With so much on the line, the newly elected federal government has tabled a budget that, in many ways, could pass as a Conservative budget. .
This budget spends two and a half times more money on the military than what the Conservatives allotted in their spring election platform, it cuts a similar amount in government programs than the Conservatives campaigned on, and it delivers half of the middle- and upper-income tax cut the Conservatives promised.
Yet the Conservatives have already signalled they won’t support this budget—even as it reflects a lot of their, and Donald Trump’s, priorities. The Bloc laid out its list of demands, which includes major increases in Old Age Security, but no increases in seniors’ supports are in this budget. Some of their provincial transfers for infrastructure might overlap several budget items.
This leaves the minority federal government in a position of having to eke out enough supportive votes from the Green Party and the seven-person NDP or risk being plunged into a pre-Christmas election campaign.
Burning the olive branch
The NDP, small as it is, may well hold the cards here. But this budget burned whatever olive branch it might have extended to the NDP: it doesn’t include pharmacare expansions or big changes in CBC funding beyond this year.
However, these are only the headline items. This budget contains a poison pill of deep funding cuts, the extent of which hasn’t been witnessed since the Harper cuts of 2011 to 2014. Both the planned cuts in this budget and the cuts suffered under Harper amounted to a nine per cent loss in federal public sector jobs.
There is a real possibility that this budget won’t pass. Last year’s fiscal update in November brought down the Trudeau government.
In the end, what will matter for this budget is whether there is enough for another party to hold their nose and support it.
Stealth cuts
We’ve done plenty of research prior to this budget trying to gain some clarity on the cuts that are coming, from the job losses, to the transfers at risk, to specific programs that might be “sunset” with little fanfare. We now have more detail about how this will happen and have refined our estimates accordingly.
This is, indeed, an austerity budget, for some. For defence though, this is a historic expansion.
The feds plan to cut $57 billion in programs over five years. They didn’t campaign on such deep cuts, and it is 40 per cent more than the cuts proposed in the Liberal’s spring election platform. It is, in fact, roughly on par with what the Conservatives wanted to cut in government spending from their platform.
These are massive cuts and will be felt by Canadians of all stripes as programs disappear. It will mean job losses that we now estimate at 40,000 people between 2024 and 2028. Over 10,000 of those cuts have already happened, with the remainder of the 30,000 jobs to be cut by 2028.
An important nod to advocates who worked hard at lobbying against cuts this summer: their efforts protected additional departments from the 15 per cent cuts. Initially, it was only the Royal Canadian Mounted Policy, National Defence and Canada Border Security Agency that would be protected from cuts; they only needed to find two per cent in savings.
The umbrella of protection has been expanded to include Women and Gender Equality (WAGE), the Indigenous departments of Indigenous Services Canada (ISC) as well as Crown Indigenous relations (CIRNAC). The academic granting agencies of Natural Sciences and Engineering Research Council (NSERC), the Social Sciences and Humanities Research Council (SSHRC) and the Canadian Institutes of Health Research (CIHR) were also protected. These departments are largely transfer departments who have small staff complements relative to their expenditures, as most of their money funds basic services in First Nations communities and academic researchers, respectively.
Surprisingly, there is a department by department breakdown of the cuts in this budget, which will require further study—although only on the expenditures and not the job impacts. The details of program impacts do float up in this budget, but, for the most part, cuts are from efficiency and other unhelpfully vague descriptions in the budget.
Here are the programs and services we do know will be cut:
- Pension benefits for disabled RCMP personnel.
- International assistance will be cut by $800 million a year, leaving Canada’s development-to-GDP ratio from its current dismal 0.32 per cent of GDP to 0.26 per cent by 2028. For context, former Prime Minister’s Lester B. Pearson’s goal was 0.7 per cent of GDP, but that has been left on the cutting floor in this budget.
- Canada Greener Homes Grant will be further cut back, although the specifics are light.
- Future expenditures on the decade-long two billion tree planting program will end.
- The Canada Public Transit Fund is cut, although several new infrastructure funds could step in.
- Citizenship and Immigration Canada will limit eligibility for economic immigrants to integration programs.
Beyond the cuts, some welcome budget decisions
There are some pieces to celebrate in this budget.
The extension of the school food program in 2029 will make the program permanent, although it was already funded until then. The government simply chose to extend it.
