Prime Minister Mark Carney, centre, with Finance Minister François-Philippe Champagne on Tuesday tabled the government's first budget, which calls for more than $140-billion in new spending.Spencer Colby/The Canadian Press
Federal budget basics
Here are the highlights of the Carney government’s plan, and how they might affect your personal finances.
The Liberal government survived a second confidence vote related to the budget Friday, but ministers were challenged in Question Period after Fitch Ratings said Ottawa’s latest spending plan weakens Canada’s credit profile.
The ratings agency issued a statement Thursday afternoon that said the budget “underscores the erosion of the federal government’s finances” and that “persistent fiscal expansion and a rising debt burden have weakened its credit profile and could increase rating pressure over the medium term.”
Fitch downgraded its credit rating for Canada from AAA to AA+ in June, 2020, during a period of record deficits during the pandemic.
The two other major credit rating agencies, Moody’s and S&P Global, have maintained their AAA rating for Canada.
Conservative MP Mike Lake raised the issue Friday.
“This has happened before, with crushing impact on Canadians,” he said, before referencing the federal cuts to health and social transfers in the 1990s. “Does anyone over there understand the gravity of this situation?” he asked.
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Natural Resources Minister Tim Hodgson responded.
“As somebody who spent much of his life in the banking community, let me tell him about the S&P and Moody’s ratings, which are triple A – the best in the entire world,” he said. “We’re doing just fine.”
John Fragos, a spokesperson for Finance Minister François-Philippe Champagne, responded to questions about the Fitch report by pointing to recent comments from the International Monetary Fund, which said Canada’s finances are among the best in the G7.
The Liberal government survived its first confidence test on the budget Thursday evening. It survived a second confidence vote Friday afternoon, in a 306-30 vote. The third and final vote on the motion to approve the budget is expected to take place Nov. 17.
The House of Commons voted Friday on a Bloc Québécois motion calling on MPs to reject the Liberal budget because it “will hurt Quebec” by failing to act on a list of Bloc priorities, including higher health transfers and Old Age Security payments, as well as stronger action to combat climate change.
NDP MPs supported the Bloc motion, but it was defeated because Conservatives voted with the government.
Shortly after the vote, NDP interim leader Don Davies said in a statement that his party backed the motion because it supports increased funding for health care, seniors and climate action.
“We have not yet made a determination on how we will vote on the main budget on Nov. 17. We continue to engage with working Canadians to assess the impact of the budget on their lives,” he said.
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The process of approving the budget involves debate on a government motion, as well as on an amendment and a subamendment.
Bloc Leader Yves-François Blanchet moved the amendment. The Bloc said they were able to do so because Conservative Leader Pierre Poilievre forgot to move an amendment Wednesday after his budget speech.
The Conservatives moved a subamendment Thursday that proposed to replace the Bloc’s wording with the Official Opposition’s priorities. That Conservative motion was defeated in a 198-139 vote Thursday evening.
Tuesday’s budget outlined a plan for more than $140-billion in new spending over five years, partly offset by about $60-billion in internal savings over the same period.
The debt as a percentage of GDP will rise slightly to 43.1 per cent next year, up from 42.4 per cent in the current fiscal year, and will stay around that level over the following three years.
While Ottawa frequently boasts that its federal net debt-to-GDP ratio – which takes into account assets held by government pension funds – compares well with international peers, the Fitch statement highlights Canada’s gross debt.
Fitch said Canada’s general government gross debt, which includes other levels of government, will reach 98.5 per cent of GDP by 2027, up from 88.6 per cent in 2024.
It said this is nearly double the forecast median of other countries with AA ratings.
The ratings agency also pointed out that the budget moves the government away from past pledges to reduce its net debt-to-GDP ratio, and to keep the deficit at no more than $40.1-billion.
Instead, the federal government now says it will reduce the deficit-to-GDP ratio and balance its operating budget.
“Given that these rules are non-binding and prior versions have been ignored, federal finances run a high risk of further deterioration,” the Fitch report said.
Prime Minister Mark Carney promoted his government’s budget Friday to a business audience in Toronto, saying the plan is about making “bold” investments in the country’s future.
Mr. Carney was asked by a moderator about concern that the added debt means an added cost for future generations.
The Prime Minister said Canada is in a strong fiscal position.
“We’ve got to be careful, and we will be,” he said. “Our risk is the economy doesn’t grow fast enough.”
He said the budget investments will create jobs and future growth for younger Canadians.
With a report from James Bradshaw in Toronto