Where To Start Cutting The Public Service?

As federal public servants race to wrap up an expenditure review the Liberals will use to map out massive change, the Carney government is learning how hard it is to shrink and reshape a bureaucracy that’s been growing for years. 

Departments have several weeks left to figure out what’s essential and what’s drift: programs, roles, and spending that may be outdated, overlapping or even outside federal jurisdiction. By Aug. 28, Prime Minister Mark Carney expects ministers to have found savings of up to 15 per cent.  

But one basic problem is the starting point. Nobody knows what it is.  

Departments are still untangling Trudeau-era restraint measures, and it’s not even clear whether the public service is growing or shrinking. 

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By Kathryn May

From Policy Options, Aug. 11, 2025

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A recent Parliamentary Budget Office report shows conflicting data. Treasury Board data says headcounts are down by 10,000. Departmental reports say full-time equivalents — a measure of actual workload — are up.  

Without a clear baseline, finding savings — or reinvesting them effectively – will be difficult, experts warn.  

Sabia’s cultural-shift signal 

The public service has grown 43 per cent over the past decade. But the review isn’t just about cuts or how many people the government employs. It’s also the machinery they’re working in.  

The Carney government signalled an intention to rewire the culture of the public service — from stability to speed, risk avoidance to innovation, compliance to outcomes. 

Privy Council Clerk Michael Sabia, the country’s top bureaucrat hand-picked by Carney, set the tone from Day One, when he said the public service is too complicated and too slow “at a time when we need to speed up because the world is moving as fast is.”  

Reforming the public service so it can deliver government priorities — rather than just manage process, which Sabia says is too onerous — is a central piece of Carney’s strategic realignment. He’s looking for savings to reinvest in housing, defence and infrastructure, some of the government’s priorities as it rebuilds Canada’s economy.  

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Most inside government are bracing for job losses. “If I were a deputy minister doing the review, I’d be looking really, really hard at what I could cut — not shave, but eliminate programs,” one former senior bureaucrat says. 

Treasury Board, however, says this is not an exercise in shrinking the public service, according to Mohammad Kamal, a spokesperson for Treasury Board President Shafqat Ali. “We have asked departments to do deep dives… and submit savings proposals that seek to make the federal government more effective, efficient, and productive.” 

Headcount confusion  

How many people does the public service actually have? Where can it be cut? How will cuts affect workload and productivity?  

It’s hard to answer these basic questions because of inconsistent data for headcount vs. FTEs (full-time-equivalents), says one veteran bureaucrat with long experience in budgeting and finance. 

Headcount measures how many people are on the books – full-time, part-time, as casuals or students. FTEs measure actual work effort by standardizing hours into workload. Both matter — but together they can make tracking real staffing a moving target.  

For example, cutting 1,000 casuals working 15 hours a week drops headcount by 1,000 — but trims only 375 to 400 FTEs. And if FTEs are rising while the number of employees is falling, that can point to inefficiencies and increasing burden on the workers who remain.  

Managing the work, not just the workers 

Counting people won’t cut it, another senior financial executive says. If fewer employees are covering the same workload, FTEs stay high — and so does the wage bill. Real restraint will mean managing the work, not just the workers. 

Without reorganizing, streamlining, or automating, cuts don’t bring efficiency. Instead, services decline, staff burn out. Canadians are left waiting while they lose confidence in government.  

The PBO report highlights how departmental plans – the government’s main tool for projecting staffing and spending – have repeatedly missed the mark. 

With Trudeau-era cuts, departments forecast a shrinking workforce that didn’t happen. Projected FTEs for 2025–26 jumped by 31,000 compared to the previous year. Another 25,000 were added for 2026–27. That’s 56,000 jobs departments didn’t expect to need or have. 

Some critics say departmental plans are unreliable snapshots that don’t incorporate the budget and are outdated by the time they’re released. How can anyone deliver a 15-per-cent reduction without reliable staffing forecasts?  

Others argue that even when governments signal a desire to cut jobs or scale back operations, the machinery is wired to push back due to layers of mandates, rules and entrenched programs.  

Signs of recent decline — but in the wrong places 

Headcount fell by nearly 10,000 between March 2024 and March 2025, Treasury Board stats show. That’s an equivalent decline of 8,000 FTEs – a trend that could mark the largest reduction in more than a decade if it holds. 

Most of the reductions, however, were term, student, and casual jobs – typically the young, eager workers government wants to attract.  Permanent FTE positions grew by nearly 3,000. 

Political and operational limits

The scale of reductions will go well beyond attrition and expiring term contracts. Reallocations remain uncertain with a trade war, economic slowdown, and increased military spending, including raises for armed forces personnel 

Carney is looking for more than the $13-billion in efficiencies he pledged in his election platform. If Canadians start to feel the pinch of job cuts and declining services, federal unions will be sure to underline it.  

They think Carney will renege on his election promise of “capping not cutting public service employment.” A recent report from the Canadian Centre for Policy Alternatives projected a flat 15-per-cent cut could eliminate close to 60,000 jobs, hitting the National Capital Region hardest. 

Hard choices remain: cut more FTEs and hope efficiency gains fill the gap; eliminate low-priority internal roles, or trim grants and contributions to outside organizations, which carries heavy political risk and job losses.  

“Rather than starting this with the wind at their back, the government faces the inertia of 10 uninterrupted years of public service growth,” said one senior government financial expert not authorized to speak publicly. “The path to balancing the operating budget runs through the $73-billion wage bill — there’s no avoiding it.” 

The target: day-to-day expenses  

But senior officials say the review is about locking in a smaller funding base that will reshape how government spends for years to come. 

The 15-per-cent reduction targets apply to roughly $180 billion to $200 billion in operational operating spending — the day-to-day costs of running government, which have been growing at about nine per cent a year. (That includes wages, services, maintenance and grants and contributions to outside organizations.)  

Carney wants to separate operational and capital budgets and cap the growth of operational spending at just two per cent. The idea is to impose more discipline on routine expenses while safeguarding long-term investments in housing, infrastructure, and productivity.  

After ministers and cabinet have looked at the proposed reductions, any approved cuts will be baked into the Main Estimates over the next three years. Future budgets will start from that smaller base. New spending — including for housing, infrastructure, or major projects — could still be added, but with limited fiscal room, it may require running higher deficits or raising new revenue. 

This article was produced with support from the Accenture Fellowship on the Future of the Public Service. Read more of Kathryn’s articles. Kathryn writes The Functionary newsletter about the federal public service. 

This article first appeared on Policy Options and is republished here under a Creative Commons license.

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