Federal Finance Minister François-Philippe buys new shoes for the budget at the Boulet boot factory in St-Tite, Que., on Monday.Jacques Boissinot/The Canadian Press
Tuesday’s federal budget will announce a $50-billion fund for local infrastructure, including housing, transportation and a specific stream for health infrastructure such as hospitals and emergency services, a senior government official told The Globe and Mail.
The source said the budget will also lay out a plan to retire aging military fleets as a way to save money on maintenance costs while the Canadian Forces wait for a wide range of new equipment that will be purchased through billions in increased defence spending.
A second senior government official said the budget is expected to include up to $1-billion to attract high-quality talent and researchers from the United States and elsewhere.
The budget will also announce tens of billions in targeted savings, including scrapping a program to plant two billion trees across the country by 2031, according to a third senior government official.
The Globe is not identifying the officials because they were not authorized to comment publicly on the measures.
Prime Minister Mark Carney and his Finance Minister, François-Philippe Champagne, have long signalled that the budget will focus heavily on “investments” to spur economic growth, coupled with targeted savings aimed at reducing the cost of day-to-day government spending.
Those investments are expected to push the size of this year’s deficit well beyond the government’s previous forecasts, with economists projecting it could be in the range of $70-billion to $100-billion.
Focusing that new spending in areas such as housing and health care could help the minority Liberal government gain the support of at least one of the three opposition parties in the House of Commons and avoid a confidence-vote defeat on the budget.
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With respect to the $50-billion fund, to be called the Build Communities Strong Fund, two of the sources say it will cover a 10 year period and be funded in part by changes to the existing Canada Public Transit Fund. The budget will pledge to streamline transit funding to municipalities and provinces.
The third official said that while the focus of Tuesday’s budget will be on “investment,” it will also provide details on savings found in an expenditure review that Ottawa launched over the summer to find internal savings.
The second official said there is expected to be increased funding for the Business Development Bank, a Crown corporation that sharply hiked provisions for expected loan losses in its fourth quarter, reflecting the potential hit from U.S. tariffs on small and medium-sized businesses.
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Industry Minister Mélanie Joly has recently discussed increased funding for the Canadian Space Agency, the National Research Council and for quantum research.
Ms. Joly has also said the budget will aim to drive investment and spur job creation through Ottawa’s $13-billion Build Canada Homes agency, Buy Canadian policy and the new Defence Investment Agency.
Bay Street will be watching closely for new tax measures related to business investment, after Mr. Carney told reporters last month the budget will give Canada “a highly competitive corporate tax system.” The Liberal election platform promised several tax changes aimed at encouraging investment in manufacturing, clean energy, and research and development.
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In terms of the defence budget, the cost of repairing and maintaining aging military equipment has long been a concern raised in Auditor-General reports and by Canadian Forces leadership.
The Department of National Defence’s latest planning report made several references to the issue.
It said the degradation of readiness of the Royal Canadian Navy fleet presents “a significant challenge” to operational readiness. It also described the situation as “the growing gap in the material readiness of an aging combat fleet.”
The report says the Canadian Army is facing a “critical challenge,” with only 52 per cent of key systems considered serviceable. This affects fleets such as tanks and armoured fighting vehicles.
“The situation is attributed to underfunding of national procurement funds, aging platforms, obsolete components, project delays, and a shortage of technicians,” the report states.
A 2018 Auditor-General’s report raised concerns about the costs of maintaining Canada’s fleet of CF-18 fighter jets, which were purchased in the early 1980s.
Canada announced a plan in 2010 to buy 65 F-35 fighter jets to replace the CF-18s by 2020, but that project’s scope and timeline have shifted several times.
The federal government has committed to raising Canada’s defence-related spending to meet NATO’s new target of 5 per cent of gross domestic product. Canada’s current level of spending is around 2 per cent.
With respect to the two billion trees initiative, one of the officials said contracts are in place to plant nearly half of that target. Those contracts will be honoured, but the remaining funds will be reallocated to “more effective” climate and clean-growth programs.
The foothills of the Rocky Mountains, north of Calgary in 2021. The federal government’s budget will end a program that pledged to plant two billion trees by 2031.AMBER BRACKEN/The Canadian Press
The official did not say exactly how much would be saved by ending the program.
The trees program was first announced in 2021 as part of Canada’s plan to meet its climate targets. A 2023 report by the Commissioner of the Environment and Sustainable Development said the tree planting program was unlikely to meet its emission reduction targets, or meet its 2031 planting target, unless significant changes are made.
In an update released last year, Natural Resources Canada said more than 157 million trees had been planted. It also said that the government had agreements signed or under negotiation to plant an additional 716 million trees.
Mr. Carney has said the budget will also include details about a new federal climate competitiveness strategy.
David Wallis, policy and campaign manager for reforestation with Nature Canada, said the cancellation of the tree-planting program is disappointing and raises concerns about what more the budget will reveal in terms of new climate policies.
“This certainly is a worrying signal on what will be contained within the budget,” he said.
With a report from James Bradshaw