The federal government under Trudeau is bigger but not as big as it used to be

Earlier this year, the Public Service Commission of Canada reported that the size of the federal public service had reached a record new high. According to Treasury Board Secre‐ tariat data, Ottawa em‐ ployed 357,247 public ser‐ vants in 2023.

That also marked a signifi‐ cant increase over where the public service stood when Justin Trudeau's government came to office in 2015. At the time, TBS said the federal public service employed 257,034 people.

But something else reached a record size in 2023 - Canada itself. And to ac‐ count for the fact that the country the federal govern‐ ment serves is always grow‐ ing, it might make more sense to measure the size of the public service as a share of the total population.

The federal public service represented 0.90 per cent of the Canadian population in 2023. That's still larger than its share of the population in 2015 (0.72 per cent). But it's not a record.

According to data from the TBS that goes back to 1980, the federal public ser‐ vice's share of the population peaked at 0.99 per cent in 1983 and 1984. That figure began to fall thereafter, but it was still at or above 0.90 per cent in every year from 1980 to 1992.

On the eve of the Liberal government's eighth budget, and with the size and shape of the federal government becoming a focus of political debate, it's worth taking stock of what has changed during the Trudeau era in Ot‐ tawa - and placing it in its his‐ torical context.

And on a few broad mea‐ sures, the trend is similar to what the data on the public service indicates. Under Trudeau, the federal govern‐ ment is bigger than it was in 2015. But it's still not as big as it used to be.

Trudeau reversed a trend toward smaller government

The federal government's spending, revenues and debt also can be measured against the size of Canada's economy. That allows for some broad historical com‐ parisons.

In the last full fiscal year of Stephen Harper's Conserv‐ ative government, the ratio of total program spending to GDP was 12.8 per cent. For the most recent fiscal year 2022-2023 - total program spending amounted to 16.1 per cent of GDP.

(The original version of this story incorrectly used program spending figures that excluded net actuarial losses and gains related to pensions and benefits. A gov‐ ernment accounting change in 2019 resulted in those ac‐ tuarial figures being listed separately. For the sake of comparing numbers across decades, actuarial losses need to be included. As a re‐ sult, program spending in 2014-2015 was 12.8 per cent, not 12.5 per cent. And spend‐ ing in 2022-2023 was 16.1 per cent, not 15.8 per cent. Other numbers have been amended below.)

That's not a small in‐ crease. But 16.1 per cent is still below the non-pandemic peak of 18.3 per cent - in 1984.

Revenue figures tell a sim‐ ilar story.

In 1992, federal revenues were 18.0 per cent of GDP. After several rounds of broad tax reductions - including the Harper government's deci‐ sion to cut the GST by two points - total federal rev‐ enues came to 14.0 per cent of GDP in 2015. For the last fiscal year, revenues were 16.1 per cent.

As a percentage of GDP, the federal debt is also high‐ er than it was in 2015 but still lower than its peak. The de‐ bt-to-GDP ratio for last year was 42.2. In 2015, it was 31.5.

But a simple line graph al‐ so shows how much of that increase is a result of the pandemic. In the last full fis‐ cal year before COVID-19 swept the planet, the debtto-GDP ratio was 31.2.

Federal debt charges were 1.3 per cent of GDP last year and are set to rise to 1.8 per cent next year. The public de‐ bt charge in Harper's last year in office was 1.2 per cent. But public debt charges were also several times larger in previous decades.

Looking at federal spend‐ ing as a share of GDP isn't the only way to measure the size of government. Per capi‐ ta spending, for instance, suggests that the federal gov‐ ernment is spending more than it ever has.

But per capita spending also suggests that Harper ran the second-most expensive federal government ever. Even Conservatives might be reluctant to embrace that metric.

Any assessment of the fis‐ cal health of the nation also has to consider the situation at the provincial level. While much will be made next week of the state of the federal deficit, eight provinces have now projected deficits for the coming fiscal year.

