By Kathryn May. Reach out: functionary@irpp.org. 

 

Hi all. So much for a summer lull.

 

Welcome to the summer of urgency. It’s like the Carney government is throwing everything at the public service at once. The One Canada Economy Act is now law. Internal trade barriers are falling. Tariff talks are back. Fiscal pressures are growing.

 

But restraint is no longer speculation or a talking point — it’s marching orders. And now the summer of urgency has a number: 15 per cent. That’s how much the Carney government wants departments to identify in program savings over three years. And he wants it done by the end of summer. As in, eight or nine weeks.

 

Let’s dig in.

 

A quiet, rather big ask: Sabia’s short, succinct letter.

“The art of the possible”: The Carney government has questions.

So much for the platform: This goes way above the target of $28 billion.

Shakeup, shakedown: This is about mapping “addressable opportunities.”

Ask for more than you need: The classic political move.

Are we learning yet?: It’s been a while since the last deep review.

Plan for pain: The targets are doable, the PBO, says, but ….

Brace for impact: The workforce-adjustment machinery has been activated.

The catch: A cap doesn’t mean your job is safe.

Bye-bye, buffer: Why these cuts could be more than an exercise.

THE TARGETS
Look and you shall find

"Spend less, invest more — Carney’s campaign slogan — is now baked into the budget plan. The July 7 letters from Finance Minister François-Philippe Champagne (pictured) to his cabinet colleagues make it clear: find 15-per-cent program savings and fund new capital projects by shifting money around internally.

 

This isn’t just about cutting costs. It’s about spending less here so you invest more there – changing the way government decides its priorities and gets things done.

 

The savings target ramps up each year:

• 7.5 per cent in 2026-27
• 10 per cent in 2027-28 (an additional 2.5 per cent)
• 15 per cent in 2028-29 (an additional five per cent)

And that’s not all. Expect a shakeup in the senior ranks this summer, a new Treasury Board-led red tape review, with a full-court push to reduce regulations and speed up the sluggish processes that have long plagued government delivery.

Michael Sabia   

And on the same day, a Sabia letter landed. Employees got a short, direct note from Michael Sabia, who has started his duties as clerk of the Privy Council Office and head of the public service. It reads like a manifesto for public-service reform, maybe even a quiet call for cultural revolution.

 

Anyone who’s pushed for change will hear echoes: focus on priorities, simplify processes, be accountable. There’s a sharp emphasis on what many say has long been missing: “personal accountability for what we do.”

 

Notably, he doesn’t say how that will actually happen.

 

PRIORITIES, PRIORITIES
So what does all this really mean?

“This is a once-in-a-political-generation shift,” says Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa.

 

“Just as Prime Minister Trudeau put his stamp on government priorities with social spending — Indigenous reconciliation, child care, dental benefits — Prime Minister Carney is now marking his era with a focus on defense, public safety, and economic sovereignty.”

 

Sahir Khan  

And new priorities mean new trade-offs — in spending, staffing and the composition of the public service.

 

“After 10 years of strong emphasis on social spending, they’re now creating a pool to reallocate resources toward defence, public safety, and industrial priorities. They want to know what the art of the possible is.”

 

This is a government betting big on transforming Canada’s economy fast — and reforming the public service and how it works along the way.

 

How big, how deep? Once ministers were briefed, Treasury Board gave letters and briefings to departments outlining how much each is expected to save — based on the spending “base” that’s on the table. Defence, CBSA, and the RCMP are largely spared, asked to find just two per cent. Agents of Parliament were excluded entirely. Unions were also briefed – and not happy they weren’t consulted earlier.

There’s plenty of speculation about how deep and real these cuts will be. But one thing is clear: the Carney government is chasing far bigger savings than what the Liberals pitched in their platform, which was $28 billion over three years with $13 billion in permanent reductions.

 

And despite promises to “cap, not cut” the public service, jobs will be affected. Lots of them.

 

A big question has been what spending base the government is using to calculate the 15 per cent cut. Jennifer Robson estimates the potential scope could range anywhere from $73 billion to $173 billion depending on the base used.

 

The Liberals’ election platform assumed a base around $250 billion, but insiders say the current review is working off something closer to $180 billion to $200 billion. That base includes all discretionary spending departments manage — operations, payroll, grants, and contributions.

 

Regardless of the size of the base, this review goes far beyond what the Carney election platform laid out — in scope, scale, and disruption for the public service. It marks the most comprehensive spending review since the 1990s’ Program Review, which reshaped the role of government and wiped out the deficit.

 

NOT JUST CUTS
A tool to reshape government

The Carney government never promised austerity or to shrink the public service. It’s promised an operating surplus — and spending redirected toward its seven priorities. That means cuts in some areas to fund growth in others.

 

Khan says Champagne’s letter is really “about stirring up the public service to dig deep — to identify where programs and operations are truly performing or lagging, where efficiency can be gained, and what’s aligned with priorities.”

“I think that’s what’s happening here. The government is shaking up the system to see what’s truly performing and what’s not, what’s aligned to priorities and what’s not. Once that pool is built, they can decide in a future budget what they actually want to harvest for reallocation,” Khan says.

