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When Prime Minister Carney warned Canadians about “coming sacrifices” in the budget landing on Tuesday, he might as well have been speaking directly to the country’s 368,000 public servants. Job losses will hit them first and hardest.
Thousands of positions will disappear or be shuffled to new priorities. Then they’ll immediately be expected to deliver the agenda meant to rebuild Canada’s economy.
François-Philippe Champagne has been unusually direct for a finance minister days away from a budget. He has said the public service will bear the brunt of those “sacrifices” and strongly hinted at what’s been rumoured for weeks: that the Carney government wants to bring the public service back to pre-pandemic levels.
“The civil service has increased at a level which I think is not sustainable,” Champagnesaid.
“We need to bring back the civil service to a sustainable level,” he says. “And I think people have seen, and they will see in the budget, if you look at how many people we have today and what we had before COVID-19, we need to get back to something more sustainable. And... we’ll be very transparent with people, but we’re going to be very compassionate in how we do it as well.”
Now, that word – compassionate. It echoes the language of the 1995 downsizing, when the Chrétien government announced its budget with generous departure and retirement incentives to accelerate attrition and “humanely” shrink the payroll. Are those incentives coming? The government has its Workforce Adjustment Directive (WFA)to guide such downsizing, with tools like buyouts, pension waivers, and retraining to manage layoffs, ideally to save as many jobs as possible. The WFA is already in play for the Trudeau-era job cuts still underway.
If this really is a return to pre-pandemic staffing, it could mark the biggest downsizing in Canada’s history.
So, let’s dig in.
Today:
$75 billion: The public-service payroll, large and vulnerable.
Three PMs, three strategies: Less with less, more with more, and, you know.
Who can/can’t deliver?: This will be a performance test, seasoned DM says.
Putting out an idea then walking away?: That won’t cut it anymore.
Signs of decline: Our world-class public service is slipping, says a former clerk.
GET READY D-Day is about to arrive
As Mark Carney’s first budget lands, tension among public servants is near a breaking point, with questions swirling over its fate in Parliament.
The budget will spell out what the government wants done and what it plans to cut – but probably not how. In seven months as prime minister, Carney hasn’t even talked about a master plan for public-service reform. Yet the bureaucracyis being reshaped piece by piece, driven less by grand design than by the urgent demands of his economic agenda.
This budget isn’t just numbers on a page: it’s about the machinery of government, the people who run it, and the shifts they’ll need to make to deliver Carney’s vision.
Unions are bracing, too, warning that job cuts are cuts to the services Canadians count on.
Big, slow and top-heavy. For years, public servants have worn the criticism that a bloated government drives up deficits and drags on productivity. Not only is the public service too big but the 9,000-strong management cadre to manage the bloat is too big,writeEugene Lang and Brigid Waddingham from the Queen’s School of Policy Studies.
Days before the budget, economist Stephen Tapp has weighed in on what he calls the bureaucracy’s productivity crisis. In a new paper,The Growing Government Gap,he argues that if government productivity matched the private sector, GDP would be $32 billion higher. His prescription? Don’t just make blunt cuts. Reallocate resources, retrain staff, and recruit talent in digital, data, and strategy.
Those perceptions are expected to become policy – in pink slips, spending cuts, re-orgs, and shifting priorities. Welcome to Carney’s Ottawa.
DEFICIT CRUNCH And the pull of the PS payroll
Economists project the federal deficit will land somewhere between $68 billion and $92 billion this fiscal year. The amount will depend on calculations for defence spending and election promises. The government can’t just borrow its way out of this. Reallocating people and money to new priorities will be key to keeping the deficit down.
Tuesday’s budget will include the results of the15-per-cent savings target, which covered roughly $180 billion to $200 billion in discretionary spending – operations, payroll, grants, and contributions. With limited options for savings, the pressure lands squarely on the $75-billion public-service payroll–the largest slice of the operating budget that Carney has promised to balance in three years.
And that election promise to cap, not cut, the public service? It came long before the sands shifted. Trade wars cratered revenues, expenses soared, and big-ticket commitments like defence and industry support piled on.
Many moving parts. The public service is a key to all the “moving parts” Carney is juggling in this budget, says Sahir Khan, vice president at OttawaU’s Institute of Fiscal Studies and Democracy. That includes everything from Trump and trade wars to the deficit, economic growth, security and sovereignty.
“I can’t remember a budget in history as complicated as this one, with so many moving parts coming together,” says Khan (pictured). “He’s got $75 billion in public-service payroll in the operating spending base in a otherwise small expenditure review pool. You can’t tell me that isn’t going to be part of the solution.”
