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Jim Flaherty or income-splitting — one or the other is leaving town.

That’s the upshot of the finance minister’s bombshell expression of deep doubts, just a day after tabling his budget, about his party’s commitment in the last election to go the income-splitting tax policy route.

Flaherty not only undercut this major promise, he gratuitously highlighted a weakness in the party’s fiscal management. “We’ve created a large public debt and we should deal with it and we should knock it down,” he said.

The debt has been rising steadily under the Tories but it hasn’t been a high-profile problem for them; while serious, our debt level is not as bad as in other major industrialized countries.

With much speculation surrounding Flaherty’s health, there’s been talk that this was going to be his last budget anyway. That likelihood has surely increased. His outburst unveiled a cabinet split, with Jason Kenney and Tony Clement coming down in favour of income-splitting. Prime Minister Harper appeared to side with them, saying in the Commons that the Conservative party had promised Canadians tax reduction.

Having expressed doubts about the wisdom of income-splitting, the finance minister surely would lack credibility if he changed his mind now and brought in such a measure.

His statement — which threw the government into disarray after a non-controversial budget — is another sign (following open dissent by several backbenchers last year over Harper’s heavy-handedness) that the prime minister has lost the iron grip he once held on his people. The Conservatives have lost about one-quarter of their support since the last election, according to recent polls; expect more MPs to question Harper’s leadership.

And the storyline coming out of this budget actually was a pretty good one for the Tories, since it was largely preparations for a balanced budget. That’s the prevailing economic narrative the government wants in the run-up to the next election.

Now they’ve lost control of the narrative. Where before there was little controversy over the government’s economic policy there is now controversy aplenty — over the future of income splitting, the future of Jim Flaherty and the national debt.

There were problems with that narrative, of course. The Conservatives, as the opposition often points out, started with a significant surplus when they came to power in 2006. They brought in policies which, over and above the effects of a global recession, were major contributors to the creation of a high deficit. They cut the GST by two points, cut corporate taxes and went on a wild spending spree — all of which delayed the return to balanced budgets.

So they’re boasting about curing a problem they did much to bring on. Bear in mind also that, as is often the case with governments balancing the books, much of what we’re told is smoke and mirrors. There’s so much scope for slicing and dicing the numbers. With this week’s budget we saw, for example, defence spending committments being pushed back a few years. Presto — $600-million in previously-allotted spending for the coming year is no longer on the books. The government is also padding revenue by maintaining needlessly high Employment Insurance payroll taxes.

With all that said, however, the Harper Conservatives do have a legitimate bragging right. Any government can balance the books through by hiking taxes. This one is doing it while reducing taxes. They’ve done it despite the loss of tens of billions in revenue via the GST cut. That’s what conservatives want, after all: tax cuts and balanced budgets in tandem. To accomplish this they’ve cut program spending by a substantial amount since 2010. Program spending had ballooned the size of government before 2010, but they’ve made headway toward a smaller government since.

And they’ve managed to do it without much of a public backlash. There isn’t a great hue and cry out there over declining public investment, no masses of people in the streets protesting about the cost to social and economic justice in this country. No, what’s hurting the Conservatives are questions about ethics and corruption — that, not their economic philosophy, is what has pulled the Tories down in the polls and could well cost them the next election.

But now they’ve lost control of the narrative. Now it’s not about the erasure of the deficit. Where before there was little controversy over the government’s economic policy there is now controversy aplenty — over the future of income splitting, the future of Jim Flaherty and the national debt.

Here’s betting that it’s Flaherty who goes and the income-splitting promise which stays. There is no stellar heir-apparent on the Conservative front benches to step into finance — which makes the situation all the more difficult.

Lawrence Martin is the author of 10 books, including six national bestsellers. His most recent, Harperland, was nominated for the Shaughnessy Cohen award. His other works include two volumes on Jean Chrétien, two on Canada-U.S. relations and three books on hockey.

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