The real goal is to map the “addressable opportunities” — a pool of potential savings and efficiencies future budgets can tap. It sets the stage for a bigger reset down the line, as the government seeks to fund new defense, security, and industrial priorities without simply slashing services.

 

It’s a “shakedown cruise,” Michael Wernick says, a psychological and operational test run to see how ministers, departments, unions, and stakeholders respond under pressure.

 

“They can harvest some things in the budget and then move on,” former clerk of the Privy Council says. “There is only so much you can do in a couple of months.”

 

It echoes the Harper-era strategic reviews, where departments identified their bottom five per cent to create a pool of options — not automatic cuts, but opportunities for reallocation.

 

Now, the reality. The ground has shifted dramatically since the Liberal platform was written — before NATO military pledges, before Trump’s deepening trade war, before growth softened.

 

Here’s the key: departments may be told to identify $20 billion in potential cuts — but perhaps only $13 billion would be saved. The rest could be redirected to defence, public safety, and industrial strategy.

 

That is a classic political move: ask for more than you need, then choose what’s viable, sellable, and aligned with your agenda. The bigger the options list, the more control cabinet has over what gets trimmed, what gets rebranded, and what gets quietly shelved.

 

In short: this isn’t just about trimming budgets — it’s giving government choices. The review feels bigger than expected because it is. It’s about building fiscal room, not just booking savings.

 

It’s about shifting, too, though. The public service and political leaders haven’t tackled a deep, system-wide review in years. For them, this is a learning exercise, Khan says.

 

He points to the big distinction between moving money around now and bigger organizational transformations that come later and take more time.

• Reallocating programs and resources: This is about shifting money and priorities — a mostly political decision that can happen quickly.
• Transforming how work is done: This means deeper changes like adjusting processes, systems, or roles, which require more time, careful planning, and greater risk.

THE PBO
Doable but not painless
The targets are achievable but not without pain, Parliamentary Budget Officer Yves Giroux says. Through attrition, a 7.5-per-cent cut next year might be managed, but layoffs are inevitable once reductions climb to 10 per cent and 15 per cent. So are deep cuts to grants and contributions.

What’s still unclear is how much of those savings will be reallocated to new priorities. “The proof will be in the pudding,” Giroux says. The real impact won’t be known until the fall budget.

Parliamentary Budget Officer Yves Giroux        

BRACE, BRACE
New phase, new phrase

Meanwhile, the government is already preparing for what it calls workforce adjustment, its formal process for managing job losses and redeployments. The machinery is moving so fast that public messaging can’t keep up.

A national joint workforce adjustment committee is under discussion. Labour-management consultation committees are being activated. Departments are being told to brace for real impacts. One signal that’s hard to miss?

 

A new phrase circulating internally: “platform promises are evolving.” Translation: staffing cuts are no longer off the table.

 

Union pushback. One union official described the briefing by Treasury Board and Finance officials as somber and almost apologetic. Senior officials were visibly distressed at the possibility of job losses. Already, more than 10,000 federal jobs disappeared last year alone, PSAC says, with no plan to maintain services. Nearly 2,000 more have already received WFA notices, with cuts announced at CRA and ESDC.

 

“Canada’s public service isn’t a piggy bank,” said PSAC President Sharon DeSousa. “We’ve always been open to finding savings — but that requires working with unions, not around them.”

 

DeSousa has called on the Carney government to honour its promise of “caps, not cuts,” warning that job losses will mean longer waits for passports, EI, and parental benefits, and it will mean a government that “can’t deliver.”

 

What “capped, not cut” really means. There’s a catch when the government says it’s “capping” the size of the public service, not cutting it.

 

A cap means the total headcount stays flat. But departments still must meet steep savings targets and shift resources toward new priorities like defence, infrastructure, and national security.

 

In practice? That likely means fewer jobs in some departments, and new roles opening elsewhere. If your job doesn’t align with the new agenda, a flat headcount won’t protect you.

 

Hiring will be tightly controlled. Attrition won’t be automatically backfilled. And reassignments will become the norm — for those who have somewhere to land.

So yes, technically it’s a cap. But for many public servants, it may feel a lot like a cut.

The chart shows Canada’s fiscal breathing room. In 2024, PBO says the federal government has just $46B in fiscal space before debt sustainability is at risk. With new spending mounting, that buffer is shrinking fast.

 

But, really, why these cuts? Remember when the IMF flagged Canada’s ballooning deficits as getting unsustainable? It triggered the Chrétien government’s massive downsizing and program review.

 

Last year, the PBO said Ottawa had about $46 billion in fiscal room before things become unsustainable.

 

Well, that buffer is vanishing. It’s been eaten up by platform promises, the fall economic statement, and new defence spending and NATO commitments.

 

To put it bluntly: the government needs to show the deficit is headed downward, another insider says. The 15-per-cent ask could end up being more than a belt-tightening and a reallocation exercise. Some argue it’s a fiscal necessity.

 

“The government has to demonstrate that the deficit is on a downward path,” said one official not authorized to speak publicly. “There’s a limit. And we’re hitting it.”

 

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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. Full bio. X: @kathryn_may. 

 

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