‘More continuity than change’: The Hub reacts to Mark Carney’s big-spending budget

Finance Minister François-Philippe Champagne unveiled the Liberal government’s federal budget yesterday, which he insisted will respond to a new chaotic world not seen since the fall of the Berlin Wall. “This is a generational shift. This is not just an ordinary transition,” Champagne told reporters alongside Prime Minister Mark Carney. “We’re going to build this country like never before. We’re gonna protect our sovereignty.” The budget includes a $78.3 billion deficit, projected to fall to $56.6 billion by the end of the decade. In the next five years, the Liberals plan to spend $115 billion on infrastructure, $81.1 billion on defence, and $25 billion on housing. They will invest in bringing down emissions through the industrial carbon tax, oil and gas methane regulations, and carbon capture, making way for the potential elimination of the emissions cap. They also plan to cut from Canada’s ballooning federal civil service, shedding 40,000 jobs by 2029. The Hub has collected insights from some of our wise contributors to get their take on the budget that was. There’s a big gap between rhetoric and reality By Trevor Tombe, professor of economics at the University of Calgary It was, to quote the finance minister as he entered the House of Commons, an “investment budget.” It aims to address Canada’s dismal productivity performance and, it said, reversing the “history of weak private sector investment” requires a “sea change.” The government is absolutely right: Moving the needle on investment is indeed key to boosting productivity growth. But did the budget succeed? The government is setting the bar high, saying that it will “enable $1 trillion in total investment over the next five years.” Unfortunately, the reality is—at best—mixed, and it falls well short of the rhetoric around making “generational investments.” First, the government highlights rising capital spending—from $32.2 billion last year to nearly $59.6 billion by 2029—but only about $8.3 billion of the $27 billion increase is actually new (details are in the budget’s “Annex 2”), and it’s mostly spending on transfers to others, like provinces. That’s roughly 0.2 percent of GDP and in line with commitments seen in many previous budgets. So, for all the hype, this budget does little that’s “generational.” To be fair, there are measures that could move the needle on private investment. Scrapping the oil and gas emissions cap is long overdue and removes a major drag on one of Canada’s most capital-intensive sectors. Another bright spot is the so-called “productivity super-deduction.” Silly name aside, it could meaningfully improve business investment incentives by allowing immediate expensing of a wide range of capital investments—from machinery and equipment to computers—the measure effectively lowers the marginal effective tax rate on new manufacturing investments to zero, from around 8.6 percent today. Other sectors see smaller benefits, averaging a two-point tax reduction. Unfortunately, while a real step to encourage private investment, potentially boosting GDP by 0.2 percent (the government reckons), it’s a temporary measure, so its long-term impact is muted. On the broader fiscal front, deficits remain large, at $78.3 billion in 2025–26, falling to $56.5 billion by 2029–30. This can matter for overall investment since public borrowing can potentially “crowd out” private investment if interest rates are higher than they otherwise would be. And as anticipated since the election campaign earlier this year, the government has effectively moved away from its fiscal anchor of a declining debt-to-GDP ratio, now planning to miss that previous goal for several years to come.” These projections also hinge on a “Comprehensive Expenditure Review” and other measures to “optimize productivity in government,” with roughly 80 percent of the planned deficit reduction by 2029 relying on these efforts. The targeted savings are substantial—comparable to the post-financial-crisis review under the previous Conservative government and about one-third the scale of Budget 1995. That requires a level of multi-year discipline and consistency not seen in many years. The budget does have a lot of detail around where those savings will be, so perhaps this time will be different. In short, it was billed as an investment budget—and in its framing, it’s right about the problem. But on the numbers, it offers more continuity than change. Prepare to be disappointed if you had high hopes for housing By Mike Moffatt, founding director of the Missing Middle Initiative Yesterday’s budget sent a clear signal to Canadians that the federal government’s plan to address the housing crisis is to reduce the demand for homes by cutting immigration, rather than increasing homebuilding. There is a chasm-sized disconnect between the housing section of the budget and the Liberal Party’s housing platform from earlier this year. During the election campaign, the Liberals made four significant housing policy commitments. Today’s budget delivered on one, substantially watered down two, and ignored the fourth altogether. The commitment to introduce a GST rebate for first-time homebuyers appears in the budget, as it is included in Bill C-4. What is being implemented is what was promised in the campaign; however, given