Transcript: Season 4, Episode 19

Watch: The full broadcast of The West Block with Tom Clark, aired Jan. 18, 2015.

Host: Tom Clark

Guest Interviews: Jason Kenney, Tom Mulcair, Scott Clark, Mark Kennedy

Location: Ottawa

**please check against delivery

On this Sunday, signs of a shaky economy are everywhere.  Target will halt operations.  Suncor is cutting back.  This past week, nearly 20,000 Canadians lost their jobs.  We’ll talk to Employment Minister, Jason Kenney.

Plus, Tom Mulcair in full campaign mode; his strategy for the economy and his reaction to Jason Kenney’s shot across the Twitter bow.

Then we’ll get the inside story about what’s really going on in the finance department as they struggle to find a surplus.

And, we’ll unpack the politics of the week with Mark Kennedy.

It is Sunday, January the 18^th, 2015.  And from the nation’s capital, I’m Tom Clark, and you are in The West Block.

We’re seeing job losses across the country and a delayed federal budget blamed on market instability.

Well last week, Target announced it was closing its Canadian operations and cutting about 18,000 jobs.  Suncor said it was cutting a thousand jobs because of falling oil prices.  And Sony will shut down its Canadian stores leaving hundreds more without a job.  And those are just some of the companies who have announced job cuts in the last few days.

Joining me now, Employment Minister Jason Kenney.  Minister good to have you hear.

Jason Kenney:

Thanks, Tom.

Tom Clark:

Wow, this doesn’t look good. I mean in a period of about 48-hours last week we lost about 20,000 jobs.

Jason Kenney:

And obviously we’re concerned about all of those people.  We reach out whenever we hear about an employer that’s laying off people to offer support, make sure that we can process their EI applications, offer them training programs and job matching.  You know, on the other side of the spectrum, the CFIB, the Federation of Independent Business, reports that there are 54,000 retail jobs available just in the small business sector in Canada.  There are hundreds of thousands of jobs available posted on our Job Bank, so we’re optimistic that most of those people should be able to find employment.

Tom Clark:

But if you’re working in the oil patch, you’re not going to go selling jeans.

Jason Kenney:

Of course, and we are concerned obviously about the downturn in the Canadian oil sector as a result of the reduced reduction in prices.  That sector has been a key engine of economic growth, particularly really high paying, high quality jobs, and we are concerned about that.  The truth however, is that the oil industry in Canada represents about five per cent of our Gross Domestic Product (GDP) so some of the coverage that suggests that we’re some kind of petro state massively exaggerates the impact.

Tom Clark:

No, but there is huge spin-off effects.  I think you’ll agree with that.  I mean that’s the core is anywhere from five to 10 per cent but there are huge spin-off costs as well.  But I want to bring this back to sort of a key question for your government, and that is that you’ve now had to delay your budget by months.  We don’t know exactly when it is that you’re going to be bringing in the budget because of the disruption of low oil prices, even though it’s not a huge part of the Canadian economy but it’s enough that you guys have sort of lost your footing on that a little bit on this.

Jason Kenney:

I wouldn’t say that.  Look, first of all, Canada has overall, one of the best job creation records in the developed world; the creation of 1.2 million net new jobs since the global downturn, 20 per cent more than any of our G7 competitors.  Just last month we saw a transition from part-time work to full-time work.  Obviously we’re watching this closely and that’s why we want to have an extra few weeks to take a look at the trend lines.  That’s only responsible.  Normally we have a budget in March.

Tom Clark:

Well you’re talking months actually, you’re not talking weeks.

Jason Kenney:

No, normally we have a budget in late February or March.  We’re having it in April now.  Many provincial governments have their budgets in April.  This will give us a little bit more time to see what the trend lines are.  It would be irresponsible given the volatility in a key factor in our economy in the oil prices to go ahead, until we really have a sense where they’re headed in 2015.

Tom Clark:

What if it’s worse in April?  What if oil prices, as many have said, the TD Bank among them, and some very respected economists from around the world saying, that by April you’re probably looking at even lower oil prices, so what is that happens?  You’re going to be in a worse situation than you are today.

Jason Kenney:

Well that’s why we should wait and see so that we can adjust accordingly.

Tom Clark:

But I’m sorry…

Jason Kenney:

On the oil prices, the impact would be primarily on corporate income tax revenues for the federal government.  We don’t take royalties out of the oil patch.  That’ll affect Alberta and Saskatchewan.  But for us, it’s a question of corporate income tax revenues.  We can assume that they will go down with energy prices although there is some offset here, Tom because the lower oil costs, lower gas costs, it means lower input costs for the manufacturing and transportation sectors.  So it will probably be a net negative but there are some positives for parts of the economy.

