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tax & spend

There are charts galore in the Clerk of the Privy Council’s annual report to the prime minister on the state of the federal civil service, and much discussion about mission and morale.

But nowhere in the 39-page report, which was shared publicly in late August, is there any analysis of one of the most important trends affecting the federal public service: the multiyear hiring spree that has swollen the ranks of civil servants by nearly a third since the federal Liberals came to power in 2015.

As the chart below shows, the expansion of the federal civil service long predates the pandemic. Starting in fiscal 2015-16, the Liberals ended the austerity policy of the Conservatives, which had shrank the size of the core federal public service by nearly 10 per cent between fiscal 2010 and 2015. (The core federal public service excludes Crown corporations and government agencies, such as the Canada Revenue Agency and Canada Post.)

The pace of hiring accelerated through to fiscal 2019, before taking a slight dip in fiscal 2020.

Some of that expansion undoubtedly reflects a shift in government priorities. Environment and Climate Change Canada, for instance, expanded its head count by 15 per cent between 2015 and 2021.

But the growth of the civil service has been broad based, with 53 out of 58 federal departments and agencies expanding their employee count between 2015 and 2021. Of the remaining five, most were relatively tiny operations, such as Copyright Board of Canada, which reduced its 17-person staff in 2015 to 16 in 2021. Library and Archives Canada was the largest organization that reduced staff over that time period, with its head count falling to 926 from 1,026.

That broad-based expansion sent the size of the federal work force on to a steep upward curve, as this second chart shows. By the end of fiscal 2019, the Liberal hiring spree had more than made up for Tory cutbacks earlier in the decade.

And the hiring has continued to build from there, with the head count of the core federal civil service topping a quarter of a million people as of March 31 of this year – even as a severe labour shortage afflicts the Canadian economy.

“The state is just getting bigger,” says Kevin Page, president and chief executive of the Institute of Fiscal Studies and Democracy at the University of Ottawa, and a former parliamentary budget officer.

A report from the Fraser Institute highlighted that trend, pointing out that the public sector (including not just Ottawa but all levels of government) accounted for 86.7 per cent of net job creation between February, 2020, and July, 2022.

The institute’s chosen metric subtracts job losses from the total jobs created. The private sector has created significantly more jobs than the public sector since February, 2020, but those gains are largely offset by jobs lost in the early weeks of the pandemic.

Still, the public sector’s share of employment has been rising, reflecting not just Ottawa’s hiring but those of the provinces as well. Most provinces don’t publish data sets about their work force. British Columbia is an outlier, giving a top-line summary of the size of its civil service in its budget and fiscal plan.

B.C., like the federal government, has significantly increased its work force since 2015, with the pace of that expansion picking up speed after the NDP formed government in 2017. Indeed, the province bolstered its ranks – using the measure of full-time equivalent (FTE) positions – even more rapidly than did Ottawa, particularly since the onset of the COVID-19 pandemic.

Economist Ben Eisen, a senior fellow at the institute, said the rapid expansion of the public sector raises questions about the long-term costs, particularly for provinces whose finances are already not sustainable.

And he acknowledged that it could be a problem for governments to be increasing competition in the labour market at a time when private companies are already finding it difficult to meet their hiring needs. “Certainly, it’s a legitimate concern,” he said.

Ottawa does provide estimates for the size of its work force in coming years, a forecast that seemingly points to a reversal of the recent ballooning in the size of the civil service. According to that outlook, employment (measured on a full-time equivalent basis) will fall by 5 per cent over the next two fiscal years, largely reversing the expansion since March, 2020.

However, there is just one problem with that forecast: It bears no resemblance to reality. “I don’t think those numbers are credible,” says Mr. Page.

There’s no nefarious intent at work here, but rather the inflexible structure of the federal bureaucracy and the lumbering pace of the budget process. Those work force estimates are based on departmental plans that are published before the budget is tabled.

Funding for new initiatives – and the staff that would be attached to them – has to be approved before being incorporated in the departmental plans. Politicians and civil servants are perfectly aware that the projections are, in most cases, wrong.

The departmental plan for Immigration and Refugee Board of Canada, for instance, forecasts a stunning 45-per-cent drop in the number of FTEs from the current fiscal year to fiscal 2025, dropping to 1,154 from 2,113. In reality, however, the department aims to increase its FTE count to 2,400 by fiscal 2025 by adding 300 temporary positions. That reflects increased funding in the 2022 budget to speed up the pace of processing refugee claims. (The department supplied that information upon request.)

Mr. Page sees a major accountability issue in the yawning gap between the official – and largely fictional – work force projections that are published and the actual plans of federal bureaucracy. If those forecasts are not realistic, and known not to be realistic, then departments cannot be expected to adhere to them.

And if that is the case, then there is no way to measure the performance of those departments on hiring. Without a gauge of cost, there cannot be a measure of value delivered. “How does the Parliament hold the government to account?” asks Mr. Page.

Tax and Spend examines the intricacies and oddities of taxation and government spending.

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