Now that the harper government has scrapped the deductibility of interest for investment abroad, maybe Bay Street will follow the advice brokers give their clients: don’t put all your eggs in one basket.

This government, of course, isn’t the first to be courting the middle class by giving the impression it will not be beholden to any vested interest such as Bay Street. But it should be very clear that this government means it for several reasons.

The Conservatives, with their populist roots in the former Reform and Alliance parties, came to the astute conclusion before the 2006 election that ordinary Canadians felt alienated and left out by the Liberals, particularly in the brief Paul Martin era, when Bay Street was pouring money into the party’s coffers at high-profile fundraisers.

Bay Street’s affinity for the Liberals between 1993 and 2006 was understandable. Martin and Jean Chrétien were well known to the Street and, as late as 2004 the Liberals looked as if they’d be in power for years.

But it was just too cozy for Conservatives and Canadian voters alike.

Today, Canada has a Conservative government that owes virtually nothing to Bay Street for its success. Indeed, this government owes little to the traditional policy elite of think tanks, associations, government departments and agencies that have had so much influence in the past.

Limits on corporate donations, ironically introduced by the Liberals in 2002, mean no government will ever again be dependent on large vested interests for financial support.

Previous incarnations of the Conservatives, after the decimation of the former Pro-gressive Conservative party in 1993, learned to depend on grassroots donations, while the Liberals had yet to wean themselves off corporate and union donations. Simply put, they don’t need Bay Street for support as the Liberals did.

To this day, no investment organization maintains an office in Ottawa to lobby the government because securities are a provincial responsibility. Besides, the Department of Finance and the Bank of Canada are a phone call away, and they know what capital markets need.

As a result, Bay Street has been comfortable in the belief that holding the annual conference of the Investment Dealers Association of Canada in Ottawa every four or five years is enough to maintain a presence.

For the past two decades, power in Ottawa has been on a centralizing trend toward the Privy Council and the Prime Minister’s Office. That trend is accelerating under Stephen Harper. The policy partnership Bay Street has had with the central bank and Finance no longer has the clout it once had.

Simply put, Bay Street was not only badly unprepared for the results of the 2006 election, but it also had not been keeping up with changes in the past decade.

As investor anger over the decision to tax income trusts continues to dog the Conservatives, this government at some point will realize it will have to reach out to the investment industry.

Bay Street and the investment community across Canada will have to start doing things differently to maintain a presence in Ottawa. A good place to start would be talking with ordinary members of Parliament.

Until it establishes a presence in Ottawa, Canada’s investment community can expect more surprises affecting its bottom line. IE