In cabinet government, few ministerial assignments are as difficult as that of managing the national finances. “It’s a thankless, lonely job,” former Conservative leader Robert Stanfield once remarked. “Particularly when you’re bad at it.” And last week Finance Minister Michael Wilson came face to face with the full complexity of the task. With the fiscal year opening on April 1, the events of the week generated both satisfaction and frustration. By week’s end the spending and borrowing foundations of his spring budget were largely in placeemdash;but so were uncertainties about the future of the economy and Ottawa’s mercurial politics.
Government spending estimates for the approaching financial year gave Wilson a guide for his budget. As well, Senate passage of a finance bill after five weeks’ delay gave him authority to borrow into the new budget year. And a federal report showed that economic growth was stronger last yearemdash;4.7 per centemdash;than Wilson had estimated last fall. But persistent foreign-exchange pressure against the Canadian dollar forced unscheduled borrowing and a rise in interest rates (page 36). The financial and political uncertainties may prompt Wilson to delay his first budget into May, opposition politicians speculated. But Prime Minister Brian Mulroney declared that Wilson’s budget, when it comes, will “restore confidence and create jobs.”
The budget will set out how Wilson proposes to raise the money, in taxes and public borrowing, to cover a record $105.4 billion in 1985-86 government spending plans presented to Parliament last weekemdash;although his budget could also trim back or delay some spending. But the dollar’s decline, the borrowing to support it and rising interest rates may compound Wilson’s budget-making problems. The minister predicted “some decline in interest rates” by April 1, but he came under intense pressure in the Commons to provide a clearer policy statement than his general pledge “to introduce a degree of stability to rebuild confidence in the Canadian dollar.” For his part, Liberal Leader John Turner, who served as federal finance minister from 1972 to 1975, assailed Wilson for what he described as a “lack of precision” in his economic statements.
The Opposition also attacked the government’s spending estimates as too large overall and inadequate in several respects. The total is a 7.3-per-cent increase over what the Liberals allocated for 1984-85. A projected seven-per-cent
increase in defence spending to $9.4 billion accounts for half of the increase, after discounting inflation. Also included in the thick blue estimates book tabled by Treasury Board President Robert de Cotret were a 20-per-cent decrease in spending on economic and regional development to $13 billion and a slim 1.5-per-cent increase to $2.58 billion for job creation and training. As well, there was an increase of more than
50 per cent in spending on staff and services in the Prime Minister’s Office.
Ottawa’s spending plans will put pressure on some provincial treasuries. Although proposed federal payments toward health care and postsecondary education, which go to all provinces, were up 16 per cent and 19 per cent respectively, four of the six poorest provinces that qualify for so-called equalization grants will lose money. Under a revised formula for the payments Quebec stands to lose $263 million, Manitoba $72 million, Nova Scotia $52 million and Prince Edward Island $3 million. New Brunswick gets an additional $22 million and Newfoundland
$35 million more. The other four provinces, with higher per-capita local revenues, do not qualify for grants.
As well as setting the stage for a potential dispute with provincial treasurers, the Mulroney government squared off for a potential showdown with the Senate, 72 of whose 104 members are Liberals. After the Upper Chamber delayed passage of the borrowing bill, Mulroney labelled the Senate’s majority “a bunch of Liberal rejects” and he vowed to move quickly to curb the Senate’s power. A constitutional amendment drawn up by Justice Min-
ister John Crosbie will be presented to cabinet this week.
But it was the battering of the dollar, which closed the week at 71.89 cents (U.S.), that most troubled Wilson. Declared the minister: “It’s the first time in history that we’ve had this enormous strength of the U.S. dollar against all other major currencies. No other finance minister, no other governor of the Bank of Canada, has had to face this before.” As his hectic week wound down, Wilson regained his customary composure and declared, “The direction is there to create the jobs, the confidence and that sense of certainty which was missing over the past 10 or 15 years.”t;£gt;
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