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Finance Minister Jim Flaherty holds a news conference prior to pre-budget consultations in Vancouver on Jan. 10, 2012.

The Conservative government is already cutting costs faster and more deeply than planned, with new data showing Ottawa has quietly trimmed overall government spending by 3 per cent.

That's the conclusion of a new report by Parliamentary Budget Officer Kevin Page, which reviewed all government spending over the first six months of the current fiscal year.

The 3 per cent decrease suggests Ottawa is on track to beat its plan to hold total spending growth to 1.5 per cent this fiscal year.

The downward spending trend might explain why the Conservatives are now signalling future cuts could be more aggressive than originally planned.

The government's 2011 budget laid out a plan that targeted a 5-per-cent cut to the government's roughly $80-billion direct program spending budget by 2013-14, which works out to a permanent cut of about $4-billion a year.

But according to the PBO's analysis, Ottawa is well on its way. Spending on operating expenditures is down 4 per cent and capital spending is down 15 per cent.

In an interview, Mr. Page said the savings are the result of earlier spending restraint plans. "This environment of austerity seems to have taken hold, and I think you do see that in the numbers," he said.

However the spending watchdog noted it could make future cuts more difficult if this year's numbers come to be used as the starting point for future cuts. He said it is unclear how Ottawa plans to measure future restraint.

Also, Mr. Page said it's important to note that the lower spending comes after a few years of very large spending increases as a result of government stimulus spending. "Spending is coming down, but that's after we put a lot into the system," he said.

Federal departments only recently began publishing quarterly spending reports and the PBO assessment is an analysis of those numbers. It is possible that spending could rise in the last two quarters of the fiscal year.

Finance Minister Jim Flaherty – who is preparing his 2012 budget – said Wednesday that some departments could be cut by more than 10 per cent as part of a government-wide spending review to erase the deficit and ensure Ottawa's finances are stable over the long term.

Broken down by department, one big boost to Ottawa's numbers is Finance's expectation that it will get back the $1.9-billion it gave British Columbia to transition toward a harmonized sales tax. The province has since pulled out of the plan and has promised to give the money back, but the timing of that transfer has not been confirmed.

The government also expects to save money through reduced capital spending at National Defence and winding down stimulus grants at Human Resources Development Canada and other agencies.

Major sources of increased spending include increases to the Canada Health Transfer and Old Age Security payments, as well as growing expenses at Canada Border Services Agency and Correctional Service Canada.

In terms of percentage, spending in the first half of the fiscal year is up 270 per cent at the border security agency, while new crime legislation and a projected increase in the offender population is cited as the reason for a 146 per cent increase in spending on the federal prison system.

Finance Canada spokesman Jack Aubry said spending for this year is in line with the government's November fiscal update. He noted in an email that differences between the Expenditure Monitor figures used by the PBO and the fiscal update numbers used in the November fiscal update are because the update uses accrual accounting and the expenditure monitor presents figures on a near-cash basis.