As David Cameron unveils budget cuts that will affect "our whole way of life", the chancellor, George Osborne, is busily studying how Canada rapidly solved its debt crisis in the 1990s, turning a budget deficit of 9% of GDP into a surplus in three years. But lessons of Canada's 1990s deficit reduction under the Liberal prime minister Jean Chrétien will not be easy to emulate in Britain, and while many of the cuts were reversed in Chrétien's later years in office, the Conservative-Lib Dem coalition have said little to indicate that they would be prepared to do the same: in Britain, a gutted public sector, once introduced, could well be here to stay.
Chrétien's "bloodbath budget" in 1994, and the years of reforms that followed, were indeed remarkable, although not without significant social costs that are still being felt today. When the Liberal government came to power in 1993, the government of Canada's debt had reached 66% of GDP; after 1998, with all the government's "program review" reforms implemented, Canada ran consecutive surpluses for almost a decade.
The program review mechanism likely to be emulated in Britain was unprecedentedly drastic, phrasing itself in terms of "what to preserve", not "what to cut". Performance indicators and performance results of public services were ignored (such measures are for budgetary "snipping", not culls) – instead, the importance of government programmes were measured relatively, and every department had the potential to be on the cutting block – including defence and foreign policy, something it is hard to imagine the Conservatives taking a similarly bold position on beyond the possibility of scrapping Trident.
Unlike Canada's comprehensive approach in the 1990s, the British Conservatives have a history of making public spending cuts in the sectors and regions that least serve their own interests as a party.
Chrétien's bloodbath budget had severe negative social impacts in areas like unemployment insurance, but in retrospect the scale of Chrétien's task remains impressive, as does the fact that programme spending on important constituencies like indigenous people and children were increased even as the public sector as a whole shrunk by up to 20%. But there's little reason to believe that the road will be nearly as smooth if implemented here. For Chrétien's government, reducing the deficit was the issue, with cross-party support and located in a robust public discussion about what programmes best serve the public interest.
According to a 2009 study by the Canadian think tank Centre for International Governance Innovation, the efficiency of the reforms were in large part due to a high level of co-ordination among departments and ministers: unlike Britain in 2010, it wasn't implemented by a coalition government of a kind previously unknown to the political system, whose flimsy mandate means the project of electoral reform also deserves priority place.
Osborne's selective borrowing of Canada's model of deficit cutting is also likely to sideline one of the most important lessons of the Canadian experience: the memory of the long recession led to greater financial regulation, scoffed at by neoliberals during the boom years, but which has stood Canada in good stead: by 2009, recession-hit countries like Ireland were turning to Canada's model of financial regulatory bodies.
The long 1990s recession had a profound cultural impact on Canada that lead to a debt-aversion in both public spending and the financial centre: it was this that enabled Canada to avoid the worst of the recession, although the impact of America's recession – Canada's main trading partner – took its toll in 2008 and 2009.
Canada's office of the superintendent of financial institutions was highly regulatory during the boom years of unfettered lending in Britain and America. Canada's main banks chose not to sell most of their mortgages, giving them an incentive to ensure they were good loans; in 2009, subprime mortages had a 7% share of the market in Canada, as opposed to 22% in the USA. But it would be too optimistic to hope that Osborne would take away this lesson of regulation from Canada's 1990s experience, rather than a simple guide in how to decimate public services.