Both the Conservative government and the New Democrat official opposition are likely to continue to work along familiar themes as Parliament resumes today. After over a month off for Christmas vacations and connecting with constituents, MPs return to Ottawa as the House of Commons resumes sitting on January 28 while the Senate resumes February 5. With the federal budget approaching, and a number of important initiatives being implemented, there should be enough to keep Parliamentarians busy.
We expect the Conservative government to use the budget as another opportunity to drive home the familiar theme of sound economic management. Meanwhile the NDP will continue to carefully build the message that they are a well-run opposition that could credibly form government. The third place Liberals will mostly avoid taking strong positions until their new leader is announced on April 14. As is always the case in federal politics, outside events could easily knock the parties of their planned message track, and, increasingly, those events are likely to come from outside of Canada. US fiscal cliff negotiations and a change in leadership in China have meant that Finance Minister Jim Flaherty has refrained from publicly previewing the content of Budget 2013.
A more concerted pre-budget communications effort may start after mid-February when the budget should be essentially finalized. As is the Conservative practice, caucus views will be solicited to help guide Minister Flaherty. He will hear from Conservative MPs about what their constituents are saying about the state of the economy and ideas to help it grow. This highlights an important trend for the Conservatives; they are actively looking for ways to reduce their reliance on the internal machinery of government for policy ideas. For example both the Tax Free Savings Accounts and reforms to Old Age Security started as ideas heard in pre-budget consultations with private sector stakeholders.
As stated by Minister Flaherty just before the World Economic Forum this month, the government’s top priorities continue to be creating jobs, growth and long-term prosperity, with a return to balanced budgets by 2015. The overall economic policy framework for the Conservatives will continue to be creating growth by increasing international trade, encouraging greater development of natural resources and fostering more innovation. These were the major themes of the Budget 2012, and we anticipate they will feature prominently in Budget 2013. Despite claims the government will have little new money to invest, there are persistent rumours of a new infrastructure spending plan.
Here is more of what we expect from the federal government over the next few months:
Federal budget
– The size of the federal deficit remains a major concern for the Conservatives. While Finance Minister Flaherty said in his fall economic update, that the deficit may not be eliminated until 2016-17, Prime Minister Harper quickly clarified the goal remains to eliminate it by 2015. Not coincidently, the next federal election is scheduled for 2015.
Clearly the deficit represents an important election issue, as either its elimination will be an important Conservative achievement or its continued existence will lead to substantive criticism of the government’s fiscal handling. As a result you should expect government departments to continue with very tight spending controls and an appetite for opportunities to reduce the cost of delivering services to Canadians.
– Due to concerns over the deficit and only modest economic growth despite good jobs numbers, the government will not have much to invest in its long awaited digital economy strategy. When Industry Canada Minister Christian Paradis appeared before the House of Commons Industry Committee in November, he was keen to include items that cost little or generate new funds, such as the new wireless spectrum auction, as part of the strategy. Industry Canada is anticipated to announce the details of the new spectrum auction in the early part of this year.
– On the innovation front, the government has two major outstanding issues from Budget 2012 that it is still working to implement. Earlier this month the Prime Minister announced a few new details for the $400 million Venture Capital Action Plan, but participating firms and partners still need to be determined. On a separate but related note, the government will announce in Budget 2013 how it will reinvest the money saved by reducing the size and scope of the SR&ED tax credit. Most indications are that the reinvested direct support to innovation will focus on small and medium sized enterprises. First Nations
– Recent events have pushed First Nations issues higher up the government’s political agenda, and Prime Minister Harper knows he must find ways to partner with Assembly of First Nations National Chief Shawn Atleo. The Idle No More movement threatens both Atleo’s leadership and, more broadly, Canadian economic stability, particularly in the resource and transportation sectors. Prior to the Idle No More movement gaining significant media attention and the resulting meeting between the PM and chiefs, improving K-12 education was the major issue being worked on between AFN and the government. A new Education Act that both creates First Nations School Boards and increases per student funding remains a distinct possibility. This would provide a starting point for the government and AFN’s leadership to show they can develop solutions together that will grow First Nation’s governance away from the Indian Act. More broadly, the federal government will look to continue with its strategy of looking for policies and opportunities to create better links between First Nations communities and resource industries. The government remains firm in its belief that rural and remote First Nations communities will not be able to elevate their stand of living until they become economically viable.
