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By Kathryn May.

Hi all,

Now that it’s not just tariffs all the time, the government is rolling out pieces of its big economic ambition – framing it as a nation-building moment on par with 1945. Behind the scenes, there’s a quiet hunt for big savings, and the prime minister says any job cuts "will happen naturally through attrition."

There are also early moves to untangle the complexity baked into every department. If there’s a public-service transformation plan buried in all this, it’s hard to see. But there has to be reform – or Prime Minister Carney won’t get it done.

Ok, let’s dig in.

Today:

Ah, yes, the 1940s: A golden age for public servants.

Behind the big moves: No sign of a­­ workforce strategy.

The hard truth: Attrition isn’t as gentle as it sounds.

Riding on retirement: The lazy way to reduce the ranks.

The “lost generation”: Chrétien’s downsizing hit young public servants hard.

The middle is shrinking: The public service is off balance.

An unequal squeeze: CRA, ESDC and IRCC will really feel the cuts.

The wildcard is AI: Yes, it could spark job losses, the government admits.

A lesson at CRA: Reducing jobs didn't reduce the work.

LIKE IT’S 1945

The once-in-generation moment

To hear Finance Minister François-Philippe Champagne tell it, Canada hasn’t seen an economic transformation like the one the government is touting since 1945, when Ottawa roared into the postwar reconstruction era.

Champagne discussing next month’s federal budget.

It was also a golden age for public servants. Soldiers came home, the welfare state was born, and politicians actually listened to bureaucrats. It’s when the modern public servant emerged – educated, non-partisan, and well-paid. And their numbers soared.

Historian Jack Granatstein called it the era of The Ottawa Men – and they were all men. (Until 1955, women had to quit after getting married.) He depicts a golden age – lingering into the early 1960s – of Rhodes scholars and Queen’s graduates, steeped in Keynesian economics, who built the modern state.

Prime Minister Carney’s team is betting on the same kind of state-building boldness today.

But where’s the revolution? Ask public servants if they see the dawn of a new golden age. What many see is a crisis of credibility and execution. They want to transform but are weighed down by bureaucracy and a public that sees them as bloated, risk-averse, slow to modernize, and unable to deliver basics like passports or answer calls at tax call centres.

That’s a big gap between Carney’s ambition and reality.

Slash and spend. Looming over all of it is an expenditure review that will at once shrink and expand the public service in some places to free up cash for growth in other places. Carney calls the upcoming budget one of "austerity" and investment." Cut here, spend there.

THE MISSING PIECE

Grand moves but no grand plan

Remember what Jocelyne Bourgon drove home in the Manion Lecture she gave this past spring? Bourgon was the clerk who oversaw the Chrétien budget cuts in the 1990s. She warned in May that Carney’s economic plans have to go hand in hand with a rethinking of how government works. I wrote about it at the time.

But Carney is laying groundwork for ambitions that will need reforms. And he’s doing it without a grand plan for overhauling the public service. No real workforce strategy or plan has emerged. No steps to map what skills and people the government needs, which roles to cut or redirect to big-ticket priorities. Or how to retrain as AI takes hold.

Meanwhile, the groundwork continues:

- A Buy Canadian policy will shake-up procurement and how contracts are awarded.

- A Build Canada Homes agency, with a $13-billion budget, beginning with plans to build 4,000 homes.

- Five nation-building projects that can be fast-tracked thanks to the One Canadian Economy Act.

At the same time:

- A 100-day blitz just started to fix the serious service delays and backlogs at Canada Revenue Agency, which has hit “rock bottom.”

- Reductions from a red-tape review are underway, signaling a push to streamline bureaucracy and improve delivery.

- Senior bureaucrats overseeing contracting now have 45 days to review all current and planned contracts to find ways to save money.

Carney’s big projects make public-service reform more urgent than ever. Yet so far, the government leans on piecemeal fixes. It is loosening rules and red tape here, setting deadlines and bypassing roadblocks there rather than planning to retool the public service itself.

