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Finance Minister Jim Flaherty leaves an Ottawa news conference on March 5, 2012.Sean Kilpatrick

A new report to Prime Minister Stephen Harper gives the clearest indication yet that public-service layoffs will be a big part of the government's deficit cutting plans.

Federal ministers have been downplaying the impact of looming budget cuts in recent weeks, but a report released Thursday paints a different picture.

"One of the major tasks that senior leaders will face is the deliberate downsizing of the Public Service," the Prime Minister's Advisory Committee on the Public Service says.

The committee is co-chaired by former Privy Council clerk Paul Tellier and former Liberal and Conservative cabinet minister David Emerson.

The report's language about cuts comes on the heels of recent revelations that Treasury Board – the central agency in charge of public service hiring – is creating a new Litigation Management Unit.

That development, made public in recently-tabled spending requests to Parliament, is raising concern among unions that Ottawa is girding for a fight.

Thursday's report to the Prime Minister hints that may be the case.

"Current provisions of workforce adjustment agreements will make this [downsizing]a particular challenge. Departures must be managed in a way that does not undermine the longer-term capacities of departments," it states.

The report also advises the government to communicate clearly and often with employees about changes. "Employees can deal with unpleasant facts. What is much harder is to live in an atmosphere of uncertainty," the report states.

The report's language is noteworthy because the Conservative government has not previously described its cost-cutting as a "downsizing" of the federal public service. Finance Minister Jim Flaherty has previously referred to slowing the rate of growth in government.

Union leader Gary Corbett, president of the Professional Institute of the Public Service of Canada, said it's the first time he's seen the phrase "deliberate downsizing" before.

"It's the elephant in the country. It's not talked about openly, but everyone knows it's going to happen," he said. Mr. Corbett added there's a lot of mixed messages in the report, noting that it talks about the importance of investing in the public service while at the same time talking about cuts and delivering bad news.

Treasury Board President Tony Clement said it was too early to say whether budget cuts will shrink the public service.

"I think it's fair to say that our position is that we should be delivering excellent services to Canadians, using appropriate numbers of personnel and that could be a whole range of possibilities. It could be current employment levels, it could be reduced or in some cases, enhanced. So in order to answer that question fully, I'm anticipating you'll repeat the question to me after budget day, but certainly we want to deliver excellent services to Canadians because that's what Canadians care about," he said.

The report notes that 2011 marks the second consecutive year in which there has been no growth in the size of the public service. However the number of public servants is higher than when the Conservatives were first elected in 2006.

There are several different ways of measuring the size of the federal public service.

Treasury Board's statistics on the population of the federal public service shows a 0.2 per cent decline between 2010 and 2011, from 282,955 to 282,352. The 2011 numbers are 13 per cent higher than the 249,932 public servants working in 2006 when the Conservatives first won power.

Statistics Canada lists federal general government employment at 416,418, a number that includes reservists and full-time military personnel. A larger category called "federal public sector" includes federal business enterprises, such as Crown Corporations. Statistics Canada reports there are 526,699 people employed in the federal public sector, which is a 9.6 per cent increase over 2006 levels.