Learning the lessons: how Canada successfully eliminated its budget deficit in the 1990s

The coalition government is expected to take Canada's Program Review as its guide to reducing the deficit in the UK. Between 1994-97, the Canadian government eliminated its budgetary deficit of 5.3% of its GDP.

The Institute for Government studied Program Review in The Government of Canada’s experience eliminating the deficit, 1994-99: a Canadian case study (PDF, 1.1MB) 

Author, former Canadian Senior Civil Servant and Governor of the Institute for Government Jocelyne Bourgon found the Canadian example to be an example of cabinet government at its finest – an impressive example of partnership between elected officials and public servants. 

The Canadian government learned from its past experience the importance of debate, strong political will and consensus across government, as well as public engagement.

How it worked

'Program Review' involved all departments and organisations including agencies, Crown corporations and quasi-judicial bodies to set about eliminating the deficit.

It offered each department an opportunity to "redesign itself to fulfil its roles and responsibilities within a federal government better adapted to the needs and requirements of the future and within its constrained budget." (Massé, 1994)

1. Does the programme or activity continue to serve a public interest?
2. Is there a legitimate and necessary role for government in this programme area or activity?
3. Is the current role of the federal government appropriate or is the programme a candidate for realignment with the provinces?
4. What activities or programmes should, or could, be transferred in whole or in part to the private or voluntary sector?
5. If the programme or activity continues, how could its efficiency be improved? Is the resultant package of programmes and activities affordable within the fiscal restraint? If not, what programmes or activities should be abandoned?

Three committees then reviewed the departmental proposals:

• a steering committee of deputy ministers operated as a peer review committee
• a special cabinet committee of ministers vetted the proposals and built political consensus
• a full cabinet arbitrated major issues and ensured overall balance and cabinet solidarity.

Prime Minister Chrétien ensured discipline and the political support of ministers, caucus and the governing party.

Lessons learned

As a result of Program Review, programme spending declined in absolute terms by over 10% between 1994-97.  By 2007-09, the country’s debt to GDP ratio was down to 30% from almost 70% during the deficit.

The lessons learned from the Program Review for eliminating a deficit are that:

• it is a societal project – it involves an open and inclusive approach that engages the whole of government, and not just a small number of people working in relative secrecy.
• a large scale programme makes possible reforms that alone would not normally be possible
• speed is important if there is a high level of consensus in society – it creates light at the end of the tunnel
• a high degree of prudence was built around Programme Review
• luck – the Canadians were lucky there were no major external shocks during the time
• it is possible to lead ambitious reforms and make choices in a principled and defensive way, rather than just make easy, unsustainable cuts.

More information

You can:

• Download Program Review: The Government of Canada’s experience eliminating the deficit, 1994-99: a Canadian case study (PDF, 1.1 MB)
• Watch a webcast of a lecture by Jocelyne Bourgon on the Program Review, chaired by Cabinet Secretary Gus O’Donnell.

Media links

• Channel 4 News: Cameron's cuts may copy Canada's 'bloodbath budget'
• eGovMonitor: Tackling The Budget Deficit - Can Britain Really Follow The Canadian Example?
• Express: Canada got rid of its deficit in four years - here's how
• Guardian Society Daily: Cuts, Canadian Style 
• Telegraph: Britain to emulate Canada's radical solution to tackle debt
• Telegraph: What do the Canadians know that we don't?
• Financial Times: Osborne seeks consensus over cuts
• Financial Times: Osborne seeks private expertise for Whitehall