Save and spend. Champagne insists this isn’t just about cuts. Yes, the public service will face “tough decisions” – streamlining processes, upgrading technology, merging programs. But those savings create room to invest in Carney’s priorities. He calls it “invest more with less.”
The irony? “The same public service Carney expects to deliver his agenda will also be the source of funds for that agenda,” Khan says.
Just as Prime Minister Trudeau put his stamp on government priorities with social spending and income transfers – Indigenous reconciliation, child care, school lunch program, dental benefits – Carney is now marking his era with a focus on defense, public safety, housing, productivity economic sovereignty.
Many public servants have only known Trudeau and his decade of expansion and new social programs. Older ones have experienced Stephen Harper’s austerity. Now Carney brings a third model: reallocation, save to spend. As Khan puts it, it’s “the tale of three prime ministers”:
Harper: austerity. Do less with less.
Trudeau: expansion. Do more with more.
Carney: reallocation. Do more with less.
The challenge: leaders shaped by growth now must shrink, reallocate, deliver, and prove value fast. “The public service will be discombobulated for years,” Khan says. “Many leaders will face tasks almost antithetical to their instincts.”
The leadership make-or-break. Much of this pivot will come down to leadership. Several former senior bureaucrats now teaching the next cohort of deputy ministers at the Canada School of Public Service say the budget signals a new modus operandi: faster decisions, shorter timelines, tighter cost discipline.
Policy advice? Public servants lost the monopoly on that years ago. Governments draw on their campaign platforms, think tanks, academics, the private sector, and markets. What matters now is execution.
Carney hasn’t yet made the sweeping senior-ranks shuffle many expected – but the budget may be the test.
SEE INSTRUCTIONS This budget will be a performance test
Daniel Quan-Watson, a long-time deputy minister, says the budget will be a performance test for public servants – a measure of who can deliver and who can’t. It will spell out what the government wants done, with accountability front and centre. Those who miss the mark could find themselves on the outs.
“I don’t think it will be the budget itself that’s the biggest harbinger of change,” he said. “It will be the idea that if people don’t meet the expectations of the government and prime minister relatively shortly thereafter, there’s going to be a serious set of issues.”
Quan-Watson (below) says this government seems ready to give the public service a chance to “act and accomplish things differently.” The budget, he said, will lay out clear instructions and short deadlines – and there will be real consequences for those who fall short.
The budget, he says, also marks a sharp philosophical turn. For a decade, the public service operated on a “do everything” instinct – fix every injustice, chase every big ambition, launch every initiative.
That era is over.
“It’s not that yesterday’s priorities don’t matter,” he says. “It’s that some things matter even more today. You ask, ‘Where are the injustices?’ You get one – maybe six, but it isn’t 22.”
“We’re not going for stars now – we’re going for low-orbit satellites. And if you catch one, you’ll be lucky.”
This is the moment to lead. As Anil Arora, Canada’sformer chief statisticianputs it, the public service needs doers, not more talkers.
Arora received an award at Public Policy Forum’s 2025 testimonial dinner.
“For too long, leadership has been about coming up with ideas, putting them out there and walking away. That won’t cut it anymore. The country doesn’t just need policy – it needs people who can implement and deliver. This is real. This is our moment. Step up when the country needs you.”
The warning signs of decline. All this comes against a backdrop of a public service – while still among the world’s best – is showing cracks. Jocelyne Bourgon is a former clerk. She is one of the architects of the 1995 program review and has advised governments around the world. She’s taken a hard look at how Canada’s public service stacks up globally. Her conclusion: it’s slipping.
The warning signs are there. Morale is down. Fewer public servants feel valued. Citizens report declining satisfaction with government services – from health care and passports to Phoenix pay, digital procurement, and CRA call centres. Canada’s e-government ranking tells the same story: we were third in the world in 2010. Nowwe’re 47th.
Bourgon (above) calls this an inflection point – a moment to act before the decline deepens. And with the Carney government signalling major downsizing and operational shifts in the budget, the public service is about to face that challenge head-on.
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A bit about me. I write The Functionary as part of my work covering and analyzing the federal public service for Policy Options, where I am the Accenture Fellow on the Future of the Public Service. I've been reporting on the public service for more than two decades, covering parliamentary affairs and politics for the Ottawa Citizen and iPolitics. My work has been recognized with a National Newspaper Award and a Canadian Online Publishing Award.