Trade and International Development
– New international trade agreements remain a cornerstone of the government’s economic agenda. Negotiations over the Comprehensive Economic and Trade Agreement between Canada and the European Union are expected to be completed in the first few months of 2013. The federal government will then move to complete negotiations with one or more of India, Korea or Japan before the end of 2013. The multilateral negotiations for the Trans-Pacific Partnership are more complex, and as a result, remain more of a medium term proposition.
Canada’s trading partners will continue to press for greater access to the country’s dairy, egg and chicken markets putting pressure on the supply management system. The two biggest sources of pressure will be the CETA agreement between Canada and the EU and the negotiations of the Trans-Pacific Partnership. While it is unlikely that the government would do away with supply management in the near term absent major concessions from other countries, it may start to increase the quotas for the amount of products that can be imported without tariffs, particularly for cheeses.
– The government will continue to develop through the Canadian International Cooperation Development Agency its plans to link international assistance to Canadian companies doing business abroad. This new approach to aid is intended to create synergies that will link social development with existing economic opportunities, particularly in resource development. CIDA continues to welcome input and ideas from both the not-for-profit and private sectors on how this can best be achieved. International Cooperation Minister Julian Fantino knows he must be very careful to avoid having this new approach come across as a subsidy to business rather than a new path to ensure development dollars have meaningful impact.
Social Development
– Another area where the government is pursuing a new approach is in social development within Canada. Human Resources and Skills Development Minister Diane Finley has become the government’s point person on social innovation – providing financial incentive for not-for-profits and corporations to develop better ways to deliver services to Canadians in need of support. The government continues to look towards measures taken in the United Kingdom under Prime Minister David Cameron’s “Big Society” model which has included new initiatives such as social impact bonds.
Defence Procurement
– With all the problems finding a replacement for the aging CF-18s has caused the Harper government in the House of Commons, we expect the government to look broadly at the issue of military procurement in the coming months. As well as actively looking beyond the F-35s as the only option to replace the CF-18s, the government may decide to try to reset the Canada First Defence Strategy to create a more consistent approach to procurement. To that end, there has been increased speculation in Ottawa that the government may seek to establish a new independent entity to handle major defence-related procurements.
Energy and Resources
– There are number of key questions for the federal government to address over the next few months in the energy sector. With the State of Nebraska now approving the new routing for the Keystone pipeline, and White House approval looking more likely, does the government have the same appetite for trying to diversify who we supply oil to with the controversial proposal for the Northern Gateway pipeline from the oil sands to the Pacific Ocean? What will the CO2 emissions targets be for oil and gas companies as the government continues with its sector by sector approach to reducing greenhouse gas emissions? Similarly, to what degree will oil and gas companies be able to buy into future technology funds rather than find ways to reduce their own carbon emissions?
Canadian Heritage
Canada’s upcoming 150th anniversary will be an important cultural milestone and it is one that the government has already started planning for. We expect that Heritage Minister James Moore and Heritage Canada will soon launch a national consultation process on how to best commemorate this important anniversary. The government will be looking for other important dates to celebrate leading up to 2017, including the 100th anniversary of the start of the First World War. Companies, municipalities and other organizations with important anniversary dates prior to July 1, 2017 may find opportunities to link their celebrations to this larger narrative.
Next Developments
– Prime Minister Harper continues to enjoy very strong support from his caucus. Under the freedom offered by a majority government, we have seen the Prime Minister trust parliamentary committees to do more advanced policy work on government initiatives. The House of Commons Finance Committee’s upcoming report on incentives for charitable giving will be another example of this.
Cabinet Shuffle
– After Parliament takes a break for the summer sometime in June, we expect Prime Minister Harper to significantly shift key personnel in his government. As it will be the mid-way point to the next election a major cabinet shuffle is likely. By this point in time planning will be taking place for the next election, the Liberals will have a new leader and there will be a better sense of how the NDP have resonated with Canadians as official opposition. The Prime Minister will also be confirming which MPs and ministers plan to run for another term and who are planning to retire. Further we may see a new Clerk of the Privy Council announced and a deputy minister shuffle in June or July as well.
What It Means for You
The policy and political environments in Ottawa remain highly complex. There are a large number of opportunities out there for organizations to affect the federal agenda. Companies and organizations need to be aware of the complexities of the environment and position their proposals to strongly link with to the government`s agenda.
Hill+Knowlton Strategies is able to provide support for clients with sector specific information to understand where the government will be focusing its efforts in the medium term. Further H+K is uniquely qualified to offer insight into the Official Opposition. We are able to help clients communicate with the government on the scope of a program should the government decide to introduce a stimulus program in the coming months. We help clients position their issues and focus advocacy efforts to deliver success.