Toppling Best G-7 Economy’s Government Is Canada Obsession Against Harper

Canadian Prime Minister Stephen Harper oversees the fastest growing economy with the lowest deficits among Group of Seven nations, the first to recoup all jobs lost in the recession. Foreign investors rewarded the government with record purchases of Canadian bonds in 2010 and with the G-7’s best performing currency over the past two years.

Opposition lawmakers may try to reward Harper by kicking him out of office.

Harper, 51, faces several Parliamentary votes this week that could bring down his Conservative Party government about halfway through its current mandate over a series of incidents the main opposition Liberal Party calls an abuse of power, including the government’s reluctance to provide details on the cost of its legislation.

The government is “definitely preparing for an election,” said Yaroslav Baran, the Conservative campaign’s director of communications in the last two elections. “The prime minister would rather not have an election than have an election, but the threat is very real.”

At stake in a vote are tax reductions worth C$6 billion ($6.1 billion) annually for businesses such as Royal Bank of Canada (RY) that the Liberals say are unaffordable and have pledged to reverse if elected. The Liberals also have said they would cancel the government’s plans to acquire 65 of Lockheed Martin Corp. (LMT)’s F-35 Joint Strike Fighter jets.

Photographer: Norm Betts/Bloomberg

Canadian Prime Minister Stephen Harper. Close

Canadian Prime Minister Stephen Harper.

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Photographer: Norm Betts/Bloomberg

Canadian Prime Minister Stephen Harper.

Recovery Accelerating

Recent data have shown Canada’s recovery is accelerating, even as inflation remains tame. The economy added jobs for a fifth straight month in February, and expanded at a 3.3 percent annualized pace in the fourth quarter, the fastest in the G-7. Government bonds have returned 4.8 percent over the past year according to Bank of America Merrill Lynch index data, compared with a 3.2 percent average for the G-7. Canada’s benchmark S&P/TSX Composite Index has risen 13.6 percent over the past 12 months, compared with a 5.2 percent gain for the Dow Jones Industrial Average.

Opposition lawmakers -- who hold a majority of seats in the House of Commons -- have suggested they may try to bring the government down with a so-called no confidence motion this week, and the government could also fall if its fiscal plan -- to be presented March 22 -- is voted down.

Polls show the opposition’s strategy may backfire. Aided by a recovering economy and a barrage of campaign-style television ads in recent months seeking to discredit Liberal Leader Michael Ignatieff, Harper’s Conservatives are poised to improve their standing in Parliament and may even win a majority of seats if an election were held, said John Wright of polling company Ipsos Reid in Toronto.

‘Death Wish’

“To trigger this would be a death wish for the Liberals,” said Wright. “The economy and jobs continues to be the No. 1 issue and the prime minister and his party have all the credibility on that issue.”

An Ipsos poll taken Feb. 23-27 for Global Television found 43 percent of Canadians would vote for the Conservatives, compared with 27 percent for the Liberals. The telephone poll of 1,000 Canadians has a margin of error of 3.1 percentage points.

The most contentious issue related to Finance Minister Jim Flaherty’s budget is his plan to maintain reductions in corporate tax rates that would cost the government more than C$6 billion in revenue next year, according to estimates by the Canadian Manufacturers and Exporters, an Ottawa-based lobby group that supports the measures.

Canada cut the federal corporate income tax rate by 1.5 percentage points to 16.5 percent on Jan. 1, and it will fall to 15 percent in 2012 under legislation passed in 2007.

Japan Crisis

Harper has said the tax cuts are needed to sustain the recovery and generate new employment, and warned a change in government may undermine the country’s recovery. Harper said last week the earthquake, tsunami and nuclear crisis in Japan highlight the need for the country to strengthen the rebound.

“We cannot afford to take our focus off the economy and get into a bunch of unnecessary political games, or as I said, an opportunistic, an unnecessary election,” Harper told reporters March 15 at a press conference in Surrey, British Columbia.

Opposition lawmakers counter the government is misleading Canadians on the costs of its initiatives, citing estimates by the parliamentary budget officer Kevin Page that suggest costs of the corporate tax cuts, the fighter jet purchase and new crime legislation are understated. Page has said the purchase and maintenance cost of the fighter jets may be about $12 billion more than the $17 billion the government estimated.

‘Contempt’ Vote

In addition to debating the fiscal plan, lawmakers this week may vote on whether the government held Parliament in “contempt” over its reluctance to detail the cost of its legislation.

“All options are open,” Ignatieff, 63, said in an interview with the CTV television network yesterday. “Election next week, election next year, either way the issue will be, ‘can you trust Stephen Harper with power?’”

The Liberals are seeking to show the electorate what they say is a pattern of government secrecy and undemocratic behavior they hope will counter Harper’s advantage in the economy, aiming to benefit politically from a series of incidents that have embarrassed the Conservatives.

Two former government officials face investigations by the Royal Canadian Mounted Police, including Bruce Carson, a former aide to Harper who was alleged to have breached lobbying laws, while four Conservative Party organizers are being charged by the federal public prosecutor with violations of election spending rules.

Two Ministers

As well, International Cooperation Minister Bev Oda has faced hearings by an opposition-dominated committee over allegations she misled lawmakers regarding cuts in funding to a non-government organization. Opposition lawmakers have also called for Immigration Minister Jason Kenney to resign after one of his staffers sent a fundraising letter from his office, violating Parliamentary rules.

“The Conservatives are going to have to answer for all of those things,” said Steven MacKinnon, a former national director for the Liberals and a candidate for the party in Quebec, in a telephone interview. “This is a government that promised to sweep in a new wave of accountability and have spent every day in office making the government less accountable and less relevant to Canadians.”

The parties have already begun campaign-like television advertisements, with the Liberal ads claiming Harper “thinks he’s above the law.” Conservative television ads have been airing since January, painting Ignatieff, a novelist and former professor at Harvard University in Cambridge, Massachusetts, as an elitist with few links to Canada.

“Every winning campaign that I’ve ever seen has started out with the ultimate winner being counted out in the beginning,” MacKinnon said. “You will have a significantly fluid electorate.”

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Christopher Wellisz at cwellisz@bloomberg.net.

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