Canadian Finance Minister Francois-Philippe Champaign presents Canada's first budget in more than 18 months, and the conventional wisdom is that there's no money, few choices, and a record deficit is likely. With me today is our old friend Yaroslav Baran, co-founder of the pendulum group and former communications director to Prime Minister Stephen Harper.
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00:00:30.000good evening western standard viewers and welcome to hannaford a weekly politics show of the western
00:00:51.900standard it's thursday october the 30th next tuesday canadian finance minister francois-philippe
00:00:58.460champaign presents canada's first budget in more than 18 months they're supposed to be once a year
00:01:04.620and the conventional wisdom is that there's no money few choices and a record deficit is likely
00:01:11.300with me today is our old friend yaroslav baran co-founder of the pendulum group and in a past
00:01:16.860life a communications director to prime minister stephen harper welcome to the show yaroslav
00:01:22.920always good to be here nigel thanks uh yaroslav mr coney was out there last week managing
00:01:28.860expectation expectations for his budget calling for sacrifice and so on i don't like the sound of that
00:01:36.120how bad do you think it's going to be and for whom exactly is it going to be worst like well it all
00:01:42.940depends on your point of view and also lots of it depends on political spin you know for example
00:01:48.360uh people decry excess deficit spending as a bad thing but those same people might be convinced that
00:01:56.160generational strategic investments are a good thing same thing it's all about the packaging so
00:02:02.480is this going to be a huge deficit deficit budget or is there going to be a generational investment
00:02:07.000budget it's all in the eye of the beholder but look there are going to be winners and losers that's
00:02:11.380for sure and it's going to be an unusual budget and nigel in that ironically it's going to be
00:02:16.880both an austerity budget and a big spending budget you know traditionally budgets will fall into one
00:02:23.760of two categories um either an austerity budget when governments try to get deficits under control
00:02:30.220or the opposite extreme what i like to call the christmas tree budget usually get those before an
00:02:35.880election you know a gift for everybody under the tree you know spread spread the wealth this one is
00:02:42.380going to be a hybrid of those two approaches and here's what i mean by that um it's going to be
00:02:49.700deep spending nigel in in very targeted areas defense housing nation building infrastructure and
00:02:57.660relief for sectors hard hit by trump tariffs but outside those four categories is going to be
00:03:04.760pretty scant spending if not cuts it's going to be a lot of not now or even cuts and for the public
00:03:12.900service for example definitely cuts uh this is this is the budget that introduces an expected 7.5
00:03:21.540budget haircut across the board across government departments well now you mentioned defense as being
00:03:29.940one of the areas likely to see an immediate investment uh my recollection of our time in
00:03:36.760uh ottawa was that it was one thing to say you were going to spend money and even to allocate it it was
00:03:41.900another to actually buy the equipment that you said you were going to buy it's easy enough to give the
00:03:48.320troops a pay raise and i believe that's in the works but uh in terms of actually taking delivery of
00:03:53.520ships aircraft and the other guns for that matter uh it's one thing to say and it's another to do it so
00:04:01.200how quickly do you think that that particular investment could actually start to make a difference
00:04:07.220well the the government made a commitment that is going to hit two percent of gross domestic product
00:04:14.220value in defense spending by march 31st of next year i'm i'll believe it when i see it because you're
00:04:22.120quite right we are our armed forces have been depleted to the point where we don't even really
00:04:28.400have the receptor capacity to spend more even if we want to and you're quite right in noting the the
00:04:35.980pay raises uh by and large you know the there's an average pay raise of 20 across the armed forces
00:04:42.200not complaining about that at all lord knows they deserve it uh they're they're the ones who uh work
00:04:48.520hard serve this country more than anybody else and often put their lives on the line for for their
00:04:52.980fellow canadians but that's the lowest hanging fruit you can you know in with the stroke of a pen you can
00:04:58.320spend a whole lot of money giving people pay raises it's harder to actually recruit retain re-equip
00:05:05.660and get stuff delivered between now and march 31st so for example recruitment um the armed forces are
00:05:13.020depleted so much that even the recruitment centers are understaffed they can put a help wanted sign