Tom Clark:

So let me ask you this, if you had your time back, if the government had the time back, you announce these two very expensive election goodies back in November; income-splitting and more on the child tax rebate.  At a time when things weren’t in surplus at that point and now that we’ve gone into this new world environment of very low oil, was it really all that prudent for the government to start giving away all this money at a time when things were really dicey?

Jason Kenney:

Well I would maintain that letting people keep more of their own money…

Tom Clark:

Well you’re actually sending them cheques.

Jason Kenney:

In the case of the UCCB, we’re increasing support for families to help them deal with the cost of living.  And you know, at the end of the day, the surplus doesn’t belong to the government, it doesn’t belong to a bunch of politicians.  The Liberals and NDP think it’s their right to spend other people’s money.  If there is a surplus, it means we’re taxing people too much and that’s why we believe in giving some of that back to the people from whom it comes.

Tom Clark:

I understand that, but if you’re in deficit and you’ve got to use the contingency fund to send all of those cheques out in July, does that make any sense?

Jason Kenney:

We won’t be using a contingency fund.  A contingency fund is there for unforeseen circumstances like natural disasters.

Tom Clark:

I’m sorry to jump in, I don’t mean to interrupt, but I just want to make this clear.  You’re saying the contingency fund, under no circumstances will be used to cover the costs of your promises.

Jason Kenney:

Well I’m telling what the contingency fund is there for, for unforeseen circumstances.  The budget, as the finance minister has made clear, will be balanced in fiscal year 2015-16.  He’ll be announcing the details of that in the budget. There may have to be some adjustments on the spending side in the future, but look, when you talk about the family tax cut being an election goodie.  The truth is, it was an election commitment that we were elected to deliver in 2011.  We’re keeping our promise, support for families and a balanced budget.

Tom Clark:

Jason Kenney, always too short but thank you very much for coming by, I appreciate your time.

Jason Kenney:

Thank you, Tom.

Tom Clark:
Thank you.

Well there is no question that the NDP is in full campaign mode.  Last week we got a peak at their party platform.  During strategy sessions in Ottawa, Tom Mulcair pledged to reverse the Conservative Income-Splitting plan if he becomes prime minister, but he would keep recent additions to the Universal Child Care benefit, to the tune of about $5 billion, and that is on top of the NDP’s $5 billion promise for national child care.

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Joining me now, is the leader of the NDP, Tom Mulcair.  Good to have you here.

Tom Mulcair:

Good to see you, Tom.

Tom Clark:

You just heard what Jason Kenney had to say.

Tom Mulcair:

Yep.

Tom Clark:

How do you respond?

Tom Mulcair:

There is one part of what he says that really leaves me worried as a Canadian, is to hear one of the key ministers on an economic file for Mr. Harper saying he’s going to wait and see.  And that’s the only answer that they’ve got.  In the past 48 hours, we’ve seen 20,000 jobs lost in Canada and yesterday, Jason Kenney, the only thing he was doing was tweeting on totally unrelated subjects.  The only thing they should be doing now is working on creating new jobs to replace those ones that have already been lost.  It’s not very promising when we hear the finance minister saying that it’s going to be at the earliest in April we’ll see a budget.  They should be acting now.  There’s clearly a crisis of confidence within the government.  One day the finance minister says one thing, the next day he contradicts himself.  Canadians have a right to know.

Tom Clark:

But oil prices are outside of the control of any government.

Tom Mulcair:

Fair enough.

Tom Clark:

So you gotta react…

Tom Mulcair:

But planning’s not outside the control of any government.  And you plan prudently when you’re a good fiscal administrator, when you’re a good public administrator. And what Stephen Harper has been doing, is for example, promising to take billions of dollars from the middle class and giving it to the richest 15 per cent in Canada.  That’s what his income splitting plan was all about that he announced in the fall.

Tom Clark:

And that’s what you want to get rid of.

Tom Mulcair:

Well we will get rid of it.  If there’s any room to manoeuvre at all, we’re going to help the middle class, who over the past 30 years have actually seen their revenues drop while family household revenue is at an all-time high in Canada.