Can you cut spending, build fast and still transform the system? And can you manage all this by attrition?

Joël Lightbound has said attrition should cover cuts, and he says it as if it’s painless. Lightbound is vice-chair of the cabinet transformation/efficiency committee co-ordinating the expenditure review. He is also the minister of government transformation, public services and procurement. Critics who want smaller government say any cut is good. And the public, convinced the government is bloated, happily believes both. But now that Carney has weighed in, attrition isn’t just a talking point, it’s the strategy.

ATTRITION
Soft word, hard truth
Attrition: The natural turnover in a workplace. Instead of laying off employees, the government counts on people leaving on their own by retiring, resigning or moving to other jobs. Attrition sounds gentler than layoffs, but critics call it the worst way to shrink the public service.

Joel Lightbound at question period in the House of Commons on June 10. THE CANADIAN PRESS/Sean Kilpatrick 

The attrition myth. The annual attrition rate is about four per cent. The public service loses about 10,000 to 12,000 people a year, around 30,000 over three years. But the 15-per-cent savings target is closer to 60,000 jobs, and that’s without knowing what funding and resources could be redirected to higher priorities.

Attrition gets you halfway.

Ministers have since admitted big “adjustments” and “tough choices” are coming. The bind? Shrink operational spending by 15 per cent while keeping service levels, capping jobs – not cutting them – and avoiding layoffs. It’s a near-math impossibility with today’s hiring practices and attrition rates.

Former Parliamentary Budget Officer Yves Giroux said so during his final days on the job. To increase or accelerate attrition, he said the government will need big program cuts. It will need to dangle generous buyouts and pension waivers. Or it will have to gamble on a hardline RTO order and hope it pushes workers to quit. That speculation has gathered steam as Ontario and Ottawa have ordered their employees back to the office.

Attrition by accounting? Giroux has said the government could get “innovative” with its accounting. Carney is splitting operating and capital budgets, but the rules for what counts as which haven’t been set. The broader “capital” is defined, the more costs can shift off the operating books – where the budget must balance – and onto the capital side, where it can run a deficit. That could let the government shrink the public service quietly through attrition, not layoffs. (The PBO, for its part, sticks to international standards for tracking operating and capital.)

The lazy solution. Critics of attrition say a real workforce plan is needed – not just one that rides on retirements. One of the most vocal critics is former top bureaucrat Michael Wernick, who is now mentoring the next generation of public servants as OttawaU’s Jarislowsky Chair of Public Administration.

He sees attrition as a lazy solution caught between “dogma and denial.” He’s all in for buyouts and pension incentives to trim older workers while saving younger and digitally fluent staff. He is also tough on unions for their blanket opposition to all cuts without helping to find better ways to downsize.

Downsizing déjà vu. The Chrétien government’s massive downsizing relied heavily on buyouts and early retirement incentives to reduce 55,000 jobs. It also froze hiring, creating a near “lost generation” of young public servants – a gap that shaped the bureaucracy for years.

Entry-level workers were cut or stuck in temporary roles, leaving an aging workforce, gaps in knowledge transfer, and rock-bottom morale. As clerk at the time, Bourgon called it a “quiet crisis” across all job levels. She later launched La Relève to jump-start leadership pipelines and give new talent a chance.

Now the government faces a similar reset – at a moment when AI and digital tools could transform work itself. And who’s first out the door? Young employees, often in term contracts, temporary, casual, and student roles. They are often the most tech-savvy but the easiest to cut.

The median age of entry into the public service is 34.4, far older than the private sector, where grads land in their 20s. A big reason is that many spend years cycling through short-term positions just to land a permanent role in their 30s.

- 18 per cent are 30 to 34.

- 22.3 per cent are 25 to 29

- 11.9 per cent are 20 to 24.

Attrition may look painless, but costs can be real: stalled careers, no new blood, and missed chances to modernize.

Retirement incentives, however, could make things worse down the road, some people warn.