the crash in new home sales, there was hope that this would be expanded upon. The Build Canada Homes (BCH) initiative and the promise to reduce development charges have both been watered down relative to the platform. The government has committed to investing $6.8 billion, on an accrual basis, in BCH over the next four years, a 40 percent reduction from the platform’s $11.2 billion commitment. The platform contained an annual commitment to spend $1.5 billion to halve development charges. The budget revises this plan, now only requiring development charges to be “substantially reduced,” and allocating only $1.2 billion annually to the measure. The final major platform commitment to reintroduce the 1970s-era MURB (Multiple Unit Residential Building) tax provision, which incentivizes the construction of rental apartments, is nowhere to be found in the budget. In place of this supply-side measure on housing, there were demand-side measures through immigration policy changes. I was surprised to see that the budget repeatedly established an explicit link between high home prices and rents resulting from housing shortages, as well as population growth driven by immigration and non-permanent residents. The budget credits lower population growth as a primary driver of the 3.2 percent reduction in rents nationwide, and promises further cuts to non-permanent resident programs. The federal government is quietly laying the groundwork to reduce housing supply targets, citing slower population growth as the reason. The rhetoric used in describing immigration policy changes is unlike anything we have seen in recent Canadian history. The budget promises that, in their words, the federal government would be “taking back control over the immigration system,” adopting the “take back control” slogan made famous by the Leave campaign during the Brexit referendum. U.K. Prime Minister Keir Starmer made a similar statement earlier this year, prompting Nigel Farage to note how the Labour government had come around to his way of thinking. In both Canada and the U.K., the immigration consensus is over. The continuing credibility crisis of federal fiscal policy By William Robson, president and CEO, C.D. Howe Institute Slogging through the 493 pages of the federal government’s November 4th, 2025, budget reveals the pre-release hype about transformational change to have been just that: hype. Start with the bloated page count. Like its predecessors, the budget buries the key numbers in hundreds of pages of repetition, reannouncements, and condescending political messaging. And the numbers themselves—the projections of revenue and expense, deficit and debt (on page 249!)—suggest that this budget is scarcely more credible than its predecessors were. We still do not have the federal public accounts for the 2024-25 fiscal year, even though it ended more than seven months ago—another sign that the government does not take stewardship of public funds seriously. In their absence, a crucial number was the total for federal spending the budget showed for 2024-25. That number has a troubling history. The first projections for 2024-25 were in the 2019 Fall Economic Statement, which put it at $421 billion. The budget now pegs 2024-25 spending at $547 billion—more than $126 billion higher in just six years. Even if that number accurately prefigures what the public accounts will show—and the delay in their release raises suspicions on that score—the government’s spending estimates have been leaping more than $20 billion every year. And notwithstanding pre-release talk of restraint and even austerity, comparing the budget’s projections for 2025-26 and beyond with its earlier budgets and fall statements reveals that the spending projections have risen yet again. Nothing has changed. If the spending projections are not serious, the fiscal plan is not serious. The 2024 fall statement showed the deficit for 2025-26 at $42 billion. Now the budget says it will be $78 billion. Past fiscal projections claimed the ratio of debt to GDP would fall. The budget now shows it rising. We have no more reason to believe the federal government’s latest plan than we had to believe the earlier ones. The government’s fiscal credibility crisis continues. Finally, some relief: Energy and resources in the Budget By Heather Exner-Pirot, a special advisor at the Business Council of Canada, and Michael Gullo, vice president of policy at the Business Council of Canada It’s been a long time since the energy sector got good news in a federal budget. During the Trudeau era, new investment-killing policies were conceived and announced constantly. Since Prime Minister Carney was elected in April, it could at least be said that bad things were no longer being layered on. With Budget 2025, some of the bad things could be taken away soon, and what’s more, some good things have been announced. There is a glimmer of hope that we are moving from an era of sticks to an era of carrots. At the top of the list of bad things was the much-reviled emissions cap. Budget 2025 identifies a series of climate actions that “would create the circumstances whereby the oil and gas emissions cap would no longer be required.” That doesn’t say the emissions cap is scrapped! Some may quibble. But as the cap is not yet enacted, all the federal government has to do is nothing, and they are