The Liberal government’s plan to find billions of dollars in operating efficiencies would require a 24 per cent cut in public service spending and “devastate the federal government,” according to the Canadian Centre for Policy Alternatives.
Prime Minister Mark Carney’s campaign platform included savings from “increased government efficiency,” with $6 billion in savings in 2026-27 and $13 billion a year in 2028-29.
The government promised $130 billion in new measures during the election campaign, including cutting the lowest marginal tax rate from 15 per cent to 14 per cent, boosting defence spending and balancing the government’s operating budget.
A new report from the Canadian Centre for Policy Alternatives, written by economist David Macdonald, says $13 billion in savings will “mostly be in personnel expenditures in non-defence departments,” amounting to a 24 per cent cut in government spending.
“If the prime minister follows through on his election promise, Canada’s federal public service will undergo the worst spending cuts in modern history,” the report says. “That will inevitably diminish the quality of public services.”
The Liberal Party platform said the party was committed to “capping, not cutting public service employment.” The platform promised a reduction in the use of external consultants and using Artificial Intelligence to enhance government productivity.
Macdonald says Canada’s pledge to boost defence spending to two per cent of GDP likely exempts the department from spending cuts, meaning spending reductions will need to come from the $89 billion in operating expenditures in other departments.
Macdonald says cutting contracting out would result in $1.2 billion in savings, and “almost all cuts” to get $13 billion in savings will be on staffing expenditures.
“Cuts at this level wouldn’t be ‘capping hiring,’ ‘finding efficiencies using AI’ or ‘not replacing retiring workers.’ For cuts this is deep, it would require across-the-board job losses and major service reductions,” says the report.
“In other words, if it proceeded it would represent a major disruption to federal public services and would rival the 18.9 per cent cut in operation expenditures of Paul Martin’s 1995 budget as the most extreme budget slashing in Canadian history.”
“Cuts of this size, and restricted in these ways, are clearly not feasible.”
In an interview on Newstalk 580 CFRA’s The Morning Rush with Bill Carroll, Macdonald said the proposed spending reductions are “likely far too big to be implemented without major impacts on services.”
“We often go through these cycles where government expands to fill a need. There were long waits at the Passport Office, you couldn’t get anybody on the phone at Canada Revenue Agency – you go on a big hiring binge to fill the staff to try to fulfil these needs and now we’re at the high point in the cycle where you may have actually enough staff to deal with the need and you say, ‘We’ve got too much staff, let’s cut this staff,’” Macdonald said.
“So, I think at this point we’re at the high point of that cycle where you think, ‘Oh, we can get efficiencies’, and you cut a whole bunch of staff. And there is an impact on service, it may take a year or two to bubble up to the political level.”
Macdonald says the report looks at the biggest item for savings in the Liberal platform
Last month, the parliamentary budget officer said the government would need to cut the size of the federal public service to implement its campaign promises and “respect its fiscal bottom line.”
“There were promises made during the campaign, but the real test comes in the implementation of these measures. In the campaign, the government promised to increase national defence spending, for example, $30 billion over a number of years, but it could choose to take a slightly different path, which would allow the government to post deficits that are aligned with its election pledges without cutting the public service,” Yves Giroux told CTV News Channel’s Power Play.
“But it would require reducing the speed at which it implements its programs. If the government really wants to implement its program as outlined in the campaign and respect its fiscal bottom line that it also indicated in the campaign, it would mean reducing the size of the public service rather than just capping its growth.”
