Federal Cabinet Ministers Face Ambitious Savings Targets Ahead of 2025 Budget

Federal cabinet ministers in Canada have been asked to find "ambitious" internal savings this summer, as the government prepares for the 2025 budget. The move comes as Prime Minister Mark Carney's government seeks to pay for billions of dollars in new spending, including a pledge to increase defence spending to $150-billion annually within a decade. Ministers have been instructed to reduce program spending by 7.5% in the 2026 fiscal year, followed by 10% in savings the next year and 15% in the 2028-29 fiscal year. The Comprehensive Expenditure Review will also involve a new pre-budget process related to minister requests for new funding, which will require them to clearly show how proposed investments advance one of the objectives in the common mandate letter.

Key Takeaways:

• Federal cabinet ministers have been tasked with finding "ambitious" internal savings this summer, with a focus on reducing program spending.
• The Comprehensive Expenditure Review will involve a 7.5% reduction in program spending in the 2026 fiscal year, followed by 10% in savings the next year and 15% in the 2028-29 fiscal year.
• The plan aims to ensure that new investments are "anchored by a new fiscal plan" that spends less on government operations.
• Ministers seeking new funding will be required to demonstrate how it advances one of the objectives in the common mandate letter and show efforts to find funding through reallocating existing resources.
• The government's large defence spending promises are projected to exceed the Liberal Party's election campaign platform, primarily due to the increased defence budget.
• Public Service Alliance of Canada president Sharon DeSousa has expressed concerns that the spending cuts will weaken the programs people depend on.
• A report by the C.D. Howe Institute suggests that the choices are to borrow, tax, or cut other areas to make room for the increased defence spending.

Statistics:

• Program spending refers to the costs related to services provided directly by Ottawa, excluding large categories such as federal transfers to the provinces and territories for health and social services, debt payments and direct transfers to individuals.
• Total federal spending in 2023-24 was $521-billion, with direct program spending accounting for $236-billion.
• The government has pledged to increase defence spending to $150-billion annually within a decade, equivalent to 5% of the country's gross domestic product.
• The Liberal Party's election campaign platform projected a deficit of 1.96% of GDP ($62.3-billion) this fiscal year, followed by 1.83% of GDP ($59.9-billion) the next year.

Sources:

• The Globe and Mail
• Letter from Finance Minister François-Philippe Champagne to cabinet ministers
• Throne Speech
• Report by Parliamentary Budget Officer Yves Giroux
• Report by the C.D. Howe Institute
• Interview with David Macdonald, chief economist for the Canadian Centre for Policy Alternatives