00:05:18.600but there's nobody to actually process the new recruits so it's it's pretty bad and and it's going
00:05:24.480to be a real aggressive move to try to to try to hit that defense spending target well if that's true
00:05:30.360of the um of the defense spending is it also true of the other things which you were talking about as
00:05:39.080major accomplishments and uh you know a major investments that that the budget would bring
00:05:44.800forward um that's going to be a little bit tougher for the government to manage alone i mean
00:05:51.100infrastructure investments by and large are going to be partnerships with the private sector and in fact
00:05:57.160most of it uh most of that investment is going to be coming from the private sector the government's
00:06:02.320role is largely going to be to clear away red tape to streamline uh approvals and in some significant
00:06:09.580cases investing billions as well but government doesn't have the agency to do that alone so it's
00:06:16.080going to be a bit of a bit of a dance and how quickly can they get their get their collective act
00:06:21.020together to get shovels in the ground and get to project completion you know say even even within the
00:06:27.540lifetime of this parliament i don't know well you know yaris left one way that they could get things
00:06:33.220rolling fairly quickly is to authorize pipelines we have an industry here in alberta that's ready to go
00:06:41.700and amazingly bill gates bill gates has just walked back the importance of climate change he says it's
00:06:50.180not going to kill us anymore it's important but other things are more important you know mr gates and
00:06:57.000mr carney think alike in a lot of ways i think they know each other fairly well do you think mr
00:07:02.740carney is going to take any permission from mr gates to actually change his stance let's have let's
00:07:09.880let's get rid of the no pipelines bill and the tanker ban and a number of other things emissions cap
00:07:16.180but are holding the industry back yeah you know there must be something in the water because
00:07:21.600everybody is suddenly starting to sound a lot more like a conservative aren't they uh mr
00:07:26.760bill gates is saying no no no it's you know it's no longer a nine alarm fire would each focus more
00:07:33.880on green uh green energy you know greening industry but not being anti-industry anti-development uh we're
00:07:44.280seeing a lot of the same kind of stuff from from mark carney i mean uh heaven knows uh compared to justin
00:07:50.760justin trudeau uh mark carney sounds like a conservative he wants to build stuff he he wants
00:07:57.140to get back into the natural resources uh game in canada these are good signs the question is
00:08:04.280is what will the delivery look like are we going to get these projects actually built and and you're
00:08:10.980quite right in noting some significant holdouts and policy change as long as we have a tanker ban
00:08:17.060on the pacific coast then we can build all the pipelines we want not not that we're building any
00:08:23.180yet uh but we can build all the pipelines we want but if you can't ship out of the west coast then
00:08:29.500what's the point and well the the the government of british columbia currently is still adamantly
00:08:37.620opposed to make any changes to the to the tanker ban well they are but in the end it's not their coal
00:08:45.060so uh it needs a it needs a federal government and i can't believe i'm i'm saying this because i'm not
00:08:53.500a fan of overwhelming federal exercise of power but the constitution is pretty clear about whose
00:09:01.180decision it is to that you do or you don't allow the tankers on the coast so yeah and and you know
00:09:07.320nigel you we've been hearing a lot about the need to diversify our export markets asia is hungry hungry
00:09:14.480for canadian energy if we want to get it to those asian markets we need to build those pipelines we
00:09:21.180need to build those lng compression terminals and it's going to be through the west coast we're not
00:09:25.480going to ship to we're not going to ship uh lng to vietnam or china through the port of halifax
00:09:33.300it's not going to happen doesn't make sense now you know mr carney has been in power since the 14th
00:09:40.380of march they were sworn in that's more than seven months and other than the slight of hand removal
00:09:46.900of carbon tax taking it off the price of the pump and putting it on the on the upstream and the sort
00:09:55.240of somewhat disingenuous announcement of five major projects through the major projects office in july
00:10:03.260uh we're already well on the way what has mr carney actually got to show for seven months in office
00:10:12.200um you can try to be fair uh yeah actually this is a time to try and be fair a serious question
00:10:20.760yeah no i always try to be fair um like the there's been a lot of architecture
