PSAC analysis of the 2012 Federal Budget

SOURCE - http://psac.com/news/2012/issues/20120404-e.shtml 

Will this government continue to hide details about public service cuts?

After months of mixed messages and secrecy, the federal budget has confirmed that this government's austerity agenda will leave Canadians without services they need. It will put tens of thousands out of work, place the environment and health and safety at risk and shrink the economy.

But what's most troubling about this Federal Budget is what it doesn't tell us. Though it says that that it's cutting 6.9% from an operational budget of $75 billion, it doesn't say enough about what that means for the services Canadians rely on.

The government must provide Canadians with a clear department-by-department accounting of exactly what services are going to be cut – where, when and how. Without that information, Parliamentarians will be forced to debate and vote on a budget without the information they need. And Canadians won't know what services they are losing until they are gone.

What happens when you take the “back office” out of services?

When you take the “back office” out of public services, you take services away from Canadians.

The government says that “modernizing and reducing the back office” won't mean fewer services. Yet last year's budget cut of $276 million to Service Canada meant cutting “back office” Employment Processing Centres from 120 to 19 and longer wait times for Employment Insurance benefits. Seniors are already waiting longer for Old Age Security and Guaranteed Income Supplement applications to be processed.

Budget 2012 doesn't specify how much of its $183.2 million cut to Human Resources and Development Canada will affect Service Canada's budget. But we do know that any further reductions will be devastating for the most vulnerable in our country – the unemployed and seniors who rely on timely access to benefits just to get by.

The government has revealed that eliminating “back office” processing of immigration claims means that more than 280,000 people who have been on a waiting list to have their applications processed will soon be cut from the list, with no reasonable justification. Instead of hiring staff to deal with a backlog of applications under the federal Skilled Worker Program, the government is arbitrarily turning people away. The budget says it will close the files of potential immigrants who applied under the program before February 2008.

Public Safety, which includes the Canada Border Services Agency and Correctional Services Canada, is seeing new cuts of $688 million, or 10% of its budget. Without details, there is a concern that these cuts will affect the “back office” work that keeps Canadians safe and our borders secure.

In addition to previous cuts, the Department of National Defence is losing $1.1 billion, or 7.4% of its budget. The Federal Budget indicates that the Canadian Forces' regular and reserve forces will remain the same, so all of the personnel cuts will be made to staff – the people in the “back offices” who support the work of our troops.  

What will “cutting red tape” mean for health and safety and the environment?

The government says it's saving money and creating jobs by “cutting red tape.” But the cuts in this budget appear to be more about undermining existing regulations and their enforcement, putting Canadians at risk.

One impact of a further $56 million in cuts to the Canadian Food Inspection Agency is that it will no longer be responsible for policing nutrition claims on food labels, instead using a “web-based verification tool” that puts the onus on consumers to verify nutrition claims and bring any concerns directly to businesses for resolution. The government is either assuming that all Canadians have the knowledge or ability to debunk claims made by food companies, or doesn't care. This drastic change in direction represents a great danger to the safety of Canada's food supply.

The government has also slashed Transport Canada spending by $152 million, or 10% of its budget. That is on top of the 154 positions that were due to be cut as a result of the 2007-2010 operating reviews, as well as other cuts made due to the personnel budget freeze. These cuts are sure to impact regulatory oversight of air, marine, rail and road safety. Previous cuts already mean, for example, that fewer planes are being inspected by Transport Canada, and more aircraft undergo paper inspections instead of more rigorous physical inspections.

The budget adds to previous years' cuts to government employees who enforce environmental regulations, including $79 million to the Department of Fisheries and Oceans, $108 million to Natural Resources Canada and almost $54 million to Environment Canada. The National Roundtable on the Environment is also being eliminated.

The budget is changing the federal review system for major oil, gas, pipeline, and hydroelectric projects. Instead of ensuring development of resources in a manner consistent with Canadians' long-term needs like energy security, this budget further opens the door to foreign investors to exploit Canada's natural resources while abandoning any long term consideration of the environmental consequences.

Why is this government downplaying job losses and their impact on the economy?

The government claims the $5.2 billion in spending cuts will mean the loss of 19,200 public service jobs. It says 7,000 of those will be dealt with through attrition. But how does the government know how many people will actually retire? Given the high household debt levels and uncertainty felt by most public service workers today, it's likely many will choose to work longer, not retire earlier. That could mean many more lay-offs than the 12,200 the government claims to be anticipating.

