Standing Committee on Public Accounts (PACP) Department of Finance Appearance on the Public Accounts of Canada 2024

Refocusing Government Spending

Issue

In Budget 2023, the government committed to reducing spending by $14.1 billion over five years, starting in 2023-24, and by $4.1 billion annually after that.

Savings for the Department of Finance were found by reducing spending in professional services, travel and other operations.  

Key Points

• The Government is committed to responsibly managing Canadians' tax dollars by ensuring that operations and programs are effective, efficient and directed towards priorities.
• As part of meeting this commitment, the Department of Finance is planning the following spending reductions:
  • 2024-25: $2,705,000
  • 2025-26: $3,861,000
  • 2026-27 and after: $5,445,000
• The Department will achieve these reductions by seeking to reduce spending in the following areas:
  • Professional services and travel – utilizing internal resources in lieu of external contractors and contracts, increasing the use of virtual meetings and conferences where possible, and reducing the number of departmental representatives attending international meetings.
  • Other operating measures – achieving salary budget savings across the Department through attrition, delays in staffing, reduction in casual employees and students, and realizing cost savings related to departed employees.
  • Research and Policy Initiatives Assistance Program – modifying the funding approach of the program by shifting to an as needed basis in place of an ongoing basis.
  • Tax Competitiveness Monitoring – gradually reducing initiative funding over time, while continuing to utilize internal resources to monitor and react to tax competitiveness pressures from tax reforms in other countries.
• The amounts in the Department of Finance's 2024-25 Departmental Plan reflect these reductions.

Anticipated Questions and Answers

1. How many jobs are expected to be cut as a result of this savings exercise?

Reductions related to professional services and travel will have no impact on jobs. Those related to operating expenditures will be phased in over three years so are not expected to result in job loss outside of normal attrition or redeployment of employees to higher priority activities.

2. What professional services spending is included in this exercise?

It is important to note that a significant portion of spending in professional services is non-discretionary, such as amounts to support legal and accounting services at the Department of Finance. These reductions will target professional services spending that is discretionary and external.

Background

Budget 2023 included a commitment to bring the growth of government spending back to a pre-pandemic path, in order to ensure that Canadians' tax dollars were being used efficiently and being invested in the priorities that matter most to them.

Budget 2023 proposed to reduce spending on consulting, other professional services, and travel by roughly 15 per cent of planned 2023-24 discretionary spending in these areas. It also proposed to phase in a roughly 3 per cent reduction of eligible spending by departments and agencies by 2026-27.  

The reduction to departmental budgets was implemented by the Treasury Board Secretariat of Canada (TBS) in collaboration with federal departments and agencies. Ministers and organizations' deputy heads, who know their organizations best, implemented the reductions. *Sentence redacted*.

Refocusing Government Spending

Issue

The government's progress in achieving savings commitments identified in Budget 2023 and the 2023 Fall Economic Statement (FES).

Background

In Budget 2023 and the 2023 Fall Economic Statement, the government announced a total of $15.8 billion in savings over five years, starting in 2023-24, and $4.8 billion per year ongoing. These savings are being refocused towards the priorities that matter most to Canadians, including health care, housing, and an economic growth plan and industrial strategy that create well-paying jobs for workers.

Following Budget 2023, the government carried out the first phase of Refocusing Government Spending to identify areas of duplication, low value for money, or lack of alignment with government priorities, with a particular focus on reducing travel and consulting costs. Care was taken to ensure that departments and agencies could meet their reallocation target without impacting direct benefits and service delivery to Canadians; direct transfers to other orders of government and Indigenous communities; and the Canadian Armed Forces. Most of the reductions from this first phase were applied in the Supplementary Estimates (B), 2023-24 and the 2024–25 Main Estimates.

Budget 2024 announced that the government would deliver on its remaining savings commitments from Budget 2023 and FES 2023 by seeking to achieve savings primarily through natural attrition in the federal public service. *Sentences redacted*.

The 2024 Fall Economic Statement also announced the launch of a strategic review of government operations and programs with a focus on expanding the use of AI in the public service to both improve efficiency and service delivery. The review will be led by the Privy Council Office's AI Secretariat, and results will be announced in Budget 2025. No savings have been booked for this review.

Anticipated Questions and Answers

1. Where are the RGS savings to date reported?

(Generally a TBS lead) The President of the Treasury Board is overseeing the implementation of RGS in respect of appropriated entities. On November 9, 2023, the President tabled the Supplementary Estimates (B), 2023-24, which included details on $500 million in travel and professional services reductions by organization for 2023-24. These were the only reductions required for 2023-24.

The 2024–25 Main Estimates, which were tabled in Parliament on February 29, 2024, include an online annex outlining reductions related to RGS for all organizations subject to the exercise, for 2024-25, 2025-26 and 2026-27 and ongoing. Departments have also reported on their specific reduction plans in their 2024-25 Departmental Plans, tabled the same day.

The 2024-25 Main Estimates show refocused spending of $2.3 billion in 2024-25, $2.8 billion in 2025-26, and $3.6 billion in 2026-27 and ongoing. The disclosure noted that additional reductions to meet the Budget 2023 targets would be required ($0.3 billion in 2025-26 and $0.5 billion in 2026-27), which were communicated as an extension of the FES exercise (Responsible Government Spending).

Budget 2024 identified the remaining savings will be obtained primarily through natural attrition in the public service. *Sentences redacted*.

2. Budget 2024 announced that over the next four years, the government expects the public service population to decline by approximately 5,000 full-time equivalent positions from an estimated population of roughly 368,000 as of March 31, 2024. Does this mean there will be cuts to public service FTEs and involuntary separations? 

It is expected that natural attrition and internal redeployments will offer flexibility to manage possible reductions to employment. New initiatives in Budget 2024, the 2024 FES and beyond will also provide opportunities for the redeployment of employees to deliver on priorities for Canadians.

Responsive on cuts to FTEs and involuntary separations

The 5,000 FTE positions estimate should also be considered in the context of an annual public service departure rate of roughly 4% (4.3% in 2019-20). Contrasted with the estimated 367,772 public service population as at March 31, 2024, this means that each year, roughly 14,500 positions are vacated, which is well above the estimated decline in FTE positions.