Opinion: Advice to the new prime minister: Let the finance minister do their job

Eugene Lang is an assistant professor at the School of Policy Studies at Queen’s University, a senior fellow at the University of Toronto’s Bill Graham Centre for Contemporary International History and a fellow at the Canadian Global Affairs Institute.

With the election now over, job one for Prime Minister Mark Carney will be to decide who will hold the second most powerful and difficult job in Ottawa: minister of finance.

There are lessons to be learned here from the reign of his predecessor, Justin Trudeau.

Mr. Trudeau is the first prime minister in half a century – since his father Pierre Elliott Trudeau – to have had two finance ministers resign.

Bill Morneau, finance minister from 2015-20, and Chrystia Freeland, who had the job from 2020 until last December, both said they quit in part over fiscal decisions they opposed but which were forced upon them by Mr. Trudeau and his office. Mr. Morneau disagreed with the level of financial support provided during the pandemic and Ms. Freeland objected to the “costly political gimmicks” the prime minister insisted upon in last fall’s Fiscal and Economic Update. The reality is more complex – Mr. Trudeau lost as much confidence in them as they in him.

Nevertheless, both cases speak to the special dynamic between the prime minister and the minister of finance in what is the most important relationship in any government.

The finance minister is the de facto second-in-command in Ottawa, and therefore occupies what is normally the most stable position in cabinet. Over the past 40 years there have been 12 finance ministers, versus some 21 foreign ministers and 21 ministers of defence, for example. Finance ministers seldom resign and rarely move into other cabinet posts.

While Mr. Morneau and Ms. Freeland had tenures of typical length, the power of the finance minister and the Finance Department eroded during the Trudeau years. The fact that every fiscal target the government set was missed or abandoned is the best measure of this erosion and is owing more to prime ministerial override than finance minister fecklessness.

One of the basic if unenviable jobs of any finance minister is to say No (or at least, not now) to most of the endless spending proposals from within the cabinet. This can only be done if there is no daylight between the prime minister and finance minister, and if everyone in the government knows this. The cabinet needs to know that end runs around the finance minister to the prime minister or the Prime Minister’s Office are futile.

This kind of discipline did not prevail under Mr. Trudeau. It was well known that he and his office were the real authority over budget and spending decisions.

Fortunately, while federal finances are challenged today, they are not a disaster. With a deficit projected to be 1.6 per cent of GDP in 2024-25, and a debt-to-GDP ratio of around 40 per cent, Canada is in better shape than many peer countries. This is because Mr. Trudeau inherited a balanced budget and a debt ratio of 30 per cent from his predecessor, Stephen Harper, who inherited an even stronger balance sheet from his predecessors, prime ministers Paul Martin and Jean Chrétien. It was that sound financial legacy that enabled Ottawa to mount pandemic fiscal support of more than 10 per cent of GDP.

However, poor fiscal rectitude – especially just before and after the pandemic – has weakened the financial position of the government just as Canada faces down U.S. President Donald Trump’s tariffs and a likely recession. If the finance minister and the Finance Department had been permitted to play their traditional fiscal guardian role over the past decade, Ottawa would be in better financial shape today to deal with what Mr. Carney calls “the greatest crisis of our lives.”

Whoever is chosen as Canada’s next minister of finance, therefore, will have a brutal job. And that job will be compounded by the Liberal platform commitment to deliver the trifecta of tax cuts, significant spending increases and a federal deficit that, as a percentage of GDP, is projected to fall by 2028-29 below its current level with no cuts to social programs, transfers to people or provinces or the public service. The trifecta is as seductive as it is elusive. It is a no-pain-all-gain promise. And it will be attempted in the midst of the worst global trade war in nearly a century.

The minister of finance therefore needs to be given the authority to square these fiscal and economic circles. Meaning he or she must be someone whose judgment the Prime Minister holds in high regard, someone who will seldom be overruled by the Prime Minister and his office – particularly when developing the government’s annual budget.

To be sure, the Prime Minister must agree with his minister of finance on the basic fiscal framework of the government and on the budget themes. He can also of course insist on specific budget measures, though that authority should be exercised rarely if there is disagreement between him and the minister of finance. Otherwise, the Prime Minister should get out of the way and let the finance minister be finance minister. Canada’s public finances and economy will benefit as a result.