Budget 2023 belt-tightening: Liberals order federal spending review, cuts

“We are reducing government spending by more than $15 billion while taking great care not to reduce the services and direct support that Canadians rely on,” Freeland said in her budget speech, according to prepared remarks.

“By exercising fiscal restraint, we are ensuring that we can continue to invest in Canadians and in the Canadian economy for years to come.”

The budget plan estimates that Ottawa will save $7.1 billion over five years, and $1.7 billion each year after that, by cutting travel and consultant spending. It says the focus will be on reducing funding for professional services, “particularly management consulting.”

The Liberals aren’t the first to try to save money by cutting back on government travel, with Stephen Harper’s Conservative government having implemented similar restrictions about a decade ago.

But the use of outside consultants such as McKinsey has become a politically sensitive issue for the Liberals due in part to the company’s work with China and Russia, and the amount of money spent on such firms in recent years.

A House of Commons committee is currently studying those contracts after the federal procurement department revealed that McKinsey alone has been hired for $116.8 million worth of contracts since 2015, including at least $62 million between March 2021 and fall 2022.

Conservative Leader Pierre Poilievre has described such spending as wasteful while raising questions about the relationship between Prime Minister Justin Trudeau and the former global managing director of McKinsey, Dominic Barton, who was later appointed as the Canadian ambassador to China.

Travel and consultants aren’t the only spending items being targeted, as the government is pressing ahead with plans to cut spending across federal departments, agencies and Crown corporations by about three per cent.

The budget plan promises the cuts won’t affect the benefits or services that Canadians receive, nor will they touch transfers to other levels of government, Indigenous communities or the Canadian Armed Forces.

Sahir Khan of the Institute of Fiscal Studies and Democracy at the University of Ottawa was skeptical of such promises given the impact of a similar spending review launched by the Harper government in 2012.

That review resulted in hundreds of federal public servants being laid off, including at Veterans Affairs Canada, which has struggled with backlogs and long wait times ever since. It also left the military struggling to maintain key equipment.

“They’re effectively cutting operational budgets for departments,” Khan said. “The last time we tried laying off public servants, there were service cuts.”

However, finding those savings will be critical as they were previously booked in last year’s budget, though this year’s budget plan estimates they won’t start to be realized until 2024-25.

“This is the different between them hitting their deficit targets or not,” Khan said.

In the interim, the budget plan says the government has already started to redirect nearly $6.4 billion in previously announced programs and projects to other priorities, though officials did not provide a list of what is being affected.

Khan said he believes the money was part of the billions that went unspent by federal departments last year, called lapsed funds.

The Canadian Press reported in January that the government failed to spend a record $38 billion in 2021-22 on promised programs and services, including new military equipment, affordable housing and veterans’ services.

The unspent funds played a big part in the Liberal government posting a smaller-than-expected deficit in the year ending March 31, 2022. Canada rang up a $90.2 billion deficit – $23.6 billion less than expected.

This report by The Canadian Press was first published March 28, 2023.

Lee Berthiaume, The Canadian Press

by Canadian Press

Budget 2023 belt-tightening: Liberals order federal spending review, cuts

What's Happening