00:10:27.280but we're waiting for results and no i don't consider establishing a new home building agency
00:10:36.960to be results that is means to eventual results but that's not results that's not building new homes
00:10:44.240yet so what has he done so far the main accomplishment so far is again um the the new
00:10:53.780major projects office this was the highlight of the spring and summer they announced this new
00:11:00.000major projects office frankly it was largely modeled uh after the old major project management office
00:11:07.760that that was created by former prime minister stephen harper largely for energy projects and natural
00:11:13.920resources project so they you know he took mark carney took harper's template expanded it a little bit
00:11:19.740and so that's a big deal but it is creating the ability to actually get results it's not the same
00:11:26.760as getting results i'm hopeful i think it's heading in the right direction the policy approach the attitude
00:11:33.380towards development seems to have shifted so i'm i'm hopeful that this is going to going to lead to
00:11:38.180stuff um another thing that he's done is he's created the uh the new home building agency build canada
00:11:46.440homes here again he's built something but that's not the same as actually as as bricks and mortar
00:11:53.620are actually being delivered or roofs delivered for for canadians who need homes and but on the policy
00:12:00.840direction with this one i'm a little bit less impressed overall and here's why 95 percent of homes
00:12:10.700that are built in this country are built by the private sector i would rather see tax incentives
00:12:18.440like accelerated cost depreciation things like that that will prime the pump of the private sector
00:12:25.020coupled with you know zoning reform and streamlined approvals to let the private sector do what it does
00:12:31.200best which is go go go instead we're seeing a new agency that's basically going to act as a
00:12:37.140crown developer to directly build new homes and repurpose old built like it seems a little bit
00:12:44.940like a 1970s approach that it must be the state that is the agent of all good i i don't subscribe to
00:12:51.140that economic model so have they done it yes is it starting to is it starting to do it to apply its
00:12:58.180craft and and build homes yeah they announced our first major project but asking me again when we
00:13:03.980actually see walls and roofs delivered to house canadians and beyond that i'd say major oh sorry
00:13:12.800you you wanted to jump in on that i was going to ask you whether they okay so they've got a new
00:13:17.920project going have they found a way to get around the municipal restrictions which in so many cases
00:13:26.940are what is really pulling back the delivery of new homes yeah um that's going to take ongoing
00:13:36.240negotiations with not directly municipalities because that'd be kind of outside the outside
00:13:42.760constitutional norms with the provinces as intermediaries to deal with deal with municipalities
00:13:48.320and some of it is zoning restrictions that's true but the biggest problem by and large from what i
00:13:55.500what i hear from municipalities is they want to build homes too because they're the ones on the
00:13:59.280uh on the front lines of a of a housing crisis so municipalities tend to want to build homes too
00:14:05.480their problem is uh investments in critical infrastructure things like water wastewater treatment
00:14:15.360sewer systems the kind of stuff you need to build homes you can't take a field and build homes on it
00:14:23.220you can build a cottage on a field you can't build a home on a field you need sewer you need you need
00:14:28.000hydro you know hydro lines you need all that core infrastructure that makes a residential you know
00:14:33.420four season home a home and municipalities simply do not have the resources to do that municipalities by
00:14:40.620law are not permitted to run deficits they can incur debt uh they don't have the tax base to be able to
00:14:47.880to invest in major critical infrastructure that's where the federal government comes in and that's
00:14:53.340going to be a pretty important role for provincial governments and federal governments to allow
00:14:58.500municipalities to unleash home building i think you're being very generous to some of the municipalities
00:15:04.260at least the i thought the line is that in vancouver there's something like eight hundred thousand
00:15:10.460dollars of any new house goes to the city of vancouver in various fees and development charges
00:15:19.380and you know the land the bricks the mortar the wood they cost this tack on another eight hundred
00:15:27.240thousand yeah so there are outliers there some municipalities are more problematic than others
00:15:32.660but also the reason they charge the these development charges is theoretically that's how they build that
