While the new budget has caused some consternation in many parts of the country due to it’s rather tepid approach towards righting the fiscal balance sheet, it is here in Ottawa that the spending pinch will be most pronounced. With almost 40% of the 2010 budget savings measures being taken from government administration costs, and another 14% coming from decreased defense spending, the city of Ottawa is clearly going to take on a disproportionate share of the burden.
By freezing Federal department budgets across the boards, many current and upcoming projects will need to be re-evaluated, with the expectation that many will be cut back, delayed, or cancelled.
While the freeze does not affect the mandated 1.5% increase in Federal compensation for 2010, a fact that most civil servants were reassured about today, this increase in salary costs will only increase the pressure to limit program funding as departments will be forced to fund this increase through cuts in their operating budgets. For those who’s civil service groups are facing contract renegotiation this year, the prospects of achieving even cost of living increases during negotiations looks bleak as this budget stipulates that, after this modest increase, federal salaries will remain frozen for the two following years.
There are also a large number of companies in Ottawa which provide services to the government. For those companies the expectation is that they will be receiving far less work in the upcoming year as canceling or cutting back external contracts are the simplest way for departments to limit expenses. Many local consultants already signed to start or continue projects in the new fiscal year are waiting with some anxiety to see if these programs survive departmental reprioritization, and whether they will be starting their new contracts in April.
Local NGOs, already struggling through reduced funding in past years, are also unlikely to see any relief in the current year.
As we examined previously, there is also ongoing concern that public service pensions may still be targeted by a government eager to balance the books almost entirely through cuts to the civil service. Although not specifically mentioned in the budget, the budget did include a note that the government plans to assess the reasonableness of public service compensation, indicating that this issue is not off the table. The budget also made no mention of addressing pension issues in general, which has been a local hot-button issue in the wake of the Nortel bankruptcy.
While all agree that the current fiscal situation requires steps to be taken, with this budget Harper and Flaherty have placed virtually the entire burden of their cuts here in Ottawa. As these cuts to government jobs trickle down in the local economy, the pinch will also have a negative effect on local retail and service businesses. With the decision not to renew the Home Renovation Tax Credit, local building and renovation companies also are expected to see a marked decrease in demand for their services.
Ottawa has weathered recessions before, and will do so again, but for local residents it is clear that for all the talk of a focus on economy and jobs, our city is not to be included in any focus on economic prosperity by this government. In his speech to the Commons, Flaherty said: “Our government is focused on jobs and growth, for one simple reason. Canadians are focused on jobs and growth.” He might well have added “Except here in Ottawa”. We can only hope that this government recognizes this fact and ensures that a fair proportion of the remaining stimulus spending budget is allocated to our community in order to help offset the hardships caused by the budget freeze. However given the well-documented Conservative strategy of targeting these funds towards districts where they hold power, it seems unlikely to expect much relief.