In 1993, the Liberals promised to 'kill' the GST. Last week's about-face was a blow to the government's credibility.
E. KAYE FULTON
His party had taken almost three years to admit the obvious-that it could not find a way to ful fil its pledge to scrap the Goods and Services tax. And the least his colleagues could do, in John Nunziata's opinion, was to wait another week for his explanation of why he had broken with them. On April 16, the 12-year veteran Liberal MP voted against his government's budget to protest its failure to do away with the GST. Appalled by his headstrong gesture, Liberal MPs at their weekly caucus meeting less than 24 hours later shunned the Toronto MP~ a man they had once toasted as a member
Funny thing, politics. A day after Nunziata’s expulsion from the liberal caucus, Finance Minister Paul Martin confessed in Ottawa
of the fabled Rat Pack that had galvanized the faltering Liberals in the mid-1980s. In turn, the rebel in their midst ignored them: he would speak only when Prime Minister Jean Chrétien returned on April 20 from a four-day trip to Russia. Nunziata never got that chance. Expelled from the Liberal caucus by Chrétien in a letter faxed to his Toronto home on Monday morning, Nunziata was a problem that the Liberal government had decided it could no longer tolerate. By Friday, the party brass was hoping that both he-and the nettlesome issue that he staked his career upon-would simply fade away.
that the liberals had made “an honest mistake” in 1993 when they vowed to abolish the GST—a promise that senior liberals in the party knew as early as June, 1994, it could not keep. Instead, Martin contented himself with announcing last week that three Atlantic provinces—Newfoundland, Nova Scotia, and New Brunswick—had agreed to merge their sales taxes with the GST (page 16). And, the finance minister said, Ottawa intends to continue pursuing a cause that senior liberals privately acknowledged to Maclean’s last week is, for the moment, all but doomed: harmonizing the GST with provincial sales taxes at a single rate of 15 per cent from coast to coast.
The Liberals expected their about-face to cause a stir. In fact, party strategists spent three weeks perfecting Martin’s apologetic pitch. They even anticipated complaints from Ontario, British Columbia and Alberta that the $960-million compensation package used to entice the Atlantic provinces to join Ottawa’s plan was little more than a political bribe. Yet the outpouring of public sympathy for Nunziata’s kamikaze dive against the GST came as a surprise to senior Liberals. Said one top official in Chrétien’s office: “Nunziata was a reminder of how vulnerable we are on this issue.”
The enduring GST jinx hit the Prime Minister and his government where they hurt most. Ushered into power in November, 1993, on a platform that hinged in large part on restoring “honesty and integrity” to federal politics, Chrétien has staged a skilful and determined game to convince the public that he has kept his word. “There will not be a promise that I will make in the campaign that I will not keep,” Chrétien boasted on Sept. 10, 1993, waving the party’s famous Red
Book of campaign promises. Key among those pledges was a carefully worded statement that a Liberal government “will replace the GST” with a system that generates equivalent revenues and “promotes federal/ provincial co-operation and harmonization.”
If the Liberals had gone no further, they would likely not face such a serious loss of poi litical credibility. But before 1 the 1993 campaign, and all I through it, Chrétien and other I top Liberals repeatedly and I flatly stated that they would scrap, even “kill,” the GST— despite the fact that polls showed that few Canadians expected to see the end of the tax they loved to hate. Another key Liberal promise was the enhancement of the role of rank-and-file MPs, with more free votes on contentious issues and a greater say in government business—a pledge that Nunziata challenged to the extreme. The coincidence of those two issues last week was arguably the most damaging blow to Chrétien’s consistently high popularity (his government currently has an approval rating of 55 per cent). “It’s going to take more than this to get the Liberals into deep trouble,” said pollster Donna Dasko, vice-president
THE LINE-THEN AND NOW
“I would abolish the GST. The Manufacturers’ Sales Tax [which the GST replaced] is a bad tax, but there’s no excuse to repeal one bad tax by bringing in another one.”
Paul Martin, April 4, 1990
“I am opposed to the GST, I have always been opposed to it and I will be opposed to it always.” Jean Chrétien, Oct. 29, 1990
“A Liberal government will replace the GST with a system that generates equivalent revenues, is fairer to consumers and to small business, and promotes federal-provincial fiscal co-operation and harmonization.” The Liberals’ Red Book of election promises, Sept., 1993
“If the GST is not abolished under a Liberal government, I will resign.”
