Our readers’ biggest questions about the federal budget, answered

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On Nov. 5, deputy Ottawa bureau chief Bill Curry, economics reporter Mark Rendell and reporter Jason Kirby answered reader questions on Mark Carney’s first budget as prime minister, and what it means for Canadians.

Both Mr. Carney and Finance Minister François-Philippe Champagne billed the new budget as a “generational” shift aimed at forcing a fundamental retooling of the Canadian economy, with a deficit amounting to $78.3-billion in the 2025-2026 fiscal year, and plans to reduce the amount of federal public service employees, increase defence spending and get the corporate world spending again.

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Readers asked about how the new budget could impact Canada’s private industries, how business leaders are reacting to it, and how the Liberal’s plans for next year could affect their livelihoods. Here are some highlights from the Q&A.

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The budget

Why do you suppose the government didn’t change the eligibility requirements for Old Age Security benefits?

Curry: It tends not to get much attention because it changes automatically, but seniors benefits are a substantial and fast-growing part of the federal budget. The budget shows the cost of seniors benefits like Old Age Security growing to $104-billion by 2029-30, up from $80.3-billion in 2024-25.

Advocacy groups like Generation Squeeze have argued the program is overly generous, particularly for higher-income seniors. The group calls for the benefits to be scaled back at incomes above $100,000 to help fund other priorities. The issue often prompts lively debate in The Globe’s letters to the editor and comment sections.

A recent change enhanced OAS benefits starting at age 75 and one of the Bloc Québécois’ main pre-budget demands was for that to be extended to seniors aged 65 to 74. The Bloc said this would cost $14.2-billion over five years. That price tag was likely too much for the government to swallow.

The government plans to cut 40,000 jobs in the public sector in the next five years. They project savings of $1.5-billion during that time and $82-million each year after that. How are these savings calculated?

Curry: The wording of that section in the budget was a bit unclear. In fact, the government is planning to spend $1.5-billion on buyouts, which will contribute to longer term savings of $82-million a year.

Some, such as former PCO Clerk Michael Wernick, had argued before the budget that buyouts would be a good idea. Otherwise, the cuts would have disproportionately affected younger workers, many of whom might be starting out with contract positions that are the easiest for departments to eliminate.

How does the current budget address the ongoing cost of the Canadian government’s reconciliation framework for First Nations?

Kirby: The budget had very little new to say on the question of reconciliation with Canada’s First Nations. It put an additional $2.3-billion over three years toward clean drinking water on reserves and boosted the Canada Infrastructure Bank’s target for investments in Indigenous infrastructure from $1-billion to $3-billion. Beyond those incremental changes, the budget mostly centred on “economic reconciliation” through its $1-billion Arctic Infrastructure Fund.

The Globe has regularly published articles about Canada’s lack of competition and productivity. To what degree do the measures in this budget balance the scales by encouraging competition and the growth of new businesses?

Rendell: Long before Trump started hammering the Canadian economy with tariffs, Canada has a problem with weak productivity (output per worker), which is closely tied to weak business investment in machinery, equipment, intellectual property, etc. It got so bad, the Bank of Canada called it an “emergency” last year.

The budget does contain a number of measures aimed at encouraging more business investment. The key one is what the government dubbed the “productivity super-deduction” – a set of seven tax incentives that allow companies to immediately deduct the cost of investments in machinery, equipment and buildings. Only two of these, however, are actually new. The others were announced in 2024 or are an extension of earlier tax incentives.

Why don’t I see anything in the budget targeted to support laid-off auto workers, steel workers, forestry and aluminium workers?

Kirby: Given all the talk in the lead-up to the budget about the pain workers in those sectors are experiencing, you weren’t alone in expecting the budget would have more new to say on the matter. Instead the government used the budget to remind people about measures it’s already announced, namely the $5-billion Strategic Response Fund Carney announced in September, temporary EI changes, liquidity measures to support impacted companies and funding to help sectors shift their exports away from the U.S. to other markets. Expect more such announcements depending on whether Trump targets other sectors or especially if the talks to renew the CUSMA (or USMCA) trade deal fall apart.