The new funding for Women and Gender Equality Canada ($660.5 million over five years) will mean fewer women’s programs will be quietly defunded through sunsetting. As well, its protection from further cuts likely means gender equality remains a priority for the federal government.
The Build Canada Homes office continues to hold promise to get the federal government directly involved in affordable housing again, although details have remained sparse.
Fossil fuels the big winner of new federal climate plan
The budget contains the federal government’s new Climate Competitiveness Strategy, but it is a “climate” plan in name only. No new spending is directed toward emission reduction programs and at least $3 billion in existing climate programs will be cut as part of the broader public service reduction, including money for tree planting, home energy efficiency and public transit.
The budget is a win for the fossil fuel industry on multiple fronts—and a huge loss for tackling the climate crisis. The budget abandons the government’s commitment to implement a cap on emissions from the oil and gas sector. It promises to roll back federal greenwashing legislation that currently prevents fossil fuel companies from spreading misinformation about the environment. And the budget even includes new subsidies for the liquefied natural gas industry.
The creation of a $40 million Youth Climate Corps will come as small consolation for environmental advocates. It is a welcome program that will create good, green jobs for young people, but it is far too little money to make a meaningful dent in youth unemployment.
The sound of silence
The budget was silent on several key issues.
Poverty reduction: A keyword search shows poverty was mentioned only 10 times, eight of which are in the impact report following the budget and revealing that the government isn’t on track to hit its 2030 target of cutting 2015 poverty levels in half. There is a new $150 supplement to cover costs of obtaining a disability tax credit certificate, a welcome recognition of this bottleneck in the system, but the inadequate support levels remain unchanged.
Income inequality: The middle- and upper-income tax cut in this budget will worsen the income gap in Canada, sending an extra $400 to Canadian tax filers in the middle- and upper-parts of the income spectrum and providing nothing to households struggling to afford food and rent.
Child care: While highlighting those aided by the $10-a-day child care plan, there is no additional funding for rapid non-profit and public space expansion, a measure sorely needed in the sector.
Health care: There is a new health care infrastructure fund that sits under the broader generational infrastructure fund. The focus in this budget is on physical capital—think building hospitals, emergency rooms, urgent care centres. It will be worth $5 billion over three years and the provinces will have to match it. The focus on infrastructure as capital—not also social infrastructure—is very much a focus of this government. Generally, the challenge in health care is staffing, not the lack of buildings. Adequate pay and retention for nurses and personal support workers are among the main drivers of long emergency waits. An expanded emergency room fixes the wrong problem, although it does count as capital.
Long-term care is completely missing in this budget. The provinces and territories could possibly use the health infrastructure to fund this. In long-term care, infrastructure, in terms of new rooms, is definitely an issue, but someone has to staff those rooms. This is the problem with an exclusive focus on capital. A building without staff isn’t a long-term care home.
Don’t fall for the deficit and debt fearmongering
Yes, the deficit is bigger than projected, in large part due to $60 billion in new military spending over the next five years and a $27 billion tax cut for middle- and upper- income earners. While it would be preferable to spend that money on services that will benefit Canadians rather than feed into the military industrial complex, the deficit is not historic in its size, relative to our economy.
For context, the federal government ran deficits of two to four times this size every year from the 1970s through the 1990s, compared to the size of our economy. The relative size of the debt is smaller today than during the pandemic, as strong economic growth during the recovery whittled down the federal debt. The debt-to-GDP ratio will remain below where it stood between 1983 and 2002.
We always have to remember that if the federal government has a deficit, then it means some other sector has a surplus. We need to understand which sector that is and, more importantly, if it’s desirable. In this case, the surplus will likely be created for high-income households and large, foreign-owned companies benefiting from defence spending—they are on the other side of this deficit.
This didn’t have to be the case. The government could have provided more support for unemployed workers through better Employment Insurance (EI) or beefed up one of the various low-income transfers. It could also have raised taxes on the rich in order to protect and improve public services.
That didn’t happen in this budget. Instead, this budget is like an iceberg: The ice you see floating on top looks like the government is betting big on major physical infrastructure and defence spending but it’s what’s hidden below that cuts deep. And this budget makes it difficult to see exactly what sits below the waterline. It might plunge Canada back into another federal election—or force the federal government to make a deal with one of the parties.
Either way, this is a budget for the history books. If it survives.
