Carney's cabinet asked to find 'ambitious savings' ahead of fall budget

Finance Minister François-Philippe Champagne sent letters to his fellow cabinet members Monday asking them to come up with "ambitious savings proposals" to get a handle on public sector spending, according to a senior government official.

Champagne will lead what's being called a "comprehensive expenditure review," with the goal of spending less on the day-to-day running of the federal government. This would allow Ottawa to invest more in initiatives that will build "a strong, united Canadian economy," according to one of the letters.

The wording of the letter was confirmed to CBC News by Champagne's director of communications.

As part of the drive to find savings, the letter tells ministers to assess whether existing programs within their departments are meeting their objectives, are "core to the federal mandate" and not duplicative of something already being done by other levels of government.

That echoes what Prime Minister Mark Carney promised in the last federal election campaign when he said a government led by him will "spend less, so Canada can invest more" by reining in the growth of federal operational spending while also funnelling money into other priorities.

Carney has already promised to spend much more on defence, including an additional $9.3 billion this fiscal year.

In an interview with CBC's Power & Politics, Transport and Internal Trade Minister Chrystia Freeland said this review is about fulfilling "a promise to spend less on the government itself, to invest more in Canada and Canadians."

Federal funds will be redirected to "significant investments in the productive capacity of the Canadian economy," building new "trade corridors" and infrastructure projects, she said, as Carney pushes to strengthen the economy in the face of a U.S. trade war that has already led to job loss and a drop in exports.

Freeland said social programs like dental care, early childhood education, daycare and transfers to the provinces to pay for other initiatives "would not be touched" as part of the planned cutbacks.

WATCH | Defence minister comments on letters sent to cabinet:

As the finance minister asks his colleagues to cut spending, Defence Minister David McGuinty says he hasn’t been part of any discussions about ‘significant social services cuts' to meet Canada's defence commitments.

Under the last Liberal government, the government's operating costs grew by an average of nine per cent annually — exceeding revenue growth and thus leading to higher deficits and a bulging national debt.

Carney's election platform promised to cap spending growth at two per cent per year through 2028-29.

Under former prime minister Justin Trudeau, the federal public service underwent explosive growth.

According to government data, the number of federal employees (including those working in "core public administration" and separate agencies) grew from 257,034 in 2015 to 357,965 this year — a 40 per cent increase. That's more than double the population growth rate over the same period, according to federal figures.

Audrey Milette, Champagne's director of communications, confirmed ministers are being asked to reduce program spending by 7.5 per cent in the fiscal year that begins in April, followed by 10 per cent the year after and 15 per cent in 2028-29. The Globe and Mail was first to report on the proposed spending reduction figures.

"It's not a job cut exercise. But we really want to rebalance the public sector," Milette said.

However, jobs could be eliminated as people retire or leave through attrition — something that is likely to draw the ire of public sector unions.

Carney has floated the idea of making the public service more efficient. As part of the recent G7 communique on artificial intelligence, he and other leaders agreed to study ways AI can be deployed within government, which could eventually have an impact on federal public sector jobs.

In order to recast the budget-making process, each federal department will also be asked to identify three top priorities for the upcoming budget, which is expected to be tabled in the fall.

WATCH | Carney asked how Canada will pay for more defence:

Announcing their billions of dollars in cumulative commitments following the NATO summit, Prime Minister Mark Carney was asked Wednesday if this would mean a tax hike for Canadians. Carney responded that these spending targets would ‘grow this economy’ while adhering to their commitment to balance the budget within three years.

To pay for these priorities, the departments will be asked to outline how they would fund them using existing resources — a sort of "pay-as-you-go" style of budgeting similar to what Conservative Leader Pierre Poilievre pitched during the last election.

Departments will be able to suggest more budget items beyond the initial three — but they must align with the seven governmental priorities Carney set out in his mandate letter to ministers earlier this year.

Those priorities include "establishing a new economic and security relationship" with the U.S., building "one Canadian economy" by removing barriers to internal trade, "bringing down costs for Canadians," making housing more affordable, strengthening the Canadian Armed Forces, returning immigration rates to "sustainable levels" and spending less on government operations.