Costs for consultants rise by $6 billion under Liberals
OTTAWA — Fees paid by the federal government to third-party consultants have ballooned since the Liberals took office in 2015, with expenditures for engineering, legal and other services rising $6 billion in six years.
Costs for “professional and special services” increased to $16.4 billion in 2019-20, up from $9.5 billion when the Liberal government took office — the highest level of spending since at least the 1990s, according to public data. At the same time, the cost of paying government worker salaries has also increased sharply, from $36.8 billion before 2015 to $47.5 billion in 2020.
The rising expenses come as Prime Minister Justin Trudeau faces pressure from some observers to rein in record-high spending levels in the wake of the COVID19 pandemic, which could include trimming an increasingly bloated public service. The federal public service has swelled by roughly 10,000 bureaucrats per year under Trudeau, to roughly 380,000 today.
Federal governments have long tapped consultancy services, which allow departments and ministries to carry out research, design or other tasks on a temporary basis. They are often viewed as an efficient way to secure specialty services without over-stretching the civil service. But public salaries have expanded in lockstep with consultancy fees, rising by $3 billion in 2020 alone.
“It’s definitely a big chunk of change,” said Kevin Page, head of the Institute of Fiscal Studies and Democracy and former Parliamentary Budget Officer.
Page said higher costs for salaries and consultants fall into a broader debate about “consumption versus investment” in government spending, and how government can allocate taxpayer funds in a way that will create future growth
Some economists and business lobby groups have been pressing the Trudeau government to prioritize programs that expand economic productivity, saying too much emphasis has been placed on redistribution schemes. While some of those programs, like childcare, drive economic gains by keeping more women in the workforce, other plans like expanding employment insurance carry less obvious benefits, experts say.
“There’s a sense that everything so far has been really consumption-focused, we’ve really pushed up these deficits,” Page said. “And most of that money going out the door is going to get spent right now. So, there’s a rebalancing that needs to take place.”
One senior government official, who spoke on the condition of anonymity because they were not authorized to speak on the matter, said rising consultancy costs ultimately “support the big machinery of government” rather than creating jobs or economic productivity.
“When you need to make investments in the economy that are productive, generally speaking it’s not in the public sector that you need to invest,” the person said.
A Treasury Board spokesperson said consultants have been hired as a way to absorb part of the workload of a strained public service, particularly during the pandemic. Nurses have been hired temporarily to provide services to communities in the North, for example.
“Shortages in certain employment groups and specific geographic locations make the use of professional services necessary to maintain operations,” the spokesperson
said in a statement.
Still, those rising costs for consultants more generally can increase strain on the public purse, particularly if they remain in place over several years, according to economists.
“From a big picture perspective, a higher public sector wage bill risks crowding out private sector investment and activity,” Rebekah Young, senior economist at Scotiabank, said in a written response.
Consultancy services have been used in the past by various governments as a workaround for what is effectively a swelling public sector, wherein higher consultancy costs cover up rising expenditures elsewhere.
“At this juncture where private investment is weak, there is all the more imperative to be cautious that this is not happening,” Young said.
Consulting costs were largest in the Department of National Defence at $4.4 billion, followed by the Public Works office at $2.2 billion. Citizenship and Immigration ($931 million), Employment ($864 million) and Indigenous Services ($636 million) were also among the larger departmental expenditures.
Specific contracts awarded by the government are listed under general categories like “business services” or “engineering services.”