PMO eyes Carney as next finance minister as tension rises with Freeland, sources say

Senior officials in Prime Minister Justin Trudeau’s office are concerned that Finance Minister Chrystia Freeland has not been effective in delivering an upbeat economic message as the Liberal government struggles to reconnect with Canadians amid low approval ratings, sources say.

The relationship between Ms. Freeland, who is also Deputy Prime Minister, and the Prime Minister’s Office has become tense. She has been the most powerful minister in the government since Mr. Trudeau promoted her to the finance portfolio in August, 2020, after the resignation of Bill Morneau.

Under Mr. Trudeau, the PMO has centralized decision-making and holds a tight grip on government messaging from ministers, bureaucrats and Liberal MPs.

There is always a healthy tension between Finance and a PMO, but the finger-pointing comes after the Liberals lost the safe Toronto riding of St. Paul’s in a by-election last month that was contested by Ms. Freeland’s former chief of staff Leslie Church. The loss prompted strong criticism from some Liberals for the prime minister to reconsider his future, shake up his cabinet and set a new policy direction for the government.

Although there are no indications the Prime Minister is planning imminently to shuffle Ms. Freeland to another portfolio, a government source said there were discussions internally about the possibility of recruiting former Bank of Canada Gov. Mark Carney as finance minister.

Two sources say the view of some senior officials within the PMO, including chief of staff Katie Telford, is that Ms. Freeland has been ineffective in selling the government’s economic policies that have come under assault from Conservative Leader Pierre Poilievre.

Other criticism includes that Ms. Freeland is not doing enough to win over members of the Liberal caucus, the sources say.

The Globe and Mail is not naming the sources who were not authorized to discuss the matter.

The Prime Minister’s press secretary Ann-Clara Vaillancourt said Mr. Trudeau has full trust in his Finance Minister.

“The prime minister, and his office, have full confidence in Deputy Prime Minister and Minister of Finance Chrystia Freeland,” Ms. Vaillancourt said. “The Deputy Prime Minister has been working tirelessly to serve Canadians since she was first appointed to Cabinet in 2015.”

Ms. Vaillancourt lauded Ms. Freeland as the first female finance minister, who introduced $10-a-day child care, dental care and pharmacare, and made “historic investments in housing and into building a stronger economy.”

Ms. Freeland’s office was not available to comment.

A Liberal Party source said there is also unease in the PMO over a controversial new tax on U.S. tech giants such as Netflix, Google and Amazon. Ms. Freeland says the tax will bring in billions in new revenue but some in the PMO are worried about the threat of U.S. countervailing duties. The Globe is not naming the source who was not authorized to discuss the internal debate over the sales tax.

For nearly a year, Mr. Trudeau and the Liberal Party have trailed the Conservatives by a substantial margin, which continued after the Prime Minister and Ms. Freeland tabled a budget in April designed to win over Canadians with a big-ticket housing program for millennials and Generation Z voters.

After the by-election loss last month, however, some Liberal Party members and MPs have called for change, including a cabinet shuffle to rejuvenate the government’s agenda.

According to one source, the PMO did discuss a scenario, first reported by the Toronto Star, to replace Ms. Freeland with Mark Carney, the former governor of the Bank of Canada and Bank of England.

In that scenario, Ms. Freeland would have been offered the foreign affairs portfolio she held before becoming Finance Minister. Both sources say Ms. Telford in private conversations had high praise for Ms. Freeland as foreign affairs minister when she renegotiated the trilateral free-trade agreement with Mexico and the United States when Donald Trump was president.

Mr. Carney, considered a leadership contender should Mr. Trudeau step down, has said the April budget, which proposed $52.9-billion in new spending, did not put an adequate focus on fostering economic growth.

In indirect criticism of Ms. Freeland’s financial stewardship, Mr. Carney warned of the risks of “constant spending” and too much government subsidies, although he also congratulated the Liberals for their investments in housing and AI.

The April federal budget unveiled capital-gains tax changes that Ms. Freeland and the Prime Minister positioned as making the wealthiest Canadians pay more but have come under intense criticism. Many economists have said the tax increase will dampen investment and further hurt already weak productivity. The tax hikes have also been criticized by the innovation sector and medical associations.

Last fall, Ms. Freeland hired Andrew Bevan, who served as chief of staff and principal secretary to former Ontario premier Kathleen Wynne. One source credited Mr. Bevan for improving media outreach, noting he has helped get the Finance Minister to hold more regular news conferences.