Federal government proposing further public service spending cuts in coming years

Fall economic statement highlights CTV's Graham Richardson breaks down the highlights of the federal government's fall economic statement.

The federal Liberal government is proposing further spending restraints on Ottawa's largest employer, but there is no concrete plan yet on how it will achieve this.

The fall fiscal update includes newly proposed public service spending reduction targets of $345.6 million in 2025-26, doubling to $691 million per year from 2026-27 onward.

The 2023 budget included a plan to find $15.4 billion in public sector spending reductions by requiring departments and agencies to cut spending by three per cent, including through measures such as cutting out consulting and professional services. The new projected spending reductions in the fall economic update are on top of what was announced in the spring budget.

"Canada maintains both the lowest deficit- and debt-to-GDP ratio in the G7, and with new reductions in government spending, this fall economic statement builds on the $15 billion in public service spending reductions that I announced this spring," Finance Minister and Deputy Prime Minister Chrystia Freeland said.

There were no details announced Tuesday about how the government would achieve these additional projected savings. The start date of 2025-26—around the time of the next scheduled election—is intended to give the federal public service time to develop plans to find the projected savings.

The fiscal update also says the government intends to return the public service "closer to its pre-pandemic growth track." Again, no specific details were provided on how this would be accomplished, but the government said that the newly proposed spending cuts combined with the previously announced measures in the 2023 budget would lead to $4.8 billion in savings per year by 2026-27 and beyond.

"It is concerning any time there is talk of cuts to the federal government because they're our biggest employer and a huge part of our economy," said Ottawa Mayor Mark Sutcliffe on Tuesday. "Fortunately, in Ottawa, we have a growing number of technology companies and our tourism industry is doing well, but we definitely want to see the federal government continue to be part of our future, so I'm looking forward to seeing what some of the details on that will be."

The projected savings starting in 2025 could offset additional spending linked to higher public sector wages as a result of new collective agreements and higher public service pension and benefit service costs.

Projections show that the government's operating expenses are expected to be $121.9 billion in 2024-25, and should remain around that level over the following two years, at $121.7 billion in 2025-26, when the new spending reduction targets take effect, and $121.8 billion in 2026-27. Spending will ramp up in future years, which the government says is a result of higher wages, ongoing spending on the modernization of NORAD, and spending on continental defence.

No new spending for city of Ottawa

The fall fiscal update did not include any new spending for the city of Ottawa, but it referenced previously announced items.

The government said earlier this month that surplus federal properties in the capital would become available starting in March 2024. The plans include 307 homes at Wateridge Village, 600 homes on Carling Avenue, and 710 homes on Booth Street, 221 of which would be considered affordable homes. These are among the 2,800 announced for Ottawa, Edmonton, Calgary, and St. John's.

"I think the federal government has shown a very clear commitment to building more housing across the country and we're very excited about partnering with the federal government on building more homes in Ottawa, especially affordable homes," said Sutcliffe. "Anything they can do to help us achieve our goals when it comes to building more homes, including affordable and supportive housing, is really welcome."

The update also included a previously announced $39 million toward Ottawa's Ranovus, Inc. to advance the company's domestic production and manufacturing of semiconductor products and services.

Over the summer, the city's chair of the transit commission, Coun. Glen Gower, said Ottawa was joining other cities in a "full-on" press for transit funding from both the provincial and federal governments.

OC Transpo is projecting a $40.8 million deficit in 2023 and a $35 million revenue shortfall for 2024, but no new money has been promised by senior levels of government.

--With files from CTV News Ottawa's Tyler Fleming.