Flaherty Remains at Finance in Canada Cabinet Shuffle

Canadian Prime Minister Stephen Harper is seeking to rejuvenate his government’s fortunes with one of the largest cabinet shuffles since taking power in 2006, as he battles slumping poll ratings and an economy struggling to build steam.

Harper added eight new cabinet ministers, including four women, to his cabinet in changes announced on the social media site Twitter. Harper’s main economic line-up remains intact with the exception of James Moore, previously heritage minister, replacing Christian Paradis as industry minister. Finance Minister Jim Flaherty, Trade Minister Ed Fast and Natural Resources Minister Joe Oliver remain in their posts.

Harper’s government is facing its lowest popularity in four years, with his party surpassed by the Liberals in public opinion polls, as the Conservatives struggle with the fallout of an expenses scandal that has implicated the Prime Minister’s former chief of staff, Nigel Wright, and two of his senators. Tepid growth also threatens Harper’s reputation as strong handler of the economy.

“It’s easy to take credit when you’re doing better than your neighbor to the south, but if there’s a perception that the U.S. economy is starting to pull away, Canadians will start to ask questions,” said Nik Nanos, a pollster for Ottawa-based Nanos Research. “I can’t see the Conservatives focusing on anything else other than the economy.”

Large Shuffle

Today’s shuffle comes at the midpoint of the government’s mandate, with elections scheduled for 2015. Lisa Raitt, a Toronto lawmaker, moves to the transport department from the labor ministry. Harper appointed Alberta’s Michelle Rempel as minister for western economic development and Kevin Sorenson, a lawmaker from the same province, as junior finance minister.

Manitoba lawmaker Shelly Glover becomes Heritage Minister. Chris Alexander, an Ontario lawmaker, becomes the new immigration minister, replacing Jason Kenney, who moves to the ministry of employment and social development.

Peter MacKay becomes justice minister, trading spots with Rob Nicholson, who moves to defense.

Speaking to reporters, Harper said he will “prorogue” the legislature, an act that ends the current parliamentary session, in order to outline a new agenda for his government later this year.

“Our new agenda will have new faces to bring it forward,” Harper said following the swearing-in ceremony. The shuffle brings “generational change” to his government, Harper said.

Flaherty, who has been suffering from a rare skin disease, had said he wanted to remain as finance minister until the country eliminates its deficit, which he forecast will happen in the fiscal year beginning April 2015.

Long Serving

Flaherty has been Harper’s only finance minister, making him the longest serving Conservative at the post in a century. If he stays through 2015, he would become Canada’s second-longest serving finance minister since the country was created in 1867.

Keeping him at the job may mean a “quiet sigh of relief” for financial markets because of all the changes at key Canadian economic institutions, Bank of Montreal’s Doug Porter said. He cited the departure of Mark Carney from the Bank of Canada last month and Julie Dickson’s planned retirement from the Office of the Superintendent of Financial Institutions.

“It’s probably more welcome than usual to have consistency at finance,” Porter, chief economist at the Toronto-based lender, said by e-mail.

Flaherty’s last budget plan -- delivered March 21 -- seeks to limit spending growth over the next five years to the rate of inflation. If successful, it would be the slowest pace since the country last eliminated the deficit in the 1990s.

Stocks Underperform

At 1.7 percent, Canada’s growth this year will be one of the slowest among the Group of 20 countries outside Europe, according to International Monetary Fund forecasts released last week. Canada’s benchmark stock index is under-performing U.S. equities for a third year after seven years of stronger gains.

According to poll aggregator threehundredeight.com, the Conservatives have averaged support of 28.9 percent in surveys taken last month, compared with 34.4 percent for the Liberals and 23.8 percent support for the main opposition New Democratic Party. That’s a drop of 4.9 percentage points for the Conservatives from the end of last year, and a 10.5 percentage gain for the Liberals, who elected Justin Trudeau as their new leader in April.

Since March, Harper has been dogged by scandal. Wright resigned from his post after the disclosure he paid about C$90,000 ($86,300) to Senator Mike Duffy to help with repayment of ineligible expenses Duffy has claimed, prompting an investigation from the the Royal Canadian Mounted Police.

Senate Scandal

Another senate lawmaker, Pamela Wallin, also left Harper’s caucus amid investigation of her expenses. Harper’s former minister of intergovernmental affairs, Peter Penashue, lost his seat in a special vote after he was found by the country’s independent voting agency to have received ineligible campaign contributions in the 2011 general election.

Wright, a managing director at Toronto-based Onex Corp., Canada’s largest private-equity firm, before becoming Harper’s third chief of staff more than two years ago, helped the government focus on structural issues such as increasing exposure in Asian markets and boosting labor mobility, transitioning away from stimulus measures to boost domestic demand.

Harper’s government last week also lost another key government adviser on economic issues when Sean Speer, Flaherty’s director of policy and a one-time aide to Harper, announced July 12 he is leaving the government for a research position.

In addition to Rempel, Alexander, Glover and Sorenson, the new additions to the cabinet include Kellie Leitch as labor minister, Candice Bergen as junior social development minister, Pierre Poilievre as minister of state for democratic reform and Greg Rickford as minister of state for science and technology.

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