Deputy Prime Minister and Finance Minister Chrystia Freeland speaks with reporters in Ottawa on Dec. 10.Adrian Wyld/The Canadian Press
Prime Minister Justin Trudeau argued for his government’s spending but did not defend Finance Minister Chrystia Freeland, on the same day she gave the clearest signal yet that the minority Liberals will not meet their promised deficit target.
Opposition MPs seized on a Globe and Mail report Tuesday that said tensions have risen between Ms. Freeland and the Prime Minister’s Office about increased spending on political strategies such as the two-month GST holiday on toys, alcohol and food and a promised $250 rebate for working people earning $150,000 or less. The two measures would cost $6.28-billion.
The report, citing 10 unnamed sources, said Ms. Freeland is concerned that this kind of spending has put what she previously called her $40.1-billion “fiscal guidepost” in jeopardy and that her department had characterized the GST and rebate policies as economically unwise.
The Globe is not identifying the sources who were not authorized to speak publicly about the tensions between the PMO and Ms. Freeland and her department.
“According to The Globe and Mail, the Prime Minister’s Office has given internal direction for an aggressive and possibly costly policy agenda that threatens to blow past spending targets,” Conservative Leader Pierre Poilievre told the House of Commons.
“She promised the deficit would be capped at $40-billion, acknowledging that if it went over, it would cause even more inflation.”
The Prime Minister did not defend his Finance Minister to Mr. Poilievre but did stand behind his government’s spending on dental care, food in schools and investments in electric battery plants. He predicted the Bank of Canada will reduce interest rates Wednesday.
“While the Leader of the Opposition continues to talk down Canadians and the Canadian economy and indeed Canada, let me once again, put it on the record, Canada is the best country in the world,” Mr. Trudeau replied.
“Canadians will keep building a positive future for themselves by being there and showing up for each other, unlike the Leader of the Opposition, who has voted against every measure that has been put on the table to support Canadians.”
Deputy Conservative Leader Melissa Lantsman read from the Globe report that some Liberals believe Ms. Freeland is facing a similar fate as former Liberal finance minister Bill Morneau, who was pushed out in 2020 by Mr. Trudeau for objecting to massive pandemic spending.
“On this side of the House we are united,” Ms. Freeland said as the opposition benches erupted in laughter and the Prime Minister stood up to applaud his embattled minister.
Conservative MP Michael Chong wondered why Ms. Freeland isn’t resigning in the spending dispute with Mr. Trudeau.
“Does the Finance Minister still have confidence in the Prime Minister?” he asked.
“Yes,” she responded, to more laughter from the opposition benches.
Mr. Trudeau’s government has never balanced the budget in its nine years in office and has repeatedly moved back the goalposts by which it judges its own fiscal responsibility.
Earlier in the day, Ms. Freeland set expectations that the government will again miss its self-imposed budget targets when she tables the fall economic statement on Monday, only committing publicly to one of the three benchmarks she set for herself just months ago.
At a press conference, Ms. Freeland told reporters that in an effort to be clear with capital markets, she was confirming that the government will meet its debt-to-GDP ratio target for the year 2023-24.
“You will see that the government is maintaining its fiscal anchor, specifically reducing the federal debt as the share of the economy over the medium term,” she said.
However, in April the government set three goals, or “fiscal guideposts” as the Finance Minister described them in her budget speech, which she said at the time would together show the government was responsibly managing the public purse.
The first was ensuring the deficit for 2023-24 stayed below $40.1-billion.
The second was lowering the debt-to-GDP ratio in 2024-25 relative to the 2023 fall update and “keeping it on a declining track thereafter.”
The third was maintaining a declining deficit-to-GDP ratio in 2024-25 and keeping deficits below 1 per cent of GDP in 2026-27 and future years.
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Ms. Freeland did not make mention of the first and third pledges on Tuesday and despite repeated questioning about the size of last year’s deficit and whether she still believed it was important for it to shrink, she would not say whether it had gone past the target she set.
“I was careful and precise in my comments about the debt-to-GDP ratio, maintaining a declining debt-to-GDP ratio is our fiscal anchor,” Ms. Freeland said. “That is important. That is how we maintain sustainable public finances.”
In October, the Parliamentary Budget Officer said the government was already on track to miss its deficit target for last year, estimating the government would record a $46.8-billion deficit for the 2023-24 fiscal year.
The final tally for last year’s deficit will be confirmed when the government publishes its delayed annual public accounts.
Asked about the tensions between the PMO and Finance Department, Ms. Freeland said it is a “great privilege to serve Canadians as Finance Minister and Deputy Prime Minister in Prime Minister Justin Trudeau’s cabinet.”
“I am conscious every day that it’s a privilege,” she added. “I am very conscious of the reality that Canadians are facing great challenges domestically and big challenges in the world, I am focused on those challenges, I am focused on my work serving Canadians and not political bickering.”
An analysis released by Desjardins on Tuesday showed the bank believes the government will clock a higher deficit for last year than promised.
“While there seems to have been efforts made to find some change in the couch cushions to try to reduce the size of the deficit, we don’t expect that it will be enough to wrestle the shortfall down to $40-billion,” reads the note to clients.
“That would mean the federal government has breached at least one of the fiscal anchors.”
“Ottawa’s deficit targets are toast,” reads a headline from BMO Economics. “Why are Ottawa’s fiscal guardrails getting watered down yet again? It’s the desire to spend,” said the bank’s senior economist, Robert Kavcic.