Spending freeze worries public service union

This year's federal budget promises to freeze departmental spending, which has Canada's largest public-sector union concerned for Ottawa's many public servants.

The government's plan to get ahead of its $54 billion deficit is built largely on the back of $17.6 billion worth of savings over the next five years that will come from streamlining and reducing the operating and administrative costs of government departments.

In the budget, under the heading "Containing the Administrative Costs of Government," is a pledge to lock salary and operating budgets at their 2010-2011 levels until 2013.

The spending freeze has the Public Service Alliance of Canada worried about program cuts.

"Departments are going to have look at the programs they deliver, and they're going to have look at who they have to deliver those programs," said PSAC president John Gordon. "Quite frankly, there's a good possibility that this could mean job cuts, program cuts … so I don't see this as good news."

Some are saying the news could have been a lot worse for federal employees. No immediate job cuts were announced Thursday. 

A large number of civil servants are to get annual wage increases of 1.5 per cent for the next several years. Those aren't necessarily under threat, but will have to be funded from existing budgets.

There were also rumours the government was going after pensions by increasing premium contributions or pushing back the minimum retirement age.

Ian Lee, MBA director at Carleton University's Sprott School of Business, said he was "astonished" the budget leaves public-service pensions untouched.

"Pension reform was the dog that didn't bark in this budget," he said. "We were all expecting the other shoe to drop, but it never did. Pension reform was kicked down the road for the next one or two budgets, but it will come back."

One potential downside to the spending freeze would be a possible brain drain from the public sector. Lee said that tighter department budgets could mean senior public servants will lose perks and fall further behind their private-sector counterparts in salaries.

"I think that will accelerate the departure, the retirement of some of the senior public service," Lee said.

Business owners in Ottawa are also concerned this new age of austerity could hurt the city's economy. Erin Kelly, executive director of the Ottawa Chamber of Commerce, said there's room for cutting costs from administrative red tape, but is concerned the freeze will affect program funding.

"Of course, we don't want the local economy to pay for the stimulus in the rest of the country," she said.