Trudeau Loses His Finance Minister After Disagreeing on COVID-19 Spending

Bill Morneau resigned as Canada’s finance minister Monday, ending his five-year tenure as the more conservative counterpart to Prime Minister Justin Trudeau.

Morneau handed in his letter of resignation Monday morning after a “constructive conversation” with his former boss, before announcing it at a surprise press conference yesterday evening.

Without him, Trudeau is now unburdened of a deficit-conscious minister, one who has been hesitant to open the spending taps amid the COVID-19 pandemic. Morneau intends to resign from cabinet and Parliament, replaced as finance minister by top Trudeau lieutenant Chrystia Freeland.

“This is what happens when you don’t say ‘how high?’ when [the prime minister’s office] says ‘jump,’” a source close to Morneau told VICE News.

On Saturday, Bloomberg reported that Morneau’s decisions were being increasingly overruled by his boss.

Morneau, at the outset of the COVID-19 pandemic, argued for slightly smaller programs, such as the emergency wage subsidy. The source close to Morneau said he was pushing for the Canadian Emergency Response Benefit (CERB) to be in line with minimum wage, so as not to disincentive work—the minimum wage in most provinces is slightly less than the $500 per week afforded by the CERB. The Prime Minister’s Office, they said, wanted to round it up to a nice even number. 

The source said Trudeau’s approach was to “announce first, think later.”

In general, Trudeau’s bullishness paid off. The payments and wage subsidies have been largely credited with keeping many Canadians solvent during the pandemic, although a commercial rent subsidy has seen dismal uptake and has failed to prevent many small businesses from going under or being forced out by their landlords.

Trudeau’s big spending has ballooned Canada’s deficit to nearly $350 billion, amid a shrinking economy and massive expenses related to the pandemic. Even before COVID-19, his government presided over a growing national debt, breaking a promise to balance the budget by 2019.

The source told VICE News, confirming reporting in Bloomberg, that Trudeau’s office prioritizes public opinion over good policy. “Every decision they made was made on polling,” they said. (Something echoed by ex-Justice Minister Jody Wilson-Raybould and former Health Minister Jane Philpott, both of whom also left Trudeau’s cabinet amid clashes with Trudeau.)

Going forward, Trudeau has signalled plans to chart a particularly ambitious course as the virus is eventually brought under control, the economy fully re-opens, and Canadians get back to work. While the specifics of that plan remain vague, Morneau’s vision for that green recovery seemed to be fundamentally at odds with Trudeau’s.

VICE News asked Morneau what policy differences led to his departure, although he largely dodged the question. He did underscore that “[the prime minister and I] have always worked together, over the course of the last five years, in a way that recognized the importance of vigorous discussions and debate to get to the best policies for Canadians.”

It’s an open question as to whether Morneau’s replacement will offer the kind of vigorous debate that defined his tenure in the job.

For the time being, Trudeau has appointed his Deputy Prime Minister Chrystia Freeland to fill in as finance minister. While she has a background in business journalism, Freeland does not have a background in business or economics. Given she has worked side-by-side with Trudeau in recent months, it seems unlikely she will offer the same resistance as Morneau.

In recent months, Trudeau has brought in advisors from outside his government to help figure out that route. Former Governor of the Bank of Canada Mark Carney, who most recently served as the governor of the Bank of England, has been offering some advice to the prime minister in recent months.

Carney looks set to run for Parliament in Toronto, either in Morneau’s former seat or in another recently-vacated seat, and could be tapped for a high-profile cabinet job.

Trudeau’s star has fallen by a not-small degree in recent years, and speculation has run rampant over who may replace him. High on the list of possible successors are both Carney and Freeland.

Morneau has been Trudeau’s only finance minister, serving since they were first propelled to government in 2015. In a press conference Monday evening, Morneau highlighted the various metrics of success for his time in office—“one million jobs created in the first four years, more than a million Canadians pulled out of poverty, and historic steps towards a stronger, greener, and more inclusive economy,” he told reporters, in a statement echoed nearly word-for-word by the prime minister’s office.

Morneau had a rough few months. In late July, he testified before a parliamentary inquiry that he had accepted travel from a charity that has received huge sums of government money, which may have constituted an ethics violation. Leaks from the prime minister’s office suggested that Trudeau would be turfing Morneau, only to have Trudeau come out and express his “full confidence” in Morneau. (A source told VICE News at the time that there were no plans to have Morneau leave his post.) Then, more leaks about a growing rift between the two men. And, finally, Morneau’s resignation.

Other media outlets have reported that part of the rift between Morneau and Trudeau came because he failed to disclose the details of his trips to Ecuador and Kenya with WE Charity, now embroiled in a controversy over a sole-sourced student grant program. The source close to Morneau says that’s not true—that staff from the prime minister’s office were aware of Morneau’s travel before it happened, and were updated when his office learned that part of the cost of the trip had been covered by WE. Morneau has said that was an oversight.

A rookie Member of Parliament, Morneau was plucked from Bay Street, where he served as the chair of his family’s pension firm. He now intends to run to serve as the Secretary General of the Organisation for Economic Co-operation and Development.

Even if he won’t be in Ottawa, Morneau said, “I’ll be watching very closely.”

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