Public servants are preparing for a fight as the Conservative government says it will act on a clear order from Canadians: The deficit is a concern and federal spending cuts are the answer.
Sensing they are on the eve a “slash and burn” attack, federal public servants across the country are posting green stickers at work that read: “Hands off our pensions.” It is part of a broader union campaign of pre-budget petitions and rallies, including events Tuesday in Calgary and Halifax.
On Wednesday morning, recently appointed Treasury Board President Stockwell Day will meet union leaders who will be looking for details on the government's approach to long-term spending restraint.
Unions are concerned about plans circulating in Mr. Day's department that include options for pension savings, and Finance Minister Jim Flaherty has described public pensions as “handsome.”
Federal pensions are considered more generous than those in the private sector – and even many provincial government plans – because they are fully indexed to inflation. Federal employees contribute about a third of their own money, compared with many provincial plans that require a 50-per-cent contribution.
Mr. Flaherty has also said he will erase the deficit through cuts to Ottawa's $100-billion program-spending budget, of which nearly $35-billion is for employee salaries and benefits.
With just over two weeks to go before budget day, Conservatives say they have been told that spending cuts, rather than tax increases or prolonged deficits, are the best way to address Canada's $56-billion deficit.
“People are concerned about what some people have been talking about – a long term, structural deficit,” said Conservative MP Ted Menzies, who sat in on many pre-budget consultations as parliamentary secretary to the Finance Minister.
“They're saying: ‘Wherever you can, whatever is reasonable, cut back on program spending,' ” he said. “There will be some cuts. We'll have to look at programs very, very seriously.”
Mr. Menzies insists he is not of the view that the deficit is “structural” – a term popularized of late by Parliamentary Budget Officer Kevin Page in arguing there is a permanent deficit of about $19-billion that will remain even after the stimulus spending ends and economic growth returns.
But Mr. Menzies is as vague as his colleagues as to whether these cuts are imminent or whether they will come after the second year of stimulus spending ends on April 1, 2011. Further, he indicated there is even a small possibility that stimulus spending might be extended should the economy sour.
An Ekos survey last week of 3,006 Canadians found only 14 per cent supported higher taxes as a way to balance the books. Cutting services and spending was the far-and-away favourite at 46 per cent. A further 10 per cent said deficits should continue and 30 per cent had no response, according to the Feb. 3-9 survey (which has a margin of error of plus or minus 1.8 percentage points, 19 times out of 20).
That is at odds with the views of senior bankers, including TD Bank chief Ed Clark, who said recently most CEOs want higher taxes. After taking a political hit for proroguing Parliament, Conservatives see the debate over taxes as a defining political issue and the ticket to brighter fortunes.
Fortunately for Mr. Flaherty, there is broad support among economists for his plan to stay the course on stimulus spending and taxes through to April 1, 2011, before taking significant measures on the deficit.
“Canada, particularly at the federal level, has the luxury of taking its time to bring deficits down because we did pay down so much debt in the previous decade,” said Avery Shenfeld, chief economist of CIBC World Markets. “We're not Greece.”
In releasing his survey last week, Ekos pollster Frank Graves warned that even though there is public support for the broad notion of spending cuts, the public mood can turn if they don't like the specifics.
