This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 OTTAWA 000594 
 
SIPDIS 
 
SENSITIVE 
 
E.O.  12958: N/A 
TAGS: PGOV PREL CA
SUBJECT: THE POLITICS OF CANADA'S BUDGET: THE RATTLING OF 
SABRES 
 
REFTEL:   A. Ottawa 375 
          ¶B. 04 Ottawa 02837 
 
¶1. (SBU) SUMMARY: On February 23, the Martin Government 
tabled its long-awaited 2005-2006 Budget.  The first 
"minority government" budget in more than twenty years 
provides for billions in spending across a broad spectrum of 
policy interests.  In addressing some of the oft-professed 
key interests of the Conservative Party (tax cuts and 
defense spending) and many of the left-of-center New 
Democratic Party's social policies, the federal Liberals 
have virtually assured safe passage of their budget in 
Parliament, thereby protecting the minority government from 
the latent threat of a no-confidence vote.  The fiscal 
implications of the budget will follow septel. END SUMMARY 
 
 
¶2. (SBU) On February 23, Finance Minister Ralph Goodale 
tabled the Martin Government's long-awaited 2005-2006 
Budget, the first "minority government" budget exercise in 
more than twenty years.  The 400-plus page document doles 
out billions for a broad spectrum of policy programs, from a 
substantial increase in the defense budget to tax credits 
for care givers.  It also addresses at least some key 
interests of the official opposition Conservative party (99 
of 308 seats) and the left-of-center New Democratic Party 
(19 seats), thereby virtually assuring safe passage in the 
House of Commons.  This should extend the shelf life of the 
minority government and was probably carefully calculated by 
the Liberals to give the electorate a chance to sample the 
benefits of the new spending before an election is called. 
More importantly, in funding the pet projects of both the 
Conservatives and the NDP, the Liberals have marginalized 
their political archrivals in the critical province of 
Quebec, the anti-federalist Bloc Quebecois (54 seats). 
 
¶3. (SBU) The government adeptly orchestrated a dramatic run- 
up to the budget speech, featuring choreographed leaks and 
announcements that provided a fairly accurate advance 
picture of the document's content.  Despite the fact that 
Min Fin did consult with them (as per Ref A, Ottawa 375) 
Opposition parties lamented the government's lack of 
consultation and warned that the Liberals should not take 
their votes for granted.  Though post-Budget Day media 
coverage criticized the budget as a document designed to 
attract popular support through social program spending, the 
personal and corporate tax cuts also prompted Conservative 
Leader Stephen Harper to remark "I note...the sudden 
occurrence of a range of interesting Conservative 
priorities."  National media also commented that the budget 
was an "election budget" that the Liberals could easily use 
as the basis of a campaign if there is an election in the 
near future.  Most commentators agree that the document was 
designed to spread enough money around enough programs to 
ensure the Opposition would not have serious grounds for 
complaint, which became evident in the first few minutes of 
Conservative Leader Stephen Harper's official response. 
 
¶4. (U) Finance Minister Ralph Goodale announced spending in 
the following areas: Fiscal Management (savings through 
efficiency); Social Foundations (health care, etc); 
Productive Economy (personal and corporate tax cuts); 
Environment and Communities; and Global Responsibilities 
(defense spending and foreign aid).  Details (covered in 
Septel) include; an increase in the amount basic personal 
exemption after five years, cuts in corporate tax rates and 
other business measures, a national child care initiative, 
tax relief for care-givers, money for greenhouse gas 
reduction, money for renewable and wind energy research, 
increased international aid money, and a boost for the 
Canadian armed forces.  Given the varied list of spending 
areas in the budget, the Opposition is finding it difficult 
to field substantial complaints or protests beyond expected 
requests for more spending or more cuts and vague demands 
for specifics and details that are never included in the 
budget speech. 
 
Conservative Party - Won't Oppose 
 
¶5. (SBU) Though Conservative Leader Stephen Harper invoked 
the traditional litany of Conservative complaints against 
the Government in his "rebuttal," he recognized that 
Canadians did not want an election and said the 
Conservatives would not force one over the budget.  It would 
be difficult for the Conservatives to take a more aggressive 
path in any case.  By funding two of the Conservative 
Party's most cherished pursuits -- income and corporate tax 
cuts and an increase in the defense budget -- the Liberals 
cut into the Conservatives' prospective elections campaign 
plank.  Harper vehemently denies media rumors that a back- 
room deal had been reached with the Liberals before the 
budget, and is quick to spin the document as a reaction to 
pressure placed on the government by the Conservative Party. 
(COMMENT: Conservative House Leader Jay Hill told us last 
week the party's polling numbers were no better now than at 
the time of the election and the Conservatives are looking 
to their very first policy convention in March to better 
define themselves and their programs for the electorate. 
END COMMENT.) 
 
NDP - Hijacked Policies 
 
¶6. (SBU) The small New Democratic Party stands closest to 
the Liberals on social issues and thus is deemed to 
constitute the greatest "threat" to the left wing of the 
Liberal Party.  The Liberals, eager to be perceived as a 
more capable and distinct entity on such issues such as 
municipalities, child care, income tax cuts and 
environmental spending, featured these issues prominently in 
the budget.  Like the Conservatives, the NDP would be hard 
pressed to lodge a complaint with any credibility. 
Moreover, with two other high-profile NPD priorities also in 
present in the House -- same-sex marriage legislation and 
the government's announcement that Canada will not join the 
U.S. missile defense program -- the NDP is arguably in the 
weakest position to posture for an election, even if it had 
the electoral muscle to do so.  As it will not be able to 
support the "token" Conservative amendment, it may well 
claim responsibility for forcing the Liberals to support 
"its" social projects and vote to pass the budget. 
 
Bloc Quebecois - Marginalized 
 
¶7. (SBU) Bloc Quebecois MPs told us earlier that the Bloc 
would be looking for specific items in the budget, noting 
that their primary concern would be whether the budget would 
address the so-called "Fiscal Imbalance."  The "imbalance" 
(ref B) is the perceived mismatch between federal and 
provincial constitutional responsibilities and their 
respective taxation powers.  With 54 seats, the separatist 
Bloc has more weight than the NDP, but not enough to sway a 
vote without significant Conservative support.  As the 
Conservatives have said they intend to support the budget, 
the Bloc will be stuck, unable to make their pitch to have 
the fiscal imbalance addressed. Bloc leader Gilles Duceppe 
denounced the budget as failing to take into consideration 
the needs of Quebec and, specifically, for not addressing 
the fiscal imbalance.  The Bloc Quebecois, touted in the 
media has having reached its high water mark in the 2004 
elections, remains very confident in its electoral chances 
and would not shy away from an early election. 
 
¶8. (SBU) COMMENT: Just prior to the budget speech, some 
polls showed the Liberals with a slight rise to the critical 
"majority government" (40 percent) range for the first time 
since the June 2004 election.  However, the pundits (and 
many of our contacts in Parliament) are not so sanguine and 
say that Canadians are not in the mood for a snap election. 
With this in mind, and taking into account Canada's eight- 
year run of budget surpluses, Liberal tacticians sense that 
their gambit of buying off the Conservatives and the NDP 
opposition will gain them time which they need as they look 
ahead to a potentially divisive leadership convention in 
early March, challenges to their decision not to participate 
in missile defense, and the ongoing same-sex marriage issue 
as it makes its way through Parliament. End Comment 
 
CELLUCCI