From the Fraser Institute

By Jake Fuss and Grady Munro

This week, after five months off and one federal election, Parliament will start a new session in Ottawa. And federal finances should be a top priority.

Too much of anything can be harmful. In recent years, both the size of government in Canada and the government debt burden have grown too large, harming economic growth and living standards. Why? Because when government grows too large, it begins taking over functions and resources that are better left to the private sector.

Consider this. From 2014 to 2024, total government spending in Canada (federal, provincial and local) increased from 38.4 per cent (as a share of GDP) to 44.7 per cent—the second-fastest increase among 40 advanced countries worldwide. Consequently, the total size of government in Canada increased from 25th highest to 17th highest (out of the same 40 countries). Again, this means that government now essentially controls a significantly larger share of our economy.

During the same 10-year period, Canada’s gross government debt (federal, provincial and local) increased from 85.5 per cent (as a share of GDP) to 110.8 per cent—the third-fastest increase among the 40 countries. As such, Canada’s debt ranking among the 40 countries increased from 14th highest to 7th highest.

Why should Canadians care?

A large government debt burden lands squarely on the backs of Canadians. For example, governments and the private sector compete for the limited pool of savings available for borrowing. As governments increase the amount they borrow, there are fewer savings available for the private sector. All else equal, this drives up interest costs and makes it more expensive for families to take out a mortgage or businesses to attract investment.

Moreover, debt accumulation today will likely mean higher taxes in the future. Indeed, a 16-year old Canadian in 2025 will pay an estimated $29,663 over their lifetime in additional personal income taxes (that they otherwise wouldn’t pay) due to ballooning federal debt. In other words, by accumulating debt today, the government is disproportionately burdening younger generations with higher taxes in the future.

Of course, when talking about Canada’s overall debt load, the federal government plays a big role. The Carney government says it will “build Canada into the strongest economy in the G7” by employing a “very different approach” to federal fiscal policy than its predecessor. Yet the Carney campaign platform promises to add to Ottawa’s mountain of debt (which currently stands at a projected $2.2 trillion) by running huge annual deficits until at least 2028/29, even outspending the Trudeau government’s previous plan. This is not a “very different approach.”

The Carney government plans to table its first budget in the fall. As Parliament resumes, let’s hope the new prime minister shows real leadership by charting a clear path towards fiscal sustainability and stronger economic growth.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute

By Franco Terrazzano

The federal government added 98,986 employees since 2016, bringing the number of federal bureaucrats to 357,965, according to data from the Treasury Board of Canada Secretariat.

“The last thing Canadians need is a bloated government full of highly paid paper pushers,” said Franco Terrazzano, CTF Federal Director. “If politicians want to provide tax relief and start paying down the federal debt, they need to shrink government bureaucracy.”

The federal government reduced its payroll by 9,807 employees over the last year. However, the federal government still has 98,986 more employees than it did in 2016 – a 38 per cent increase.

The average annual compensation for full-time federal bureaucrats is $125,300, when pay, pension, and other perks are accounted for, according to the Parliamentary Budget Officer.

Taxpayers would save about $7 billion annually had the federal bureaucracy grew in line with population growth over the last 10 years.

There are seven federal departments and agencies that have more than doubled their number of employees since 2016, including:

• Infrastructure Canada (375 per cent)
• Women and Gender Equality Canada (334 per cent)
• RCMP External Review Committee (229 per cent)
• Elections Canada (173 per cent)
• Immigration and Refugee Board of Canada (158 per cent)
• Financial Consumer Agency of Canada (154 per cent)
• Impact Assessment Agency of Canada (127 per cent)

Employment and Social Development Canada added the greatest number of employees since 2016. The department added 16,842 employees since 2016 – a 75 per cent increase.

The Canada Revenue Agency added the second greatest number of employees over the decade. The CRA added 13,015 employees since 2016 – a 33 per cent increase.

“It’s good to see the bureaucracy shrinking a little bit, but it’s still too bloated and too expensive,” Terrazzano said.

It isn’t just the size of the federal bureaucracy that’s ballooning – the cost is too.

The PBO estimates the federal bureaucracy cost taxpayers $69.5 billion in 2023-24. In 2016-17, the cost of the bureaucracy was $40.2 billion. That’s an increase of 72.9 per cent.

The federal government handed out more than one million pay raises between 2020 and 2023, according to government records obtained by the CTF. The federal government also rubberstamped more than $1.5 billion in bonuses for bureaucrats since 2015.

Given the rash of bonuses and pay raises, on top of new hires, Canadians might wonder: how well are things running in Ottawa?

Less than 50 per cent of the government’s own performance targets are consistently met by federal departments within each year, according to a March 2023 report from the PBO.

“We are also committed to capping, not cutting, public service employment,” according to the Liberal Party’s 2025 election platform.

“Prime Minister Mark Carney’s promise to cap the bureaucracy doesn’t go nearly far enough and just entrenches the Trudeau government’s costly bureaucrat hiring spree,” Terrazzano said. “Taxpayers need politicians to cut the bloated bureaucracy and make pay and perks more affordable.”