Canada's Martin May Be Toppled Today, Leading to January Vote

Canada's Martin May Be Toppled Today, Leading to January Vote


Nov. 28 (Bloomberg) -- Canadian Prime Minister Paul Martin will probably be ousted by opposition parties today, forcing a January election that may yield the same result: a divided parliament struggling to get anything done.

Lawmakers vote on a motion at about 6 p.m. in Ottawa calling for Martin to step down after a public inquiry found members of his Liberal Party received kickbacks in exchange for advertising contracts. The opposition parties control the House of Commons, allowing them to topple the government for the first time since 1979.

Polls by Ipsos Reid show no party has enough support to win a majority, leading to the first back-to-back minority governments since the 1960s. That may cripple the prime minister's ability to pass corporate tax cuts, open up regulated industries to foreign ownership or allow lenders such as Royal Bank of Canada to merge.

``Certainly the possibility of another minority is a concern,'' said Perrin Beatty, a former minister and president of the Ottawa-based Canadian Manufacturers & Exporters. ``We're apt to see measures which undermine what needs to be done for business.''

Martin must consult with Governor-General Michaelle Jean to set a date for the second election in 19 months. Under Canadian rules, the campaign lasts at least 36 days, with voting on a Monday. The party leaders have said they would take a break from campaigning between Christmas and New Year's, meaning the election will probably be Jan. 16 or 23.

Winter

The prospect of a winter campaign, the first since 1980, doesn't thrill most Canadians who have to trudge through the snow in temperatures as low as minus 30 degrees Celsius (minus 22 Fahrenheit) to vote. A poll earlier this month found 57 percent would prefer to wait until spring for a federal election.

Martin, 67, who waited 13 years for his predecessor Jean Chretien to step down, has been handicapped by his inability to unilaterally pass legislation since he won his first election in June 2004.

Without a majority in the House of Commons, the Liberals were unable to deliver on promises such as decriminalizing marijuana or releasing guidelines allowing the country's five largest banks to merge. Martin's government was also forced to raise spending and shelve corporate tax cuts to win backing of the opposition New Democratic Party to stay in power.

Martin raised spending by 15 percent last year, the largest increase in 20 years, and repealed a C$5 billion tax-cut package for corporations that had initially been included in this year's budget.

Coalitions

Because Canadian parties rarely form coalitions, minority administrations need opposition backing for laws. Minority governments have lasted an average 16 months in Canada. Another informal alliance between the Liberals and the New Democratic Party may be the most likely outcome in the January vote.

The Liberals have about 36 percent support of decided voters, compared with 27 percent for the Conservatives, 16 percent for the New Democrats and 13 percent for the Bloc Quebecois, according to an Ipsos Reid poll published on Nov. 17. The survey of 1,000 people has a margin of error of 3.1 percentage points.

An Ekos Research Associates Inc. poll published Nov. 26 in the Toronto Star found the Liberals had almost 39 percent, compared with 29 percent for the Conservatives. Ekos polled 802 Canadians by telephone from Nov. 22 to Nov. 24. Results of the survey are accurate to within 3.5 percentage points.

Parties typically need to win more than 40 percent of the vote to gain majorities in parliament. The Liberals have 133 seats in the House of Commons, the Conservatives have 98, the Bloc hold 53 and the New Democrats 18.

Minority Government

``It certainly looks as if another minority is in the cards,'' said Donna Dasko, a pollster with Environics in Toronto. ``A safe bet would be to suggest there will be another Liberal minority.''

A new alliance could spell trouble for businesses such as BCE Inc. and Telus Corp., Canada's two biggest phone companies, which are pressing the government to allow them more leeway to set prices and sell services. A government-appointed panel is scheduled to complete a review of the rules by the end of December. The New Democrats opposes deregulating the industry.

``A minority government creates challenges in terms of any legislative agenda,'' said Janet Yale, Telus' vice-president of government and regulatory affairs. ``It's hard to predict, given the nature of the recommendations, whether the government is going to be able to get a consensus.

Other policies that could trigger sharp divisions in parliament include efforts to ease foreign ownership limits on media companies such as BCE, the nation's banks and Air Canada, the nation's largest airline. Banks are also awaiting a decision early next year on whether they will be allowed to sell insurance services through their branches.

Allies

A minority led by the Conservative Party may be even less effective because it has no natural allies in parliament, said Richard Anderson, a former senior adviser to Preston Manning, Canada's opposition leader between 1997 and 2000.

The Bloc Quebecois is seeking the separation of Quebec from the rest of the country. And animosity between Martin and Conservative Party Leader Stephen Harper means an alliance between the country's two largest parties is unlikely.

Harper, 46, has ``managed to create for himself a situation where he can't win a majority and couldn't govern if he had a minority,'' Anderson said.

With the nation's finances at their healthiest in decades and the economy benefiting from a surge in energy prices, Canada can afford the political uncertainty, said Donald Stewart, chief executive of Sun Life Financial Inc., Canada's second-biggest insurer. Canada is on track for its ninth straight budget surplus, the only member of the Group of Seven nations not in deficit.

``The government, whatever its political challenges, is presiding over a pretty good economy, which is more important to us than many other things that it could or could not be doing,'' Stewart said in an interview.

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

Last Updated: November 28, 2005 00:15 EST