WHAT MIGHT THE NEW GOVERNMENT LOOK LIKE?

C O N F I D E N T I A L SECTION 01 OF 03 OTTAWA 003670

SIPDIS

NOFORN

E.O. 12958: DECL: 12/13/2015
TAGS: CA PGOV PREL
SUBJECT: WHAT MIGHT THE NEW GOVERNMENT LOOK LIKE?


Classified By: POL M/C Brian Flora, reasons 1.5 (b) (d)


1. (C/NF) Summary: With the parties polling eerily similar
to where they were at this point in the 2004 election, one
might assume that the next government will look much like the
last one. However, even if the gross percentages are the
same, the next government will be very different, and
possibly different in ways that directly affect U.S.
interests. Two weeks into the eight-week campaign, the most
likely scenario is another Liberal minority government.
However, even with NDP support, which is not a given, a
Liberal government might not have enough seats to pass
legislation or even to stave off a vote of no-confidence. It
would be inherently shaky from the outset and would have
trouble governing effectively. The country might well go
back into an election before 2006 is over. To survive, any
government would have to seek new arrangements, such as a
formal or informal coalition, that have not been tried in
Canada before. In any event, the next government of Canada
will likely not enjoy the political
support it needs to make any bold decisions. The coming year
might well bog down in relative political chaos. End Summary


CURRENT STANDINGS
--------------


2. (C/NF) At the close of the 38th Parliament the Liberals
and NDP together had 151 seats (133/18),and the
Conservatives and Bloc together had 152 (98/18),with four
independents and two vacancies. A total of 156 seats are
required to form a majority government, including one seat
for the Speaker. According to the most recent Strategic
Council polls, there are some 40 seats in play in the
election. As of mid-December this is how we see things
shaping up for the parties:

-- The Liberal Party is expected to lose several of its 21
seats in Quebec (of 75 total seats there),several in British
Columbia, and possibly the single Liberal seat in Alberta
held by Deputy PM McLellan. Some commentators even predict a
near-sweep for the Bloc Quebecois in Quebec with only
portions of Montreal Island and Gatineau remaining in Liberal
hands. Though polls indicate the Liberals will likely pick
up extra seats in Atlantic Canada, there is no where else in
Canada they could pick up enough new seats to make up for a
big loss in Quebec.

-- The Conservative Party will not win any seats in
Quebec, or make significant gains in urban or suburban
Toronto, where a recent poll shows the Tories trailing by 19
points. A new poll by the Strategic Council, however, shows
the Conservatives rising 9 points in Southwestern Ontario,
where Strategic Council President Allan Gregg says it could
pick up as many as 15 seats. The same poll suggests they
would lose several seats in BC, but this would still leave
the Conservatives with a net gain.

-- The New Democratic Party is currently holding 18 seats,
and they are expected to make at least modest gains (unless
large numbers of NDP supporters vote Liberal to thwart a
perceived Conservative victory) in urban British Columbia,
Southwestern Ontario, and Saskatchewan where the party is
well supported by the organization behind a provincial NDP
government. In SW Ontario this could effectively split the
left-leaning vote to the advantage of the Conservatives. It
also appears that in several ridings in B.C. and Saskatchewan
the fight will be between the Conservative and NDP
candidates, with the Liberals effectively marginalized. Look
for modest gains overall.

-- In the wake of the sponsorship scandal which has cut
the legs out from under the Liberal Party in Quebec, no party
is in a better position for a winning campaign than the Bloc
Quebecois. For all intents and purposes, while polling
numbers on support for separatism can be questioned, when it
comes down to voting day there are only two options, Liberal
and Bloc, and the Liberal brand is severely tarnished.
Predictions are that the Bloc will gain around 4-6 new seats.


Possible Scenarios for the 39th
--------------


3. (C/NF) While it is premature to speculate over the next
government, it is useful to frame the range of options for
the final outcome, and point out those with a significant
impact on U.S. interests. They are:

-- Liberal Majority: Despite the musings of Liberal
strategist David Herle at this summer's Liberal Caucus
retreat, this would require 23 new seats without a loss. It
is highly unlikely the Liberals could ever score a majority
without holding a significant number of seats in Quebec.

-- Conservative Majority: Until such time as the
Conservative Party breaks into Quebec in a meaningful way,
and finds a way to pick up more than a quarter of the seats
in Atlantic Canada, there will not be a Conservative majority.

