Carney's plan to cut tens of billions in spending is tough but doable, experts say

The federal government has started its comprehensive review of government spending, but what will it mean for Canada's public service, what balance will it have to strike and can the Liberals really cut so much?

These are the questions facing Prime Minister Mark Carney as he embarks on one of the most ambitious public spending reviews since former prime minister Jean Chrétien and his finance minister Paul Martin balanced the budget in the 1990s.

Finance Minister François-Philippe Champagne kicked off Carney's review on Monday by sending letters to fellow cabinet members, asking for "ambitious savings proposals" that will lead to spending less on the day-to-day running of government.

Champagne wants to cut operational spending by 7.5 per cent for the 2026-27 fiscal year, 10 per cent the following year and 15 per cent in 2028-29.

Mel Cappe, who served as clerk of the Privy Council from 1999 to 2002, a position that includes heading up the public service, said meeting those targets will be tough but doable.

"There's somebody in the public who's going to be outraged by the cuts," he said. "This is going to require all ministers holding hands, saying prayers together."

Carney has said that there will be no cuts to transfers to the provinces for things like health and social programs, nor would he cut individual benefits such as pensions and Old Age Security payments. 

Key programs rolled out by prime minister Justin Trudeau's government such as child care, pharmacare and dental care are also spared.

Sahir Khan, executive vice-president at the Institute of Fiscal Studies and Democracy at the University of Ottawa, estimates that when those areas are carved out, the government is targeting a pot of money that is about $180 to $200 billion of the $570 billion it will spend this year.

Sharon DeSousa, the national president of the Public Service Alliance of Canada (PSAC), the union representing about 240,000 government workers, said she's concerned about job losses.

On CBC's Power & Politics this week, she said the cuts don't "have to be on the backs of public sector workers … there are solutions that we can actually propose."

To allay those fears, the Liberal government said it plans to meet its goals by eliminating vacant positions and reallocating staff rather than laying off workers.

But previous clerks of the Privy Council say it will be difficult for the government to avoid cutting staff because wages, benefits and pensions are such a large part of the operating budget.

In 2023-24, excluding one-time payments like back pay made after a new collective agreement was signed, the federal government spent $65.3 billion on salaries, pensions and benefits. That was a 10 per cent increase over the previous year.