Finance Minister François-Philippe Champagne sent letters to cabinet ministers Monday, asking them to find ways to reduce program spending starting next fiscal year.Justin Tang/The Canadian Press
“Through this ambitious review each minister should examine the programs and activities in their portfolio to determine which are: meeting their objectives, are core to the federal mandate, and complement versus duplicate what is offered elsewhere by the federal government or by other levels of government.”
So reads the text of a letter from the federal Minister of Finance to his cabinet colleagues, enjoining them to participate in a new and more stringent “Comprehensive Expenditure Review.”
I say “new and more stringent” because we have had several rounds of expenditure review before this. They usually didn’t amount to much. The 2022 Strategic Policy Review, for example, was supposed to yield $6-billion in savings over five years (total federal program spending over the same period: $2.5 trillion) but never got off the ground and was quickly forgotten.
Ah, but this time is different. The Minister is reported to have told his colleagues to “find ways to reduce program spending” by 7.5 per cent starting next fiscal year, 10 per cent in the following year, and 15 per cent in the 2028-29 fiscal year.
Three quick points. One, those numbers would appear to be cumulative, not additive: i.e. by fiscal 2029 spending should be 15 per cent lower, not 30 per cent. Two, those are almost certainly cuts from what spending would otherwise have been, not from where it is now.
And three, as reported, they are reductions in what is called direct program spending. There are no plans to make cuts in transfers to individuals or transfers to other governments, though these together account for more than half of total program spending.
Rather, it would appear the reductions are to be from spending over which the government has more direct control. Presumably this includes not only departmental operating expenses ($127-billion in fiscal 2029, according to projections in the 2024 budget) but also the vast archipelago of discretionary transfer payments known as “other transfers” ($113-billion).
Mind you, some $46-billion of that spending was pencilled in for the Department of Defence, plus another $9-billion in defence-related spending delivered through other departments (e.g. Veterans Affairs). Far from being cut, this spending is to be drastically increased.
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That leaves about $185-billion in direct program spending against which to apply that 15 per cent cut. This implies the government intends to reduce program spending in 2029 by about $28-billion. That’s a lot of money, even if it is only 6 per cent of total projected non-defence spending of $487-billion in that year.
Hence the radical rethinking urged in the Minister’s letter. Imagine! In this new age of austerity, programs will be required to “meet their objectives”? To be “core to the federal mandate”? To avoid duplicating other programs, either federal or provincial? This is some wild and way-out stuff.
If the Minister had really wanted to blow his colleagues’ minds, he might have even asked them to consider whether a program was necessary at all – whether it was part of the proper role of government, or could be better carried out by the private sector. He might have asked them to identify what market failure, if any, a program was intended to remedy, and to show that it did not simply replace it with an even-worse government failure.
Nevertheless, the letter itself was enough to set off warnings that public services were about to be decimated. Comparisons have even been made to the deep cuts in spending Jean Chrétien’s government made in the late 1990s.
Steady on. The 1995 budget proposed cuts in total non-defence spending of nearly 10 per cent over two years – in absolute terms, not just from what it otherwise might have been. It didn’t just cut operating expenses (13 per cent overall, though some departmental budgets were cut in half), or transfers to businesses and Crown corporations (20 per cent), but also transfers to the provinces (14 per cent).
The Chrétien government later went on even to cut transfers to individuals – or tried to. A proposal to combine Old Age Security and the Guaranteed Income Supplement into a single, income-tested benefit was abandoned in the face of public and political opposition. Modest reforms to Employment Insurance were also implemented, but partially reversed after the 1997 election, in which the Liberals lost 20 seats in Atlantic Canada.
A 15 per cent cut to departmental spending over three years is not nothing. But let’s not make it out to be more than it is. At a time when deficits are already running at 2 per cent of GDP or more, and when defence spending is scheduled to double or (depending on how you define it) even triple, it is the very least ministers should be asked to do.