Tom Clark:

But let’s do a little math here, if you get rid of that income splitting, that’s worth about $2.5 billion more or less.  So that’s $2.5 billion that goes back into the kitty but we’re probably, according to TD Bank, among others, in a deficit situation.  But you’ve also got a $5 billion plan for national child care.  Under these circumstances, if the government has to plan prudently, which presumably means pulling back a little bit, don’t you also have to do the same in terms of your election promises?

Tom Mulcair:

It was great to hear Kevin Page on that today.  You know, Kevin Page has been talking about these issues for years in Ottawa.  He’s been explaining that some of the…

Tom Clark:
He’s the former Parliamentary Budget Officer.

Tom Mulcair:

Exactly, and a very respected individual and he’s looked at the way the Conservatives have managed the economy.  When they came in, the massive surpluses they had.  How the cupboard is now bare to do anything.  So they’ve removed the fiscal capacity of the state.  What we’re saying is this, Canadians want solutions, they want concrete ideas.  We’ve put on the table, as you said, $15 dollar a day, day care but it’s going to be rolled in.  The number you’re putting up is after eight years.  And the first years, it’s only a few hundred million a year, but we’re going to do it.  At the end of one mandate, we’ll have 450,000 $15 dollar a day child care spaces in Canada.

Tom Clark:

All right, but we’re in an era right now where we’ve gone from potential surpluses into pretty well assured deficits.  So how do you handle a deficit?  Do you say, okay, I’m not going to roll out the $5 billion dollars for that child care plan just yet?  I’m going to wait until we’re back into a surplus position?

Tom Mulcair;

Well as I just said, the $5 billion is at the end of eight years when it’s been fully financed and put in place.  Governing is about setting priorities.  As you know, I’ve been around the cabinet table.  You set your own priorities.  You tell Canadians what you’re going to do.  For 30 years, Liberals and Conservatives have promised affordable child care in Canada and not done anything about it.  The NDP will get it done.

Tom Clark:

Okay, but I really want to zero in on this because you’ve got something that’s expensive that’s sitting on the table.  People have been criticising this government for bringing in such things as income splitting and the universal child care, which actually you’re going to continue even though they brought that in when there was still a deficit.  I’m trying to get my head around the idea of where are you going to pull back?  Where are you going to trim your sails to live in this new environment?

Tom Mulcair:

Well the advantage of having a record of public administration is that people actually get to see what you have done.  When I was the minister of environment in Quebec, I lowered my budgets but I was able to make it more effective by bringing in economies of scale, bringing in new administrative techniques.

Tom Clark:

Well what part of your platform do you change then?

Tom Mulcair:

Well I’ve talked very openly, and you know that, whether I’m in a union hall in Sudbury or I’m talking to a bank president in Toronto, I’m very clear about the fact that the $50 billion decrease in corporate taxes brought in by Stephen Harper’s Conservatives makes no sense at all.  We’re going to make sure that everyone in Canada pays their fair share, including Canadian corporations.

Tom Clark:

Well let’s talk about that, we haven’t got much time left, but corporate tax cuts.  We’re seeing, as you pointed out, in the last few days, 20,000 jobs lost; companies closing down here.  I mean you’re going to a lot of these companies who have had to shelve plans, fire people and now you’re saying, oh now you gotta pay us more money.  Is this the right environment to be doing that?

Tom Mulcair:

It’s always the right environment to make sure that everyone’s paying their fair share.  No one was using that sort of argument when they were paying a few points more.  We’re going to get closer to the G7 average, those who are our closest trading partners who have economies similar to ours.  And there’s no reason not to.  Everything that costs money in our society, whether it’s the court system and the police to enforce contracts and property rights or it’s the streets and the education system costs money for everyone.  Corporations are not paying their fair share in Canada.  That’s a mistake by Stephen Harper.  We’re going to make sure they do.

Tom Clark:

Would you run a balanced budget in your first year?

Tom Mulcair:

It would be a priority for us.

Tom Clark:

Does that mean, yes?

Tom Mulcair:

We think that’s it’s always a good idea to run a balanced budget.

Tom Clark:

So the first year of an NDP government, balanced budget.

Tom Mulcair:

That’s what we’ll be striving for.

Tom Clark:

Okay, well we’ve got that on tape as well.  NDP Leader, Tom Mulcair thanks very much for being here.  I always appreciate your time.

Tom Mulcair:

Thanks, Tom.

Tom Clark:

Thank you.

Well still to come, we’ll unpack the politics of what we’ve just heard and the consequences of low oil for the Conservatives.

But first, our West Block Primer on the commodity causing all of these problems, and a former deputy minister of finance on the challenge analysts inside the department face, trying to keep that elusive surplus.

