Cash crunch hangs over Liberal party
John Ivison, National Post
Published: Tuesday, July 08, 2008
Chris Wattie/Reuters
OTTAWA -- The Conservative Party is planning another four by-elections for the first week of September - two in Quebec and two in Ontario - but has hit a snag: John Godfrey, the Liberal MP for Don Valley West, is not going to resign until August 1, even though he has already taken up his new job as head of the Toronto French School.
The delay would push the Don Valley contest into the middle of September at the earliest. Conservatives allege the Liberals have stalled Mr. Godfrey's resignation because they are so hard-up for money they don't want to fight four by-elections at the same time. The Tories are obliged to call a vote in the Montreal riding of Westmount on July 23 for a by-election as early as seven weeks later. They are likely to call contests in the Quebec riding of Saint Lambert and the Ontario constituency of Guelph for the same day.
The Liberals say the date of retirement was of Mr. Godfrey's own choosing and has nothing to do with electoral strategy. But a quick look at the recently-filed party financial statements for 2007 suggest that if it's not, it should be.
While the Conservatives are peppering the airwaves with commercials lambasting "Dion's tax trick", the Grits have produced a feel-good, glossy commercial for their "Green Shift" carbon tax plan that they can't afford to run on television.
The party's financial statements show an organization that is still solvent but one in which expenses outpaced revenues by $1.6-million last year. The largest source of revenue was the government allowance awarded for each vote received at the last election, which came in at $8.5-million. Contributions from grass-roots Liberals accounted for $4.7-million, compared to around $18-million for the Conservatives. This is the bitter legacy of Jean Chrétien's campaign finance reforms, which wiped out corporate donations, the source of 50% of Liberal fundraising. Stephen Harper's Conservatives have added to Grit woes by reducing Mr. Chrétien's $5,000 individual contribution ceiling to $1,000.
The financial statements also show a $2-million loan with an extremely punishing 9% interest rate, collateralized against the assets not only of the party but of a number of riding associations. This is highly unusual and indicates a degree of financial stress long suspected but never admitted by the party.
This is not just an arcane party issue - there are serious implications for the timing of a general election and the long-term competitiveness of the party.
The Liberals will be able to fund an election campaign as they have in the past by borrowing against the 60% rebate they receive from Elections Canada for expenses incurred during the writ period. This means they can borrow around $12-million of the $20-million they will need to fund a campaign, based on the rebate that all parties get for election expenses. But they will still need to raise about $8-million and the only collateral likely acceptable to lending institutions is the government allowance of $1.75 for every vote they receive. This means that if their vote goes down at the next election, they could conceivably be forced to spend the bulk of what they get from the taxpayers to finance their debt, leaving little money for anything else. This fear of a financial death-spiral is what motivated a number of wise old heads around Mr. Dion to urge caution when he was considering bringing down the government earlier this year - their concern is the survival of the institution, rather than the current incumbent.
"They can't afford to run and not do better," said one expert in campaign financing.
This is the background against which Stephen Harper recently raised his defamation claim against the Liberal Party to $3.5-million. Other storm-clouds looming over the Grits include a potential lawsuit by Toronto-based environmental consulting company, Green Shift, which is considering suing the party for damages after it launched its green strategy of the same name.
The only bright spot on the horizon is that contributions rose 60% in the first quarter of this year. While still eclipsed by the Conservatives, if the performance were repeated through the rest of the year, the party would move into the black on an operating basis. The Grits have recently launched the Victory Fund, an attempt to recreate the Conservatives' success at eliciting small monthly donations from a large number of grass-roots supporters.
Daniel Lauzon, deputy director of communications for the Liberal Party, said the party has made no secret of the fact that 2007 was a "challenging" year but said progress is being made. "I'm not about to discuss exactly how we are going to finance the next election, but I can tell you that we will spend the maximum allowable under the Elections Act, and I'm pretty sure we'll win too, given that we have the best team, the best leader and the best vision for the country," he said.
Even Liberals who see no chance of victory with Stéphane Dion as leader must hope that Mr. Lauzon's confidence is not misplaced if the Liberal Party is to remain a political force in the long term. Politics, as Will Rogers noted, has become so expensive, it takes a lot of money even to be defeated. This fact is becoming increasingly inconvenient for a Liberal Party being held together with duct tape.
National Post
jivison@nationalpost.com
