Finance Minister Bill Morneau resigned suddenly from the Trudeau cabinet Monday evening, saying he never intended to run in the next election and that a new finance minister is needed to oversee the long-term economic recovery from the pandemic.

The announcement came in the wake of recent reports of tension and policy disagreements between the Finance Minister and Prime Minister Justin Trudeau.

He said the Prime Minister had not asked him to resign. Mr. Morneau did not directly address the notion that tensions existed.

Mr. Morneau said he intends to put his name forward as the next secretary-general of the Organization for Economic Co-operation and Development (OECD) with Mr. Trudeau’s endorsement.

Mr. Trudeau released a statement afterwards praising Mr. Morneau and pledging that Canada will “vigorously support” his OECD campaign. Neither men provided any public indication that they were at odds.

The Prime Minister is planning to announce a new finance minister “shortly,” two senior government officials told The Globe and Mail. The officials, who are not being identified by The Globe because they are not authorized to comment publicly on the matter, said Mr. Morneau’s replacement will not be former Bank of Canada and Bank of England Governor Mark Carney, who has recently been advising the government in an informal capacity.

Current Deputy Prime Minister Chrystia Freeland, Foreign Affairs Minister François-Philippe Champagne and Treasury Board President Jean-Yves Duclos are viewed in Ottawa as possible candidates.

The finance minister and his staff are the key point of contact in government for executives at Canada’s largest banks, who have generally forged solid relationships with Mr. Morneau, according to sources familiar with banks’ frequent contact with the Finance Ministry during his tenure. The Globe is not identifying the sources because they were not authorized to discuss the matter publicly.

Among bankers, Mr. Morneau was seen as a rare but important voice of restraint and fiscal discipline, serving as a counterbalance to some of the government’s more free-spending instincts, the sources said.

The loss of that voice, in the midst of planning for the next phase of the economic recovery from the pandemic, marks an unsettling turn to many in Canada’s financial sector, they said.

Goldy Hyder, the president and CEO of the Business Council of Canada, said that business leaders thanked Mr. Morneau for his service to Canada and for his commitment to sound public policy over the past five years in extremely challenging circumstances.

“Canada needs strong and steady leadership during these extraordinary times to help ensure a healthy and durable economic recovery,” Mr. Hyder said in a statement while he wished him well for his bid to become the next OECD secretary-general.

Financial market reaction was muted, according to BMO chief economist Doug Porter, who pointed to a momentary decline of 0.2 per cent in the Canadian dollar after the announcement.

“Any serious market reaction is likely to await the announcement of a replacement, and thus any related potential shift in policy direction,” he said in a note.

At the news conference on Parliament Hill, Mr. Morneau told reporters that he met with the Prime Minister earlier in the day to inform him that he would not be running in the next election. That vote is scheduled for the fall of 2023, but could come sooner given that the Liberals only hold a minority of seats in the House of Commons.

Mr. Morneau said he never intended to run in more than two elections and that the next phase of Canada’s economic recovery from COVID-19 requires a finance minister who can oversee the plan over the next several years.

“That’s why I’ll be stepping down as finance minister and as Member of Parliament for Toronto Centre,” he said.

“It’s been a real privilege to have this job. But like any job, there’s a time where you’re the appropriate person in the role, and the time where you have to decide when you’re not the appropriate person in the role.

“Since I’m not running again, since I expect that we will have a long and challenging recovery, I think it’s important that the Prime Minister has, by his side, a finance minister who has that longer-term vision. And so that’s what led me to conclude, during this time period, that it’s appropriate for me to step down.”

He is the only Finance Minister that Mr. Trudeau has had since his government came to power in 2015.

Mr. Trudeau thanked Mr. Morneau for his service, adding that he counted on the minister’s leadership, advice and close friendship over the years.

“Bill, you have my deepest gratitude and I know you will continue making great contributions to our country and for Canadians in the years to come,” Mr. Trudeau said.

Mr. Morneau had yet to release a 2020 budget. Plans to table one in March were shelved as the severity of the pandemic set in. In July, he released a fiscal “snapshot” that revealed the deficit for the current fiscal year is projected to reach $343.2-billion. He said a further update would be released in the fall.

Mr. Morneau entered politics in 2015 after leading Morneau Shepell, the Toronto-based pension-management and employee-benefits company originally founded by his father.

He put his pension expertise to work immediately as finance minister, securing a national agreement with the provinces and territories to expand the Canada Pension Plan, an achievement that had eluded his predecessors. He also played a central role in negotiating the federal government purchase of the Trans Mountain pipeline from Kinder Morgan in 2018.

