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Responsive Public Management Responsive Public Management IGPDE – Research Bureau Public management monitoring news – No. 48 – September 2012 Canada: a restrained budget for a growing economy In a speech given on 29 March, Canada's Finance Minister Jim Flaherty presented the 2012-2013 federal budget, in which the emphasis is squarely placed on reining in public spending and budgetary balance. The budget speech underscored the Harper government's commitment to a healthy economy and to sustainable, long-term growth. The budget's1 various measures are expected to help Canada counteract the effects of the persistent global economic crisis. The outlook for Canada, however, is much less grim than for other Western nations. With 610,000 jobs created since July 20092 against 400,000 jobs eliminated between October 2008 and October 20093, Canada is one of the few OECD countries to have fully recouped all jobs lost during the recession. The unemployment rate increased only during a single year, rising from 6.1% in 2008 to 8.3% in 20094. By June 2012, it was back down to 7.2%5, its lowest level since the crisis began. Moreover, the IMF's projections6 for Canada are encouraging: GDP is expected to increase by 2.1% in 2012 and 2.2% in 2013. In the early 1990s, the unemployment rate had topped the 10% mark, and Canada had run a budget deficit for the previous two decades. Between 1997 and 2007, following spending reductions, Canada had a budget surplus, a declining public debt burden (which had fallen from 64.7% of GDP to 23.1%)7 and an unemployment rate that had been reduced to 6% by 2007 (compared with 9.1% in 1997)8. Starting in 2008, however, the budget deficit reappeared (it is currently estimated at C$21 billion for 2012–2013) and the public debt began to increase as of 2009, pushing past 30% in 2010. The Canadian government does not believe that the 2012 budget is an austerity budget, compared with other countries or with some Chrétien-era budgets9. Rather, it is a reflection of the Harper government's plan to stimulate the Canadian economy by investing nearly C$1 billion in various areas, including innovation, research and training10. A balanced budget followed by a return to surplus Nevertheless, the government remains focused on cutting spending and lowering the public debt. It has therefore committed to balancing the budget by 2015, and then generating a surplus of C$3.4 billion the year after. A return to balanced budgets will thus "ensure that Canada's finances are sustainable over the long term"11. In particular, cutting spending will involve a Program Review, a practice that has been common since 1993. The Review will allow Canadian departments and agencies to make savings of up to 7% through streamlining, increases in efficiency and pooling both activities and resources between departments. The 2012 budget12 includes a number of measures that are expected to save the government C$20 billion by 2015 (i.e. C$5.2 billion annually). They include eliminating 19,200 federal public-sector jobs over three years (out of a total workforce of 278,09213 – a 6.9% reduction). These cuts will primarily 1 In Canada, the government's fiscal year runs from 1 April to 31 March. 2 http://www.budget.gc.ca/2012/rd-dc/speech-discours-eng.html 3 http://www.statcan.gc.ca/pub/75-001-x/2009112/pdf/11048-eng.pdf 4 http://www.stat.gouv.qc.ca/donstat/econm_finnc/conjn_econm/TSC/pdf/chap6.pdf 5 http://www.statcan.gc.ca/daily-quotidien/120706/dq120706a-eng.htm 6 http://www.imf.org/external/pubs/ft/weo/2012/01/pdf/text.pdf 7 http://www.oecd-ilibrary.org/economics/oecd-economic-surveys-canada_19990081 8 http://www.stat.gouv.qc.ca/donstat/econm_finnc/conjn_econm/TSC/pdf/chap6.pdf 9 The Chrétien government (Liberal Party), which was in power from 1993 to 2003, made significant efforts to cut spending. See RPM No. 32 "From Program Reviews to Strategic Reviews: 30 years of reining in Canadian public spending". 