COVER

THE HOT SPOT ON THE HILL

WILSON’S FIFTH BUDGET IS A CRUSADE

MARC CLARK May 1 1989
COVER

THE HOT SPOT ON THE HILL

WILSON’S FIFTH BUDGET IS A CRUSADE

MARC CLARK May 1 1989

THE HOT SPOT ON THE HILL

WILSON’S FIFTH BUDGET IS A CRUSADE

Finance Minister Michael Wilson recalls it as a moment of epiphany. In 1977, Wilson, then a high-flying executive with a Toronto securities firm, was in a Hong Kong office tower trying to convince a local businessman of the wisdom of investing in Canada. The businessman pointed out of his window to the squalor of the sprawling great Asian centre of commerce some 50 storeys below. He told Wilson that Hong Kong was the most congested state on earth, that it produced little food, but its people thrived by dint of their hard work and sharp wits. In Canada, the businessman went on, the people have everything: land, food, good schools, natural resources. Then he asked Wilson, “How can you be messing it up as badly as you are?” Wilson recalls now that the businessman’s question “stopped me cold.” Then and there, Wilson said, he decided to enter federal politics.

Crusade: Twelve years later, Wilson’s name has become synonymous with the government’s battle to lower its debt. He holds what is widely regarded as the most difficult political post in the country, but he appears to revel in it. At times, his struggle with the nation’s

nagging deficit seems to verge on a personal crusade. Recently, he has repeatedly referred to the taming of the deficit as the government’s “overarching problem.” But it is not a newfound concern. Toronto consultant Douglas Robson, a close friend of Wilson’s and manager of several of his election campaigns, recalls that in 1978 Wilson showed him a graph illustrating the mounting federal debt—then $60 billion, compared with $321 billion now—and warned that it must be brought under control. And during Wilson’s 4V2 years as finance minister, the federal deficit has in fact dropped substantially—from a high of $38 billion in the 1984 budget, the last year of Liberal rule—to less than $29 billion in 1988-1989. Now, with the apparent support of Prime Minister Mulroney and his cabinet, Wilson has been making the final preparations for yet another leap forward in the battle against the deficit when he tables his fifth budget on April 27.

Friends and foes alike say that Wilson is a fundamentally decent, intelligent—if uninspired—and enormously hardworking politician, a man who gave up a lucrative financial career for public life out of a genuine belief that he could make Canada a better place. A minis-

ter’s salary of $124,900—of which $19,900 is tax-free— still looks good to many Canadians. But some of Wilson’s Bay Street colleagues estimate that he would be $20 million richer by now if he had not gone into politics. And even his political foes acknowledge his sincerity. Said Havi Echenberg, executive director of the National AntiPoverty Organization in Ottawa: “The finance minister and I agree on almost nothing, but I respect him. He has a lot of integrity.” But as Wilson goes about reshaping the government’s finances,

Echenberg and others remain troubled by one aspect of his background: Wilson has little in common with the average Canadian.

Elite: Wilson has led a privileged existence since his birth on Nov. 4, 1937. The son of Harry Holcombe Wilson, who went on to become the head of National Trust,

Wilson was mostly raised in Toronto’s Rosedale neighborhood, the enclave of old and wealthy families, at a time when it was the preserve of the city’s Anglo-Saxon establishment. He went off to school alongside other sons of the elite at Upper Canada College, modelled on England’s private schools, then went on to the University of Toronto’s Trinity College. After graduating with a commerce degree in 1959, Wilson served apprenticeships with respected broker-

MINISTER WITH A MISSION

As the April 27 date for Michael Wilson’s fifth budget presentation approached, the finance minister talked with Maclean’s Ottawa staff correspondent Marc Clark in an interview last week. Wilson spoke about the need to lower the debt:

Maclean’s: Are you concerned that, at a time when the economy is slowing down, you could push the country toward a recession by taking money out of the system?

Wilson: I don’t see that we are into a recession. The signs in the economy are for some slowing. We expected that. Yet the economy is moving along pretty well. The budget should not have the effect of moving things into a recession. The debt problem is a serious one. We must deal with it, and it is important that people understand that, if

we do not act on this, we are going to find that our fiscal situation becomes difficult. Maclean’s: Is the situation critical enough that it would be worth running the risk of a recession?

Wilson: Interest costs of the debt have gone from about 12 cents of every revenue dollar 20 years ago to 26 cents in 1986 to 31 cents last year. This year, they are going to be even higher. And that is in the face of the work that we have already done in getting the deficit down. There is a momentum that develops when the debt is growing as it has. And the only way that you can stop the growth in the debt is by getting the annual deficit down. This is what we must do, and this budget is a very important one in moving that process along.

Maclean’s: So this is essential regardless of other economic conditions?

Wilson: It is an overarching problem. It is the nature of the political process that there are requests, pressures to do this expenditure program or that tax break, and governments have been inclined to acquiesce and provide

this new program or that new tax break. Canadians have to understand that we cannot continue to do this, even though we may like to be popular.

