Prime Minister Mark Carney’s cost-cutting initiative will impact the Department of National Defence, despite a projected increase in defense spending over the next few years. Finance Minister François-Philippe Champagne has directed all cabinet members to identify savings of 7.5% in their budgets starting in fiscal 2026, with targets increasing to 10% the following year and 15% in 2028. This move aligns with Carney’s commitment to balancing the federal operating budget while boosting expenditures on defense and other capital projects.
Carney’s recent announcement to augment defense spending by $9.3 billion this year preceded NATO allies’ agreement at the summit to raise defense and security budgets to five percent of GDP by 2035. Defence Minister David McGuinty acknowledged receiving Champagne’s letter but did not provide specifics on where budget cuts would be made within his department.
As preparations for the 2025 budget continue in Ottawa, Carney’s focus on spending less and investing more to fortify Canada’s economy amidst trade challenges from the U.S. remains steadfast. The Liberal platform in the recent federal election outlined plans to achieve a $62 billion deficit this year and to balance the operating budget by 2028 while maintaining a deficit in capital spending.
While details on budget cuts are pending, concerns have been raised by the parliamentary budget officer and critics regarding potential escalation of the federal budgetary deficit this year due to recent spending announcements by the government. The Public Service Alliance of Canada cautioned against significant job losses and diminished services should the proposed cuts materialize, emphasizing the potential closure of programs and extended wait times for services such as passport processing.
In a separate development, Treasury Board President Shafqat Ali announced a review to streamline regulations across the public service to alleviate barriers hindering the Canadian economy. Ministers are tasked with examining regulations within their purview and proposing measures to reduce red tape by eliminating outdated rules, minimizing overlaps with provincial regulations, and enhancing service delivery efficiency. Reports outlining the next steps for reducing regulations are expected within 60 days.
Michael Sabia, recently appointed to lead the Privy Council Office in Ottawa, highlighted the need for the federal bureaucracy to simplify its operations, citing overly complex internal processes that necessitate streamlining efforts as a top priority. Sabia emphasized the importance of addressing process simplification despite acknowledging the challenges inherent in the endeavor.