PS faces 2-year wage freeze
The Harper government targeted Canada’s 419,000 public servants Thursday with an unprecedented three-year freeze on department operations that will eat into their salaries, jobs and the programs and services they provide to Canadians.
Finance Minister Jim Flaherty’s budget is poised to take the biggest bite out of the public service — most of which is outside of Ottawa — and its day-to-day operations since the Liberals’ massive downsizing of the mid-1990s.
The freeze, which will affect salaries, administration and overhead, is expected to save $6.8 billion over the next five years, which accounts for the biggest slice of the $17.6 billion in savings squeezed from departments to reduce the $53.8-billion deficit.
The wages of public servants will be allowed to increase this year by 1.5 per cent, as mandated under collective agreements. But departments must fund the increase, which amounts to roughly $300 million, from their operating budgets. After this year, salaries and operating budgets will be frozen for two years.
The freeze will extend to the military, RCMP, Crown corporations and agencies that receive federal funding. Those that don’t, such as Export Development Corporation and Business Development Bank, are expected to follow suit.
“We will take action to ensure the government lives within its means,” said Flaherty. “Canadian families and businesses have accepted the need for restraint. Fairness requires the government, too, should have to keep costs under control.”
But the budget also set the stage for further reductions, including a slew of reviews, the results of which will be fed into the preparation of the 2011 budget.
In his speech to the Commons, Flaherty said: “Our government is focused on jobs and growth, for one simple reason. Canadians are focused on jobs and growth.”
As expected, the budget follows through on the second year of the government’s stimulus plan, a move that will inject $19 billion into the economy.
Beyond the stimulus plan, the budget contains a smattering of new initiatives, such as $60 million to help youth deal with the tough job market, $62 million for elite and amateur athletes, and $8 million to create a new oversight body for the RCMP.
But the biggest revelation is the government’s restraint plan, which pledges to all but balance the budget by 2015, when the deficit is expected to fall to $1.8 billion.
The government plans to save $4.5 billion over five years by capping foreign aid at this year’s level, in the process breaking a promise to increase aid by eight per cent per year. Foreign aid will rise by $364 million to $5 billion.
The Conservatives will also slow the rate of previously planned growth in the national defence budget — a move that will save a further $2.5 billion.
All told, the restraint measures will limit the growth of direct program spending to 1.3 per cent once the stimulus plan expires. Previously, the Conservatives had predicted such expenditures would grow at more than twice that clip.
At a news conference, Flaherty said it was a “tough budget” — one that offers probably the smallest hike in new spending in a decade.
“We have to make some tough decisions,” he said. “The economic recovery is fragile … We needed to make the decisions now so that we would have a credible plan we would follow now.”
Treasury Board President Stockwell Day will lead the “aggressive” departmental spending review, where all programs and services could be on the table. The government is also launching an administrative review to streamline internal operations of departments, from human resources to informatics, and to end duplication.
It will also hold consultations with the 18 federal unions to come up with a “reasonable” compensation regime and find ways to organize work and use technology to improve the productivity of workers. The government will also be looking for ways to “better manage” compensation, including pensions and benefits.
Budget documents say these measures will “over time” reduce the size of the public service, which has mushroomed to support the government’s spending spree of recent years.
The freeze will spark a showdown with its unions, which have already had to swallow four years of wage controls and a suspension of collective bargaining.
Unions and Treasury Board are supposed to be back to the bargaining table in 2011, but will face the pressure of the operating freeze because departments will have to absorb any raises.
“It doesn’t look good,” said John Gordon, president of the Public Service Alliance of Canada. “With the freeze, they aren’t giving departments money to pay for their employees so, when we go back to the table, does that mean we start negotiating at zero? That is not negotiating.”
Gary Corbett, president of the Professional Institute of the Public Service, said he was heartened that the government promised to consult with unions before the next phase of reductions. He said unions have ideas on how to save money that should be considered before the government starts cutting critical programs and services.
“What we’re talking about is a change in the public service now and forever because if we lose talent now we will never get it back,” he said.
None of the opposition parties said they would support the Conservative budget, but Liberal leader Michael Ignatieff said enough of his party’s MPs would abstain or be absent from the budget vote to allow it to pass, thus avoiding an election.
“Canadians don’t want an election,” Ignatieff told reporters. “What they want from me is an alternative, an alternative to cuts, freezes and gimmicks. And we’ve been working hard on that alternative.”
NDP leader Jack Layton also said his party did not support the budget, but would wait to decide how his MPs would vote, in the hopes of negotiating changes with the Conservatives. Bloc Québécois leader Gilles Duceppe said his party would outright oppose the budget.
Kathryn May writes for The Citizen. Andrew Mayeda writes for Canwest News Service.
Budget highlights
n $19 billion in stimulus
measures
n Planned spending to be cut by $17.6 billion over five years
n $53.8-billion deficit cut
in half in two years
n Freezing the salaries of
the PM, MPs and senators
n Planned spending for
military is cut by $2.5 billion over three years
n A national securities
regulator within three years
n New bank notes and coins
n $62 million for elite
athletes and amateur sports
n A new civilian complaints commission for the RCMP
n $3.2 billion in personal
income tax relief
n $1 billion for training
programs for workers
n $4.1 billion for social housing
n $1 billion over five years
for Clean Energy Fund
n $300 million for Atomic
Energy of Canada and the Chalk River Laboratories