signaling they will do just that. At any rate, the limited political space they’ve left to revive it, the bait and switch that would represent to the markets, and the howls it would elicit from the West, make us confident the oil and gas emissions cap is dead. The elimination of the greenwashing amendment, which made improperly substantiated climate goals punishable with heavy fines, is the icing on the cake. And then there are the carrots. Calls to amend the investment tax credit regime were heard; the mining exploration tax credit was renewed; there are accelerated capital cost allowances for LNG facilities; and meaningful funding for defence-related critical minerals projects. Further, the federal government has created space for a collaborative conversation with the provinces about the competitiveness of Canada’s industrial carbon pricing regime. Expectations for the Major Projects Office have gotten higher. It remains to be seen if billions in new infrastructure funding will crowd in private capital for energy projects and trade corridors. Directionally, the budget is positive. If you’re an energy or mining investor, Canada looks more attractive today than it did yesterday. But there are ways to make it more attractive yet. The budget made some steps, but there is still a way to go yet. Alberta searches for clarity in Carney’s new climate competitiveness strategy By Falice Chin, The Hub’s Alberta bureau chief Mark Carney’s first budget acknowledges Alberta’s central role in Canada’s economic future, and in doing so, shifts away from the current 2030 emissions targets and toward the longer path to net zero by 2050. It is, in some sense, an implicit admission that the earlier timelines were politically unrealistic. But even with a longer runway, the budget still falls short of providing all of the regulatory clarity and investment certainty Alberta has been asking for. The budget does not outright eliminate the much-criticized emissions cap or industrial carbon pricing. Instead, it recasts the first as conditional and positions the latter as the centrepiece of Canada’s new climate competitiveness strategy. If carbon capture, methane reduction, and a more liquid carbon market can reduce emissions at scale, then oil and gas production can still grow. Gone, too, will be the so-called “greenwashing” provisions. “When conditions are met, we won’t need the cap anymore,” said Finance Minister François-Philippe Champagne. In other words, technology and carbon markets, rather than output cuts, are expected to carry the burden of decarbonization. This framing mirrors some of what Alberta Premier Danielle Smith has been advancing. But how, exactly, we get there remains vague. As expected, the budget elevates the Pathways Alliance carbon capture network, tying its success to the development of “additional energy infrastructure that will support a strong conventional energy sector while driving down emissions from the oilsands.” Yet for all the detail offered on clean energy—from hydrogen tax credits and the revived role of nuclear power in meeting AI electricity demand—it offers far less clarity on the plan for conventional energy and the strengthened role of carbon markets. The practical mechanics around permitting, timelines, and provincial alignment remain undefined. Given how central the oil and gas sector remains to Canada’s economy, the gaps are hard to miss. But this budget—massive as it is—should also read as a positioning document. Another test of direction will come when Ottawa announces the next tranche of major projects by the Grey Cup. Smith, too, says she’s reserving judgement until then. Budget 2025 doesn’t make “transformational” investments in productivity growth By Taylor Jackson, The Hub’s research and prize manager As someone who cares deeply about the direction of the Canadian economy and has lamented the lost economic decade of the Trudeau years, Budget 2025 has some positives, particularly in recognizing that the heart of Canada’s macroeconomic woes lies in weak productivity growth and stagnant business investment. The budget document is absolutely correct when it says that “A strong economy is tied to strong productivity. Productivity growth, the basis of rising living standards and economic competitiveness, means finding ways for businesses and workers to produce more with the same effort.” It is also correct to note that Canada’s productivity growth has been weak relative to our peers over the past decade. Given the economic challenges Canada faces, this is a breath of fresh air relative to the Trudeau government, which consistently focused on redistributing more of Canada’s economic pie rather than growing the Canadian economy. However, despite correctly diagnosing Canada’s economic ailments, Budget 2025 falls far short of delivering a transformative plan to address our stagnant productivity growth. At best, what Carney’s first budget does is make minor improvements at the margins. On the tax side, the “Productivity Super-Deduction” is the government’s catchall of tax incentives, like the reinstatement of the Accelerated Investment Incentive and several immediate expensing provisions for sectors that Ottawa deems worthy. The government is also making some positive changes to the SR&ED credit to spur research and development. On the investment side, for a government correctly