Maclean’s: But are you afraid that the public will tire of deficit-cutting and that the government will lose support if it is a long-term battle?

Wilson: Public interest in cutting the deficit is increasing, not decreasing. I think people understand the problem, and we will be doing what we can to increase that understanding. We can deal with this problem and we can have healthy economic growth. We can have a reduction in the unemployment rate while this is happening. Maclean’s: Did the government lose some ground in 1987 and 1988?

Wilson: I’m not going to say we did or we didn't. This debt problem has taken a long time developing. We haven’t seen a surplus for 20 years now, and the actions of one year or another year are a part of that overall debt. □

age and banking houses in London and New York before returning to Toronto. By age 35, he was executive vice-president and part-owner of Dominion Securities. Six years later, in the 1979 general election, he ran successfully for the Tories in Etobicoke Centre, a well-to-do suburb west of Toronto, and sold his interest in Dominion Securities. He has been in the House of Commons ever since.

Exposure: Occasionally, Wilson’s comments have hinted at a background radically different from most Canadians. While courting support for his unsuccessful run at the Conservative leadership in 1983—Wilson placed a distant fourth on the first ballot—he told Alberta delegates that it was his dealings on the Toronto Stock Exchange that “taught me about life.” * One of Wilson’s aides, Richard Rémillard, said the minister once told him that he genuinely liked his exposure to door-to-door campaigning in Etobicoke because “for the first time he realized that there was a whole different world out there, different ethnic groups and different kinds of people.” For her part, Echenberg recalls her astonishment during one meeting with Wilson when he began musing about whether new changes to income tax rates would encourage or discourage welfare recipients from taking jobs. Said Echenberg: “I told him that people on welfare don’t generally talk to their accountants about marginal tax rates before taking a job.”

But Echenberg said that Wilson has made his own philosophy clear: “He genuinely believes that the less restrained the marketplace, the more benefits will accrue to all of us, including the poor.” And Wilson carries those convictions to the finance department with awesome energy. Veteran Tory organizer Harry Near says that Wilson is the hardest-working minister in cabinet. One senior Finance official said that he is “the ideal minister”—knowledgeable of the issues, and supportive of staff, even though he drives them to the brink of exhaustion. Wilson favors lengthy meetings to build consensus on policy. In effect, he makes himself part of a team. Said the Finance official: “He has less ego than any minister I have seen.” Added an aide to another senior minister: “Wilson’s meetings are interminable, but he and his people seem to love it. It would drive me crazy.”

Wilson’s passion—aside from work—is sport. He is a passable hockey goaltender and a strong skier who has sampled the slopes from the Austrian Alps to the helicopter skiing of British Columbia’s legendary Bugaboos. Between Christmas and New Year’s, he, his wife, Margaret, and one of their three children had a skiing holiday at Mont Tremblant, Que. Wilson is also a jogger and a passionate golfer noted for his strong tee shots. But his favorite activity is squash—Wilson is reputed to be the best player on Parliament Hill. And at six feet, two

inches and 200 lb., he is a formidable opponent. Said Near: “Let’s put it this way—he does establish position at the centre of the court.” Rémillard said that Wilson tries to play once or twice a week, in the mornings before work. A favorite partner: Supreme Court Justice John Sopinka, 56, a former professional football player.

Lobbies: But there was no time for squash last week in the budget run-up. Wilson learned the necessity for meticulous budget planning in 1985, in the aftermath of his first budget. Senior citizens stormed onto Parliament Hill after Wilson proposed deindexing their pensions, and the government was forced to back down. Since then Wilson has consulted routinely with interest groups ranging from blue-chip business lobbies to Echenberg’s antipoverty organization. Since 1985, three successive budgets and wide-ranging tax reform proposals have encountered no overwhelming public relations hitches. But his current task could be the most challenging of his career. If the dire predictions proved accurate, Wilson first would have to persuade Canadians that the hefty tax increases and cuts in service are in their best interests. Then, by early summer, Wilson is expected to table his proposals for a controversial national sales tax—probably of eight or nine per cent—that would apply to all goods and services except food and pharmaceuticals.

Yelling: Wilson’s Conservative colleagues in Ottawa said that the minister has the full support of Mulroney and his cabinet. For her part, former MP Patricia Carney, who as Treasury Board president was a cabinet colleague of Wilson’s before she left politics last year, said that he always worked carefully to build that support. And Wilson fights hard for what he wants, she added. Said Carney: “Wilson is not as meek and mild as his public persona.” Added consultant Robson, with a smile: “No serious discussion with Mike is complete without a little yelling and pounding on the table.”

Still, Robson said that Wilson wisely avoided battles around the cabinet table that he could not win—and he was especially aware of the need to let the government spend in the run-up to the election last November. Said Robson: “From Day 1 of his being finance minister, he would chuckle and say, ‘When we get to 1988, we will have to loosen the purse strings a little.’ ” Last week Wilson was putting the finishing touches on a plan to rein in the spenders.

MARC CLARK in Ottawa