Finance Minister Francois-Philippe Champagne says it’s time for the government to tighten its belt.Adrian Wyld/The Canadian Press
The federal government will shrink the size of the public service by 40,000 people from its peak in 2024 over five years, a component of a budget plan to find nearly $60-billion in internal savings in part by reversing the growth in government ranks since the pandemic.
Some specific programs are listed for elimination. But most of the savings are described by departments as general efficiencies to be realized through staffing reductions – including attrition, early retirements and potential layoffs. They also pledge to spend less in areas such as training, travel and contracting.
As a result, many of the details related to spending cuts will be revealed over the coming months by individual departments.
The size of the public service has climbed steadily since the Liberals formed government in 2015 and accelerated through the pandemic, exceeding the pace of growth in the Canadian population.
Prime Minister Mark Carney had warned that the budget would include elements of austerity and sacrifice, and the document includes cuts to foreign aid, the elimination of some programs and the broader staffing reductions.
“Canadians have been tightening their belt for quite some time, and it’s quite natural that we do the same as the federal government,” Finance Minister François-Philippe Champagne told reporters Tuesday.
The core public service reached a peak of 367,772 employees in 2024 before falling to 357,965 this year, according to the Treasury Board.
“These reductions will continue the trend toward a more sustainable public service size of roughly 330,000 by 2028-29, a decline of about 40,000 or 10 per cent from the 2023-24 peak – where attrition has, and will continue to be, a driver,” the budget states.
It acknowledges, however, that attrition alone will not be enough to meet that target.
Such a reduction would be significantly more than the 16,000 positions eliminated during the last significant cost-cutting exercise, under the then-Conservative government’s 2011 spending review.
The budget says this new review will be similar in scale to those Conservative-era savings, when measured as a share of projected direct program expenses. The budget aims for a 4.9-per-cent reduction, while the Conservative review looked to trim 4.5 per cent.
For context, the budget says the deep cuts of the mid-1990s represented a 14.9-per-cent reduction.
The government will offer early retirement incentives for older government workers and rely on a mix of attrition and layoffs to meet the target.
Federal union leader Sean O’Reilly, president of the Professional Institute of the Public Service, said the budget’s references to cuts in the public service go against Liberal campaign pledges and raise more questions given the lack of detail.
“In the platform, they promised to cap the public service, not cut. And now we’re seeing across-the-board cuts. That really does concern me,” he said.
Michael Wernick, a former clerk of the Privy Council, said he’s pleased to see the government is offering buyouts for older workers so that the staffing reductions don’t disproportionately affect younger workers.
He said the budget savings are essentially a starting point. Departments will now have to work on specific decisions related to cuts, and MPs will need to push officials at committees to provide more information regarding their impact.
“You can see the macro scale of it, but there’s an awful lot of detail to follow,” he said.
Former parliamentary budget officer Kevin Page expressed a similar view, saying the spending review will likely continue for several years.
“It is significant, but I don’t think they’re done yet,” he said.
Stephanie Levitz, The Globe’s senior reporter in Ottawa, details some of the key elements of Prime Minister Mark Carney’s first federal budget.
The Globe and Mail
The budget also says the government will be bringing in legislative changes to collective bargaining that will ensure Canada’s “fiscal circumstances” are taken into account.
The government and public sector unions are currently in a new round of collective bargaining over future contracts for wages and other benefits.
The budget says its efficiency efforts will produce $59.6-billion in savings and revenue over five years.
The Prime Minister had promised that the budget would lay out a plan to “spend less” in order to invest more.
However, only day-to-day operational spending was targeted for savings. The government had previously made clear that other large categories, such as health transfers to the provinces or direct transfers to individuals such as seniors’ benefits, would not be affected.
Overall program expenses will continue to rise, reaching $568.3-billion in the 2029-30 fiscal year, up from $489.9-billion in 2024-25, a 16-per-cent increase.
As promised, the budget includes an additional presentation aimed at separating the government’s operating and capital spending.
The government defines capital investments as any government spending or tax break that contributes to public or private capital formation, either federally or by other levels of government. Everything else is defined as operating spending.
By that definition, the government will meet its stated goal of aligning deficit spending to capital spending, allowing it to say it has balanced the operating budget.
The budget lays out a plan for capital investments that ramp up to $59.6-billion in 2028-29, up from $32.2-billion in 2024-25.
The deficit, meanwhile, will jump to $78.3-billion this fiscal year, up from $36.3-billion the year before. It is then projected to decline to $57.9-billion in 2028-29, which is roughly the same size as the capital spending budget.
The debt as a percentage of GDP will rise slightly to 43.1 per cent next year, up from 42.4 per cent in the current fiscal year, and stay around that level over the following three years.
Previous Liberal governments had pledged in budgets to keep the debt-to-GDP ratio on a declining trend.
Mr. Page said the budget does show that ratio declining over the longer term. He said the extra spending this year is understandable in light of the economic shock Canada is facing owing to trade tensions with the United States.
“The government is basically saying we need to provide more support at this particular point in time, which will not allow us to have a declining debt-to-GDP ratio over the short to medium term,” he said.