Finance Minister Bill Morneau’s fiscal and economic snapshot contained numbers that are staggering, sobering and scary: a projected deficit for fiscal 2020-21 in excess of $343 billion, accumulated net federal debt at $1.2 trillion and the Canadian economy contracting by 6.8 per cent this year.
But the only number that matters for the National Capital Region is the one that did not pass from the finance minister’s lips: 1995. As in the landmark 1995 federal budget of the Chrétien administration that slashed federal transfers to the provinces, restructured the Canada Pension Plan and offered civil servants incentives to retire early and cash buyouts for those designated “surplus.”
As a result, the feds trimmed 45,000 people from the public service while also dismantling 70-plus agencies, boards and commissions. About 40 per cent of these cuts directly affected people and operations in the National Capital Region.
But this was one budget, and its measures were spread over three years. Furthermore, a chunk of affected workers were hired back as consultants. Others transitioned to our burgeoning tech sector and still others enjoyed – albeit earlier than anticipated – their newfound golden years.
A louder – and more worrisome – fiscal reckoning
With Morneau’s snapshot in full view, the whispers that have echoed through the corridors of power, across our massive associations sector and amongst veteran business leaders and lobbyists for the last few months about the fiscal reckoning to come post-COVID are sure to become louder, more worrisome and the subject of political debate and speculation.
Rewinding to Budget 1995, in no way do I diminish the impact it had on affected families and businesses at the time. Yet our local economy weathered this shock well given the transition period, generous payouts and amazing national and global economic growth from 1995 to 2001.
On the other hand, to steal an analogy from Back to the Future, Doc Brown would surely tell Marty McFly not to set the DeLorean for any Budget Day on Parliament ‘Hill Valley’ between 2021 and 2025 as Biff Tannen will be writing the speeches. And this doesn’t even contemplate the possibility of another round of COVID-19 lockdowns amid a more deadly second wave that would add more red ink to the federal ledger.
Implications for Ottawa and Gatineau
Despite the City of Ottawa’s current fiscal challenges, our city and regional economy have fared well compared with other urban centres. This is due, in part, to our good fortune of being the seat of the federal government with stable employment (more than 20 per cent of our workforce is employed in public and para-public settings), a predictable housing market and large pockets of private businesses oriented to serve a dependable market of government workers, government agencies and associations.
Local political leaders at all levels of government – along with business, community, cultural and charitable executives – need to posit and prepare for not one, but successive federal budgets that will revise the size and scope of the federal public service downward. Regardless of the party in power, the reality of successive multibillion-dollar deficits (even with a robust recovery) and a trillion-dollar debt burden will force the hands of those around the cabinet table.
Sure, there will be some growth of public health and resiliency operations (think onshoring of supply chains, more adaptive social welfare – both policy and delivery capacity – programs and co-ordinating bodies working with other levels of government, major industries and the NGO sector), but the net effect will be fewer inputs in, and outputs of, federal government activity in our region.
Fewer employees due to an inevitable repeat of program or expenditure review-type exercises. Fewer employees given advances in automation. Fewer employees working downtown and in designated federal employment zones due to the time-saving, money-saving and environmentally advantageous benefits of working from home.
Respond, repurpose, rebrand, rebound and re-emerge
Even with severance and retirement incentives, the impacts of this downsizing will be profound. Commercial real estate in our core will be affected, as will consequent federal payments in lieu of property taxes to Ottawa and Gatineau. Discretionary spending across a range of sectors – retail, bars and restaurants, sports-arts-culture venues, local tourism, vehicles and appliances, just to name a few – that have already been whacked by COVID-19 will decrease as family budgets are affected.
Downstream, charitable and community organizations, including food banks, mental health and addictions support agencies and counselling services, will be doubly challenged in trying to find ways to transform and increase services and programming amid a tenuous backdrop of regional economic contraction and a stunted, or depressed, housing market.
Local leaders need to strategize and plan now. How will we market Ottawa to the rest of the world for inward investment more aggressively than we've ever done before, given the anticipated numbers of highly educated and bilingual professionals that will be looking for work?
While the timing and scope of forthcoming federal restraint is murky, the strategy is crystal clear: respond, repurpose, rebrand, rebound and re-emerge so we are an even more resilient region in which to live, work and play. To take Morneau’s fiscal snapshot comments out of context, for our local economic future, this is “the challenge of our generation.”
Walter Robinson is a government and public affairs executive who served as chief of staff to former Ottawa mayor Larry O’Brien in 2006-07.