Only a day after the government’s throne speech opened with a proud line about how Canadians “never shrink from lending a hand to the most disadvantaged,” Finance Minister Jim Flaherty tabled a budget that freezes foreign aid spending to hit its deficit-reduction target.
Despite wide popular approval for the Conservative government’s high-profile effort to help out Haiti after the country was hit by a devastating earthquake early this year, Flaherty’s 2010 budget aims to cut $1.8 billion a year out of planned foreign assistance by 2014-15.
That’s almost equal to the $2 billion Flaherty’s budget plans to cut from administrative costs spread across the entire government. And the squeeze on foreign aid is meant to reap almost double the $1 billion he expects to save by 2014-15 by constraining the growth of defence spending.
The 2010 budget halts the ramping up of aid spending begun back in 2002 by the former Liberal government. That year, flush with huge budgetary surpluses, former-prime minister Jean Chrétien promised to double international assistance by 2010-11. The Conservatives are keeping that promise, boosting aid by eight per cent, or $364 million, this year to about $5 billion—but then freezing it.
As recently as last fall, though, the government’s economic update projected ongoing eight-per-cent a year increases. But that upward trend will now flatten, resulting in overseas-aid savings climbing from an estimated $438 million next year to the $1.8 billion expected in 2014-15.
Flaherty calls his deficit-fighting plan “Returning to Balance.” It doesn’t quite achieve that, however—whittling the annual fiscal shortfall down to $1.8 billion over five years from $53.8 billion in 2009-10. Besides foreign aid, military spending is the only other area conspicuously targeted for restraint after years of robust growth.
Spending on the military climbed to $18 billion a year in 2008-09 from $15 billion in 2005-06. It now eats up about a fifth of all direct federal program spending. Flaherty laid out a track yesterday to sharply reduce previously planned defence spending growth—but only after troops are pulled out of Afghanistan next year.
Far less precise than the aid and defence cuts are the budget’s measures to reduce overall departmental operating expenses. Still, some savings are expected across the entire government.
Starting immediately, departments will have to cut their own spending to find money to cover the 1.5-per cent hike in bureaucrats salaries set out in contracts with public sector unions. Then, in 2011-12 and 2012-13, operating budgets will be frozen at 2010-11 levels. That’s expected to save the government $1.8 billion in 2012-13.
Major questions remain unanswered about the specifics of the strategy for wrestling down the deficit that Flaherty puts under the catch-all heading of “review of government operations.”
Just about everything Ottawa does—except the protected transfers of many billions to the elderly and the provinces—will be reviewed with an eye to shrinking the payroll. “Over time,” the budget states, “this should result in a reduction in the size of the public service.”
Flaherty vowed to continue what the Conservatives call “strategic reviews.” Departments have been doing these for two years, ordered to identify the “lowest-priority and lowest-performing” five per cent of everything they do. Up to now, though, senior mandarins have been allowed to suggest ways to reinvest anything they saved. Yesterday’s budget dictates that, going forward, savings will be savings—not money freed up for other purposes.
As well, the government is taking a few highly selective steps to prove that restraint begins at the top. It’s cutting 245 of the approximately 2,700 prime patronage appointments managed by the Prime Minister’s Office, and freezing the salaries of the Prime Minister, cabinet ministers, MPs and senators for three years.