With EI freeze, Tories steal Liberals’ ammunition in battle for middle-class votes

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There are electoral calculations behind Jim Flaherty's announcement Monday that the Harper government is freezing employment insurance rates, and not just the obvious one of trolling for votes by cutting taxes.

In the war between the Conservatives and the Liberals for the territory known as the middle-class voter, the Tories are determined to leave the Liberals no fiscal room for manoeuvre. Freezing EI taxes fits within that strategy.

The Conservatives' previous decision to increase EI premiums had always seemed like an anomaly: increasing a payroll tax hurts both workers and employers and hardly seemed to fit with a government committed to tax cuts, not hikes.

And in truth, the EI account has always been abused for political purposes. The Tories raged against the Chrétien government for raiding the fund to help eliminate the deficit and build surpluses.

During the 2008-09 recession, when those surpluses disappeared, the government froze rates and pumped in money to make up the difference. But in his March budget, Mr. Flaherty began raising rates again, in an effort to make the fund self-sustaining.

The Finance Minister said that falling unemployment freed up money that permitted a freeze; critics said tougher new rules, including those that force unemployed workers to take jobs for less money and to commute for up to an hour to get to them, forced people off the dole.

In any case, the new rules have rendered the party deeply unpopular in Atlantic Canada and elsewhere. Freezing rates fits the mantra of any majority government: Bring in the big, unpopular changes early in the mandate, then soften the impact in the lead-up to the next election.

But the move also denies the Liberals the possibility of freezing or lowering rates themselves as part of an election platform, making it harder for Justin Trudeau to define himself.

The Liberal Leader rightly refuses to get bogged down in policy details two years before an election. Stephen Harper, you will recall, did not release major elements of his 2006 election platform until half way through the campaign.

But back in 2006, voters were well acquainted with Mr. Harper, who had already fought and lost the 2004 election. The knew exactly what he stood for: lower taxes and getting tough on crime. The platform itself simply filled in the details.

Voters don't know who Justin Trudeau is. He says he wants to help the middle class. How?

In 2011 Michael Ignatieff's proposed "family pack" offered money for postsecondary education and early childhood learning; help for caregivers at home and for those planning for retirement – all to be paid for by setting a higher corporate tax rate than the Conservatives proposed. It did not go down well.

If Justin Trudeau wants to help the middle class through tax cuts rather than new spending, that will be difficult. The Conservatives have already lowered the GST and corporate taxes. Mr. Flaherty has now beaten the Liberals to the punch by freezing a major payroll tax.

There will be tax revenue available once the books are balanced in 2015. The Conservatives have already flagged their intentions: couples with children will be able to pool their two incomes, thus lowering their overall tax burden. A very middle-class thing to do.

The Liberals may have different plans for a tax cut. Or they may prefer to spend the money on new programs – say, postsecondary education, early childhood learning, support for caregivers, improved pensions. Except we know how that worked out.

All Mr. Trudeau has to do, over the course of the next two years, is entrench in the public's mind a few strong, simple ideas about how he plans to help the hard-pressed middle class.

But if it includes lowering their taxes, Mr. Flaherty has just made that harder.

John Ibbitson is the chief political writer in the Ottawa bureau.