Everything looked so relaxed and unstudied. Prime Minister Jean Chrétien was in short sleeves while members of his caucus, gathered in a parliamentary committee room last week for a midsummer’s reality check, favored light frocks and golf shirts. Tourists meandered about the lawns and halls of Parliament, gawked at a Mountie on a horse and eavesdropped indoors as Human Resources Minister Lloyd Axworthy talked to reporters about plans to revise unemployment insurance. Chrétien hosted a caucus garden party at 24 Sussex Drive. Some MPs brought spouses and kids. Solicitor General Herb Gray, the cabinet’s biggest rock and roll fan, took pause from affairs of state to express his sadness at the passing of Jerry Garcia, leader of the Grateful Dead. When the two-day meeting ended, Chrétien made a brief stop in his office, then headed back to Harrington Lake, the prime minister’s summer retreat in the Gatineau Hills north of the capital. Even the approach of the Quebec referendum, expected this fall, could not ruffle what has become the trademark composure of Chrétien’s Liberal government.
Said Intergovernmental Affairs Minister Marcel Massé, one of the few ministers who showed up in a suit:
“I think the best situation is for us to remain calm.”
The tranquillity surrounding the caucus meeting, the first since Parliament recessed in late June for a 2V2-month break, was not just for show. Neither, however, was it an entirely accurate reflection of the reality of internal Liberal politics in the 21-month-old Chrétien government. Axworthy won broad support for his plans—not yet finalized—to cut and remake unemployment insurance, but there were some grumbles. Many MPs said that a month in their ridings talking to voters had convinced them that the government, which has aggressively cut the federal deficit, will have to put more emphasis on job creation. And they said it was about time the Liberals kept their promise to get rid of the Goods and Services Tax. Chrétien said he agreed with them. A proposal to replace the GST will be outlined in the next budget, he said, and job creation will get more attention. “As long as there are people who want to work in the country, we will never stop,” he said to reporters afterward. “It’s the right priority.”
But come autumn, with Parliament’s return, a key priority will be changes to unemployment insurance, not job creation. Caucus approval
was the last step in shaping the revisions before the package goes to the cabinet for final approval. Legislation will be introduced this fall. “There is very broad support for the §s direction we want to take,” Axworthy told reporters last week. The Liberals are trying to spin the changes as an aid to the unemployed and have taken to calling the program employment insurance. “What we need in Canada is a way of giving a lot of Canadians who are facing long-term unem_ ployment the tools to get back in the workforce,” said Axworthy. “Work is the primary way of dealing with low income.” Axworthy is working within limits set in last February’s budget. Finance Minister Paul Martin then announced that UI benefits would be cut by a minimum of 10 per cent—about $1.5 billion a year. The
cabinet, however, has agreed that Axworthy can take $800 million of the savings and put the money towards programs that will help people without jobs get work. “The whole purpose of the reform,” Axworthy told Maclean’s, “is to make it far more of an incentive for work and to provide more support for reemployment measures.” Axworthy has been forced to abandon an earlier option of a formal two-tier system that would have provided a system of lower benefits for repeat claimants, many of them in seasonal resource industries. A 1991 study indicated that 38 per cent of UI recipients have filed three or more claims over five years, with the highest proportion of frequent claimants in the Atlantic provinces. But his current plan, which could be phased in over several years, will still have the effect of penalizing frequent users by reducing their benefits. The scheme would also reduce benefits for people making claims after working less than 20 weeks. There is, however, provision for somewhat richer payments for those on low incomes.
The plan left some Liberals unimpressed. The most vocal critic was Newfoundland MP George Baker who complained that Axworthy’s plan would take money from jobless Canadians. “No matter how you look at it, people in high-unemployment areas or with seasonal employment will have a reduced cheque,” he said. “If you go any further on that right wing, you’re going to need a parachute.” But even Baker conceded that he was in the minority. Some MPs on the left of the party, including Winnipeg’s John Harvard and Windsor’s Shaugh-
nessy Cohen, applauded Axworthy’s proposals. Others, Prince Edward Island MP Wayne Easter among them, took solace from Axworthy’s promise to caucus that the proposals are open to change. “He’s made it clear that it’s not etched in stone,” said Easter. “I feel much better coming out of this caucus meeting than I did going into it.” Government officials said, however, that the basic principles in the UI plan will not change.
