Prime Minister Mark Carney’s government unveiled a blueprint Tuesday to counter rising U.S. protectionism and bolster a sluggish economy through tax incentives to spur corporate investment, targeted federal spending and cuts to the public service.
Mr. Carney’s first budget, presented to the House of Commons by Finance Minister François-Philippe Champagne, lays out new spending of more than $140-billion over five years, but after factoring in $56-billion in savings from cuts to the public service and program spending, net new spending is $89.7-billion over five years. Mr. Champagne said the budget could spur $1-trillion of investment.
Federal budget basics
Here are the highlights of the Carney government’s plan, and how they might affect your personal finances.
Although Mr. Carney had said two weeks ago the budget would be “generational,” it did not make major changes to the tax system. Much of the expected investment depends on private-sector participation.
The budget says the 2025-26 deficit will be $78.3-billion and is projected to drop to $56.6-billion by 2029-30.
Tuesday marks a milestone moment for Mr. Carney’s minority government, which has been under pressure to strike a trade deal with the Trump administration to end the tariffs upending Canada’s economy, while also moving faster to address the everyday economic concerns of Canadians.
Finance Minister François-Philippe Champagne holds up the federal budget in the House of Commons on Tuesday.Blair Gable/Reuters
Spending plan marks a shift from Trudeau Liberal government
The budget is focused on corporate measures and infrastructure spending and contains few of the pocketbook promises or the sweeping new social programs that were often centrepieces of the previous Liberal government led by Justin Trudeau.
The Prime Minister was a critic of government spending under Mr. Trudeau.
Mr. Carney has been clear with the opposition parties that he expects their support for his inaugural fiscal plan. Without the backing of at least some opposition MPs, the budget won’t pass and the government could fall.
Send us your questions about the new federal budget
The Liberals had been three seats shy of a majority in the House of Commons before Nova Scotia MP Chris d’Entremont announced Tuesday he is leaving the Conservative caucus and will be joining the Liberals.
Mr. Carney won the April federal election by leveraging his past as a central banker to argue he was best placed to rebuild Canada’s economy in the face of U.S. President Donald Trump’s reshaping of the global economic system.
Mr. Champagne framed the budget in that context Tuesday as he delivered his remarks with Mr. Carney by his side.
Stephanie Levitz, The Globe's senior reporter in Ottawa, details some of the key elements of Prime Minister Mark Carney's first federal budget.
The Globe and Mail
“The rules-based international order and the trading system that powered Canada’s prosperity for decades are being reshaped – threatening our sovereignty, our prosperity and our values,” Mr. Champagne said.
The budget turns to the private sector to carry some of the load of rejigging the economy, creating jobs and easing the affordability crisis for Canadians.
It proposes something the government calls a productivity super deduction – a set of tax incentives covering all new capital investment to allow businesses to write off a larger share of the costs right away.
The deduction is part of a package of other tax measures to entice Canadian and international businesses to massively boost their spending on infrastructure projects linked to natural resource development, artificial intelligence, scientific research and energy conservation equipment.
“This budget will unleash $1-trillion in total investments over the next five years. That would boost average wages by $3,000 per year,” Mr. Champagne predicted. “It would add $15-billion to federal revenues that can support health care, lower your taxes and pay down Canada’s debt.”
One tax break is an end to the luxury tax on planes and boats – which Mr. Champagne told reporters earlier Tuesday cost too much to collect – while at the same time the government is promising to cut foreign aid by $2.7-billion over four years and instituting new requirements for refugees to pay a portion of their supplemental health care costs.
The budget says the tax measures will make Canada more competitive at a time when Mr. Trump’s own One Big Beautiful Bill Act is luring investment to that country through its generous corporate incentives.
Mr. Carney and Mr. Champagne head into the House of Commons with the budget document.Justin Tang/The Canadian Press
Bank of Nova Scotia economist Rebekah Young said the budget is ambitious, but not transformative unless the private sector takes advantage of the tax breaks to invest in infrastructure and other nation-building projects.
“The infrastructure, trade corridors and military are likely to add half a percentage point of GDP yearly over the horizon,” she said. “It would be transformational if the private sector and provinces showed up and collaborated. To get to $1-trillion over five years they need the other parties.”
Private-sector economic forecasters have told the government they expect gross domestic product growth of 1.1 per cent in 2025 and 1.2 per cent in 2026 – down sharply from what was predicted in the fall of 2024. Inflation is forecast to be 2.4 per cent in 2025.
Public service cuts planned
The budget pledges $56-billion in cuts over five years to government spending. By 2028-29, the budget projects a public service work force of 330,000, a reduction of 40,000 over a peak in 2024.
The program spending cuts include major changes to medical cannabis benefits reimbursement and federal pension indexing, and many lower-level tweaks such as having diplomatic outposts merge with those of other countries and ending a program that gave cabinet ministers access to souvenirs to give as official gifts.
While the Carney government is promising to spend nearly $82-billion to rebuild and rearm the military, it is also retiring aging military fleets to save money while the Armed Forces wait for a wide range of new equipment.
There are also measures to attract high-quality talent and researchers from the United States. The Trump administration has cut university research funding and is making it difficult for foreign scientists to work in the U.S.
Mr. Carney undid a few of Mr. Trudeau’s signature policies immediately after the federal election, including ending the consumer price on carbon. The budget chops down another: a promise to plant two billion trees.
The budget also signals potential change to the cap the Trudeau Liberals placed on emissions from the oil and gas sector, saying other climate measures it wants to put in place to reduce emissions could render the cap unnecessary.
Removing the cap has been one of the long-standing requests from the federal Conservative Party, led by Pierre Poilievre, which also demanded the government hold the deficit at $42-billion.
Andrew Coyne: After all the hype, Carney’s first budget fails to meet the moment
Mr. Champagne said that approach was misguided in the current environment and would mean eliminating social programs and all the capital investment Canada needs.
“We choose a different path,” he said.
The Conservatives, Bloc Québécois and New Democrats have all attacked Mr. Carney in recent days for his record in office thus far, saying he’s failed to sign a new trade deal with Mr. Trump for Canadians or bring down the cost of living.
Mr. Poilievre told the Commons that his MPs would not vote for the budget as did Bloc Québécois Leader Yves-François Blanchet.
“The Liberals have introduced the most costly and largest budget deficit in Canadian history outside of COVID. The cost of this Liberal budget will drive up the cost of food, housing and everything else Canadians buy,” Mr. Poilievre said. “Conservatives will not be able to support this budget.”
Interim NDP Leader Don Davies said his party will study the budget and consult with Canadians. He did not rule out allowing some of his seven MPs to abstain from the confidence vote and prevent an election.
If all NDP MPs decide to vote against the budget, the Liberals will need two more floor-crossers to survive the vote.