But when measured against GDP and viewed in the context of the last 40 years, the story is that the Trudeau Liberals have broken with a 30-year trend toward a smaller federal gov‐ ernment - but without quite returning the government to the size it was before the cuts began.

Right-sizing govern‐ ment?

Even the Liberals might ad‐ mit that some of their room to spend was created by the restraint imposed by previ‐ ous governments. But a more activist government is also basically what they promised in 2015 - epito‐ mized by their explicit deci‐ sion to run deficits.

"The point I make to peo‐ ple is, Canadians actually kind of wanted all of that new spending," Tyler Mered‐ ith, a former senior policy ad‐ viser in the Trudeau govern‐ ment, said in an interview this week. "They wanted the [Canada Child Benefit], they wanted investments in In‐ digenous communities. They wanted additional defence spending. They wanted in‐ vestments in decarbonization and climate action."

One way to look at the change, Meredith said, is that "perhaps what we learned through the 2000s is that government got too small. And now, actually, we're real‐ ly kind of right-sizing govern‐ ment for some of the big challenges that we face."

A fuller accounting would be necessary to explain everything that has con‐ tributed to the increase in government spending. But the Liberals surely would be happy to point to a few things.

According to the govern‐ ment's own figures, spending on Indigenous communities has increased from $11 bil‐ lion in 2016 to $30 billion in 2024. The Canada Child Benefit amalgamated several existing programs but added funding, and was later index‐ ed to inflation. New funding for child care was rolled out in 2021. And the federal gov‐ ernment is now spending bil‐ lions more on housing and clean technology.

(The federal carbon tax and rebates also add 0.3 per cent of GDP to both revenue and spending totals.)

Conservative Leader Pierre Poilievre tends not to focus on such things when he talks about reducing the size of government. He prefers to talk about funding for the Canada Infrastructure Bank or the public service's spending on management consultants and projects like ArriveCan.

Whether Poilievre can de‐ vise a plan to balance the budget in the short-term while only touching things voters don't care too much about remains to be seen. But the public service's use of outside contractors suggests that, whatever the size of the government, the talent and resources it has on hand also matter - and solving that problem might end up re‐ quiring more investment.

How big should the fed‐ eral government be?

Sean Speer, a former policy adviser to Stephen Harper, wrote last fall that the federal government had now come to reflect "Stephen Harper's tax rates and Justin Trudeau's spending preferences" and that those two things were "ultimately irreconcilable." Speer concluded that some‐ thing had to give.

As noted above, Speer's frame isn't entirely accurate federal revenues have in‐ creased since the Conserva‐ tives left office. Meredith notes that those increases have been achieved without broad-based tax hikes. Short‐ ly after coming to office, the Trudeau government raised taxes on those earning $200,000 or more, but since then it has largely focused on closing loopholes and ensur‐ ing compliance.

But there's still a gap be‐ tween revenues and spend‐ ing. Forecasting far into the future, the last fall economic update projected a deficit of $15 billion in 2029. And Meredith said there's a de‐ bate to be had about whether more revenue is needed to pay for further de‐ mands, from health care to national defence to decar‐ bonization.

A poll released by the An‐ gus Reid Institute last week showed that 59 per cent of Canadians thought the feder‐ al government was spending "too much." But that senti‐ ment plummeted when re‐ spondents were asked about specific areas of spending: just 22 per cent of those polled said Ottawa was spending too much on social programs, while 32 per cent said environmental mea‐ sures were getting more money than they were worth.

Conversely, 48 per cent of respondents said the govern‐ ment spends "too little" on national defence. Those voters might wish to see Canada hit the NATO target for defence spending - but the parliamentary budget of‐ ficer has reported that reach‐ ing that goal would require $13 to $18 billion in addition‐ al annual spending.

All these numbers frame what could be a consequenti‐ al debate over the next year and a half about how the fed‐ eral government has evolved, and what it should be and do going forward.