Mark Carney Is Hacking Away at Canada’s Public Sector
Just over 100 days into his term, Canadian prime minister Mark Carney is taking aim at the size of the state while ramping up military spending. He’s launched a whole-of-government review, pushing deep cuts, deregulation, and a $9 billion boost to defense.
Mark Carney speaking at LeBreton Flats on Canada Day in Ottawa, Ontario, Canada, on July 1, 2025. (James Park / Bloomberg via Getty Images)
When millions of Canadians returned a Liberal Party government — led by Mark Carney — earlier this year, they were attempting to manage two concerns: threats to the country’s sovereignty from Donald Trump and the United States, and the specter of a Conservative government led by its Margaret Thatcher–esque leader, Pierre Poilievre. But Carney, who capitalized on a surge in nationalism triggered by Trump, ran as a right-wing Liberal, a “sensible” technocratic figure, who had twice headed a G7 central bank. He rode into town with a plan to build, to “catalyze” private sector investment in the economy, and to reduce public spending. Now, just over 100 days in power, he’s beginning to make good on his promise to cut the size of government — except, notably, for defense spending, which is set to increase. And he’s ready to slash deeper than many expected.
Carney Plays the Neoliberal Hits
When Carney was running for Liberal leader earlier this year, some observers, including myself, argued he would have been a fine fit in the 1980s and early 1990s Progressive Conservative government of Brian Mulroney. But a better comparison might be a bit more recent: either the mid-1990s, government-gutting, department-demolishing ministry led by Prime Minister Jean Chrétien and his finance minister, Paul Martin, whose notorious 1995 budget cut some federal departments by roughly half and reduced public spending by tens of billions, or, more recent still, the Conservative government of Stephen Harper, which reduced the size of the public service by roughly 10 percent while cutting taxes, lowering the general sales tax from 7 percent to 5 percent.
In the last several days, word has gone out from the center of government to departments to identify areas for both spending and regulatory cuts. Last Wednesday, in a bid to “spend less and invest more” — a mantra Carney often repeats — he ordered a whole-of-government review through the new Red Tape Reduction Office to target potential regulatory cuts. The order came two days after Finance Minister François-Philippe Champagne launched a “comprehensive expenditure review” and asked his cabinet colleagues to identify potential operational and program cuts.
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