On November 4, the new Liberal government tabled its first budget in the House of Commons. The nearly 500-page document lays out Mark Carney’s plan to supposedly “build Canada strong” in a time of profound political and economic transformation. Yet a closer look shows a short-sighted, inadequate and destructive plan that misses the mark in every area where it counts.
Soon after Carney was elected, the government announced that almost all government departments would be required to cut 15% of their budgets by 2028/29. Budget 2025 outlines what that will look like: staff cuts that will put 40,000 public servants out of work over the next four years, as well as cuts to programs and departmental transfer payments. These cuts will place further strain on the delivery of important government services.
The budget includes no plans or funding to further develop programs like pharmacare, dental care and child care. It leaves major funding and policy gaps in EI, health care, child care, and long-term care, and prioritizes the demands of corporate lobbyists. The budget embraces artificial intelligence, fossil fuels and military spending in a way that gives huge benefits to American business interests. Carney promised transformative change, but gave us tweaks and half measures at best.
Since his election campaign, Carney has been repeating the slogan “spending less to invest more.” This catchphrase is exemplified by a new federal budgeting process called the “Capital Budgeting Framework.” This new framework separates government spending into two categories: operational spending and capital investment.
Operational spending includes the kind of spending that most people would associate with the government: transfers to individuals, funding provided to provinces for health and social programs, and the costs of running government operations and services, including salaries and benefits.
The second category, capital investment, is a bit more complicated. In the broadest terms, it includes any government spending or initiatives that build Canada’s “capital stock” – meaning assets such as roads and bridges, mines and pipelines, machinery, and buildings ranging from factories to hospitals; the kinds of investments that are expected to encourage economic growth.
In the current budget, capital investment also includes things like tax breaks aimed at attracting business investment in Canada, and other efforts to make Canada’s economy more “competitive,” including by weakening our climate strategy or blindly embracing artificial intelligence.
Under the new capital budgeting framework, subsidies to fossil fuel executives, real estate developers and other big business owners are presented to the Canadian public as investments that will benefit the rest of us in the long run. However, the numbers just don’t add up.
In the weeks leading up to budget day, Mark Carney promised that his government would “balance the operating budget in three years’ time” — a misguided priority with a hidden cost that we exposed in the Fall 2025 edition of Economy at Work. The new capital investment distinction is how Carney plans to “balance the budget,” by balancing operational spending through cuts, and creating a capital investment deficit by subsidizing billionaires.
The problem with this plan is that it overlooks the importance of operational spending and overstates the economic benefits of capital investment for working people. By focussing its spending priorities on building infrastructure and attracting business investment, the government reduces its capacity to invest in workers and high-quality public services. For example, the new budget focus on how capital investment might allow a province to build a new hospital, in partnership with a private development company. But with no increase in operational spending, there might be no funding to hire more health care workers to staff it.
As previously mentioned, Carney’s Liberals do not consider the Canada Health Transfer and Canada Social Transfer, funding that is transferred to provinces and territories for health care and social programs, to be investments within their new framework. It’s not surprising, then, that Budget 2025 ignores repeated calls to address the strain on health care, social services and education by increasing transfer payments, which are not keeping up with inflation or population growth.
Perhaps the only impressive thing about Carney’s plan in Budget 2025 is that it finds a way to increase government spending in a way that has sent the Conservatives into a frenzy, while delivering massive cuts to government programs, and not investing any new money into areas where working families need it the most.