Canadian Government Executive - Volume 25 - Issue 03

The constraints on consultation imposed by the British tradition had been a barrier to tax reform. Bold measures such as Gordon had proposed exacted high costs in loss of political face. As Sir Humphrey Appleby might drily note, Gordon had been “very brave.” August/September 2019// Canadian Government Executive / 11 GOVERNMENT regularly asserted their views. But there was no open political bargaining about particular measures. Canada was Brit- ish, not American. And in Britain in 1947, a Chancellor of the Exchequer had been forced to resign because he had indis- creetly disclosed tax measures to a jour- nalist before the budget speech, even though only minutes before. It was an alleged violation of this stern convention of budget secrecy that imme- diately took over budget debate after Gor- don’s June 13 budget speech. Were those four Bay Street experts, sworn by an oath of secrecy as they were, nonetheless fun- nelling sensitive facts back to Toronto? Had the summary of the speech prepared by Clarkson, Gordon, and Co., Gordon’s old firm, arrived in Vancouver suspicious- ly early on the 14th? Postal schedules were scrutinized, aspersions cast. Of course, front page stories summa- rized the main features of the speech. But the real story was whether the opposition and the NDP would be able to use the secrecy question to inflict some serious damage on the new government’s claims of competence, and perhaps see Gordon replaced as minister. As the secrecy is- sue subsided – it really had no substance – protest from the Montreal Stock Ex- change forced substantial changes in the proposed tax treatment of foreign invest- ment, and the construction industry ex- acted the staging-in of a tax on building materials. Lost in the foofaraw was any discus- sion of Gordon’s expert measures to close some big tax loopholes. “Administrative lawlessness!” erupted Diefenbaker in the House. But only tax lawyers noticed. Both parliamentarians and the press found easier targets than a remedy for dividend stripping. It was frustrating for Gordon to see his bold work overlooked, as it may well have been for Morneau to be shouted down. But one legacy of the 1963 debacle is that no one would now make the mis- steps that got Gordon in hot water. Today’s governments take major tax measures through multi-tiered public and private consultations before the bud- get speech. We still have budget secrecy, but it’s far from the undemocratic version that armed opposition politicians in 1963. Calls for better pre-budget discussion be- gan to appear in the business press in late 1963. Then, in November 1969, finance minister Edgar Benson, formerly Gor- don’s parliamentary secretary, pushed the constraints and published a White Paper on tax reform. These were major proposals, the fruit of six years’ hard study and political ma- noeuvering. Had Finance gotten the com- promise right? Benson wanted a broad public consultation, but as a spectator to Gordon’s fate, he was careful not to open himself up to partisan proceduralist got- chas. The department’s lawyers checked in with senior British lawyers. The constraints on consultation im- posed by the British tradition had been a barrier to tax reform. Bold measures such as Gordon had proposed exacted high costs in loss of political face. As Sir Hum- phrey Appleby might drily note, Gordon had been “very brave.” Today, the greatest furore happens dur- ing consultation processes, not after the budget speech. Our tax talk is more genu- inely participatory. Both consultations and the budget speech play a role in edu- cating voters about public policy. Drawing attention to budget issues was easy back when budget speeches some- times offered big surprises. The 1963 bud- get made for a rivetting political show. Because consultations now make budget speeches so much more predictable, oppo- sition critique is harder. There are fewer easy hooks for drama. The resulting types of critique are not always suited to grown- ups’ taste, which finds drama enough in a subtle resolution to hard problems. and the 1962 Canadian dollar crisis meant that budget measures had to provide both stimulus and a reassurance of price stabil- ity. Partly because of recent interventions by the IMF, the Diefenbaker government had not presented a budget to parliament in two years. Gordon had to restore confi- dence among international investors (im- plying an attack on budget deficits) and support growth with full employment. And he had campaigned on reversing the trend toward foreign ownership in the resource and manufacturing sectors: a na- tionalist project. With a big agenda and a politically in- spired project to deliver in sixty days, Gordon brought in four tax experts from Toronto financial firms to help plan the measures that his speech would propose. This was to be a signature budget for the new government. It needed fresh eyes, and, in Gordon’s view, the current senior staff of his department were not ready to do what was needed. For their own reasons, they largely agreed. They wrote a draft speech; Gordon and one of his To- ronto men rejected it and wrote an alter- native one. Gordon took his proposals to the Gover- nor of the Bank of Canada, who disliked the taxes that were designed to discour- age foreign ownership and favour Cana- dian investors. These and other tax mea- sures would prove controversial. But the convention of budget secrecy prohibited a wider consultation. Cabinet heard a summary on the eve of budget day. The approval of the Prime Minister was all that was required, and Pearson gave it. This was a world in which MPs (of all parties), the Ottawa press corps, and Ca- nadians could – gulp! – look forward to some real surprises in a budget speech. Finance ministers consulted, to be sure. Annually, in January or February, the minister would give a deadline for bud- get proposals from the public to be con- sidered by Finance. Organized interests Walter Gordon, photo from the Toronto Star Archives