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Ottawa Citizen

Salgo: Public service cuts — we've seen massive reductions before

As he prepares his first budget, Finance Minister François-Philippe Champagne has asked federal ministers to find program spending cuts that will rise to 15 per cent by 2028-29. Calling this a comprehensive expenditure review and not mere cost-cutting, his office says it's about spending less running government in order to invest more in the productive capacity of the Canadian economy. Not to mention that we'll soon be spending a lot more on defence. Article content Article content Champagne took pains to emphasize that this is not a job-cutting exercise. But it's pretty hard to imagine how to cut the cost of operations without cutting staff, especially when major social transfers such as dental, daycare, and provincial transfers are not up for grabs. Article content Article content So, while it's not clear that there will be a 15 per cent cut in the size of the public service, the bureaucracy will have to brace for some serious reductions, a far cry from the cap that Mark Carney talked about during the election. Article content Can this be done? Well, yes — we know because we've done it before. A generation ago, the Jean Chrétien government's Program Review (1994-99) cut total program spending by more than 10 per cent between 1994-95 and 1996-97 — in absolute terms, not based on projected increases. It reduced government spending as a share of GDP from 16.8 per cent to 12.1 per cent over five years and cut the size of the public service by 19 per cent, or 45,000 people (55,000 counting separate agencies). Cutting 15 per cent of today's federal public sector would involve roughly the same number of jobs. Article content How hard this will be depends on what you consider hard. Public sector unions have characterized the review as a betrayal of both workers and Canadians who rely on government services. But Canada's public service grew at a heady pace under Justin Trudeau's government and it's not clear whether there were service improvements to match. It's hard to argue that Canada has right-sized its public service, although we're still waiting on a report from the Working Group on Public Service Productivity to (one hopes) help guide us in this respect. Article content Article content In human terms, the cost of cuts could be very high. The supposedly easy way to cut is through attrition: retirements and other voluntary separations. We don't have firm numbers (the Treasury Board has stopped publishing them) but Public Service Commission data on 'outflows' suggest that the attrition figure in recent years has been in the 10,000 range annually. Another convenient option is not to renew the contracts of term and casual workers, although the cost in both human terms and lost skills may be high. Article content If those rates prove too slow for the government's ambitions, there are ways to encourage voluntary separations. Under Program Review, generous packages such as the Early Retirement Incentive and Early Departure Incentive kept involuntary cuts and labour friction to a minimum. But such incentives are expensive, at least in the short run, and if they're open to everyone by choice you may lose some of your best people. Article content Moreover, while attrition may allay the anxieties of current employees, it's terrible from a strategic perspective. It's unlikely to align tidily with the actual need for skills and, like hiring freezes, it can cost the government a generation of new talent. Article content Governments need to rethink what they do and how, which requires selective rather than random cuts, as well as the infusion of new talent in key areas. Carney's election platform promised to make staffing easier, and his government is framing the cuts as a strategic realignment, none of which meshes with heavy reliance on attrition and hiring freezes. Article content Article content A chance for intelligent cuts Article content The simple truth is that an urgent, fiscally driven exercise like this, even one geared to rethinking priorities, is not going to re-engineer the public service. Attrition, hiring freezes, and overall salary restraint will almost certainly play a role. But the government has an opportunity to be at least somewhat surgical. Champagne was right to ask individual ministers to look at how best to cut in their departments, since central agencies such as the Treasury Board Secretariat don't have the detailed operational knowledge needed for the task. But the assumption is still that almost all departments have broadly the same scope for cuts, which skirts some tough questions. Article content