures that investors and voters alike can compare apples to apples when evaluating the fiscal health of different governments. Mr. Carney cannot unilaterally change the accounting rules. To be credible, the federal government’s audited financial statements would still need to be prepared according to PSAB standards.
What Mr. Carney is not proposing to do is to balance Ottawa’s program-spending budget, also known as its primary balance. That part of the budget is already in surplus, with program expenditures projected to reach $486-billion in the 2024-25 fiscal year compared to $495-billion in revenues. Ottawa’s projected deficit of $48.3-billion is mainly the result of the $53.7-billion it will fork out in interest payments on the $1.4-trillion federal debt.
What Mr. Carney seems to be offering, then, is an alternative budget presentation that makes a clearer distinction between day-to-day program spending and capital investments in new infrastructure, technology and military equipment. Mr. Carney seems to subscribe to the idea that it is easier to justify borrowing to finance these investments because, unlike Old Age Security spending, they are more likely to foster future economic growth.
Yet, much of Ottawa’s capital spending takes the form of cash transfers to provinces and municipalities to fund infrastructure, such as transit projects. Ownership of these projects lies with those lower levels of government, not Ottawa. And their value is difficult to measure.
Conservative Leader Pierre Poilievre has dismissed Mr. Carney’s proposal as “a sneaky accounting trick to take billions of new Liberal spending off the budget records.” Until Mr. Carney provides more details about his plans, he will remain vulnerable to such criticism.
Mr. Carney’s proposal echoes changes British Chancellor of the Exchequer Rachel Reeves introduced in her October budget, including new “fiscal rules” (what Ottawa calls fiscal anchors) that capture “not just the debt that government owes, but also financial assets that are expected to generate future returns.”
This is no surprise. Mr. Carney served as an economic adviser to Ms. Reeves, who worked as an economist at the Bank of England when he was governor, prior to last year’s election. He was a strong proponent of the changes to the fiscal rules, which will enable the Labour government to boost borrowing by about £50-billion ($89-billion) for capital projects.
“Governments can act only if they have adequate financial resources and the necessary fiscal flexibility,” Mr. Carney wrote in an October op-ed in The Times of London. “If government money is being spent to build or buy an asset on behalf of the nation, it is only right that its value is captured in the definitions of the national debt.”
A spokesperson for Mr. Carney said he would enshrine his proposed fiscal-rule changes in legislation and “the specifics will be finalized through the implementation process.”
But if the prospective Liberal leader wants Canadians to trust him to manage the country’s finances, he owes them a clearer explanation of his budget plans now.