00:15:39.100that that's how they that's how they connect new homes to to grids to to water and wastewater and
00:15:44.740sewage and whatever because the provinces and the federal government have not been contributing enough
00:15:50.260to make that possible so um i yeah i mean i did part of part of me feels for for the municipalities
00:15:57.160because they're trying to do what they can with one hand tied behind their back because they don't
00:16:01.660have they don't have the tax base the federal government does it's what do they use it on do they use it
00:16:06.360wisely on not exactly sexy stuff like building new or or upgrading sewage systems but that's that's the
00:16:14.220kind of stuff that's most needed okay now as long as we're in a segment of the show where we're going
00:16:20.140to be fair i want to run past something past you that uh conservative leader pierre poilier said very
00:16:26.780recently i think he put this out as a tweet that if mark carney had kept his promise to handle trump
00:16:33.560that was and negotiate a win and get a deal by july the 21st we would not be facing the latest tariff
00:16:42.220hike now of course this is a little background to this mr ford premier of ontario in my opinion
00:16:49.400recklessly put out a provocative uh ad it wasn't so much the ad itself but the fact that he chose to do
00:16:56.220it at all that was provocative uh and of course uh president trump responded by guillotining any process
00:17:04.880that might have been in progress now mr polyev says if uh mr carney had kept his promise to handle trump
00:17:14.880he wouldn't be dealing with this do you think that's a fair criticism nobody handles trump well but but you know what i do think that's a fair criticism and it's not so much
00:17:25.820a comment on mark carney's failure it's more a comment on mark carney himself having set unrealistic
00:17:34.560expectations for his own government he himself set the bar uh where it is um he won the election as
00:17:44.480the self-proclaimed trump whisperer he said elect me i'll be able to handle this i contain the beast
00:17:52.560canada will be okay in terms of trade relations with the united states if you if you elect me
00:17:59.200and a continuation of liberal governance so he mark carney himself said i'm going to be the savior
00:18:05.920elect me i'll get it done and he hasn't yet so there's got to be some accountability for setting the
00:18:11.900bar um you know so much in politics as you know nigel so much of it comes down to expectation management
00:18:19.160and in this case i think he did the opposite of what one ought to have done in a volatile kind of
00:18:26.620dealing with trump world we all know that donald trump can wake up one morning and say
00:18:31.380yeah yeah sure negotiations with canada back on and then on thursday friday saturday he could wake up
00:18:38.440again and say no forget canada you know that's a reality so why on earth politically would you set the
00:18:44.840kind of expectations of elect me and i'll get this done by christmas no problem and we'll all go have
00:18:49.140a beer together well i want to run by you a crazy conspiratorial theory uh the news reports indicate
00:18:57.200that mr ford showed mr carney these ads before he ran them and mr carney didn't tell him not to
00:19:04.340they must both have realized that quoting ronald reagan and whether done accurately or with selective
00:19:12.020editing was going to be like sticking a put poking a stick into mr trump's ear and yet they went ahead
00:19:21.560and did it anyway with the predictable result that things are shut down right before mr carney goes to
00:19:29.420the apex conference in south korea and meets his old chinese friends couldn't get a deal with the
00:19:36.300americans the chinese were more than pleased to see us do you think there's something going on
00:19:41.920with china oh geez china's a tough one and look this is it's a really tough nut to crack and the prime
00:19:52.560minister is meeting with chinese president uh xi and but this this follows several years of deep
00:19:59.420freezing relations as you know prompted by a major foreign interference scandal state kidnapping of
00:20:06.140two canadian diplomats extraterritorial harassment of chinese canadians on our on our shores but you
00:20:13.500know china is also our second biggest trading partner after the u.s and as we see volatility
00:20:20.700unpredictability and trade hostility from the u.s there's there are understandably going to be voices
00:20:26.540and public sentiment in canada saying that we should re-engage with china we should trade more
00:20:32.320with china as a hedge and overall there's a push from the government and from the public at large to
00:20:41.680diversify export markets because of all this stuff with trump so it kind of makes sense that he's going
00:20:47.680to china our second biggest trading partner is saying let's kind of get things back on track and trade
00:20:52.840more but also let's get some perspective our trade with the united states is at least 10 times greater
