Jim Flaherty skates well, and is good in the corners

Finance minister has made some mistakes but he still has the PM's confidence

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The Gazette, Friday, August 17, 2007

First came the cabinet shuffle, next comes a deputy shuffle. Deputy ministers, like their bosses, are appointed by the prime minister and serve at his pleasure. And like the cabinet, the senior ranks of the civil service are due for a shakeup.

Only three people would be part of this conversation: the PM, his chief of staff and the clerk of the Privy Council. That would be three very smart guys named Stephen Harper, Ian Brodie and Kevin Lynch.

In any deputy shuffle before a new Throne Speech expected in mid-October, one of the moves could be at finance. This would be no reflection on the many qualities of the current deputy, Rob Wright, one of the brightest and nicest people in Ottawa. Wright would be a logical candidate to replace David Dodge as governor of the Bank of Canada, when he leaves early in the new year.

Finance Minister Jim Flaherty already has a new chief of staff, Derek Vanstone, a lawyer from Gowlings in Toronto who previously worked with him at Queen's Park. He replaces David McLaughlin, a former deputy to Bernard Lord as New Brunswick premier, who has moved on to become head of the National Round Table on the Environment and the Economy.

If Flaherty is to have a fresh start at finance, it stands to reason that he would be getting a new deputy as well. The question is, who? Finance was once home to the best and brightest in Ottawa, but the department isn't as deep in talent as it used to be. Twenty years ago, when Stanley Hartt was the deputy at finance, the four associate and assistant deputies were named Fred Gorbet, David Dodge, Kevin Lynch and Ian Bennett, every one of whom went on to become the deputy at finance.

For a lot of reasons, including the devaluing of public service by the media, there isn't anything like that kind of bench strength today. But there is one obvious candidate among the associate deputies at finance and that's Mark Carney, a former international investment banker who is highly regarded by Flaherty's political staff as well as by permanent officials.

In any event, there's no doubt Flaherty needs a fresh start as he begins the consultations leading to his next budget, probably in late February.

Three things have been following Flaherty around - the reversal on income trusts, the nasty fight with Newfoundland and Nova Scotia over equalization, and the offshore investment tax loophole that was plugged in the last budget.

The first two have resulted in Conservative losses with voters - angry investors over income trusts and angry premiers over equalization and offshore. Both were broken promises, but both arguably needed to be broken in the national economic interest of the country. It's the third one that should be troubling to Flaherty because it resulted in a loss of confidence in the finance brand in the markets.

Flaherty's intent was to end double dipping, but the effect was to end deductibility on foreign borrowings, and the markets were quick to point out no other country imposes such penalties on investment. In the oil patch of Alberta, where liquidity is always an issue, the locals went nuts. On Bay St., the boys simply shrugged and said it was proof finance didn't know what went on in the real world.

For all of the above reasons, Flaherty's political currency has been devalued. One of the second day stories out of the cabinet shuffle is that Flaherty got his wings clipped in that he lost the chair of the cabinet economic committee to Trade Minister David Emerson, and will no longer be vice-chairman of the Treasury Board.

Aha, Flaherty wasn't in Ottawa on Tuesday, therefore he was sulking. Actually, he was in Toronto, where he is the minister for the Greater Toronto Area, which is the biggest political pie in the entire country. The party line is Flaherty is about to be given additional responsibilities, perhaps as early as today, that will conflict with membership on those cabinet committees. And in any event, the finance minister sits wherever he wants in Ottawa, because he's holding the purse strings. The only thing that matters is the confidence of the prime minister, and every indication is Flaherty retains Harper's confidence.

Flaherty has also been busy in the last week, along with Dodge, dealing with the meltdown in the stock market over the sub-prime credit issue in the United States.

All of which is to say Flaherty has quite enough on his plate. But in light of the last budget, it will be very important for him to get the next one right.

Anyone who knows Flaherty, a former hockey player of some talent, can tell you three things about him. He is a consummate team player. He loves to mix it up in the corners. And he never makes the same mistake twice.

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