The 2019 Federal Budget – An Elephant in the Room?

February 14, 2019

By Adrian Travis

In my view, the Federal Budget focuses too much on what gets spent on whom, rather than elucidating how efficiently the money gets spent. The elephant in the room is that our Government needs to get more efficient at delivering services.

Between 2003 and 2013 in Canada, public sector employment grew at a whopping rate of 22.6% while the private sector only grew 10.7%. Despite this public sector growth, we still have a 40-year old fighter aircraft flying, long wait times for medical procedures, a bogged-down court system, and a federal mail service that doesn’t deliver reliably.
A key element in the relationship between public and private sector employment is that public sector employment is ultimately paid for by taxation and tax revenues that are a function of private sector growth. The private sector is the main source of wealth creation in any economy, and of the resources needed to provide public goods and ultimately generate public sector employment.

I’m a former public servant myself, and I found it distressing how little emphasis there was on doing more with less. Often the federal organization I worked for was rewarded with budget increases for spending every cent of its allocation each year, or marginally exceeding it.

Now, in my current role, where I help organizations to improve the productivity of their people and assets, I have a unique vantage point to comment on what would be most helpful to our economy. It’s striking that I’ve helped over 150 private sector companies get more productive in my career, but not one governmental or quasi-governmental organization has signed up for a productivity improvement engagement.

How should we go about driving public sector efficiency?

1. The Federal Budget should be a tool to control and rein in spending. Necessity is the mother of invention, and we need to persuade our government departments to innovate, adopt new technologies, and get efficient. In order to truly promote innovation and efficiency – the operating budgets in many governmental departments need to be reduced. Without a burning reason to innovate, nothing will change.
2. We need to motivate our private sector to grow faster. As a country, we tax the successful businesses heavily, and protect the businesses that are inefficient. This sends the wrong message to entrepreneurs and corporate executives. Recent government bail-outs, subsidies, and incentives have only rewarded companies that are poorly run or not sufficiently focused on ‘future-proofing.’
3. The government needs to understand that we are moving swiftly to becoming a knowledge economy. Instead of machinery and tools, we need to place emphasis on services, ideas, and intellectual property. While the recent improvements in Capital Cost Allowances (CCA) will match the favorable depreciation benefits that companies in the USA enjoy – they do nothing at all for knowledge-work businesses that have no ability or need to purchase and depreciate assets like trucks, machinery and tools. In essence, we need to create a better business environment for the knowledge-work businesses that will be a big part of Canada’s future economy.