Any word on electric vehicles? Such as subsidies or getting China to build a factory here?

Kirby: It’s remarkable how little this budget had to say about EVs or batteries, both big topics in recent budgets. (By my count batteries got mentioned twice, versus more than two dozen times in the 2023 budget). The budget made no mention of subsidies coming back despite hints ministers have offered over the past few months. Watch in the coming weeks for the government to announce the outcome of its review of the EV sales mandate. Given the difficulty Canada is having holding on to automotive production, don’t be surprised if that mandate is scaled way back or shelved altogether.

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What it means for Canada

Why was this touted as a generational change? This doesn’t seem radical enough to truly boost our economy and drive business.

Rendell: We’ve been wondering that same thing ourselves! There’s always a gap between political rhetoric and what’s actually delivered. But this one seems particularly wide. That said, the budget is something of a break from the Trudeau era. It limits spending on operations, including a small cull of the civil service, and puts more money toward infrastructure, defence, tax incentives for business investment, etc. Is it a generational change? Probably not. But it is being seen by many economists and business commentators as a step in the right direction.

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In what ways did Donald Trump influence this budget?

Curry: Pretty hard to understate the President’s impact on Canada’s 2025 federal budget. The cover page is a cargo ship sailing through icy waters. Presumably, the implication is that those goods aren’t going south. The entire framing of the budget is built on the premise that the U.S. is no longer a reliable trading partner and Ottawa should fund port infrastructure and other projects that will help expand Canada’s trade with other markets.

I recently covered the Prime Minister’s pre-budget speech, where he pledged to double exports to non-U.S. markets over the next decade. That’s the plan. We’ll obviously be closely covering the details in terms of how it is implemented.

For me, it seems that the first budget tabled by the Carney government was underwhelming given the hype around it. Could the government have gone further with changing its tax policies, given the sense of disappointment coming from corporate Canada?

Curry: I had a chance to put a similar question to the Prime Minister, asking him to respond to reaction from some in the business community who said they were underwhelmed by the budget and felt it was “more of the same” and “a missed opportunity,” according to Desjardins economics.

“Look, this budget is a is a sea change in the approach for the government,” he said, before going through some of the programs and tax changes that he said will drive long-term investment.

“I’ve been around a lot of budgets. This is a very different budget. I have a different view than the one depicted,” he said.

The political history of major reforms to CPP (the Canada Pension Plan) and EI (Employment Insurance) show that they can be very controversial and drawn out. While smaller changes to EI and OAS do occur from time to time, CPP is a joint program with the provinces and territories and recently went through a significant expansion that took years to negotiate, so it’s probably unlikely that we’ll see more CPP changes any time soon.

The federal government is already paying over a billion a week of interest on their debt. How much will this debt increase over the next year if this budget gets passed?

Curry: Based on your question, I don’t think you’ll like the answer! Previous Liberal budgets used to promise to keep the debt-to-GDP ratio on a downward track. This budget makes clear that is no longer a fiscal target for the government. Instead, the debt-to-GDP ratio will rise to 43.1 per cent next fiscal year, up from the current 42.4 per cent. For context, the ratio was in the low 30s before the pandemic, spiked to 47.2 per cent during COVID-19 and had been trending downward since. The cost of servicing the debt will rise to $76.1-billion in 2029-30, up from 52.4-billion in 2024-25. The size of the federal debt will reach $1.6-trillion in 2029-30, up from the current $1.3-trillion. I recently wrote about Ottawa’s evolving fiscal targets here.

Looking ahead

How likely is it that this “generational” shift budget is really in anticipation of the end of CUSMA?

Rendell: Everything right now is being framed by the uncertainty created by Trump’s tariffs. The government is spending billions to support steel, aluminum, auto and lumber companies that have been hit by tariffs. And its push to build new trade infrastructure, and speed up the approval of resource projects and infrastructure through the major projects office, is tied to getting more products to non-U.S. markets. If CUSMA were to collapse next year – which is a real possibility, given Trump’s intransigence on tariffs and his comments about potential bilateral deals with Canada and Mexico replacing the trilateral deal – all these efforts to get resources out of the ground, to the coasts, and then on to overseas markets will only become more important.