During the recent federal election, Prime Minister Mark Carney made significant promises regarding government spending. He pledged to "spend less on operations so we can invest more" in what he termed "nation-building projects." Additionally, he committed to capping public service employment rather than cutting jobs. However, the feasibility of these promises raises questions, especially considering the substantial growth of the federal public service in recent years.

From 2015 to 2024, the federal public service expanded by 43%, a figure that far exceeds the 15% increase in Canada’s population during the same period. The population grew from approximately 35.6 million in 2015 to about 41 million in 2024. Even with ongoing reductions in the federal workforce, projections indicate a 39% increase in public service size from 2015 to 2025, which is more than double the 16.6% growth rate of the population.

To meet his goals, Carney aims to limit the increase in federal operating costs to less than 2% annually. This is a stark contrast to the nearly 9% increase seen during Justin Trudeau's administration. Carney also intends to achieve a balanced operating budget within three years. However, simply capping the size of the public service may not suffice to meet these financial targets.

To address these challenges, Carney may need to consider reducing the number of employees through attrition and other methods. This is particularly relevant as certain government departments have been instructed to cut their operating budgets by 7.5% next year, 10% the following year, and 15% by 2028-29. At the same time, the government plans to significantly increase public spending on yet-to-be-identified nation-building projects and fulfill Carney's commitment to raise Canada’s defense spending to 2% of annual gross domestic product by March 31, 2026.

Carney's strategy involves separating the federal government's operating expenses from capital spending on infrastructure. This approach aims to redefine how debt is categorized. However, this reclassification does not eliminate the debt; it merely presents it in a different light. Taxpayers will still be responsible for repaying the debt, along with interest, in the future.

The specifics of what Carney will classify as operational spending versus capital investments remain unclear. The federal budget, which is expected to be released next month, will provide more insight into these distinctions. The exact date for the budget announcement has not yet been disclosed.