Carn he do it?

Ex-governor of Bank of England Mark Carney to take over as Canadian Prime Minister.

For a farewell speech, Justin Trudeau received an atmosphere that could be described as none other than electric at the Canadian Liberal Party event on Sunday. After 10 years leading his party, and the country, internal pressures for him to step down had finally overwhelmed his instincts as a self-described “fighter”.

In the short period following his official resignation notice, he has remained at the helm to steer the country through torrential international engagements regarding Ukraine, as well as the imposition of tariffs by the US at the behest of the Trump Administration.

His final words lauded the progress and achievements he had made while in office. Yet for his successor, Mark Carney, who took 85.9% of the first ballot in the party’s leadership that Sunday evening, there are several entrenched challenges.

Whilst the Liberals, and their poll support, have been galvanized in defence against actions by the Trump administration, they have long been in domestic trouble for a burgeoning cost of living and a chronic housing crisis.

These are formidable obstacles for a Liberal victory in the federal election due to be called this year, with the Canadian Conservatives mobilising around the populist, small-government Pierre Poiliviere.

Despite encompassing the second-largest land mass in the world, since 2015 when the Liberal party took office the average home price has doubled from $450,000 to roughly $800,000 in 2023.

This can be attributed to a myriad of issues, such as the concentration of population on Canada’s border with the US and on its coasts. Contrary to expectations, its generous land mass has not guaranteed plentiful housing.

The fallout from Covid, which saw many employees resort to remote working from home, combined with an airy immigration policy (in 2021, 23% of the population was a landed immigrant according to Statistics Canada) has exacerbated demand for its highly-regulated housing market.

A generous foreign investment policy has also done its part, as foreign buyers into real estate have assisted in driving up prices beyond the reaches of Canada’s working and middle classes.

Eradication of home-ownership dreams has been toxically compounded with grievous inflation, reaching as high as 6.8% back in 2022 (Canada IMF). This can partially be owed to external factors such as the invasion of Ukraine and disruptions in supply chains from Covid, with the prices of basic items such as ground beef having soared by 20% at the highest (depending on the province).

Most contentious has been the “Carbon tax” policy, designed to penalise contributors to greenhouse gases such as fuel transportation and agricultural production. Whilst many have credited it as a substantial step towards reducing climate impact, it has played its part in pushing up the costs of food.

Liberal attempts to abate these issues, such as a carbon tax “rebate” (a relief on lower-middle income households) and first-time home buyer scheme have generally been insufficient to reverse the population’s view that, virtually - everything - has become too expensive.

In December 2024, a study by Abacus Data found that 35% of Canadians have reported “a diminished quality of life”. The latest tariff war launched by the Trump Administration has only made matters worse.

Canada’s Conservative party has been eager to capitalise on the country’s problems, with its leader Pierre Poilievre often seen hounding the late Trudeau in the House of Commons “Question period (a daily 45-minute variant of the United Kingdom’s PMQs).

His campaign mantra of “Axe the tax. Build the homes. Fix the Budget. Stop the Crime.” has been a simple, yet effective summary of Canada’s woes used to pelt the Liberal-NDP coalition.

The two progressive parties’ confidence-and-supply agreement has since expired. With the Canadian Tories now polling at 39.8% (CBCNews poll tracker, March 12th) Mark Carney has the rather unenviable task of navigating his party through the inbound federal election this year.

He was the first non-Briton to take the reins of the Bank of England back in 2013 when a Conservative-Liberal Democrat coalition was enduring the throes of a financial crash from 2008. Having been personally sought out by the then-Chancellor of the Exchequer, George Osborne (who lauded him as “the outstanding central banker of our generation), he was instrumental in maintaining low interest rates, down to even 0.25% following the Brexit referendum in 2016, to maintain monetary stability in his stint as governor.

His governance back then was associated with the usage of quantitative easing (QE) to support lending, yet the Canadian Bank has paused its QE program since 2023 to assist in combating inflation. QE may be less helpful now.

Any policy that could be perceived as aggravating inflation (which stood at 1.9% in January, according to Statistics Canada) may expose vulnerabilities to further attacks from Poilievre, who has criticised the bank for being “financially illiterate” and even conjured the term “justinflation”. Minimising attacks from the resurgent Conservatives on monetary policy will be crucial if Carney is to succeed and employ his expertise spent at the Bank of England.

Carney is not the Prime Minister yet. He is the “Prime Minister-designate”, yet he will undoubtedly be sworn into office in the next few days. His first steps will be to mobilise response to the escalating trade war with the US, as Trump now threatens to double the levy on Canadian steel and aluminium to 50%.

In the meantime, he has made promises to increase defence spending to 2% of GDP by 2030 - a wise choice, considering the uncertainties over America in regard to its NATO responsibilities and the ramping up of defence in Europe.

It is suggested that he will make fiscal responsibility the centre of his administration, as national debt as a percentage of GDP was expected to stabilise around 106% in 2024 (IMF). He has also promised to lift the consumer carbon tax and opt for incentive-based climate change initiatives. Still, there may be a few drastic changes to see once he succeeds in office.

Theo Argitis of ‘The Hub’ has described his inbound administration as “The same core agenda, without the excesses”. We may see a shift towards curbing some of the more burdensome taxes and climate policy, yet the most significant comparisons will be how he engages with the Trump Administration.

Indeed, Mark Carney’s success may hinge on whether he can bring the US to heel with retaliatory tariffs and potential collaboration with Europe in other areas such as Ukraine. Trudeau was in attendance at Keir Starmer’s London Summit on the conflict during the 2nd March, signifying the value that the European community places in Canadian cooperation, especially as Trump has begun to exhibit his unreliability as a key partner.

Carney could follow up with this faith - particularly with his past history as a vocal ‘remainer’ back in the Brexit referendum of 2016. He has already pitched himself as a strong contender on the international stage following his leadership succession speech, confirming he will maintain tariffs on US imports “Until the Americans show us respect” and likening opposition leader Pierre Poilievre to Donald Trump.

“Slogans are not solutions” was his subtle reference to the Conservative’s campaign mantra. It seems Carney is prepared for the confrontations on the domestic and international stage to come - “Canadians are always ready when someone else drops the gloves”.

Will the ex-banker’s ungloved hands be enough? Trudeau managed to redeem himself in the grim last days of his premiership, upholding Canada’s role on the international front. Removing the consumer carbon tax will negate many of the domestic opposition’s attack lines, yet it may not matter. If he can see off Trump, he will undoubtedly stand a greater chance at seeing off Poilievre at the federal election.