The Carney government’s first budget falls short in ways both big and small.
One way that is both big and small is the length of the document.
Clocking in at 493 pages, it is hard to wrap one’s head around the budget’s central message. Indeed, it is even difficult to locate the budget proper — the part with actual revenues and expenses listed — within the poorly indexed document.
If you’re lucky enough to stumble across these pages, you’ll see they are disappointingly vague.
Our editorial team was not able to identify, for example, how much spending is allocated to dental care, a program the government said in its 2023 budget would cost $13 billion over five years. In this budget, it is not shown as its own line item or explained with any specificity.
The same goes for pharmacare, a program projected in the 2024 budget to cost $1.5 billion over five years.
Similarly, one of the largest single expenses in the budget, labelled “Elderly benefits,” does not break out major spending categories. It shouldn’t be too much to ask that Old Age Security and the Guaranteed Income Supplement — which will collectively cost $83.1 billion this year — be listed separately.
The budget’s vast size and aimlessness help explain why much of the reporting and commentary that has followed its release is similarly difficult to digest. Numbers are presented in a kind of scattershot fashion; huge in size, but meaningless for lack of context.
This leads, then, to the budget’s biggest failing: It does not articulate a clear vision for addressing Canada’s profound economic challenges.
One important caveat to this, we’d note, is defence spending. The Carney government deserves credit for finally putting money where Canada’s mouth has been for years. Since 2014, Canada has said it will spend two per cent of GDP on defence, as required by NATO. Not until this year have we actually done so.
(Unfortunately, one could reasonably argue that Canada would not have made this giant leap forward had it not been for President Trump’s forceful rhetoric.)
But aside from this substantive investment, there is not much to praise.
Take housing, an area where the government has said it is making transformational investments.
Mike Moffatt, Canada’s foremost housing policy expert, wrote yesterday that “disappointing is too weak a word” to describe the 2025 budget.
“I went into the budget lockup expecting to be disappointed, but I had inadequately prepared myself for how disappointed I would be,” he said.
The new Build Canada Homes agency received about half of what it had been promised in the Liberal platform, he notes. The budget makes no mention of a Liberal platform commitment to introduce a Multiple Unit Residential Building (MURB) tax incentive.
And Ottawa has softened its stance on getting provinces to lower their development charges — a key driver of housing unaffordability — saying only that they will have to “substantially reduce” these charges to qualify for federal funding. This is instead of having to halve them, as previously promised.
For Moffatt, the biggest surprise is that the budget signals a shift away from the rhetoric of boosting housing supply to one of curbing housing demand by reducing immigration.
“In a striking departure from past rhetoric, the Budget frames housing affordability improvements as stemming from lower immigration targets and reduced population growth, asserting that Ottawa is ‘taking back control’ of immigration,” he wrote.
But housing is not the only area in which the budget fails to meet the moment.
In early October, former Bank of Canada governor David Dodge and former TD Bank chief economist Don Drummond wrote that Canada’s rapidly worsening economic outlook called for major changes, including “broad-based incentives to innovate and reinvest.”
The budget does not include these types of incentives. It proposes no major tax reforms that might incentivize a significant change in investment or innovation levels. Some people may argue a new accelerated depreciation measure could be significant, but even this industry experts are billing as modest.
In the main, the budget resorts to the sorts of tried and tired tax practices that make the tax code ever more cumbersome to understand and administer.
Take, for example, a new temporary tax credit for personal support workers worth up to $1,100. This will be available only in select provinces and in place for just five years. The auditor general recently disclosed that the Canada Revenue Agency advises individual taxpayers correctly just 17 per cent of the time. Our sympathies to a personal support worker who moves mid-year from one province to another and calls the CRA for guidance.
What makes all this especially disappointing now is not only the increasing urgency of Canada’s economic situation, but also the promise that Canada’s new prime minister was going to offer something different.
Mark Carney was the leader Canadians were happy to elect on the promise that he, with his impeccable credentials, would know what needed to be done and actually do it.
The letdown is so great in part because the expectations were so high.
Paul Martin is best remembered for his 1995 budget, but this was actually the second one he brought in as finance minister. Perhaps we can hope for better on Carney’s second go around — provided his government lasts that long.