His relationship with Canada’s small-business owners took a major hit however after he announced a package of tax changes in 2017 that many owners felt were unfair, leading the government to back away from several elements of the original plan.

Last Tuesday, The Globe reported that sources said Mr. Trudeau was not committed to keeping Mr. Morneau on as the key architect of the federal government’s economic revival plan after the two clashed over the Finance Department’s policy responses to the COVID-19 crisis.

Insiders said that Mr. Trudeau was uncertain whether Mr. Morneau was the right fit to steer the country into a postpandemic economic recovery.

The Globe did not identify the sources because they were not authorized to speak publicly about Mr. Trudeau’s plans for a cabinet remake that could lead to the departure of Mr. Morneau.

The PMO issued a statement after last week’s Globe report that said Mr. Trudeau had full confidence in his Finance Minister.

Both the Conservatives and the NDP have expressed skepticism about reports of friction between Mr. Trudeau and Mr. Morneau and suggest it is a Liberal attempt to take the public focus off of the WE controversy.

The Ethics Commissioner is investigating Mr. Morneau and Mr. Trudeau over whether they breached the Conflict of Interest Act in relation to a now-cancelled contribution agreement of $543.5-million with the WE Charity that has been the source of a political firestorm for the Liberals this summer.

At a committee hearing into the issue last month, Mr. Morneau revealed that he had reimbursed $41,366 to WE Charity earlier that day for travel expenses that the group covered for personal trips his family took to Kenya and Ecuador in 2017, leading to his second public apology that month related to his involvement with WE.

Conservative Leader Andrew Scheer said that Mr. Morneau’s resignation is further proof of a government in chaos.

Mr. Trudeau’s government is consumed by scandal at a time when Canadians are worried about their health and finances, Mr. Scheer said on Twitter, adding the departure is an attempt to try and save the Prime Minister.

“Scapegoating Morneau does not solve the problem,” he said. “As long as Trudeau is Prime Minister, the corruption will continue.”

NDP Leader Jagmeet Singh said in a statement that the Liberal government is losing a finance minister at the same time as it’s about to leave millions of Canadians on the Canada Emergency Response Benefit without any idea of how to pay the bills in August.

His party’s ethics critic, Charlie Angus, added that there wouldn’t be a finance minister in the world that steps down in the middle of the biggest crisis of the century and says it is the perfect time to look for other opportunities.

“He took the fall for the Prime Minister and he did it very loyally and he walked the plank,” Mr. Angus said in an interview. “This is about Justin Trudeau’s ethics crisis and it cost him his finance minister just like his last crisis [the SNC-Lavalin affair] cost him his justice minister.”

Former Liberal justice minister Jody Wilson-Raybould, who resigned from Mr. Trudeau’s cabinet in the last Parliament over the SNC controversy, said on Twitter that resignation day is a tumultuous day by any measure and for many reasons whether it is voluntary or not.

“I have to think there is more to this story,” she said.

The frayed dynamic between the Prime Minister and his finance minister has been put under the microscope by political insiders who wondered if Mr. Morneau would be able to remain in his post.

Liberals were comparing the situation to the tense relationship between prime minister Jean Chrétien and his finance minister Paul Martin in the 1990s and early 2000s that created deep and long-lasting divisions in the party.

The Prime Minister’s former principal secretary Gerald Butts took to Twitter earlier on Monday to urge his former colleagues to “knock it off” unless they missed losing.

He said Liberals are more lethal to Liberals than are any competing partisans and that Canadians have “little patience for this stuff in the best of times, and these are not those.”

Michele Cadario, a consultant and former deputy chief of staff to Mr. Martin when he was prime minister, said there is always a “healthy tension” between a prime minister and a finance minister, who heads a department that views itself as the defender of the public purse.

“What is something that no one ever wants, and no one should want, is for any of those tensions to surface and for any of the sniping back and forth,” she said.

Ms. Cadario, who along with Jenni Byrne, a former deputy chief of staff to prime minister Stephen Harper, recently formed an organization to help companies recruit more women to boards of directors. After Mr. Morneau’s announcement, Ms. Cadario told the Globe that Ms. Freeland would be an “excellent” choice to replace Mr. Morneau.

“I very much hope that his resignation means Canada will have its first female finance minister,” she said. “It’s past time to crack that glass ceiling.”

The Globe and Mail, August 17, 2020