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Canadian model for council cuts

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Swingeing public service cuts are not the best way for local government to deal with a huge reduction in grants, a former Canadian cabinet minister has warned Britain.

Marcel Masse, who served as minister for public service renewal between 1993 and 1996, told LGC the response of Canada’s provincial and municipal governments to funding cuts of around 17% had led to deterioration in service quality that quickly had to be rebuilt.

Mr Masse said Canada’s provinces – which have tax raising powers and responsibility for health and education programmes – had slashed spending by more than their federal grants were cut.

It is a common tactic to shift burdens on to other levels of government during a cost-cutting exercise

Jerrett Myers

“They cut the number of doctors and teachers and then had to hire them back two years later because services deteriorated so badly,” he said.

“Meanwhile municipalities [broadly equivalent to local authorities] increased their charges for discretionary services so the overall tax burden went up.”

He added that of the 10 provinces, only Quebec and Ontario had the capacity to invest in IT to deal with the cuts in grant without significantly cutting services.

Mr Masse spoke at a seminar organised by Sir Michael Bichard’s Institute for Government.

In the mid-90s, Canada conducted a complete review of all areas of government activity after a ballooning budget deficit caused federal net debt to approach 70% of GDP.

A host of senior civil servants and politicians - including Ray Shostak head of the Prime Minister’s delivery unit and shadow cabinet minister Francis Maude – attended the seminar.

They also heard Jocelyne Bourgon, the head of Canada’s public service at the time, speak about how the government re-engineered the role of the state to get the public finances back on track.

“It is a common tactic to shift burdens on to other levels of government during a cost-cutting exercise,” said Jerrett Myers, a senior researcher at the Institute for Government.

He added that the provinces’ ability to raise taxes was a “big difference” between the UK and Canada, and that they had “actually fared pretty well” and managed to pay off their budget deficits.

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