Liberal promise to slash $13B from services is a dangerous fantasy

The Liberal platform’s plan to cut $13 billion annually from federal operations would gut the public services Canadians rely on

Interview requests

The Liberals’ 2025 election promise to cut $13 billion annually from federal operations isn’t just unrealistic—it’s dangerous. Achieving those savings would require mass layoffs and deep cuts to public services Canadians rely on, all to fund tax breaks and new military spending. There’s no credible plan to get there without doing real harm.

As part of their 2025 campaign platform, the Liberals promised to pay for new spending and tax cuts by boosting “government productivity.” Their platform pledged to find $13 billion in annual savings from federal operations by 2028-29.

Operational spending covers the day-to-day costs of running government—things like salaries for public servants, leases, IT systems and services such as passport processing, tax administration and benefits delivery. In other words, these cuts wouldn’t just affect bureaucrats in Ottawa. They’d hit everyday services Canadians rely on.

These proposed savings, equal to a 10 per cent cut to total federal operating expenses, would be the single largest line item in the party’s platform. Larger than the proposed tax cuts for the middle and upper classes. Larger even than the platform’s new military spending, at least before the much larger commitments made after the election.

But the numbers don’t hold up. The $13 billion target appears to be a round, back-of-the-envelope estimate, with vague talk of “capping not cutting” operational spending and leaning more on artificial intelligence. The reality is, operational expenses are already projected to flatline at about $130 billion a year through 2028-29. Under those conditions, “savings” can’t be found by slowing growth—they require actual reductions.

The platform points to a few ways to get there: capping public service hiring, reducing external consultants, applying AI, consolidating service delivery and managing litigation more efficiently. But federal budget data shows those ideas fall far short.

Contracting out is often blamed for waste. Yet even if the government immediately brought all work in four major areas—IT, legal, management consulting and temporary help—in-house, the savings would likely top out at just $1.2 billion a year. That still leaves nearly $12 billion unaccounted for.

That shortfall would almost certainly have to come from the federal workforce, meaning the people Canadians rely on for everything from processing pensions to running Service Canada counters. And here’s the real problem.

The Department of National Defence is now likely exempt, having just received a $9 billion funding boost. It would make little sense to reverse course a year or two from now. But DND represents more than a quarter of all federal operational spending.

With Defence off the table, the $13 billion must be found in the remaining $89 billion of operational spending: a 15 per cent cut to all other departments. And if we exclude areas unlikely to be touched, like infrastructure, leases and utilities, the required cut rises to a staggering 24 per cent. Most of that would fall on personnel.

That would rival or exceed the deepest austerity moves in modern Canadian history. It would go beyond Stephen Harper’s five to 10 per cent reductions and edge into Paul Martin’s 1995 austerity budget, which cut operating costs by nearly 20 per cent.

This isn’t about productivity gains or attrition. These kinds of cuts would mean widespread layoffs and significant reductions in public services, at a time when demand is only increasing.

Every time governments attempt these kinds of savings, they promise there will be no impact on direct services. That wasn’t true then, and it won’t be true now. Canadians can expect longer waits for passports, no support when EI payments are delayed, and hours-long phone queues to fix problems with Old Age Security or child benefits. And if AI is used as a substitute, don’t expect better results. Imagine calling about your taxes and being answered by a bot that gets half the answers right—but you don’t know which half.

In short, the Liberals’ plan to fund tax cuts and military spending with $13 billion in service reductions may look tidy on paper, but it’s logistically and socially unworkable. The platform offers no credible roadmap to reach that number without large-scale job losses and weakened public services that Canadians count on every day.

I, for one, hope this is one campaign promise they fail to deliver on.

David Macdonald is a senior economist at the Canadian Centre for Policy Alternatives.