concerned about stagnant productivity, it’s surprising that only $5 billion of the $115 billion (4.3 percent) the government is planning to spend of infrastructure over the next five years is going to “Trade and Transport Infrastructure,” that is infrastructure investments like the St. Lawrence Seaway and the Trans-Canada Highway that are proven productivity enhancers in the long run. Put this together with some of the other bureaucratic exercises in the budget that aim to spur economic growth from the top down through the channels of power in Ottawa, and one is left disappointed. Some of the Carney government’s new measures will likely boost productivity a bit. Others are likely to amount to more money down the drain. But for a government promising transformation, one can help but be left scratching their head and thinking “meh.” This is it? This is what will catalyze generational productivity growth? Colour me skeptical. The budget takes baby steps in the right direction—but more is needed By Theo Argitis, senior vice president, policy at the Business Council of Canada It’s a serious budget, focused on the right priorities, with credible measures to bolster productivity, innovation, and industrial capacity. There’s a lot to like, particularly since it’s been a while since we’ve had one of these. The last investment-focused budget was the 2017 fiscal plan under Bill Morneau. And yet, as I read the document in the media lock-up room on Tuesday, the overriding sense I felt was that I wanted more. Only two weeks before the budget, Prime Minister Mark Carney talked about swinging for the fences. This is not that. Instead, we get a fine-tuning budget that will move the needle, no doubt, but that will likely struggle to meet the government’s own lofty targets for private investment, at least immediately. The expenditure review appears to be real but constrained. The infrastructure spending, while positive, also happens to be the kind of infrastructure spending you can build an election campaign around. Roads, hospitals, and YMCAs. The signaling on regulatory reform is genuinely encouraging, but remains mostly signaling for now. It’s a first and important pivot for federal economic policymaking, but a careful one. At least, the government is finally thinking about the economy and productivity. Perhaps it was the former journalist in me craving for the really big story. I was hoping swinging for the fences meant a real, risk-taking fiscal reset that would shift expectations about Canada as a place to invest. Something front-loaded, decisive, and transformational. I had even convinced myself the country may have been primed for it. Maybe this is what bold looks like in Canada. One can argue that, in a moment of uncertainty about where things are headed, a measure of caution could be warranted. We can calibrate as the dust settles on the emerging global economic order. My concern is that the major policy mistakes of the past half century have come when governments tried to confront structural change with incremental adjustments. When the challenge is to change the country’s economic trajectory, fine tuning is rarely enough. The Carney government embraces industrial strategy By Rachel Samson, vice president, research, and Steve Lafleur, research director at the Institute for Research on Public Policy Governments have always used industrial policy. Over the years, there have been plenty of programs and tax incentives aimed at influencing the scale and direction of private investments. But there has not been a system-wide industrial strategy in Canada for some time. Yesterday’s budget changed that. With a doubling of capital spending over five years that is expected to “enable” more than $1 trillion in investment, the Carney government is unabashedly taking the reins of Canada’s economy to steer it through the rupture that is reshaping Canada’s economic foundations. Major announcements include $51 billion over 10 years for a Build Communities Strong Fund, a suite of tax incentives that will reduce the corporate marginal effective tax rate by more than two percentage points, $5 billion over seven years for a new trade diversification corridors fund, and $6 billion over five years for a defence industrial strategy aimed at improving the ability to buy military technology and equipment in Canada. If they can execute it well, it could save Canada from the worst of U.S. and Chinese tariffs, through a combination of short-term economic stimulus and stronger long-term economic foundations. But if growth fails to materialize, it could add to the debt falling onto the shoulders of young Canadians left to pay the bill. In September, the IRPP published a report with recommendations for how the government could do a better job on industrial policy. Step one is clear goals, like the government’s commitments to build 500,000 new housing units per year and double the value of non-U.S. exports in 10 years. Step two is strong governance, through putting in place the expertise, institutions, and accountabilities needed to achieve results. Step three is rigorous and systematic program evaluation to correct course in real time. Whether or not the government executes these steps effectively, at the same time it is implementing significant cuts to the public service, will determine whether Budget 2025 is a boon or a bust for Canada.