The Carney government is easing its cost-cutting demands on several federal departments and agencies, reducing the number expected to slash spending by 15 per cent over the next three years — a shift one economist says reveals a spending review that “was not thought through.”
Earlier this year, Finance Minister François-Philippe Champagne instructed most ministers to trim program spending by 15 per cent, while granting smaller two per cent targets to National Defence, the RCMP and the Canada Border Services Agency. Now, eight more organizations have been added to the lower-cut category.
Among those newly shielded from the steepest reductions are Crown-Indigenous Relations and Northern Affairs Canada, Indigenous Services Canada, and Women and Gender Equality Canada. Also moved to the two per cent track are Canada’s three federal research councils — NSERC, SSHRC and CIHR — along with Canada’s intelligence agencies, CSIS and the Communications Security Establishment.
Finance Department spokesperson Benoit Mayrand said the revised targets reflect the need to attract top researchers, support reconciliation, and safeguard the rights of women and LGBTQ+ Canadians.
Economist David Macdonald, however, said the adjustments were predictable. Many of the newly protected departments are “transfer agencies” that distribute funding to outside organizations rather than running programs internally. Imposing a 15 per cent cut on them would have meant direct hits to First Nations schools, research funding and frontline community services. “You would end up with very perverse outcomes,” Macdonald said.
He also suggested that shielding Women and Gender Equality Canada was a political response to public backlash, especially after women’s and LGBTQ+ groups warned of looming funding cuts. The Liberals’ re-election earlier this year was buoyed heavily by support from women voters.
The inclusion of CSIS and CSE on the two per cent list struck Macdonald as odd — and likely an oversight — since other security agencies like Defence and the RCMP were already given smaller targets.
The shifting lists point to a broader problem, he added: “I don’t think it was well thought through. I don’t think any of this is a particularly good idea.”
The budget outlines plans to reduce program and administrative spending by $60 billion over five years through restructuring, consolidating internal services, scaling back certain federal programs, and shrinking the public service through attrition. But which programs will be reduced or cut remains largely unclear.
Hints buried in the budget’s annex show Agriculture and Agri-Food Canada plans to wind down initiatives outside its core mandate, including Agricultural Climate Solution Living Labs. The CRA intends to eliminate units tied to the Digital Services Tax, Federal Fuel Charge and the Canada Carbon Rebate. The CBSA plans to stretch its fleet vehicle replacement cycle from seven to 10 years.
Former Privy Council clerk Michael Wernick noted some newly protected organizations have so little discretionary funding that any major cut would land on salaries or basic IT costs. He questioned why intelligence agencies face any reduction at all but speculated that sparing them entirely would spark calls to exempt even more departments.
Wernick warned that the real test will come midway through the next fiscal year, when departments begin to see whether they can stay within their tightened budgets. “It may get uncomfortable for some the closer they get to year end,” he said.
The revised targets underscore the government’s struggle to balance fiscal restraint, political sensitivities and the practical limits of cutting essential services — a balancing act that is only beginning.