Sheila Copps, Oct. 18, 1993
“We hate it and we will kill it.” Jean Chrétien, May 2, 1994
“We made a mistake. It was a mistake in thinking we could bring in a completely different tax without undue economic distortion and within a reasonable time period.” Paul Martin, April 23, 1996
“We are fulfilling the promise that we made as set out in the Red Book.”
Jean Chrétien, April 24, 1996
“The fact is that when you’re on the campaign trail, you get excited and sometimes you shoot from the lip. Did I make a mistake in making that statement? Yes.
In the Catholic vernacular, it was venial not mortal. I think I should go to purgatory and not hell.” Sheila Copps, April 25, 1996
of Environics Canada in Toronto. “But the GST issue has taken on a life of its own. Quite simply, their motives look bad.”
That is precisely what troubled the senior liberals who met at the Ottawa home of House leader Herb Gray on Saturday, April 20, to plot the government’s strategy. They realized that the Liberals could not avoid a mea culpa on the GST, despite Chretien’s well-known aversion to admitting mistakes. “We had to come clean, we knew we wouldn’t get an ounce of credit for it, nor should we,” said a senior Liberal involved in the discussions. Nor could they wait any longer in the hope that Ontario would join the harmonization scheme. In fact, the consensus at the finance department was that no other provinces would come aboard, aside from Quebec, which was the only province that agreed at the outset of the GST in 1991 to blend its sales tax with Ottawa’s.
Negotiations with Ontario Premier Mike Harris had continued until the last minute in a seesaw battle to win the support of the largest province. Federal Liberals were convinced that Harris was fishing for a sweeter deal, knowing full well that the Liberals needed his support to make their plan work. The switch from the old to the new tax scheme would not cost the Ontario treasury any money.
But Harris was, in the end, not to be budged. Reluctant to help the Liberals keep a campaign promise, the premier complained that Ontario taxpayers and consumers would be providing $400 million of thé almost $1 billion promised as compensation to the Atlantic provinces. The result of harmonization, he said last week, would be to hurt the province’s retail sector by curtailing consumer demand. “We think it’s the wrong time to stomp on the area of the Ontario economy that is hurting the most,” he said.
In Alberta, Premier Ralph Klein had a similar reaction, saying that his province will wind up helping to pay for Ottawa's deal with the Atlantic provinces. "I think it's unfair, ab solutely," he said. Instead, the Liberal strategy was to concen trate on what little good news they had to offer.
A list of more than 100 technical reforms to the GST, among them the addition of frozen juice bars to the tax roll and the exemption of canned salad, was supposed to show that the Liberals were intent on reforming, if not in some cases complicating, the structure of the five-year-old federal tax. The tax amendments had been ready for months: in fact, the finance department was about to attach them to the March budget until an official pointed out that the government had not yet publicly given up on the GST Certainly, the three Atlantic provinces were prepared to express their satisfaction with the new tax scheme. Compared with combined sales-tax rates of 18 to 19 per cent under the old system—the highest in Canada—the reduced rate of 15 per cent scheduled to take effect in April, 1997, is expected to be a boon to the region’s businesses and consumers.
Extracting the government from its GST nightmare in other parts of Canada was a different matter. Martin was not the only Liberal MP on the firing line. During the 1993 election campaign—and again after a Liberal caucus briefing in January—Deputy Prime Minister Sheila Copps had rashly threatened to resign her seat if the GST was not abolished. But unlike Nunziata, Copps had undergone a change of heart. The exact words she would use to express that conversion were left to her. “The fact is that when you’re on the campaign trail, you get excited and sometimes you shoot from the lip,” Copps told reporters on Thursday. “Did I make a mistake in making
that statement [that she would resign!? Yes. If you want to take your pound of flesh from me, go ahead.”