45-TO-59
A missing middle?
The public service is off-balance. At one end are the older employees hanging on past 60. At the other end: younger recruits finally landing jobs in their 30s.

Meanwhile, the middle is shrinking: the 45-to-59 cohort of managers and junior executives who feed the leadership pipeline. That means fewer seasoned managers to run operations, train rookies, or step into senior roles.

Buyouts and pension incentives will push more out, but they risk further hollowing out the middle, and those people take their experience and knowledge with them. That leaves a workforce heavy at the ends, thin in the middle. And when the centre doesn’t hold, service delivery can start to crack.

RED TAPE
Could 500 rules actually be cut?
Attrition won’t solve a harder problem. The government keeps piling on programs and rules, making work more complex, not simpler. Until it’s willing to cut the red tape, the public service can’t truly get good at service.

Treasury Board’s red-tape review hunted down 500 rules, processes, and regs to scrap and streamline – the kind that bog down public servants and businesses alike.

The more things change... A major review of 50 years of spending reviews shows the mix of the public-service workforce has barely budged: for decades, there’s been one bureaucrat for every 100 Canadians, and pay has held steady at 15 per cent of federal spending.

That’s despite 80 years of new technology – from computers to the internet – that should have made things easier. Why hasn’t it? Government keeps layering on programs and rules. Complexity eats the gains. Labour demands stay the same.

The front-line squeeze. Privy Council Clerk Michael Sabia, Carney’s pick, laid it out from Day One: Simplify. In his first letter to public servants, he wrote the service is “too complicated and too slow at a time when we need to speed up because the world is moving fast,” too focused on process over outcomes. Fixing that complexity? That would be revolutionary – à la 1945.

This time, Ottawa has to grow and shrink at once. Defence, border security, Arctic operations, and trade are expanding. DND, RCMP, and CBSA are spared the 15-per-cent reductions and face only two-per-cent trims while gaining billions. (DND alone got $8.6 billion in June.) That leaves service-heavy departments – CRA, ESDC, IRCC – carrying the weight of full 15-per-cent cuts. 

The squeeze hits front-line services the hardest. And shifting people around isn’t simple: you can’t drop an ESDC clerk into a CBSA border job without training, which takes time and money the government doesn’t have.

AI is the attrition wild card. It could accelerate departures by automating the repetitive, rules-driven tasks that make up much of government work, and finally government admits it. Chief Data Officer Stephen Burt acknowledged it will cause some job losses. But he says the goal is to help workers retrain and change jobs.

Nearly 60 per cent of federal public servants are in roles AI could easily replace, a recent Dais report shows. That is double the rate for the overall Canadian workforce.

The feds have lots of finance, HR, and administrative jobs – exactly where AI thrives. Nearly two-thirds of tasks in these jobs are at high risk of automation. Municipalities, by contrast, rely more on front-line workers like firefighters and landscapers, jobs that are far less vulnerable.

Finally, back to CRA.

The flagship department is under fire again for long wait times and mounting backlogs. CRA relies heavily on term, casual, and student workers – mostly younger staff. Thousands of these positions were eliminated during Trudeau-era spending reductions, yet FTEs – full-time equivalents, the measure of work effort – showed the workload stayed the same.

CRA’s troubles are longstanding, but they also show what happens when cuts hit front-line workers first. It's the largest department, created to improve service and collect the cash that keeps everything else running.

Shouldn’t government or its management board have spotted the cracks sooner?

Attrition can shrink headcount, but it doesn’t shrink the work. That means rethinking service with technology, training, and the political will to fix what’s broken.

As one senior bureaucrat put it: if Carney wants to bring back a golden age, start with CRA. Get under the hood and tackle the nitty-gritty problems, from outdated HR and rigid job classification to old tech and too much process. These are the things that plague every service department.                                                           

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A bit about me. I cover and analyze the federal public service for Policy Options as the Accenture Fellow on the Future of the Public Service. I've been reporting on the public service for 25 years. My work has appeared in the Ottawa Citizen and iPolitics, and has earned a National Newspaper Award.

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