1 week Ago By Paul G. Thomas
During the pandemic and the related economic downturn, there were strong pressures on governments to spend on existing and new policy areas. At the same time there were calls to cut taxes and to end deficit spending. Post-pandemic inflation created an affordability crisis which led governments to offer relief through tax cuts and new spending.
Read this article for free: Already have an account? To continue reading, please subscribe: * During the pandemic and the related economic downturn, there were strong pressures on governments to spend on existing and new policy areas. At the same time there were calls to cut taxes and to end deficit spending. Post-pandemic inflation created an affordability crisis which led governments to offer relief through tax cuts and new spending.
Read unlimited articles for free today: Already have an account? Opinion During the pandemic and the related economic downturn, there were strong pressures on governments to spend on existing and new policy areas. At the same time there were calls to cut taxes and to end deficit spending. Post-pandemic inflation created an affordability crisis which led governments to offer relief through tax cuts and new spending.
In response, many governments launched spending reviews, often accompanied by bold promises to shrink government, attack waste, enhance productivity, and shift resources away from low-priority programs to higher priority areas of public spending. For multiple reasons, such initiatives seldom live up to their advance billing. There are always more voices calling for new or additional spending than for less.
Governing parties usually make tough budgetary choices early in their term, loosening the purse strings close to an election. Ministers depend on public servants for budgetary advice so there can be resistance to downsizing. Somewhere between 60-70 per cent of the budget involves so-called statutory spending which requires legislation to eliminate or reduce.
Wages, benefits and job protections negotiated by public sector unions are another constraint on efficiency drives. Not all attempts to scale back government are the same. Some involve the use of an outside advisory commission to wielded a budgetary axe.
An example is the U.S. Department of Government Efficiency (DOGE) created by President-elect Donald Trump.
DOGE is led by Elon Musk, the world’s richest man, and Vivek Ramaswamy, entrepreneur and former candidate for the Republican nomination for president. They have promised to deliver US$2 trillion in savings from a total spending budget of US$6.7 trillion by dissolving agencies, eliminating regulations, drastically cutting the workforce and achieving other efficiencies.
Experts note such drastic actions would mean cuts in entitlements programs (like Medicare), defence or other vital services like border patrols. There is no suggestion in-depth assessments will guide the downsizing, instead the axe will simply be brought down on agencies and programs deemed to be expendable or overgrown. Both foreseen and unforeseen impacts, some of them highly negative, are bound to happen.
A second approach to dealing with the financial stress is to end or reduce funding for underperforming programs and reallocate the savings to higher priority areas. The Trudeau government adopted this approach in its 2022 budget with the announcement of a strategic policy review. The review was intended to secure $9 billion in savings from a total budget of $400 billion.
Money released would be redirected to key post-pandemic priorities like economic growth, climate change and inclusivity. There was also a search for potential efficiencies through greater use of digital service delivery models used during the COVID-19 pandemic. The review seemed to go nowhere before being replaced by the Refocusing Government Spending initiative announced in the 2023 budget.
RGS was forecast to reallocate $15 billion over the following five years from existing programs to higher priority areas like health care and housing. There was no mention of the program effectiveness reviews, promised one year earlier, which were meant to guide the reallocations. Restrictions on spending on management consultants and travel, and tighter controls on discretionary spending, were forecast to yield nearly $13 billion in savings.
This was more than offset by $69 billion of spending on new programs, like pharmacare and denticare, meaning there was less deficit reduction. Meanwhile in Manitoba, the former PC governments of premiers Brian Pallister and Heather Stefanson (2016-2023) followed a philosophy of smaller government, lower taxes, reduced spending and balanced budgets. Pallister was a strong proponent of performance measurement and balanced scorecards as an analytical device to guide downsizing.
In practice, a forced pace of top-down, imposed restraint seemed to prevail. After the NDP’s election victory in October 2023, there was considerable speculation on how the new government would fulfil its many campaign promises and still meet its commitment to eliminate the deficit by 2027. The government insists there is a multi-year budgetary plan.
However, the publicly available budget documents do not describe any overall strategy to eliminate programs or to reallocate resources based on systematic evaluations. Instead the traditional approach of annual negotiations with departments over incremental increases in their spending is apparently being followed. In April 2024, the NDP delivered its first budget.
That document reported an overall 4.3 per cent increase in revenues, boosted by a whopping 13.6 per cent increase in federal transfer payments.
Expenditures were to increase by 6.3 per cent in 2024-25 to $24 billion, with health gaining a hefty 13.7 per cent increase.
Over the ensuing three years, expenditures were forecast to grow at approximately 2.5 per cent annually. A gas tax holiday, increased wages for unionized employees, and a tendency to say yes to most new spending requests, lead me to ask how cost containment and a balanced budget will be achieved by 2027.
Have departments be given savings targets? Is there a vacancy management program which leaves certain public service positions unfilled? Are there restrictions on spending on consultants, supplies and equipment, travel and conference attendance, and a ban on allowable budget carryovers from one fiscal year to the next? We all want governments that work better and are affordable. We focus too much attention on how much is spent and too little on what that spending buys us in terms of results. Budgetary systems can help but political will matters more.
Paul G. Thomas is professor emeritus of Political Studies at the University of Manitoba. Advertisement Advertisement.
