The next Canadian election is drawing near, with the permanent campaign in full swing and federal spending is already on the agenda as a ballot box issue. Is it out of control? Is it fueling inflation? Is it an investment in a better future? Is it “making life more affordable?”

Spending is just one tool in any federal government’s policy box. There are other ways to advance priorities. But spending is the most visible way to signal where the government’s prime concerns and values lie.

My view is that there has long been a systemic bias in the decision-making algorithms that all federal governments use to make these choices. Over time, that bias acts to diminish the capacity of the federal government and sows the seeds for subsequent crises. It is time to call it out and lean against it.

Through its annual budget-making – and from time to time through an array of “spending review” tools – each government will change not just the volume of spending but also the mix.

It is the “mix” that never gets enough attention. It is easier to bat around vague generalities about total spending and bottom-line fiscal targets than to talk seriously about the components within them.

Within that mix, the federal government should give higher priority to investment in the capabilities of the federal state and properly fund the things only the federal government can deliver.

There is incessant pressure from other levels of government for transfers from Ottawa. True, there are structural issues behind those pressures, but the reason it will never cease is that it is rewarding for mayors and premiers to upload the pain of raising taxes or borrowing to the federal government.

They have spent decades pressuring the federal government and then blaming it for their service issues. Stakeholders and media coverage help perpetuate the blame-the-feds game.

Not in my back pocket

As well, there is resistance to any changes to transfers to individuals and businesses. Cuts to programs with clear, identifiable recipients cause much more political backlash to the federal government than cutting operating budgets. There’s a kind of “stakeholder politics” that results – a form of NIMBYism – in “cut spending, but not the kind I benefit from.”

That means that any federal government seeking to dampen spending regularly looks to operating budgets for savings. Cue the usual management consultant language: efficiencies, lean, innovation, smart. Or the more politicized terms: cutting the fat and rolling back government.

Regardless of the ideology, governments are often tempted by outsourcing and partnerships with third-party delivery because it can deliver a reduction in the number of public servants. That’s something that can be easily communicated as proof of their seriousness.

Play the long game

Cuts to federal operations often turn out to be myopic. Eventually, the cuts bite back and specific activities are affected. The public later complains that the government isn’t providing the services it wants want as fast as it wants them.

There have been complaints that the current Liberal government is spending too much. Voters will get to decide whether this is true. Some efforts have been launched to tap the brakes. Yet there are clearly areas where the federal government is under-resourced or that insufficient investment has been made.

Rummaging through media articles and the reports tabled by the Auditor General over the past decade provide several excellent examples including:

Armed Forces: There is clear pressure to spend more on the Armed Forces and to have this spending reach two per cent of Canada’s GDP – a NATO benchmark. Even here, there are biases in the algorithm. Military officers have told me their greatest need to improve performance is not high-profile equipment purchases but operating dollars to regularly conduct larger exercises of regular and reserve units. However, there are no industry lobbyists for this, unlike for the big-ticket items.

Public service: The civilian public service needs to at least double the amount of its training and leadership development programs to keep skills sharp in the face of constant change and to reduce the need for external consultants.

Agents of Parliament: There are regular complaints that these important watchdog organizations don’t have the resources to properly exercise their role in holding the executive branch to account.

Records management: Investments must be made in digitization, safe storage and organization for retrieval in records management. These are part and parcel of the accountability tools needed for access to information requests, commissions of inquiry and court proceedings. These services are currently in disarray and require a more sustained effort.

Digital government: While ambitious in rhetoric, a fully modern digital government is still not available for all services in the federal system. Many organizations are waiting in a long line for attention and Shared Services Canada faces a backlog of legacy IT systems to upgrade. There are many areas where more investment in data sources and analysis will be required to deliver smart policies and better services.

Emergency management teams: More operating dollars should be made available for these teams. This is particularly necessary to do more simulations and drills. The needs are growing, from extreme weather events and public health crises to network failures and violent attacks.

Cleaning up contaminated sites: There are a number of contaminated sites on federal lands as well as unexploded munitions and dumping sites at sea that must be addressed by the federal government. It’s a long list and it will grow more expensive as time wears on.

Federal marine agencies: There is a need to Increase operating funds for federal marine agencies from the Coast Guard to pilotage, port and seaway authorities to implement digital “e-navigation” to keep pace with our trading competitors. Canada’s ports also need to become “green” to replace shore-based power for ships currently using diesel round the clock while in port.

Technology innovation adoption: Federal regulators, safety inspectors and environmental monitors aren’t getting the operating resources they need for a more rapid adoption of technology innovations that have already been proven in other countries. These include tools such as remote sensors, satellite links, aerial and marine drones.

My career spanned the Neilsen Task Force on Program Review of the Mulroney government and the deficit-reduction action plan under Harper, plus many exercises in between, notably the Program Review by the Chrétien government.

By now, it’s clear: simplistic, across-the-board cuts have done a lot of damage that had to be repaired later at greater cost. A more mindful approach is needed.

The collateral damage of not investing in federal government capabilities is telling. The weakening of investment in financial controls during the 1990s was exposed in subsequent political scandals.

Deferred recapitalization of federal government IT platforms created a huge snowplow effect that Shared Services Canada is still working to clear. Federal laboratories and testing facilities were allowed to fall behind in both practice and equipment.

Cutting $15 billion from the public service won’t be that hard. But what’s next?

Also from the author: Stress testing Canadian governance

Stockpiling of inventories needed in emergencies languished while deferred hiring led to an aging of the public service.

Yes, it is always worth looking at operating budgets and the machinery of the federal government. Of course, it is also legitimate for elected governments to make choices about the size and scope of government and where to spend finite dollars.

It is legitimate and possible to make decisions that reduce the size and footprint of the federal government. But governments should do this only while recognizing there are pre-existing biases in the political algorithm and compensating for them in thinking about priorities.

The current and future federal governments need to invest where it is necessary. By all means, tap the fiscal brakes and reallocate funds. But from now on, let’s do it mindfully and make sure the federal state’s own responsibilities are properly resourced.

Federal functions and capabilities should rank much higher, not be bumped to the end of the line by premiers and stakeholder lobbies with a louder voice.

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Michael Wernick
Michael Wernick served as 23rd Clerk of the Privy Council from 2016 to 2019 after many years as a federal deputy minister. He is a consultant at MNP Digital, the Jarislowsky Chair in Public Sector Management at the University of Ottawa and the author of Governing Canada.

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