PBO ‘not holding’ his breath over public service layoffs as personnel spending still on the rise

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The amount of money the federal government is spending on workers’ salaries has continued to increase, according to a new report by the Office of the Parliamentary Budget Officer (PBO), though that could change as the government plans to cut down on the size of the public service.

According to the PBO report, personnel accounts for around $2.9 billion (or 11.7 per cent) of new spending tabled in the House of Commons on Nov. 19. About half of that is for the Treasury Board of Canada Secretariat to cover public service insurance plans and programs ($644 million) and to compensate departments and agencies for negotiated salary adjustments as a result of collective agreements that were signed since last year ($971 million).

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“We were not surprised to see the personnel spending continuing to grow because that’s totally consistent with the trend that we’ve seen since 2018-19,” said parliamentary budget officer Yves Giroux. “It’s something that we expected to see because it’s a continuation of previous years’ trends where we have seen the personnel spending continue to grow in conjunction with the number of (full-time equivalents) in the public service and also considering salary increases that are to be expected.”

The PBO report found that spending on personnel in the 2023-24 fiscal year reached $69.5 billion, which it said was “consistent with PBO’s prior observation that personnel spending has been consistently increasing over the past several years.”

The report also found that spending on personnel in the first five months of 2024-25 is up 8 per cent compared to the same period last year, at $29.0 billion as of August 2024.

The Treasury Board of Canada Secretariat website indicates that the total size of the public service was 273,571 in 2018. Six years later, that number has ballooned to 367,772.

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However, in Budget 2024 the federal government committed to decrease the population of the public service by about 5,000 over the next four years through attrition.

Now, it seems that the government is looking to cut back even more. Public sector unions said the government signalled to them in a meeting earlier in November that it was opening the door to laying off term, casual and permanent employees.

The government has tasked departments and agencies with figuring out how they will meet specific savings targets, but has also said that savings are expected to be drawn from operating budgets and through natural attrition “to the greatest extent possible.” The Canada Revenue Agency recently told around 600 term employees that their contracts would not be renewed due to spending reviews.

Based on the commitment of a 5,000-person reduction in the public service, Giroux said there “could very well be a deceleration” in personnel spending or at least a pause on the explosive growth of recent years.

“That means a continuing increase in the personnel costs, but at a lower pace than what we have seen recently,” Giroux said.

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However, Giroux isn’t convinced the government will be laying off permanent employees.

“I’m not holding my breath,” he said. “It’s something we have been told before in previous years.”

Giroux said the future of how many public servants might be cut and what kind of impact that would have on finances will become clearer in a fall economic statement if there is one, but more likely when the federal budget is tabled next year.

The PBO report analyzed $24.8 billion in spending, which included the $2.9 billion for personnel. Parliament will need to approve $21.6 billion of that amount.

However, Parliament has been gridlocked for eight weeks over a motion brought by the Conservatives and other opposition MPs over documents concerning the now defunct cleantech agency called Sustainable Development Technology Canada. Giroux said the logjam might prevent Parliament from approving the spending estimates.

“That would mean that some programs could end up being starved for cash and would probably need to ramp down some of their operations,” Giroux said, adding that it’s hard to determine which departments and agencies could be most impacted without knowing their cash holdings.

In an email statement, Treasury Board President Anita Anand said the Conservatives “need to stop playing partisan games, put Canadians first, and let Members of Parliament debate and decide on voted expenditures so that Canadians can have more housing, a national school food program, expanded dental care, and more opportunities for young people.”

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