Budget on the table, public service on the chopping block

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The Conservative government is launching the most aggressive period of government restraint since the mid-1990s as it attempts to deliver on a central campaign pledge to speed up the deficit fight.

Departments are already handing out pink slips and entire programs are headed for the chopping block as the public service faces some of the pain that spread throughout the private sector during the recession.

On top of already ambitious targets to curb growth in government spending, Finance Minister Jim Flaherty stressed the importance of the government's 2015 target to erase the deficit as he released a slightly revised version of his March budget. Now armed with a majority, the Conservatives will have no problem winning Parliament's approval for this latest spending plan.

As previously signalled, the June budget contains just two major changes.

The biggest is a decision to set aside $2.2-billion for Quebec, part of a campaign pledge to strike a deal with the province by September on a harmonized sales tax. The second is a pledge to axe direct subsidies for political parties. The Tories will phase out the $2-per-vote subsidy introduced by Jean Chrétien in 2003.

This year's budget deficit rises, largely as a result of the $2.2-billion election promise to Quebec. It creeps up to $32.3-billion in 2011-12 before falling abruptly to $18.4-billion in 2012-13.

The 374-page budget document - which has the same cover and title as the March budget - so closely matches its predecessor that Finance Canada officials used a blue font to highlight new sections.

Speaking with reporters, Mr. Flaherty indicated that a new cabinet-led effort to find $4-billion a year in savings will be more aggressive than spending reviews from previous budgets that are already starting to affect departments.

"This is a very large enterprise," he said of the government. "It's really quite amazing, if not shocking, that there has not been an operational review of the Government of Canada's operations in 15 years. Now we've been faced with the great recession in the last few years. It wasn't actually the most opportune time in the middle of a recession to deal with that. But now we can deal with it."

The cutting from previous reviews is already under way. The Bank of Canada eliminated 33 jobs last week - 66 per cent through layoffs, the rest from attrition. By next year the bank plans to eliminate a total of 85 to 95 jobs, according to a bank spokesman. Reports are also emerging of job cuts at National Defence, Environment Canada, Fisheries, the National Gallery and the Museum of Civilization.

The Harper government's fiscal plan requires an overall level of restraint like nothing the Conservatives have achieved before.

Their budget calls for relatively minor increases in program spending over the next few years, far below the demands of inflation and population growth. Program spending grew an average of 6 per cent a year in each of the first three years after the Harper government took office. Now, the Conservatives say, they will actually reduce program spending this year and hold it to increases of roughly 2 per cent in each of the next two years.

Prior to the election, opposition MPs expressed frustration at the lack of detail coming from the government regarding cuts. Those details are now starting to trickle out, but the opposition says there's still too much secrecy.

"I think the government on purpose is not telling Canadians what it's going to cut because it knows it will be unpopular for doing so," NDP Leader Jack Layton said. "I would have hoped we would have had more transparency."

The Conservatives have to move fast in passing at least some elements of their budget.

They have promised that $300-million in increased aid for low-income seniors will take effect July 1 - a benefit worth up to $50 per person. This means the Tories must get parliamentary approval on implementing legislation before the month is out so the cheques for the extra Guaranteed Income Supplement cash can start flowing.

The Conservatives are comfortable with the repetitive nature of the budget because it underlines the Tory campaign message that their defeat in March interrupted important fiscal measures, including the fiscal plan now being re-released and passed.

With a report from Gloria Galloway