The man Stephen Harper has tapped to lead the charge on chopping federal spending warns that Canadians expect “considerable sacrifices” from Ottawa as it tries to balance its books.
But Stockwell Day, a Conservative cabinet minister who is president of Ottawa’s powerful Treasury Board, declined to say how much pain Canada’s 180,000 federal public servants will have to bear in the process.
He said the March 4 budget will identify some areas for cost-cutting as the Tories try to dig the federal coffers out of record deficits.
“You will see some of the specifics; other areas will be more general where we will want ongoing input from Canadians,” the minister said. “As everybody looks at the budget ... there will be that confidence that the government has a plan.”
Mr. Day was talking to reporters after he met with heads of two major federal government employee unions. A self-styled fiscal conservative, he was appointed by the Prime Minister to send the civil service and Canadians a message that Ottawa is serious about reducing its budget deficits.
But today Mr. Day appeared to be trying to reassure worried union leaders that he’s not out to savage the civil service. Significant reductions in the quality of public servant jobs or employee pension plans would hurt bureaucrats’ morale and hinder Ottawa’s ability to attract new blood.
“I do believe we have one of the best public services in the world. That’s commented on and noticed internationally ... We have people who work very hard and are committed to providing good service to Canadians. We want to see that continue,” Mr. Day said.
Mr. Day refused to say whether Ottawa is planning cuts to the pensions of public servants. But he promised to work with labour unions to “maintain the integrity” of public-servic pension plans.
“As I’ve said to the leaders of the public service who I’ve met already, we want to be working closely with them. We want to make sure our pension plans are strong and continue to be strong.”
It’s hard to see the government reaping any significant savings from cuts to pensions – ones that would have a substantial impact on deficit reduction.
Outside economists have forecast that Ottawa would have to cut as much as $20-billion in annual spending to balance the budget by 2014-15.
But in any given year the federal government only spends about $2.5-billion in annual contributions to pension plans. Treasury Board reports suggest it also spends $4.4-billion in annual payouts to pensioners. Much of the rules governing pensions are enshrined in law and even if Ottawa ripped open existing arrangements – a move that would start a war with the public service – a 5 per cent cut in this area’s spending would only save $350-million a year.
Plus, Ottawa is already on track to force public servants to fund more of their retirement savings. It’s reducing the ratio of federal government to public-servant pension contributions to 60:40 from 70:30.
Mr. Day took pains to signal that he wants to work with labour unions and noted that it would be hard to make big changes outside of rewriting existing laws.
“Many of the things related to the funds themselves are all entrenched in legislation. Some of those aren’t even at this point a matter of the collective bargaining process. That’s why I want to maintain close communications.”
He said 1.5-per-cent limits on public-service wage increases will continue 2011 as already negotiated. Post-2011, he said, “there will be other discussions.”
Toronto Dominion Bank chief economist Don Drummond said cuts to public pensions would not be able to generate much current savings unless Ottawa went back and broke already negotiated deals.
“Absolutely not, unless they do this retroactively,” he said. “And I doubt very much they have retroactivity in mind.”
Mr. Drummond, a former Finance Canada official, said Ottawa could, however, change rules that allow public servants to retire at 55 – after 30 years of service – with no actuarial penalty to their pension. But again, this wouldn’t generate significant savings for Ottawa in any given year.
(Photo: Canadian Press)
