Ottawa to rely on public service attrition for lion's share of spending cuts

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Nearly $1.7-billion in promised cuts to government spending will come almost entirely from attrition in the public service, suggesting a relatively pain-free opening round as Ottawa begins to trim its record deficit.

Treasury Board President Stockwell Day, who has recently been briefed on the first wave of internal cuts, said about 11,000 public servants vacate positions each year - mainly through retirement - and not hiring replacements will be Ottawa's main source of savings.

While that does not rule out cutting some programs outright, Mr. Day said employees working in programs that do get the axe could move to fill vacated positions elsewhere.

Speaking to reporters following a speech to the Federation of Canadian Municipalities in Ottawa, Mr. Day would not provide further detail on the draft plan to cut $1.7-billion in spending, which will be confirmed in the 2011 budget.

"We'll have to see what the final numbers bring. I don't know that [attrition]rsquo;s going to address it 100 per cent, but certainly it relieves a lot of the pressure," Mr. Day said.

The 2011 budget will be a key moment in federal politics, as it marks the Harper government's shift away from stimulus spending and towards restraint. The ensuing House of Commons vote on that budget is widely considered to be a possible trigger for a spring election.

That $1.7-billion will come from the first year of a three-year plan to save money. In each year, a third of all government departments have been asked to permanently cut 5 per cent of their budgets and senior bureaucrats have been given the responsibility to decide where the savings will be found.

Mr. Day's Treasury Board is among the 13 departments and agencies asked to find cuts this year. Others include National Defence, regional development agencies, Human Resources Canada, Industry Canada, Public Works and the Privy Council Office.

But Mr. Day's math doesn't quite add up, notes Carleton University economics professor Frances Woolley.

Even if exactly 11,000 jobs were left unfilled, finding $1.7-billion in savings assumes the average compensation of the departing workers is $155,000, which she said is high. Further, pension obligations mean a retired public servant is not off the books. Internal transfers will also be a challenge, she said, because retirees are often leaving senior positions while cuts will likely affect more junior workers.

Dr. Wooley expects there will be cuts, particularly in transfers for outside research. Overall, however, she said Ottawa's fiscal situation does not require drastic measures to balance the budget on schedule. Ottawa promises to return to surplus by 2016 even though the deficit hit a record $55.6-billion last year.

"I think [the federal government]is being optimistic in saying they're going to be able to make it through attrition," she said. "But the more basic problem is that a lot of the real financial problems are being felt by the provincial governments."

In his speech to mayors and other members of the Federation of Canadian Municipalities, Mr. Day repeated the Conservative government's pledge that Ottawa will not balance the federal books by cutting transfers to lower levels of governments, as was done in the 1990s.

That was welcome news to federation CEO Brock Carlton, who was leading a full day of lobbying on Parliament Hill to urge against such an approach.

"We appreciate the investments that have been made so far, in infrastructure in particular," Mr. Carlton told reporters Thursday in summarizing his group's message to cabinet ministers and MPs.

"We're also saying that as we go into a period of deficit fighting, we cannot return to the 1990s. We cannot return to what we call the lost decade when there was so much downloading that municipalities were unable to keep up."