Finance Minister François-Philippe Champagne holds up the federal budget in the House of Commons on Tuesday.Blair Gable/Reuters
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 net new spending of $89.7-billion over five years and roughly $56-billion in savings from cuts to the public service and program spending. Mr. Champagne said the budget could spur $1-trillion of investment.
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 is 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.
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.
Send us your questions about the new federal budget
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.
The Liberals are three seats shy of a majority in the House of Commons. 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.
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
Mr. Champagne framed the budget in that context Tuesday as he delivered his remarks with Mr. Carney by his side.
“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.
Scotiabank economist Rebekah Young said the budget is ambitious but not transformative unless the private sector steps up to the plate to take advantage of the tax breaks to invest in infrastructure and other nation-building projects.
Mr. Carney and Mr. Champagne head into the House of Commons with the budget document.Justin Tang/The Canadian Press
“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.
The trade dispute has hit the aluminum, steel, auto and lumber sectors the hardest but the ripple effects are now being felt throughout the economy.
“To weather the storm of uncertainty, we will not lower our sails,” Mr. Champagne said. “Quite the opposite. We will raise them – to catch the winds of economic change.”
Public service cuts planned
The budget pledges $56-billion in cuts over five years to government spending, which the budget says will shrink the public sector by about 16,000 full-time equivalent positions. That includes cutting 1,000 executive jobs over the next two years, with some through attrition which the government is hoping to speed up.
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.
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.
Tories, Bloc won’t support budget, NDP may let MPs abstain
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.
Conservative Leader Pierre Poilievre told the Commons that his MPs would not vote for the budget as did Bloc Quebecois 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 Davis 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 a few floor-crossers to survive the vote. At least one Conservative MP has indicated he may vote with the government.
Nova Scotia MP Chris d’Entremont resigned from the Conservative caucus and the party on Tuesday. He informed Mr. Poilievre in a letter viewed by The Globe.
Mr. d’Entremont submitted his letter after telling Politico that he was considering crossing the floor to the Liberals.
Ahead of the budget release, the government had announced some new affordability measures, including making the national school food program permanent. A slice of the newly announced $51-billion Build Communities Strong Fund will be devoted to health care infrastructure, which is a priority for both the Bloc and NDP.
That fund also proposes immediate support for 23 local projects – some of which sit in ridings held by opposition MPs.