Federal – Comprehensive Expenditure Review
The Comprehensive Expenditure Review (CER) announced by PM Carney’s government in July 2025 is a significant initiative aimed at reducing federal spending to fund new priorities, such as the $9.3 billion defense spending increase to meet NATO’s 2% GDP target, while addressing economic pressures from U.S. tariffs. Below is a detailed overview of the CER, including its scope, targets, and process.
In Recent News
- Announcement: Launched July 7, 2025, by Finance Minister François-Philippe Champagne via letters to cabinet ministers, directing them to identify “ambitious savings proposals” for the 2025 fall budget
- Objective: Reduce day-to-day government operating costs to reallocate funds to high-priority investments (e.g., defense, economic resilience), aiming to cap spending growth at 2% annually through 2028–29, down from 9% under the previous Liberal government
- Context:
- Responds to fiscal challenges, including a projected 2025–26 deficit exceeding $70 billion and pressures from U.S. tariffs (e.g., 25%–50% on Canadian goods).
- Builds on Carney’s campaign promises to “spend less, invest more” and balance the operational budget within three years
- Spending Reduction Targets
- Program Spending Cuts:
- 2026–27: 7.5% reduction in direct program spending (approximately $13 billion, based on 2023–24 program spending of $236 billion).
- 2027–28: Additional up to 2.5% cut (total 10% reduction).
- 2028–29: Further up to 5% cut (cumulative 15% reduction, equating to ~$25–28 billion in savings)
- Scope of Cuts:
- Targets direct program spending ($236 billion in 2023–24), which includes departmental operating expenses ($127 billion projected for 2029) and discretionary transfer payments ($113 billion).
- Excludes transfers to individuals (e.g., seniors’ benefits, Canada Child Benefit), transfers to provinces (e.g., Canada Health Transfer), and certain defense-related spending.
- Departments like National Defence, RCMP, and Canada Border Services Agency face a lower 2% savings target due to their critical roles.
- Total Savings Goal: Approximately $25 billion by 2028–29, with some estimates suggesting up to $28 billion, depending on baseline projections.
Process and Implementation
- Ministerial Directives:
- Champagne’s letters require ministers to evaluate programs based on:
- Whether they meet their objectives.
- Alignment with core federal mandates.
- Avoidance of duplication with other federal or provincial programs.
- Ministers must submit savings proposals by August 28, 2025, for inclusion in the fall 2025 budget.
- Champagne’s letters require ministers to evaluate programs based on:
- New Budget Process:
- Ministers seeking new funding must demonstrate reallocation of existing resources and alignment with government priorities (e.g., economic growth, defense).
- Departmental Plans, to be tabled in June 2025, will detail how savings align with planned results.
- Regulatory Review:
- Announced July 9, 2025, by Treasury Board President Shafqat Ali, a cross-departmental review of all regulations to cut “unnecessary red tape” and enhance efficiency, complementing the CER.
- Use of Technology:
- PM Carney has proposed leveraging artificial intelligence (AI) and automation to improve public service efficiency, potentially reducing staffing needs. This aligns with a G7 commitment to study AI deployment in government.