Liberals to table ‘big, bold’ federal budget Tuesday as Carney looks to put his stamp on government

Finance Minister Francois-Philippe Champagne will unveil the new Liberal government's first budget on Tuesday, which will be full of what he calls “generational investments” designed to spur growth and help the country weather the tariff-related economic storm.

While Champagne is the minister in charge of the issue, Prime Minister Mark Carney, a former central bank governor, has a singular interest in financial matters and has personally pledged to deliver a pro-growth budget that will usher Canada into a “new era” and “define our next century.”

“We have the resources to transform our economy from one of dependency to one of sustainability,” Carney told reporters Saturday after a nine-day visit to Asia designed to open new markets for Canadian goods and services at a time when relations with the United States are on shaky ground.

Carney said that through a combination of channeling public funds into specific industries and easing regulation of major nation-building projects, he wants to “stimulate unprecedented investment in Canada” and build the country's reputation as an “energy superpower” given its vast oil and natural gas reserves and expertise in renewable energy.

Champagne said Monday that this budget will set out the Carney government's vision for the future, suggesting it will be more important than in past years given the many challenges Canada faces.

“This is a unique moment in the history of our country and we need to meet this moment and we are going to meet it together,” he told reporters after purchasing a new pair of shoes ahead of budget, in keeping with Canadian parliamentary tradition.

“This is the budget you will remember,” he said. “Canadians have asked us to build big and bold projects.”

• What questions do you have about the budget? Send an email to [email protected].

Whatever the ambitions, introducing this document to parliament is only the first step.

The minority Liberal government has 169 seats in the House of Commons and needs at least three opposition members to support the budget if it has any chance of passing – although that number could be reduced to two if the speaker wants to break the tie. This equation could also change if some members abstain from voting.

So far the government does not have the necessary support.

Both conservatives and Bloc Quebecois have made a number of demands that are not expected to be met in exchange for their votes.

The Conservatives want the deficit to be $42 billion or lower – about the same as the last Liberal government said this year – and that is likely a poor option given what the Liberals have already announced will be in this budget. One observer said the deficit could reach $100 billion this fiscal year.

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Back in June, several pre-budget announcements were made which included, but were not limited to:

• By the end of March, $9 billion will be spent on defense.
• $13 billion (initial) for Build Canada Homes.
• $2 billion for small nuclear reactors in Darlington, Ontario.
• $5 billion for a new Strategic Response Fund.
• $3.6 billion over three years for temporary energy efficiency measures due to tariff uncertainty.
• $1.8 billion to increase federal police capacity.
• $370 million for new biofuels incentive.
• $77 million over four years to CRA for trucking non-compliance.
• $660.5 million over five years for gender equality and safety (including new RCMP officers).
• $97 million over five years to create the Foreign Degree Recognition Action Fund.
• $450 million over three years for a worker retraining package.

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Conversely, the Bloc wants more government largesse with higher pension benefits for the elderly and increased health care spending, which is equally unlikely given this government's commitment to belt tightening and making what Carney called “hard choices” and “sacrifices.”

Interim NDP Leader Don Davis said his caucus can't support an “austerity” budget and party MPs will decide how to proceed after they see what the champagne actually involves. As CBC News previously reported, Davis also stated: abstaining from voting is an option.

If the government loses the budget vote, Canadians could head to the polls before Christmas – something Carney has said he is prepared to do if the opposition demands it.

“I am 100 percent confident that this budget is the right budget for this country at this time,” he said.

More money for housing and the army

Tuesday's budget is expected to include a $50 billion local infrastructure fund for items such as housing and transportation, a senior government official confirmed to CBC News. It will also allocate up to $1 billion to attract skilled workers from abroad, including from the United States. The matter was first reported by The Globe and Mail.

The budget is also expected to include more money for the military as Canada catches up after years of underinvesting in housing and the military.

U.S. President Donald Trump's protectionism has hurt some Canadian sectors more than others—steel, aluminum, autos and timber have been hit hard by his Section 232 tariffs—and this budget will likely include some form of aid to help prop them up now that bilateral tariff-cut talks have stalled.

There will also be some changes to the tax structure so that it is more “competitive, pro-growth and de-risking investments in Canada,” according to a senior government official who spoke to CBC News.

Carney also said the budget will be split differently than in previous years, with capital and operating expenses being accounted for separately.

Capital expenditures are what the government spends on infrastructure and other fixed assets (Ottawa says it's anything that “contributes to public or private sector capital formation”), while operating expenses are expenses such as salaries and benefits of government employees, as well as money for transfers to the public and provinces.

While promising to spend more on capital (Carney said he wants to “spend less and invest more”), Champagne and Carney signaled cuts are being made in the bureaucracy as the Liberal government looks to find 15 per cent savings over the next three years to rein in spending after it ballooned under the Trudeau government.

The civil service has grew many times faster than the total population — which itself was historically high — and Carney said those days were over, promising the operating budget would be balanced in three years.

In addition to the expected reduction in the size of the bureaucracy, the budget is expected to provide some details on the savings achieved under comprehensive cost review which Ottawa launched during the summer months. One program being cut to cut costs is the Liberal government's latest pledge to plant two billion trees.

Economists are divided over Canada's finances

Economists are divided on the state of the country's finances.

Interim Parliamentary Budget Officer Jason Jacques has raised alarms about the country's deficit and debt levels, especially after Carney said he would spend many more billions a year on the military. he announced a $9 billion increase this fiscal year alone. — and canceled some planned revenue sources, such as changes to the capital gains tax inclusion rate and the elimination of the digital services tax.

In September, Jacques said the fiscal path was “unsustainable” and the country's finances were on the “precipice.”

Meanwhile, one of Jacques' predecessors, Kevin Page, publicly disputed the NBO's interim assessment of Canada's financial health, arguing that Canada was “in a pretty good financial position” compared to other rich countries.

“It is not shocking that the deficit will increase because the economy is slowing and we have obligations to NATO. In my opinion, this is a sustainable process,” Page said.

International Monetary Fund Managing Director Kristalina Georgieva said in October that while some G7 countries have “serious financial problems,” Canada is not one of them.

Conservative Leader Pierre Poilievre said he wants Carney to present what he calls an “affordable budget” with much less government spending.

Poilievre has long criticized Ottawa's growing debt load, saying it contributes to inflation.

As debt grows, so do debt servicing costs, meaning that a larger portion of every dollar raised goes to repay Canadian bondholders.

Speaking to reporters Sunday at a food bank in suburban Ottawa, Poilievre said the government has justified large deficits in the past by saying it would encourage private sector investment, but that simply hasn't panned out.

“It’s just more spending, more debt, more taxes, more inflation, more of the same,” Poilievre said of Carney.