Deputy Prime Minister and Minister of Finance Chrystia Freeland speaks at a news conference in the media lockup, ahead of the tabling of the federal budget, in Ottawa, on April 7, 2022.Justin Tang/The Canadian Press
Introducing the Liberal Slimming Plan, in which you are guaranteed to lose five pounds – by not gaining the 20 pounds you were on track to pack on, and instead adding just 15.
If you find that pitch compelling, you are also likely to be a fan of what the Liberals generously describe as a “strategic spending review,” aimed at saving $15-billion over five years.
Anita Anand, newly installed as Treasury Board President, has kicked that review into high gear, or at least a gear, setting out in a memo to her cabinet colleagues an Oct. 2 deadline for each ministry to detail how it will meet its allocated portion of the $15-billion.
Ms. Anand brings her customary crispness of execution to Treasury, but her memo does raise the question of what her predecessor was up to in the 15 months since Finance Minister Chrystia Freeland first announced the government’s intention to tighten the spending taps ever so slightly.
Still, at least the process has begun. The larger problem, however, is that the ambition of the Liberals’ spending review is woefully inadequate. At best, the result will be a federal budget far bigger than before the pandemic, paying for an engorged civil service that continues to hire at a record pace.
It bears repeating: The government is not looking to cut $15-billion from this year’s spending, which would qualify as significant fiscal restraint. No, the Liberals are instead reducing future increases in spending.
Five years from now, total federal spending is projected to be $76.5-billion higher than in fiscal 2022-23, a 16-per-cent increase. Notably, that rise assumes the Liberals find their $15-billion in “savings.” Even that $76.5-billion figure is a lowball, since it doesn’t include the billions in added costs from this spring’s negotiation of collective agreements with public sector unions. And it further assumes that the Liberals do not repeat their sleight of hand from an earlier $3.8-billion spending review for fiscal 2022-23. All of those savings came from lower-than-expected uptake of pandemic benefits – in the previous fiscal year.
More significantly, the Trudeau government would have to stick to its multiyear spending plan for even this deeply diluted version of fiscal restraint to actually come to pass. But this government has habitually added on billions of new spending in each new budget. The 2021 budget, for instance, predicted total spending in this fiscal year of $447.4-billion. By the spring of 2023, forecast spending for the current year had surged by $49.5-billion to $496.9-billion.
Any savings that Ms. Anand secures are likely to be spent, several times over, come next spring.
Of course, the hoped-for savings are modest in the short term: $500-million this year, or just over one dollar for every $1,000 in spending. The bulk of any efficiencies come in later years, including after an expected federal election in 2025.
This spending review will deliver very little in the short term, and not much more later on. So what would a more substantial exercise in fiscal retrenchment look like?
For a start, the government would need to commit to the spending projections from its most recent budget. Any new Liberal initiatives would have to be found within that (admittedly voluminous) envelope. That would include the extra costs resulting from this spring’s wage settlements.
Even that is likely expecting too much from this government. But a legitimate exercise in fiscal prudence would aim to constrain the size of federal spending as much as possible in order to avoid undermining the inflation-reducing effects of the Bank of Canada’s interest-rate hikes.
Supporters of the government are fond of asserting that an extra billion here or there does not have a decisive impact on inflation, which is true as far as it goes. But they avoid the larger point: the Liberals’ continual expansion of spending has (and still is) adding fiscal stimulus and undermining monetary policy.
The most obvious, if not the quickest, step the government could take is to impose a hiring freeze immediately. That would force Ottawa to rethink how it deploys staff rather than simply hire thousands more to paper over deficiencies in process and productivity.
Ideally, real fiscal restraint at the federal level – rather than the play-acting version offered by the Liberals – would reduce inflationary pressures, thereby speeding the day when the central bank can begin to roll back interest rates that have risen to punishing levels for so many Canadians.