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Mark Carney Is Hacking Away at Canada’s Public Sector
### Just over 100 days into his term, Canadian prime minister Mark Carney is taking aim at the size of the state while ramping up military spending. He’s launched a whole-of-government review, pushing deep cuts, deregulation, and a $9 billion boost to defense. * * * Mark Carney speaking at LeBreton Flats on Canada Day in Ottawa, Ontario, Canada, on July 1, 2025. (James Park / Bloomberg via Getty Images) When millions of Canadians returned a Liberal Party government — led by Mark Carney — earlier this year, they were attempting to manage two concerns: threats to the country’s sovereignty from Donald Trump and the United States, and the specter of a Conservative government led by its Margaret Thatcher–esque leader, Pierre Poilievre. But Carney, who capitalized on a surge in nationalism triggered by Trump, ran as a right-wing Liberal, a “sensible” technocratic figure, who had twice headed a G7 central bank. He rode into town with a plan to build, to “catalyze” private sector investment in the economy, and to reduce public spending. Now, just over 100 days in power, he’s beginning to make good on his promise to cut the size of government — except, notably, for defense spending, which is set to increase. And he’s ready to slash deeper than many expected. * * * ## Carney Plays the Neoliberal Hits When Carney was running for Liberal leader earlier this year, some observers, including myself, argued he would have been a fine fit in the 1980s and early 1990s Progressive Conservative government of Brian Mulroney. But a better comparison might be a bit more recent: either the mid-1990s, government-gutting, department-demolishing ministry led by Prime Minister Jean Chrétien and his finance minister, Paul Martin, whose notorious 1995 budget cut some federal departments by roughly half and reduced public spending by tens of billions, or, more recent still, the Conservative government of Stephen Harper, which reduced the size of the public service by roughly 10 percent while cutting taxes, lowering the general sales tax from 7 percent to 5 percent. In the last several days, word has gone out from the center of government to departments to identify areas for both spending and regulatory cuts. Last Wednesday, in a bid to “spend less and invest more” — a mantra Carney often repeats — he ordered a whole-of-government review through the new Red Tape Reduction Office to target potential regulatory cuts. The order came two days after Finance Minister François-Philippe Champagne launched a “comprehensive expenditure review” and asked his cabinet colleagues to identify potential operational and program cuts. The government is planning to reduce spending between now and 2029, beginning with a 7.5 percent cut in the coming year, rising to 10 percent, and then 15 percent cumulatively by 2029. It’s also looking to reduce the size of the federal public service — with the help of artificial intelligence somehow. The parliamentary budget officer says those cuts are feasible, but adds: “It’s just a matter of how much pain that will inflict on public servants and on Canadians.” Even as the Liberals are cutting elsewhere, they’re planning to increase military spending by $9 billion this year alone, with further increases to come in a bid to meet NATO targets pushed by, among others, Trump and the United States. They’ve already trimmed the bottom tax rate by a point and removed federal sales tax from the purchase of new homes. And you’ve got to pay for that somehow, right? * * * ## The Euphemisms of Austerity The Liberals are selling the cuts under the amorphous category of “investment.” The idea is hardly new. The Justin Trudeau–era Liberals were already reviewing spending in 2024 and eyeing cuts to the public service. But the Carney Liberals are all-in on the notion that the government is too big, too bloated, too laden with regulations, too slow, and too duplicative in its efforts. Carney and company are throwing around the usual words that accompany cuts — not just “investment,” but “transformation,” invariably in the service of being “ambitious” and “efficient.” A spokesperson for the Finance Department even told the _Ottawa Citizen_ that the goal of spending cuts was a “long-term modernization of the government.” Carney himself says the country must “make government processes more effective so we can build the strongest economy in the G7,” which Liberals prior to Carney’s win had assured us we already had. The Carney ministry must believe, as so many Liberals and Conservatives before them have, that government as it’s currently constituted is unfit for purpose — especially during a moment of crisis during which Canada must simultaneously placate the Trump administration in hopes of finding tariff relief and find new strategies to grow the economy without relying on the United States. The first goal requires spending billions on border security and defense; the second requires infrastructure investments and deregulation. Together, we are told, they necessitate a slimmer and trimmer federal government — after years in which operating costs have risen at a recent average of 9 percent per year. Carney plans to bring that growth down to 2 percent. There are almost certainly some regulations, programs, and even personnel the country wouldn’t miss. And there’s nothing inherently wrong with reviewing programs, procedures, and regulations. But a sharp-eyed observer will note the targets have been set _before_ full reviews have been undertaken and — during a time of national uncertainty and economic vulnerability — represent an aggressive reduction of the size and, one assumes, scope of government. Rather than beginning with the question, “Are there spending and regulatory cuts that must be made?” Carney, seemingly building on past Liberal assumptions, is leading with the notion that there must be and setting ambitious reduction targets for departments to meet. As economist David Macdonald has previously warned, these may result in the “worst cuts to the public service in modern history.” * * * ## Liberal or Tory — Same Old Story? As _Politico_reports, Sharon DeSousa, national president of the Public Service Alliance of Canada, says that according to her briefing by the government, “There is no plan in place” for the cuts — meaning a wide range of options could be on the table. In this permissive moment, with a Canadian public anxious about the Trump administration and the implications of a trade war, Carney and company may be able to push through quite a lot before anyone notices — all under the banner of preparing Canada to deal with a changing world and a mercurial, quasi-erstwhile ally south of the 49th parallel. There must be some buyer’s remorse circulating among Liberal voters or, at least, some concern about the direction the country is headed. For those who wanted a liberal-conservative program, they got it. Even Conservative Poilievre thinks so. In a recent interview, Poilievre says the Liberals “admit” that his party “won the debate.” “First they said Poilievre has no policies,” he tells the _Calgary Herald_ ’s Rick Bell. “Then they said he’s got policies but they’re terrifying, they’re so wild and extreme. Then they said we agree with Poilievre on everything.” Not everything. But close. And the Conservatives are sure to back the Liberals in cutting government, likely urging them to go even further than planned. It’s therefore critical for the Left — from individuals to civil society organizations to unions and politicians — to make the case for the public service, for the good of the state, and to forestall unnecessary cuts that will undermine state capacity now and in the future. The Liberals hold only a minority in parliament, and even with occasional Conservative support, they remain vulnerable — to both public opinion and the will of a majority in the legislature. They ought to be reminded of that daily, just as they ought to be convinced that the last thing Canada needs right now is deep cuts. * * *
