The Carney government will need to cut 24 per cent of public service spending for the Liberals to regain the billions it pledged to recover on the campaign trail, requiring “across-the-board job losses and major service reductions.”
Prime Minister Mark Carney pledged to regain $6 billion a year in 2026-27 and $13 billion a year in 2028-29, which would be acquired by “savings from increased government productivity.”
Carney’s platform also promised $130 billion in new measures, including boosted defence spending, while balancing the government’s operating budget.
According to a new study from the Canadian Centre for Policy Alternatives, the $13 billion in savings will “mostly be in personnel expenditures in non-defence departments,” amounting to nearly a quarter-cut in government spending.
Economist David Macdonald, who authored the study, said such cuts would be “dramatically worse than Stephen Harper’s 10 per cent cuts on some departments” and would rival Paul Martin’s record-setting 18.9 per cent cuts in 1995.
“If the prime minister follows through on his election promise, Canada’s federal public service will undergo the worst spending cuts in modern history,” reads the report. “That will inevitably diminish the quality of public services.”
It could also walk back the Liberals’ campaign promise of “capping, not cutting public service employment.”
The Liberals claimed that savings could be made by reducing reliance on external consultants, instead utilizing AI to improve government productivity.
However, the report noted that cutting contractors would only amount to roughly $1.2 billion in savings, a far cry from the $13 billion promised annually.
Additionally, the report noted that newly increased defence spending would likely mean that the defence department would be exempt from spending cuts.
This would force spending reductions to be found from other departmental operating expenditures.
“The Department of National Defence takes up 28 per cent of federal operating expenditures. If the cuts are proportional by department, we would expect to cut $3.5 billion in defence spending. But that department will likely be safe from cuts: the government is planning an immediate and dramatic increase in funding of $8.57 billion,” reads the report.
“What’s left amounts to $89 billion in operating expenditures. To cut $13 billion out of that, the government would be looking at a 15 per cent cut in remaining departments, not the original 10 per cent.”
This would mean making up for savings by reducing staffing expenditures.
“Cuts at this level wouldn’t be ‘capping hiring,’ ‘finding efficiencies using AI’ or ‘not replacing retiring workers.’ For cuts this 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.”
Macdonald’s report concluded that “cuts of this size, and restricted in these ways” were “clearly not feasible.”