-- Conservative Minority: If there were a complete
disaster for the Liberals in Quebec, and good overall gains
for the Conservatives in southwestern Ontario, B.C., and
Atlantic Canada, the Conservative Party could come out on
top. This is the nightmare scenario some fear, because the
Tories could be forced to seek the support of the Bloc to
have a tenable long-term government (although Bloc
participation would not be a requirement to form government).
It is difficult to imagine a scenario where a
Conservative-Bloc arrangement would be tenable for long,
given the deep social and economic differences. But one
option suggested by political analyst Sean Durkan would be
for the two parties (possibly with the support of the NDP) to
agree on a simple agenda of cleaning up government, and leave
new policy initiatives alone.

None of these outcomes are considered likely, which leaves
some form of a Liberal Minority as the most probable. The
exact nature of such a government is an open question but two
options are worth considering.

-- Liberal Minority NDP = Majority: If the NDP picks up
a greater number of seats than the Liberals lose, they could
join the Liberals to produce a voting majority. The NDP
would thus be even more indispensable than they were in the
38th parliament. They could informally agree to support the
Liberal government in exchange for Liberal support for NDP
policy interests, not unlike their recent Parliamentary
performance where they exacted concessions on a rolling basis
so as to retain maximum leverage. They could enter a formal
Liberal/NDP arrangement that stops short of a full coalition,
something they would shy away from given their fear of being
engulfed by the Liberals. Or they could form a
European-style full-on formal coalition, with NDP members
sitting as cabinet ministers. Both of these "alliance"
scenarios would also require a fair amount of contrition on
the part of the Liberals.

NOTE: Coalition government is something that has never really
happened in Canadian Parliamentary history. It cannot be
ruled out now, however, since the rise of the Bloc as a large
third party has undermined the traditional two party system
in which one party could invariably be assumed to win a
majority and minorities were short-lived. If the Bloc stays
in the 55-60 seat range and neither the Liberals nor the
Conservatives lose significant support, minority government
will be the future of Canadian politics and will require
adjustments to how the country is governed. Coalitions will
presumably be one serious option. And if the NDP is
essential to Liberal survival it might well have influence
out of proportion to its numbers. This would also touch upon
issues of importance to the United States, such as defense,
environmental policy, foreign aid, and economic/regulatory
policy. END NOTE.

-- Liberal Minority NDP = Less than Majority: If the
NDP does not win enough seats to bring the two parties to a
Parliamentary majority (which present polls point to as the
most likely outcome),the Liberals, even with NDP support, do
not have enough seats to govern effectively. The
Conservatives and Bloc may in that situation decide they do
not want to bring the government down immediately and vote
with them on early confidence votes such as the budget and
the Throne Speech, but they would try to exact a full pound
of flesh to do so. The Liberals would finally have to govern
as a minority, not the country's "natural governing party,"
managing business in Parliament somewhat humbly on a
case-by-case basis.

But as the opposition found in the 38th Parliament, a party
quickly loses credibility as the opposition by voting with
the government on key issues. In this scenario Parliament
would be even less effective than the last, and could also be
very short-lived. The parties would need to replenish their
campaign coffers, but Sean Durkan says the government could
fall in a matter of months (Minority governments here
typically do not last longer than six to nine months in any
event).

-- We also note another option open to the Governor
General if faced with an essentially dysfunctional scenario
where the Liberal minority, even with NDP support, still does
not reach the 50 percent threshold. She could turn to
Stephen Harper and asks him to try to form a government.
Harper would then have to consider how to form a partnership
that would be more stable than the one the Governor General
rejected, the most probable being some form of arrangement
with the Bloc.

WHAT WE KNOW (AND WHAT WE DON'T KNOW)
--------------


4. (C/NF) To sum up, we are uncertain how this election will
turn out, or even how the campaigns will be run. But the
following are important considerations:

-- The next government will likely be weaker than the
current one; making it functional calls for a new model for
governing or at least creative new governing arrangements
that may not have been used in Canada before. This will then
require a shaking out period as new roles and rules are
developed.
-- Such minority government instability will be the rule,
not the exception, over the next several years. It is even
possible there could be another election in 2006.
-- Both parties will be looking for new leadership soon
after the election in a bid to break the deadlock and come
back with a working majority.
-- The Bloc Quebecois will be stronger, and with it the
sovereignty issue will gain in prominence.
-- Issues of importance to the U.S. could be lost in the
shuffle of a dysfunctional government that is unable to stake
out bold positions and constantly distracted by the task of
preparing for the next election.
-- The NDP may find itself in a stronger position and may
be able to impose its policy choices in a way that is out of
proportion to its numbers.

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