The federal government has initiated a thorough examination of government expenditures, prompting questions about the impact on Canada’s public service, the necessary balance to be achieved, and the feasibility of substantial cuts by the Liberals.
Prime Minister Mark Carney faces these challenges as he undertakes a significant review of public spending, comparable to the budget-balancing efforts of former Prime Minister Jean Chrétien and Finance Minister Paul Martin in the 1990s.
Finance Minister François-Philippe Champagne launched Carney’s review by soliciting “ambitious savings proposals” from cabinet members to reduce day-to-day operational expenses. The goal is to reduce operational spending by 7.5% in the 2026-27 fiscal year, followed by 10% the next year and 15% in 2028-29.
Despite the difficulty of meeting these targets, former Clerk of the Privy Council Mel Cappe believes it is achievable but acknowledges potential public outcry over the cuts, emphasizing the need for collective ministerial support.
Carney has assured that transfers to provinces for essential services and individual benefits like pensions and Old Age Security payments will remain untouched. Key programs introduced by Prime Minister Justin Trudeau, such as child care and pharmacare, will also be preserved.
The Institute of Fiscal Studies and Democracy estimates that the government aims to target around $180 to $200 billion out of the $570 billion total expenditure this year, excluding protected areas like health and social programs.
To address concerns about job losses, the government plans to achieve its objectives by eliminating vacant positions and reallocating staff rather than resorting to layoffs. However, former Privy Council clerks caution that reducing staff may be unavoidable due to the significant portion of the budget allocated to wages, benefits, and pensions.
Carney’s strategy involves leveraging attrition to streamline costs, but experts warn that relying solely on attrition may not be a sustainable management approach. They advocate for strategic cuts in specific areas and suggest reallocating staff to more critical government priorities to prevent expenditure rebounds.
The government aims to enhance cost-cutting measures by leveraging artificial intelligence and automation, requiring investments in training and technology. Former clerks recommend targeted program cuts rather than across-the-board reductions to streamline operations effectively.
Drawing parallels between Carney and Chrétien, experts highlight their prior government experience and crisis response mandates. They emphasize the importance of public support, which historically enabled successful fiscal reforms during crises, such as the debt crisis in the 1990s.
In light of the current challenges faced by Canada, including economic uncertainties, experts believe that the public may be more receptive to necessary cuts, providing a potential pathway for the expenditure review to yield positive outcomes.