The Prime Minister’s Office had more pressing problems. On April 16, the day of the budget vote, Nunziata sent a letter to Chrétien informing him that he planned to vote against the budget, aware that such a breach of parliamentary procedure has traditionally been viewed as a vote of nonconfidence in the government. As Nunziata said last week, he gambled that Chrétien would allow such dissension so the York South/Weston MP could prove to his constituents that he was “prepared to go to the wall” for them over the GST. Not coincidentally for the publicity-wise Nunziata (who was rumored last week to be contemplating a bid for the leadership of the Ontario Liberal party), it would also make quite a public splash. If Chrétien was angered that Nunziata chose to fax his letter rather
The severity of Nunziata's punishment was seen as a lesson to all Liberal MPs
than deliver it in person, aides said he was even more incensed at Nunziata’s flagrant disrespect for party solidarity. “Chrétien doesn’t mind MPs sounding off; in fact, he’s got kind of a perverse affinity for it,” said one senior Liberal. “But what he couldn’t permit and couldn’t ignore was the vote to defeat the government.”
In fact, Chrétien has shown little tolerance for serious dissent. Last September, the Prime Minister yanked Montreal MP Warren Allmand off the Commons justice committee after the 30-year veteran voted against the 1995 budget to protest massive cuts to social programs. Three other Liberal backbenchers who voted against government legislation were temporarily stripped of their seats on parliamentary committees. Whether or not it was intentional on Chrétien’s part, the severity of Nunziata’s punishment was seen by many MPs as a lesson to them all. In fact, as Nunziata noted last week, most of the April 17 Liberal caucus meeting was not spent discussing the flip-flop on the GST. Instead, more than
30 MPs clamored to know whether Chrétien would allow a free vote on legislation to amend the human rights act to prohibit discrimination against homosexuals.
Last week’s disarray in Liberal ranks was neither unusual for a majority government, nor was it entirely unexpected. Among the most vocal MPs are those from the 32-member Toronto caucus. “We are the early warning system for the government, but they have chosen to ignore us,” said Toronto MP Dan McTeague. “Ousting John was a very serious mistake.” In fact the most damaging display of support for Nunziata’s stand may be yet to come. Declaring that he was on “a Gandhi-type retreat” from Ottawa, Toronto MP Dennis Mills told Speaker Gilbert Parent last week that he, too, wanted to be moved across the floor of the Commons to sit with Nunziata. “I don’t want to be associated with a party that
kicks somebody out of caucus if they speak out,” Mills told Maclean’s. “I don’t accept that John was out of order, and neither does a single person outside the Ottawa bubble.”
Not to be outmatched, the Bloc Québécois and Reform party pounced at the first serious crack in the Liberal government’s facade. The two opposition parties were not without their own contradictions on the GST. Hampered by Quebec’s decision to harmonize its taxes with Ottawa, Bloc Leader Michel Gauthier was left with a sputtering complaint that the province’s share of the equalization payments to Atlantic Canada is an estimated $250 million over the next four years—while Quebec will receive nothing for its cooperation.
The rambunctious Reform party had fewer restraints to hold back its attack. Ignoring a 1994 parliamentary report in which Reform complimented Martin for his harmonization efforts, the party lashed out at Chrétien’s love-hate affair with I the GST. “The Prime Minister d supported the GST when he ran £ for the Liberal leadership,” Reform MP Deborah Grey said during a heated exchange in the Commons. “He opposed it in the last election, and then he supported it again now that he got Canadians’ votes.” Added Grey, as she tossed the Red Book to the floor: “This Red Book means nothing, absolutely nothing. Ifs a prop. It is a sham.” Grey claimed her disgust was more than partisan theatrics. “I’m just so disgusted with these Liberals,” she later told reporters. “I sat with these potlickers for the whole last term when (former Conservative prime minister Brian) Mulroney brought this GST in. I trusted them. I believed them that they were really going to live up to their promise.” Despite the overblown rhetoric of last week, that was apparently never a reasonable expectation. Aside from the preparation of three federal budgets, the fruitless search for an alternative to the GST has consumed the federal finance bureaucracy since 1993. During parliamentary hearings into the options Ottawa had to replace the tax in 1994, 500 witnesses could agree on only one thing. As a frustrated Alberta businessman told committee members, the GST was so expensive and time-consuming that “I might as well hire somebody just to dig a hole and fill it in for a week.” In the end, voters may well accept the Liberals’ excuse that they tried, but failed, to dump it. What is less likely is that Canadians will soon forget the spectacle that accompanied those efforts. □