Break

Welcome back.  Well Finance Minister Joe Oliver announced last week that he’s pushing back the federal budget’s date until at least April because of plunging oil prices and economic uncertainty.  And yet, he still says there’ll be a surplus this year.  Now before we delve in to how that works, here it is, a West Block Primer on the commodity causing all this trouble:

Oil, it has a history of building itself up and then letting us down.  After the steep drop of the 2008 recession, oil has been enjoying a very strong rise.  It’s been a pretty nice ride but little did we know that we hadn’t seen anything yet.  High oil prices naturally brought more oil on line; fracking in Canada and the US, increased production in the oil sands and in Russia, and a return of oil production in Iraq and Libya.  Now at the same time, cars became more efficient and consumers were looking for all sorts of ways to get off their addiction to this high priced oil.  But then, the laws of supply and demand kicked in.  And so, another bust, but this one is huge.  And experts are saying it may last a whole lot longer than before.

Well we requested an interview with Canada’s finance minister but despite our very best efforts, he was not made available.  So we turn to a man who knows what’s going on behind the closed doors of the finance department, former Deputy Minister of Finance, Scott Clark.  Mr. Clark awfully good to have you here.

Scott Clark:

A pleasure to be here.

Tom Clark:

Now, the budget has been pushed back as we say because of the low oil prices.  The minister says however, that even though there is great uncertainly, he already knows the outcome of all of this and that’s going to be a surplus.  Take a listen to what he had to say last week:

Joe Oliver:

“…And I’m proud that our government is on track to achieve a budgetary balance next year.  And that will be based on our private sector forecasts as in the past.  There is nothing new here”.

Tom Clark:

Well, there’s nothing new here apparently, except everything seems to be new.  Listen, bottom line, can he produce a surplus for 2015?

Scott Clark:

Well let’s put it this way, I think it’s a huge challenge and what’s really at risk here is the credibility of the government because a number of people, including myself and my colleague Peter DeVries, the Toronto Dominion Bank, the Canadian Imperial Bank have all put out forecast reviews that indicate that if oil prices fall to $40 or below $50 then in fact, he would record a deficit in 2015-16, even allowing for the $3 million contingency fund and other reserves he had.  In other words, reserves will have been used up to protect his bottom line and therefore you’re in deficit absent any other policy actions he may take.

Tom Clark:

And unless he pulls those tax goodies that he delivered in November, unless he pulls that off the table, the contingency fund will be going to pay for things like income-splitting and that sort of thing.

Scott Clark:

Well exactly, but everything has changed since last October.  There are things that are new, notwithstanding what the minister just said.  I mean in October the government thought we have a good surplus here; we’ll make those tax cutting announcements.  In November they put out their projection based on $81 a barrel, said there would still be a surplus in 2015-16.  Since then, only four months, everything’s off the table now.  And clearly when you postpone a budget, which I don’t remember ever happening, that’s telling me that within the government and within the department of finance, there’s a lot of uncertainly about what assumptions to make in preparing the budget, and that’s where the question of credibility comes in.

Tom Clark:

And they, like you, when you were the Deputy Minister of Finance of this country look at the numbers but there’s another aspect of this and that’s political.  The government has said, over and over again, we are going to provide a surplus.  So it raises the question, can you manipulate numbers enough?  Can you cook the books to produce a surplus, if that’s what you want?

Scott Clark:

Well there’s always flexibility in numbers to use a quite mild phrase.  And when you’re trying to forecast numbers like revenues and spending and the economy, and all the uncertainties that go into that, there is risk.  They always could be higher, could be lower.  So there is flexibility.  I think there’s not enough flexibility I think, right now, but there are some key factors he’s going to have to look at, which we don’t know the answers to.  For example, this year, the year we’re in right now, they will post a surplus.  That’s a common view right now, notwithstanding he’s saying there’s going to be a deficit.  We just don’t know how big it will be and how much of that will carry forward into 2015.  So there is that uncertainty and he’d like to know more about that.  But as far as oil prices go, I guess over the next couple of weeks and months, we’ll know whether it’s going further down towards 40, it’s going to bounce around a little bit and then he needs to know.  But I’m not sure why that would affect the budget timing in March.  He’s had them in March before.  I’m not sure what he’s going to know really importantly that’s going to change things in April.  So…

Tom Clark:

And it could be better in April but it could also be worse.

Scott Clark:

I think that most people…when the budget is held, will all be looking with great keenness at the numbers that he’s assuming.  I’m a little worried that he has indicated well you know, oil prices go down and oil prices go up and therefore he seemed to be implying I’ll just assume they’re going to go back up again.