00:21:00.360than our trade with china you cannot offset that overnight you can't offset in a decade let alone
00:21:07.240overnight and so for all the talk uh and energy into expanding non-us markets how much can we really
00:21:16.760shift to china and do we really want to because remember three years ago when the government launch
00:21:24.840launched its indo-pacific strategy it was all about moving away from china and largely towards india
00:21:33.640but then of course you know the excrement hit the fan our relations with india also sunk to rock bottom
00:21:41.000so it really creates a problem you know we want to diversify but the countries that we see as the
00:21:46.040biggest diversifying potential aren't really that reliable either and don't forget that china is
00:21:54.680not as predictable and stable as they let on china has been very notorious especially vis-a-vis canada
00:22:02.280for waking up one morning and saying oh we don't like your hogs we don't like your pork we're banning
00:22:06.760them or we don't like your canola and it's never about viruses or weevils or whatever they try to pin it
00:22:13.160on it is always geopolitical china what about it i mean they dropped they they dropped the tariffs on
00:22:19.240canola and we as the americans who taken their motor industry back yeah uh we have to take chinese
00:22:26.760cars is that the deal that's coming up that's that's what they've pitched i mean the chinese have
00:22:31.480explicitly said this to to several of our premiers and and and to our federal government you drop drop the
00:22:37.960canadian tariffs on on electric vehicles from china and suddenly your canola will magically be
00:22:43.400safe again and let let the trade roll so that's that's not any more reliable in terms of a rules
00:22:49.640based stable trade environment than you know the kind of stuff we've been seeing with trump over the
00:22:54.840last half year you're a soft we're fast running out of time here i'm afraid but let's get to the
00:23:01.640uh let's get to the big question here in alberta daniel smith gave mr carney six months to meet
00:23:08.280alberta's demands you know we've heard it all before getting rid of the anti-pipeline laws the tanker ban
00:23:13.880much else you know does gates is does gates's recent uh withdrawal of his enthusiasm for climate change
00:23:23.320narrative um give mr mr carney room to move and related to that is this budget when we get to
00:23:32.120decide whether mr carney is doing a good job when will we know that canadians picked or didn't pick
00:23:39.560the right person earlier this year it's back to look am i holding my breath for the tanker ban to
00:23:45.880be lifted anytime soon i'll be i'll be stunned if that's in next week's budget um the you know some
00:23:52.120of the anti-development legislation that's the legacy of the of the justin trudeau government i
00:23:58.120think that mark carney thinks he is fixing that is he fixing enough of it and and is he doing it
00:24:03.880quickly enough um you know some of this is technical questions um we'll see we'll see what the development
00:24:10.680community we'll see what the private sector says do they feel that they're empowered to do what they do
00:24:15.400best under a mark carney you know legal and regulatory regime time will tell
00:24:22.520is this the budget where where we get to start giving mark carney um a report card probably a
00:24:31.240little bit too early uh we're a half half a year into you know into this the government post-election
00:24:37.880but this government should contain some important signals about the policy direction i in some respects
00:24:45.480i've been impressed with the direction this government is heading in in terms of incentivizing major
00:24:51.480projects allowing the private sector to do what it does allowing major projects to go forward but
00:24:57.560we haven't seen the results yet we've seen in some cases some shovels almost ready to go into the
00:25:03.000ground but ask me again when we start to see some of these major projects coming to completion
00:25:09.560how smooth the process was and how quickly it happened so how long do we give him
00:25:14.280well the reason we have four-year uh election terms is that's a reasonable life cycle to be able to
00:25:21.880give somebody uh somebody a report card but again mr carney and his team have set the bar really high
00:25:28.840let's see if they can meet that you know that that bar that they were pretty confident in themselves
00:25:33.640in okay yaroslav i think i'll believe it when i see a formation of f-35s doing a low pass of the
00:25:42.680abbotsford air show but anyway right now we don't have them and we do have mr carney and we have a budget
00:25:51.320we have a trade negotiation to complete every time you come on i always feel a little wiser
00:25:57.800at the end so thank you very much for your perspectives today my pleasure for the western