The government's 19,200 job loss figure also downplays the number of jobs that will be lost over the next three years, by excluding the 6,300 jobs still to be cut as a result of the previous 2007-2010 “strategic reviews” and another 9,700 positions that will be claimed by the 2010 personnel budget freeze. That could all add up to 35,200 less people working over the next three years.

The 19,200 number also excludes the thousands of term employees – many of whom are young – who will see their employment end with no notice or transitional support. In 2010, the federal government employed 26,000 of them. Nor does that number include the impact of cuts to organizations dependent on grants and contributions from the federal government. This includes Crown Corporations such as the CBC, which is being cut by $115 million. A lot of people doing contract work for the government will be out of work too. Economists estimate that the cuts to people and organizations dependent on government funding will cost a further 37,000 jobs by 2014-15. 

It all adds up to at least 70,000 public and private sector jobs, plus however many term and casual workers aren't rehired. But that may not even capture the full impact, given the number of small and medium sized businesses whose survival depends on those 70,000 salaries. Economists with the Canadian Association of Professional Employees estimate tens of thousands more could be affected, including sales clerks, workers in the construction industry, cooks and servers in the food service industry, accountants, architects, taxi drivers and hairdressers.

All of this spells trouble for the national economy, which grew by just 0.1% in January. Canada's unemployment rate seems stuck at 7.5%. The Canadian Labour Congress estimates the “real” unemployment rate, including discouraged job-seekers and involuntary part-time workers, was about 10.6% in 2011. Young workers are feeling the brunt with a “real” unemployment rate of 19.7%.

And which cities and towns will be hardest hit? That's hard to know without more information. The government says that the National Capital Region will bear the burden of the cuts and that the proportion of federal jobs in each region compared to other regions will not change. That's possible. The Canadian Centre for Policy Alternatives estimates that about 13,000 jobs will be lost in the NCR, possibly pushing the unemployment rate from 5.9% to 7.8%. The Conference Board of Canada predicted that 11,500 federal government jobs could be lost in the NCR over the next three years. But this doesn't mean that there won't be significant job loss in each region. There will be. It will just be evenly spread out.

What will be the impact of this government's attack on retirement security?

In what essentially amounts to a pay cut for all Canadians under 54, the government has announced that starting in 2023, seniors will have to wait two more years – until they are 67, not 65 – to collect Old Age Security or the Guaranteed Income Supplement. This forces Canadians to choose between working longer, or finding a way to put more money aside. For someone who is 53 years old, for example, this means having to put away about $5,500 to make up for that lost income. For a 40 year old, it means putting away about $21,000. For someone 20 years old, it means finding $34,500 to save.

For those with enough disposable income to save more for retirement, the Old Age Security changes amount to a pay cut and less spending power, which in turn will hurt the economy. For those without, it means retiring in poverty. But more importantly, not all Canadians are able to work that long. This change will have a dramatic impact on people with disabilities, for example, who are less likely to be in the workforce for as long. Other benefits are designed to work in tandem with Old Age Security. It isn't clear whether the federal government expects provinces to make up the difference by extending benefits like social assistance to age 67. Disability insurance plans are also set up to expire at age 65. Who is the government expecting to pick up that cost?

The government also cut take-home pay for public service workers by increasing their share of pension contributions. For a public service worker earning $50,000 a year, for example, that means a cut in take home pay of about $1,100 a year. The government has also raised the age at which workers joining the public service after 2012 can collect their pension, from 60 to 65. This has created a two tier pension system that means people working side-by-side will be paying in the same amount for different benefits. Once again, it is the younger workers who are bearing the burden of the government's choices.

Canadians must demand a better way forward

In the lead up to this budget, PSAC called on this government to choose a way forward that would keep the economy strong and protect the public services Canadians rely on. We urged the government to be transparent about what its choices would mean for workers, families, communities and the economy. We called for evidence-based decisions that would mean any further cuts were put on hold pending a public review of the social and economic impact of previous cuts. We asked the government to put Canadians' health and safety and the environment first by ensuring that Canadians could continue to rely on inspectors, regulators and scientific research.

It appears that the government has instead chosen a path that will shrink, not grow the economy. It has chosen to ignore the very real crisis brought about by previous cuts to services, and the very real risk to Canadians and the environment posed by undermining existing regulations and their enforcement.

To that end, PSAC will be working with our members and the public to call on the government to rethink their choices and give Canadians the information we need to understand the impact of this budget on our families, communities and the economy. Canadians need a better choice – a way forward that protects the economy and the services we rely on.