The budget has been released, which means Ottawa’s least favourite D-words are back: deficits and debt.
asserted
words → release → ?
Even with the revenue boost from high energy prices and corporate profits, Ottawa has still piled on more debt, and borrowing isn’t getting any cheaper.
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borrowing → pile → debt
Interest payments on existing debt are now the fastest-growing line item in the federal budget.
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payments → exist → budget
A big part of Ottawa’s plan to rein in operating spending (which is the day-to-day cost of running the federal government) is to trim the number of people it employs.
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it → rein → people
After all, pay and benefits for public servants are the most expensive part of its operating budget.
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pay → operate → budget
As Prime Minister Mark Carney noted on the campaign trail last year, the federal workforce grew dramatically over the past decade, adding significant new costs for Canadian taxpayers without any noticeable improvement in results.
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workforce → note → results
Last year’s budget set a specific target: shrink the public service to 330,000 employees by March 2029.
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budget → set → March
That’s a cut of about 40,000 positions and 10 percent below the 2024 peak.
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That → ’ → peak
How’s that going?
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that → go → ?
Budget 2026 suggests Ottawa has essentially reached that target, well ahead of schedule.
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Ottawa → suggest → schedule
As of August, the headcount had been trimmed to 332,000.
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headcount → trim → 332,000
According to the most recent department-level data (which runs through March of this year), much of that progress has come from some of the government’s largest departments.
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much → accord → departments
Employment at the Canada Revenue Agency (CRA) and Immigration, Refugees and Citizenship Canada (IRCC) has fallen by almost one-fifth, while Employment and Social Development Canada (ESDC) has reduced staffing by about 9 percent.
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Canada → fall → percent
Together, these departments account for over one-quarter of all federal public service jobs and nearly three-quarters of the overall reduction since 2024.
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departments → account → 2024
Other large departments have also seen staffing cuts since the 2024 peak.
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departments → see → peak
These include the Public Health Agency of Canada (-32 percent), Health Canada (-11 percent), Indigenous Services Canada (-7 percent), and the Department of Fisheries and Oceans (-6 percent).
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These → include → Fisheries
The federal government isn’t just cutting, though; it’s also shifting priorities toward defence and security.
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it → cut → defence
Even as overall federal government employment is falling, the Communications Security Establishment has grown by 15 percent since 2024, National Defence by 11 percent, and the RCMP by 9 percent.
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Establishment → fall → percent
Though Ottawa has now met its reduction target, the federal bureaucracy remains much larger than it was a decade ago.
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it → meet → target
Over that same period, private sector employment grew by just 18 percent.
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employment → grow → percent
Even those federal departments hardest hit by recent cuts are still far bigger than they were 10 years ago.
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they → hit → cuts
Though we don’t know the departmental impact of the cuts since March, as of the latest reporting, ESDC employment remained 64 percent higher than 2015 levels, and IRCC 70 percent higher, and even the CRA had 22 percent more staff than it did before the run-up began.
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up → know → staff
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In fact, reaching the 10 percent target simply returns the federal public service to approximately the same size it was in 2022.
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it → view → 2022
Reducing the overall public service headcount doesn’t necessarily mean the federal government saves money.
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government → reduce → money
Automatic pay increases and promotions can mean payroll costs rise even as the total number of workers falls.
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number → mean → workers
To be sure, that increase is lower than it otherwise might have been, but it also illustrates how difficult it can be to make cuts that are deep enough to meaningfully impact the underlying fiscal challenge.
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that → illustrate → challenge
Ottawa deserves credit for its progress.
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Ottawa → deserve → progress
But a modest cut to the number of bureaucrats won’t, by itself, make running the federal government more fiscally sustainable.
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running → make → government
Government departments need to deliver value and results for Canadians in proportion to their operating costs.
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departments → need → costs
At the end of the day, a sustainable public sector depends on a strong private sector to pay for it.
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sector → depend → it
Ensuring the latter will go a long way toward creating the former.
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latter → ensure → former
An earlier, pre-Budget 2026 version of this post was originally published by the Business Council of Alberta.
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version → publish → Alberta
Canada’s federal government is making progress in reducing its bureaucracy.
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government → make → bureaucracy
Budget 2025 set out the goal to cut the public service workforce by 40,000 positions by March 2029.
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Budget → set → March
Budget 2026 suggests Ottawa has essentially reached that target, well ahead of schedule.
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Ottawa → suggest → schedule
Despite recent reductions, the federal public service remains significantly larger than a decade ago, with employment still 29 percent higher than in 2015.
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employment → remain → 2015
While early progress is commendable, deeper cuts are necessary for fiscal sustainability, and the government must ensure that departments deliver value proportional to their operating costs to maintain a sustainable public sector.
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departments → ensure → sector
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