Budget 2023 proposes across-the-board 3 per cent spending cut for government departments

The federal budget proposes an across-the-board three per cent spending cut for all departments and agencies, a belt-tightening move after years of massive growth in the federal public service.

The proposal is one of several the Liberals say will save more than $15 billion in government spending over the next five years.

"We think there are opportunities to tighten the management of the ship," a senior government official told reporters on Tuesday inside the budget lockup. "We have seen costs go up, we have seen the size of the public service go up."

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The three per cent spending cut will be phased in by 2026-27, the government says, adding the plan will save $7 billion over four years.

Finance Minister Chrystia Freeland said the spending cuts will not include layoffs or staff reductions in the public service.

"Those savings will come from government operations, and I think that those savings are eminently attainable," Freeland told reporters on Tuesday.

Freeland added that the savings are "the right thing to do" and the government was aiming to find a balance between investing in Canadians and continuing "to be a fiscally responsible government."

"Finding that balance, I think quite appropriately, involves the government taking a look at how we do things ourselves, and doing it a little more efficiently," Freeland said.

The budget document, titled "A Made-in-Canada Plan," also says the spending reductions won't affect services.

"Reductions will not impact direct benefits and service delivery to Canadians; direct transfers to other orders of government and Indigenous communities; and the Canadian Armed Forces," the budget document says.

On top of the across-the-board cut, the government is also proposing to reduce spending on consulting, travel and other professional services by 15 per cent of planned 2023-24 spending. The government says that will bring in a savings of $7.1 billion over the next four years.

The budget also promises to work with federal Crown corporations to ensure they make comparable spending reductions. That would account for $1.3 billion in savings over four years starting in 2024-25, the budget says.

In all, the proposals represent savings of $15.4 billion over the next five years.

"We think generally across the federal public sector there are opportunities to reallocate resources," the senior government official said. "That's just good housekeeping."

The Parliamentary Budget Office has said that the size of the public service has grown by 28 per cent since the Liberals took office in 2015.

But one expert suggested cuts across the board are a simplistic approach to governing more efficiently.

"Across the board cuts is a pretty blunt instrument," said Fred O'Riordon, the national leader for tax policy at EY, who worked for more than three decades in the public service.

"It doesn't distinguish between programs that are already running efficiently and effectively and those that aren't, and it doesn't identify programs that are no longer necessary."

The head of one of the country's largest public sector unions applauded the government's decision not to cut services or jobs.

"We celebrate the government’s decision to find $7.1 billion in savings through a cap on expenditures on outsourcing and consulting fees, not at the expense of public services Canadians rely on," Jenn Carr, president of the Professional Institute of the Public Service of Canada, said in a news release.

"By capping outsourcing, the government is ensuring the quality and stability of the services we provide to Canadians."

Chris Aylward, the head of the Public Service Alliance of Canada, expressed skepticism about where the government will find the money for the planned savings.

"They are unable to explain exactly where they're going to get these savings from. So we're very concerned about that, we're concerned about potential job loss as a result of this budget," he told CTV News. "This budget screams austerity."

The budget also proposes to reduce previously announced fuynding that is no longer required or remains unallocated, or delay it where it's being spent slower than first envisioned. That will lead to savings of $6.4 billion over six years, the budget reads.A reporter reads a copy of the Federal Budget in the lockup for the Federal budget, Tuesday, March 28, 2023 in Ottawa. (Adrian Wyld/THE CANADIAN PRESS)

GOVERNMENT PROGRAMS TO BE REVIEWED

The budget also announces new "cross-government program effectiveness reviews," the first of which will focus on skills training and youth programming.

"The first review will examine skills training and youth programming, to determine, by Budget 2024, whether improvements can be made to help more Canadians develop the skills and receive the work experience they need to have successful careers," the budget says.

Treasury Board President Mona Fortier, whose department oversees the management of the public service, will lead these reviews.

O'Riordon said he would prefer a more complete program review, rather than a piecemeal approach that focuses at first on one thing.

"My preference would be a more comprehensive program review and deeper cuts where they're justified with a reallocation of resources—or resources savings—and leaving effective, efficient programs whole."

MORE FUNDS FOR PHOENIX PAY SYSTEM

The budget allocates more than $1.3 billion in money to deal with ongoing pay issues for public servants. That money is for the problem-plagued Phoenix pay system, which continues to face issues years after it was implemented.

The budget sets aside $517 million in the coming fiscal year and $521 million in 2024-25 for Public Services and Procurement Canada to "maintain pay system resources as the government continues its work to resolve public service pay issues."

The system has cost the government hundreds of millions of dollars and led to pay nightmares for tens of thousands of public servants.

The budget also allocates $52 million to "improving the government's pay administration" for the coming fiscal year.

That money will go toward Shared Services Canada as it continues to work on a "potential next-generation pay solution."

MONEY FOR DIVERSE, INCLUSIVE PUBLIC SERVICE

The budget also promises a new $45.9 million mental health fund for Black public servants.

"All too often, Black public servants face barriers to career advancement and lack adequate support for the challenges they face—particularly for their mental health," the budget document says.

The $45.9 million would be spread over three years and also fund new dedicated career development programs, including to prepare Black public service leaders for executive positions.

A group of current and former Black public servants have filed a class-action lawsuit against the federal government, saying systemic discrimination negatively affected their careers, including being denied job advancement.

The government is also proposing $6.9 million over two years to advance a "restorative engagement program" that would empower employees who have suffered harassment and discrimination, and to "drive cultural change in the public service."

The funding will also go toward a review of the processes for addressing harassment, violence and discrimination complaints.