Flaherty, McGuinty team up just as furor erupts over HST

KAREN HOWLETT
Globe and Mail

TORONTO — From Tuesday's Globe and Mail Published on Tuesday, Nov. 24, 2009 12:00AM EST Last updated on Tuesday, Nov. 24, 2009 3:30AM EST


Federal Finance Minister Jim Flaherty has gone from denouncing Premier Dalton McGuinty's stewardship of the economy to supporting the Ontario government's ambition to transform the province into one of the world's top-10 financial centres over the past year.

Their friendlier relations were on display yesterday when Mr. Flaherty and Mr. McGuinty attended a blue-chip meeting of CEOs from Canada's biggest financial services companies in Toronto. But the meeting came on the same day debate in the provincial legislature almost ground to a halt over a pet policy of Mr. Flaherty's, highlighting differences between the federal Conservatives and their provincial cousins.

The McGuinty government is under attack by opposition members at Queen's Park over its plans to blend Ontario's 8-per-cent retail sales tax with the 5-per-cent federal goods and services tax - an initiative made possible with $4.3-billion in federal funding.

Ontario Progressive Conservative caucus members staged a protest over the proposed retail tax changes by walking out of Question Period en masse, just minutes into the one-hour debate, after Mr. McGuinty refused to hold public hearings. Progressive Conservative Leader Tim Hudak yesterday accused the Premier of avoiding full public hearings across the province because he does not want to face consumers, who would end up paying the new tax on goods and services that are now exempt from the provincial levy.

"Sadly, we see a Premier ... who hangs out with the elite and won't listen to hard-working taxpayers," Mr. Hudak said in Question Period. "If he has that kind of contempt for taxpayers, I see no point in continuing with Question Period today," he said, and left.

It was Mr. Flaherty who began pushing the Premier to adopt harmonization when the Conservatives came to power in 2006. He also called on the Ontario government to lower its corporate tax rates, at one point ridiculing the province as the last place anyone would want to invest.

The Ontario government announced in the budget last March that it had reached an accord with Ottawa to reform the province's retail sales taxes, effective next July 1. The provincial Tories stepped up their attack last week after the government introduced legislation on the harmonized tax, which is now in second reading.

Everyone who works in the Ontario Legislature (including reporters) has endured the incessant ringing of bells meant to call MPPs into the chamber. But the Tories latest tactic was criticized by both the government and New Democratic Party Leader Andrea Horwath, who is also fighting the harmonized tax and who said MPPs need to be in the legislature to "hold the government's feet to the fire."

Mr. Flaherty has not gone out of his way recently to help Mr. McGuinty sell the harmonized tax in public. But an Ontario government source said the fact that Ottawa is providing financial aid attests to its support. He also said Liberals are comfortable with the way the public debate is unfolding, because it calls attention to the fact that the federal and provincial Tories are divided on the tax changes.

Mr. Flaherty was not available for comment following yesterday's first meeting of a new financial council that will look at creating more jobs in the banking and insurance sectors.

But Mr. McGuinty said it was a mistake for Mr. Hudak and his caucus to walk out. "Their responsibility in Question Period is to provoke, cajole, and highlight shortcomings in government policy and they should be there to do that."