US embassy cable - 05OTTAWA1283

UNCLAS SECTION 01 OF 02 OTTAWA 001283 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: CA, PGOV, Stephen Harper, Ralph Goodale, Paul Martin, NDP 
SUBJECT: HARPER SUGGESTS POINT OF NO RETURN ON ELECTIONS 
 
REF: OTTAWA 00640 
 
(SBU) Summary:  Conservative Party Leader Harper reacted 
strongly to news of the budget deal between the NDP and 
Liberals, stating that he would be returning to his caucus 
and asking the Conservatives to &put this government out of 
its misery.8  The deal announced late Tuesday between NDP 
leader Layton and PM Martin was an  agreement in principle' 
that exchanged CN$4.6 billion in new government spending for 
NDP support of the Liberal budget.  The deal seemed odd, 
since even with NDP support the Liberals would appear to come 
up short in a vote, but without the NDP they didn,t stand a 
chance.  The vote could take place as early as next week, 
when the government,s survival would be in the hands of the 
three independent MPs and two Conservatives whose ill health 
may keep them away from Ottawa.  End Summary 
 
Let,s Make a Deal 
----------------- 
 
2. (SBU) After several days of eyeing each other across the 
dance floor, PM Martin and NDP Leader Layton struck a deal 
Tuesday evening that would infuse CN$4.6 billion in new 
government spending to NDP priority areas over the next two 
years, while deferring corporate tax cuts worth CN$3.6 
billion.  This new spending would be for housing ($1.6 
billion), the environment ($900 million), tuition assistance 
($1.5 billion), foreign aid ($500 million), and pension 
protection ($100 million).  PM Martin emphasized that the 
corporate tax cuts deferral would affect larger corporations 
but those for small and medium sized firms would go forward. 
(NOTE: The tax cuts had been backloaded, with most not 
scheduled to take effect until 2008 -- see reftel.  In fact, 
if the deal survives, the CN $4.6 billion to buy off the NDP 
will be funded by this year,s surplus.  END NOTE) 
 
3. (SBU) The deal required some fiscal explaining.  Speaking 
in Regina today, Finance Minister Ralph Goodale readily 
admitted that he would have preferred his original budget and 
described recent weeks as &a bit of an untidy process.8 
Still he defended the government,s actions and maintained 
that he was adhering to fiscally responsible principles, 
while placing the blame squarely on the Conservative Party 
for its obstructionist attitude in Parliament which forced 
the Liberals to make this deal with the NDP.  The Canadian 
Chamber of Commerce and the Canadian Council of Chief 
Executives, meanwhile, were quick to condemn the deal as 
damaging to Canada,s sound economic policies and 
international investment reputation, as well as being bad for 
economic growth.  Goodale also stressed that the deal will 
not push the country back into deficit spending, something 
none of the major parties would advocate. 
 
Party Positioning 
----------------- 
 
4. (SBU) The NDP has never been riding so high.  Leader Jack 
Layton was given a hero,s welcome by party faithful on his 
return from the summit, but even then was quick to emphasize 
that the deal announced on Tuesday applies only to support 
for the budget and is not a blanket endorsement of the 
Liberal government.  In Layton,s statement about the deal, 
he noted there would be an election soon, but in the meantime 
he intends &to get as much done as we can.8 
 
5. (SBU) Bloc Quebecois Leader Gilles Duceppe pointed out 
that Bloc priority issues such as the federal-provincial 
fiscal imbalance and employment insurance reform were not 
included in the deal (even though he would have agreed with 
much of the social spending).  He called it a bad budget for 
Quebec and a bad budget for Canada and stated that he would 
continue to oppose it, as the Bloc did during the last budget 
vote. 
 
6. (SBU) Conservative Leader Stephen Harper was much more 
scathing in his criticism and clearer in his intentions.  In 
comments made to a business group in Amherstburg, Ontario, 
broadcast on Wednesday afternoon, Harper referred to the pact 
as &death-bed conversions and deals with the devil.8  He 
called this the most dysfunctional Parliament he has ever 
seen, and decried the situation in which &what the Liberals 
don,t steal, the NDP gets to spend.8  But he ended by 
laying down the clearest marker yet on a spring election. 
&As soon as I get back,8 Harper said, &I will ask my 
caucus to put this government out of its misery at the 
earliest possible opportunity.8  (NOTE: This does not mix 
with his previously stated commitment to get feedback from 
his MPs from the April 25-29 Constituency Break before making 
a decision.  END NOTE) 
 
If It Comes to a Vote 
--------------------- 
 
7. (SBU) There may still be a way out of this train wreck, 
but at least one commentator said a budget vote could come as 
early as next week.  If this happens, the survival of the 
government goes to the question of how the three independents 
vote and whether two very ill Conservatives can vote.  The 
line up of voting members is as follows: 
 
Liberals          131   (not counting Speaker Milliken who 
only votes in a tie) 
NDP               19 
Total       150 
 
Conservatives     99  (of whom two members -- David Chatters 
and Darrel Stinson -- are very sick with cancer; their 
attendance at a vote, especially one held on short notice, is 
not guaranteed) 
Bloc Quebecois    54 
Total       153 
 
Independent       3  (of which only Carolyn Parrish,s vote 
for the Liberals is secure; David Kilgour is undeclared; 
Chuck Cadman has recently suggested that he would vote to 
bring the government down, but he is also ill with cancer). 
 
In principle the Liberals would need all three independents 
to survive, but if one or two Conservative are out sick, 
their chances improve.  And of course all they have to do is 
tie for Speaker Milliken to cast the deciding vote. 
 
8. (SBU) Comment: No matter what happens, Jack Layton and his 
NDP come out winners, as his mouse of a party has gotten the 
attention of the lions, all the while being able to 
innocently state that he is trying to make government work. 
In the battle for Canada,s so-called progressive voters, 
Layton has finally presented himself and his party as having 
power and influence in Ottawa.  How the others will fare is 
less clear.  PM Martin could come out of it as having merely 
acceded to the wishes of Canadians in trying to continue to 
make government work until Gomery finishes its business and 
they can make electoral decisions based on full disclosure. 
But he could just as well look increasingly desperate, and 
paint himself as one who is willing to do anything to stay in 
power.  With Harper it is less a question of what he gains 
from the deal, as whether there is any way to retrieve the 
gauntlet he just laid down if he finds out later this week 
that his caucus is wary of going to spring elections.  After 
today,s comments that would appear to be increasingly 
difficult.  End Comment. 
 
Visit Canada's Classified Web Site at 
http://www.state.sgov.gov/p/wha/ottawa 
 
DICKSON