Tom Clark:

I think he’s hoping that’s going to go back up again.

Scott Clark:

And I think that would completely undermine their credibility of the government if he were to do that.

Tom Clark:

Scott Clark, always good to have you here.  Thank you very much, sir.

Scott Clark:

Pleasure to be here, Tom.

Tom Clark:

Thank you very much.

Well still to come, we’re going to unpack the politics of the week that was.  What are the political implications of low oil prices?  And best bets on where we’re heading and when we’re heading rather to the polls.  That’s next.

Break

Tom Clark:

Welcome back.  Well it’s that time of week where we sit down and unpack the politics of the last seven days.  Joining in that task as always, Mark Kennedy the Parliamentary Bureau Chief for the Ottawa Citizen.  So Mark, this was a week just past, where the government seemed to have lost its footing on its central platform, which was good economic stewardship and management.  How much is this going to hurt them?

Mark Kennedy:

It could hurt them a lot.  This is what Stephen Harper got elected on in 2011.  This is what got him the majority government in 2011.  He was going to be a strong fiscal manager and the others weren’t.  Well now we’re asking ourselves the question, how did we get to this?  How is it that Stephen Harper last fall, decided that he was going to announce billions of dollars in tax cuts when he was claiming that we were about to go into a surplus situation, apparently not knowing that oil was about to plummet?  Did he not see that coming?  So now the government’s in a position of potentially losing all credibility on the one thing that matters most to it, and that’s being seen as a strong economic manager.

Tom Clark:

And let’s make clear here too, that when all those election goodies were announced, just happened to be before that by-election in Oshawa-Whitby, Jim Flaherty’s old seat, but at that time, there were already signs everywhere that oil was beginning to collapse.  In fact, it was that same month that Joe Oliver redid his economic forecast to put oil in at $70 dollars.  So they weren’t that blindsided back then, but is there a way back because you could say this, look the collapse in oil prices whether you saw it earlier or whether you saw it late is nevertheless a fact of life.  It’s hurt everybody’s books.  It’s hurt everybody’s bottom line.  Could Stephen Harper simply go to the people of Canada and say you know this is of my own doing, I don’t control oil prices.  And so those really expensive election goodies I put out there, income-splitting and child tax rebate, they’re just going to have to wait for another day.

Mark Kennedy:

Oh that’s a tough one.  I’ve asked myself that question.  I think he’s got his neck out there so far it’s very difficult for him to do that because then we’ll as the question, well what were you thinking?  Why did you make that promise in the first place before you had to actually go out and deliver it?  The problem now for the Tories is now that they’ve delayed their budget until sometime in April, possibly even beyond.  Who knows if it’s May?  Probably April.  It now has to be seen to be a credible document.  I look back to the fall of 2008, shortly after Stephen Harper won his second victory and Jim Flaherty was finance minister and was about to bring in a fiscal and economic update.  They brought it in, I remember being in a room up on Parliament Hill where they brought in the document.  I looked at it.  This is as the economic recession was coming down on our heads and we all knew it, they forecast five years of surplus.  We all knew it was a joke of course before long they had to admit that.  So I guess what I’m saying is this, if their budget in April becomes a laughing stock, it’ll hurt the country and it’ll hurt their political fortunes.  A lot hinges on this budget for them now.

Tom Clark:

I almost cringe to ask this question but are you on team spring or on team fall when it comes to the federal election?

Mark Kennedy:

I was always on team fall, for a number of reasons.  I think the prime minister has been out there quite vocally saying it’s the fall.  Secondly, I think it’s very difficult for them to go to the polls before the Mike Duffy trial comes to the public forefront because I think people would ask themselves the question, is he trying to get this in under the wire before I get to learn what happens in the Duffy trial?

Tom Clark:

Would it be way too cynical for somebody to suggest that the budget is now coming at the same time as the Mike Duffy trial?

Mark Kennedy:

Ah, some cynics might say that.  I think it’s simply the fact that the government doesn’t know what it’s doing and is having to scramble.

Tom Clark:

Okay, Mark Kennedy as always, thanks very much.  Good to have you here.

Mark Kennedy:

Thank you.

Tom Clark:

Well that is our show for this week.  Don’t be shy about getting in touch with us.  Here are all the addresses where we can be found.  Let us know what you think about the issues of the day.  I’m Tom Clark.  That’s our show for today.  Have a great week and we’ll see you back here next Sunday.