10 http://news.nationalpost.com/2012/03/29/budget-2012-federal-canada/ 11 http://www.budget.gc.ca/2012/rd-dc/speech-discours-eng.html 12 http://www.cbc.ca/news/politics/story/2012/03/29/federalbudget-flaherty-hilights.html 13 Office of the Chief Human Resources Officer - http://www.tbs-sct.gc.ca/res/stats/ssen-ane-eng.asp RPM n° 48 – September 2012 – Research Bureau – IGPDE affect the cities of Ottawa14 and Gatineau15. As a result, there will be minimal impact to the regional distribution of civil servants. In addition, some public programs and organizations will no longer be funded, including Katimavik16 and the National Round Table on the Environment and the Economy (NRTEE)17. In implementing these measures, voluntary departures and early retirement will be emphasized. Paradoxically, there will be no hiring freeze since there are certain gaps in the labour force18. The idea is not to return to the approach of the 1990s, when job cuts resulted in a loss of skills, which had to be replaced by subsequent hiring. The federal workforce shrank by 21% in the 1990s; however, steady hiring since 1999 has returned staffing numbers to their early 1990s levels19. Another measure involves gradually raising the retirement age from 65 to 67 starting in 202320. Those who wish to keep working after this may do so in exchange for increased benefits. This will help keep down the rising cost of pensions, which is expected to reach C$108 billion in 2030, compared with C$38 billion in 201121. A budget not to everyone's liking According to the Public Service Alliance of Canada, a trade union with more than 172,000 members, the new budget will imperil some 100,000 public-sector jobs22. The PSAC has launched a campaign entitled "We Are All Affected"23, stating that these measures will adversely impact the general population by reducing the quality of public services. In a report entitled "The Cuts Behind the Curtain", the Canadian Centre for Policy Alternatives24 believes that the budget will put social programs at risk, particularly in the areas of education and healthcare for Aboriginal peoples, on-reserve housing, and benefits for low-income Canadians and the unemployed25. Although transfers to provinces and territories will not be affected in the short term, these areas must shoulder social assistance costs to offset the later retirement age. They are therefore concerned, particularly since, in the medium term, federal transfers with respect to health care are expected to level off26. Canada's 2012 budget is thus in line with the cost-cutting policies that the country's Conservative government has pursued since it came to power in 2006. The report by the Centre for Policy Alternatives maps out three waves of cuts to federal programs, staffing levels and government activities27. The report also addresses the lack of transparency that the government has shown during the budget preparation process, a criticism taken up by Parliamentary Budget Officer Kevin Page28 in his presentation to the Standing Committee on Finance on 26 April 201229. Fatima Argrag 14 Canada's capital city, located in the province of Ontario. 15 City in the province of Québec (more than 200 km from Montréal and less than 10 km from Ottawa). 16 Katimavik is a volunteer program for young people that was started in 1977. Volunteers work full-time for non-profit organizations in various sectors (the environment, social work, culture, etc.). 17 The NRTEE was established in 1988. Its goal is to promote sustainable development through reconciling economic prosperity and environmental conservation. 18 "Nineteenth Annual Report to the Prime Minister on the Public Service of Canada" – March 2012 19 http://etatscanadiens-canadiangovernments.enap.ca/en/nav.aspx?sortcode=2.0.2.6 20 The Old Age Security Pension and the Guaranteed Income Supplement 21 http://www.servicecanada.gc.ca/eng/isp/oas/changes/faq.shtml 22 http://www.radio-canada.ca/regions/ottawa/2012/03/01/005-manifestation-fonctionnaires-federaux.shtml 23 http://www.psac-afpc.com/federal-government-layoffs/index-e.shtml?l=1 24 The Canadian Centre for Policy Alternatives is a think tank that was founded in 1980 by professors at Carleton University. The Centre works on various themes including the economy, the environment and social issues. 25 http://www.policyalternatives.ca/publications/reports/cuts-behind-curtain 26 http://m.radio-canada.ca/nouvelles/Politique/2012/07/26/001-conseil-federation-sante.shtml 27 The Centre discusses the Strategic Reviews launched between 2007 and 2011. 28 Kevin Page was appointed in 2008. His mandate involves providing the Senate and House of Commons with an independent analysis of Canada's finances, as well as a forecast of economic trends. 29 http://www.parl.gc.ca/content/hoc/Committee/411/FINA/Evidence/EV5527596/FINAEV54-E.PDF RPM n° 48 – September 2012 – Research Bureau – IGPDE.
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