One More For the Road: The Latest Liberal Scandal

Sensing that the end was nigh before this Monday's vote on the Conservative no-confidence motion, the Liberals took care to make the most of what was left of their tenure in office. They made spending announcements at a rate of a billion dollars a day, most of which was not included in any of the 3 budgets from the last six months (i.e. the original budget, the NDP amendment, and finance minister Ralph Goodale's economic update from this month), and managed once again to mire themselves in scandal. I refer to Wednesday's sudden finale to the suspense surrounding the fate of income trusts.

An income trust is a form of investment containing income-producing assets, and whose shares are traded publicly like stocks. Income trusts have been popular because they can provide a steady stream of revenue for the trustees and because they are tax-free. In September, Ralph Goodale made investors nervous by announcing a review of the tax-status of income trusts. As late as two weeks ago, Goodale was telling the media to expect results of the review to be announced in January. But on Wednesday, November 23rd at 6 p.m., Goodale unexpectedly announced that no new taxes would be imposed on income trusts. The next day saw a huge spike in the S&P/TSX Capped Trust Index as the cloud over the heads of income trust investors was removed.

The whole episode seemed like another example of incompetent bungling by the Liberals, unnecessarily skewing market forces by loudly toying with the idea of a new tax. Upon closer inspection, there may be more at play than mere negligance. As reported in the National Post, the Capped Trust Index was up 3.6% for the week by the close of trading on Wednesday, before Goodale's announcement. There was no news to account for investors' sudden enthusiasm, yet whoever was wise enough to purchase shares that week profitted immensely from Thursday's spike. This raises the possibility that Goodale's office may have leaked information about the announcement, tipping off some investors. The RCMP is now investigating to determine whether there was any illegal insider trading.

It is befitting that the Liberal government should expire in such circumstances. Many pundits point out that the opposition can only carry anger over the sponsorship scandal for so long, especially since it occured under a different leader. This viewpoint errs in assuming that Paul Martin has run a clean ship, and that the sponsorship scandal is the only blemish on an otherwise clean record. Evidence suggests that this isn't the case. For example, there is the CSL scandal which I wrote about a while ago. Not to mention the Gun Registry scandal, the Dingwall affair, and several crony appointments to the senate.

Canada deserves better.