(Bloomberg) -- Prime Minister Justin Trudeau’s government has unveiled the details of C$500 million ($362 million) in spending cuts, aiming to assure Canadians that fiscal responsibility is a priority amid high interest rates and stubborn inflation.
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Still, the cuts represents only about 0.1% of the C$490 billion in spending budgeted for the 2023-2024 fiscal year. Treasury Board President Anita Anand put forward the plan for the cuts — which take aim at consulting, professional services and travel across 68 departments and agencies — in the House of Commons on Thursday.
The reductions are an initial step in the government’s first spending review since taking power in 2015. In total, the government aims to chop C$15.4 billion from spending over five years and C$4.5 billion annually after that, and Anand promised to reveal more details in the months to come.
“Not only is this the first time our government’s undertaking a spending review, but we’re also in a time of high inflation and high interest rates,” Anand said in an interview with Bloomberg. “What we need to do is to ensure that we are spending taxpayer dollars prudently.”
Trudeau’s government has been sinking in the polls as the opposition Conservatives hit him hard on the skyrocketing cost of living. Anand was selected as Treasury Board president in a July cabinet shuffle that Trudeau billed as shoring up his economic bench.
Previously, Anand oversaw the Department of National Defense, which was hit hardest by the cuts on Thursday. The department lost C$211.1 million — more than 40% of the overall C$500 million — though, at the same time, the government gave it a one-time injection of C$1.5 billion, of which C$500 million is for military aid to Ukraine.
Anand pointed out that she asked departments to identify consulting, professional services and travel expenses that could be chopped, so these figures were approved and sent to her by Defense Minister Bill Blair.
“It is his view, therefore, that this is spending that we can refocus,” she said.
Public Works, Foreign Affairs, Fisheries and Immigration rounded out the top five departments for the most in spending cuts, though they saw between C$20 million and C$34 million trimmed from their budgets, significantly less than that of Defense.
Trudeau’s government came to power on a promise to run modest deficits to boost public infrastructure. It has increased budgets year after year, racking up Canada’s highest deficit ever during the pandemic, and has yet to return spending to pre-Covid levels.
Finance Minister Chrystia Freeland is set to deliver a fall budget update on Nov. 21 that she has said will be focused on housing, affordability and fiscal responsibility.
Anand stressed that Canada has a AAA credit rating, low unemployment and the lowest net debt-to-GDP ratio in the G7. The deficit is projected to decline in every year and return to 1% of gross domestic product or lower in 2025-2026 and ongoing, she said.
“It is because Canadians are facing high inflation and higher interest rates that we need to examine our own pocketbook to see where we can refocus spending toward supporting Canadians,” she said, “whether it is through job creation and the green economy, whether it is through reconciliation, whether it is through support in the area of health and dental.”
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