Approaching its second anniversary, Chrétien’s government retains the approval of more than half the voters, opinion polls indicate. But many Liberals arrived at the caucus meeting fearful that the party, elected in October, 1993, on a message of hope about economic recovery, had become hypnotized by the deficit, expected to stand this year at $32.7 billion in a budget of $163 billion. It is a view shared outside the caucus room, as well. “Deficit reduction has consumed the entire political agenda,” says Susan Phillips, editor of the recently published edition of the yearly publication How Ottawa Spends. “The four pillars of the Red Book [the Liberal election platform] have been collapsed into one as the imperative of deficit reduction has pushed aside plans for job creation, social security reform and child care.” Robert Jackson, a political science professor at Carleton University in Ottawa and policy adviser to former Liberal leader John Turner, says the party’s thinking under Chrétien has changed. “The country has lurched to the right and Mr. Chrétien and Mr. Martin have lurched with them.”
Inside the caucus, such MPs as Baker, Toronto’s John Nunziata and Charles Caccia, along with Montreal’s Warren Allmand, have argued that it is time to return to the Red Book campaign themes, which had criticized the Tories for their single-minded attention to the deficit. “I don’t see a public preoccupation with the debt and deficit as there was a year ago,” Caccia said. Nunziata said he wants to see more government intervention to create jobs. “You can’t just cross your fingers and hope.”
The push for more effort on job creation comes partly because economic growth has slowed. With July unemployment at 9.8 per cent of the national workforce, Statistics Canada reported that there has been no significant job growth in eight months. “Our focus has been getting the national finances under control,” Harvard told Maclean’s. “We have to shift gears.” But neither he nor other senior Liberals said the
change in emphasis would entail any lessening of the effort to reduce the deficit. And some strategists said the shift might be more an adjustment in the way the Liberals try to package and sell their programs. As an example, one of them noted that deficit reduction has meant lower interest rates, and that has put more money in the pockets of consumers than any government program could do. Cohen said Canadians understand that job creation isn’t as easy as meeting other election commitments. “This is not like helicopters and Pearson airport, that bang, it’s done.”
One election promise that will be met, Chrétien promised again last week, is elimination of the GST. “It will be replaced,” he said. MPs said the Liberals could not back away from the promise, and strategists agreed that many voters viewed the pledge as a test of Chrétien’s word. “If we don’t do something about it, our credibility is gone,” said Mississauga MP Carolyn Parrish. But keeping that promise may provide scant tax relief for Canadians. Ottawa is likely to push for a new levy that would see the GST and provincial sales taxes rolled into a single national sales tax—a proposal that is favored by Ontario’s newly elected Conservative government, but has met with stiff resistance from several other provinces, including Alberta, Saskatchewan and Manitoba.
Cleavages in the Liberal caucus have followed two divides: a leftright split on economic and social policy, and an urban-rural split most apparent on gun control. Where the fault lines converge is on a demand for greater freedom for MPs. Baker says that until Chrétien gives his backbenchers more clout, “the government will be in trouble with dissident MPs for the rest of this term.”
But the splits have so far been well contained, and while many Liberals have grumbled, sometimes publicly, about budget cuts, only Allmand voted against the budget bill. Gun-control legislation was also contentious, but again only nine of 177 Liberal MPs voted against their party. There are rifts, one Liberal acknowledges freely, but “it’s a sliver of a splinter.” Chrétien said last week the splinter was not giving him any trouble: “There is no problem with the caucus.” With the dissent so muted, it was a hard point to argue. The serenity continued.
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