“Mr Dithers” and his distracting “fiscal cafeteria”

Canada

Feb 17th 2005 OTTAWA
From The Economist print edition

The prime minister will probably survive a sleaze inquiry. Will that allow the old Paul Martin to stand up?

AS PRIME-MINISTERIAL occasions go, being questioned for more than four hours at a judicial inquiry—broadcast on live television—hardly ranks among the most agreeable. Indeed no serving Canadian prime minister had suffered such an indignity for 130 years. In the event, Paul Martin acquitted himself rather well when he appeared as a witness before an inquiry into sleaze on February 11th. But 15 months after succeeding his fellow-Liberal, Jean Chrétien, Mr Martin, a successful finance minister for almost a decade until 2002, cannot quite shake off the impression that Canada's top job is too big for him.

As finance minister, Mr Martin acquired a reputation as a tough and decisive deficit-cutter who transformed the public finances and oversaw the renaissance of the Canadian economy. But as prime minister, his faltering leadership has earned him the sobriquet of “Mr Dithers”. At an election last June intended to give him a personal mandate, the Liberals scraped back, reduced to a parliamentary minority. Both before and since, Mr Martin's main concern seems to have been to court popularity by parading a generous social conscience.

Yet before the cameras last week, a steelier Paul Martin resurfaced. He had himself ordered the inquiry—into the siphoning of funds from a C$250m ($200m) federal sponsorship programme set up by Mr Chrétien to promote Canadian unity in French-speaking Quebec. At the time, perhaps the inquiry seemed a clever idea, an attempt both to embrace clean government and embarrass Mr Chrétien, who had become his bitter rival.

It has turned into a millstone, which has burdened Canadian politics for a year. Judge John Gomery has probed the inner workings of government to find out who—bureaucrats or politicians—oversaw contracts to Liberal-friendly public-relations firms who are said to have skimmed up to C$100m in unwarranted commissions. So far his finds have hardly been earth-shattering: an extravagant C$59,000 for 480 neckties with a Canadian flag ordered by the prime minister's office, for example.

In his own testimony to the inquiry, Mr Chrétien defended the purpose of the scheme—to discourage Quebec from seceding, as it almost did in a referendum in 1995—and hinted that Mr Martin knew more about the details. But the prime minister pleaded his own lofty reasons of state for ignorance. He was immersed in steering the economy and leading the G20, a club of finance ministers, he said. Yes, several of his budgets included a C$50m Canadian “unity reserve” for the prime minister's office which he had never queried. It was up to the Treasury Board, Canada's civil-service department, to monitor this. He said that he did not know the sponsorship program even existed until reading press reports of its mismanagement.

He has probably done enough to distance himself personally from the scandal. But the affair has already damaged his government. Opposition parties made Liberal sleaze the main issue in last year's election. To shift attention, Mr Martin made some lavish spending promises.

Top of the list was a pledge to “fix for a generation” Canada's beloved but creaking Medicare system. The provincial premiers, who run the system, subsequently extracted from Mr Martin a larger cheque than he had originally offered: $41 billion over ten years, as well as a special deal for Quebec. He failed to win any commitments to reform the system in return.

Mr Martin is ceding revenues to the provinces too. On February 14th, he flew to the Maritime provinces to sign a special deal under which Nova Scotia and Newfoundland will keep all their revenues from offshore oil and gas but not lose federal handouts from the equalisation fund (an arrangement under which richer provinces hand over some of their revenues to poorer ones). In doing so, Mr Martin was honouring an unwise election pledge. More federal money is unlikely to revive the Maritimes' economy, which has been slowly dying for decades. But the deal has unleashed a stampede of demands from other provinces, led by Ontario, a Liberal stronghold and the largest of the three net contributors to the equalisation fund.

Last week, a ministerial conference on child care—another of Mr Martin's pledges—again suggested that Quebec should have special arrangements. Mr Martin is setting up a “fiscal cafeteria” for the provinces to choose their own takeaways, quipped Hugh Mackenzie, a Toronto economic consultant. At the same time, the federal government has seemed slow and hesitant in pushing ahead with its own agenda. Mr Martin has travelled abroad almost frenziedly, but a long-promised foreign-policy review has yet to appear.

For now, the prime minister can afford all this largesse. The economy is growing steadily. The federal government has a large fiscal surplus. Yet in allowing his authority to be undermined, Mr Martin may be storing up trouble. This week, the opposition united to defeat a bill to split the Foreign Affairs and International Trade Department into two. A bill to make same-sex marriage legal across the country may barely squeak through in the face of fierce Conservative opposition.

All this means that the budget, on February 23rd, will have unusual political importance. It should allow Mr Martin to set some priorities, rather than responding to those of others. It may include a shake-up of foreign aid, and money for a new rapid-response army brigade. The opposition is unlikely to force a fresh election by rejecting the budget. But if Mr Martin is to win that election when it comes, perhaps next spring, he will have to show more of his decisive leadership of old.

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