We’ve all had to give up some luxuries amidst rising inflation — it’s been sooo long since we’ve bought a fancy jar of fig jam — and the government is no exception.
Driving the news: Treasury Board President Anita Anand dropped her detailed breakdown of $500 million in spending cuts across 68 federal departments and agencies. It’s the first baby step in a broader campaign to cut spending by $15.4 billion over the next five years.
- The Department of National Defence faces the biggest dollar cut of $211.1 million, while the Canadian Space Agency will see the biggest percentage cut of 1.37%.
Why it matters: Affected departments will source these cuts from two areas: Travel budgets and outsourcing on consulting. The latter has become an addiction for the feds as of late.
- Government spending on private contracts skyrocketed by 74% between 2015 and March 2022, with billions going to firms like KMPG and, notoriously, McKinsey.
- Heck, the government wasn’t even able to devise these budget cuts without some outsourcing, paying KPMG nearly $670,000 to help find ways to trim spending.
Yes, but: Like many addicts, the government may be unable to function without its fix. The feds have grown over-reliant on outsourcing in areas like IT and defence, and some critics worry these branches won’t be able to work effectively without billions spent on outsourcing.
- This development has been dubbed “consultocracy,” where the power of consultants creates external knowledge bases that replace competent internal departments.
Zoom out: The rise of outsourcing is a global trend and is particularly acute in Australia and France. This year, France’s federal watchdog said the government must limit its hiring of consultancies, while the Aussies are dealing with a scandal involving the firm PwC.—QH