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In Budget 2025, pocketbook issues such as affordability are front and center, in addition to funding for housing, infrastructure and defense, as well as investments to further Canada’s relationship with its trading partners. Last July, François-Philippe Champagne and Treasury Board President Shafqat Ali (Brampton Centre, ON) instructed the Carney cabinet to pinpoint a plan reducing operational spending by 7.5% for the 2026-2027 fiscal year. It’s worth noting that the day-to-day operational costs of the government have been growing at an average rate of 9% per year including bureaucratic salaries, maintenance costs, and grants to external entities.
These measures will serve to offset the defense spending increases, as Mr. Carney has committed to allocating 2% of Canada’s GDP to this sector, as per NATO targets. However, Canada’s deficit is still projected to grow to more than $92 billion in 2025. All things being equal, Canada would still keep a favorable debt-to-GDP ratio, especially in the global context.
Historical Outlook
Mr. Carney’s plan to overhaul government spending has been heralded as being the country’s most ambitious undertaking of the sort since Jean Chrétien’s Program Review. In fact, comparisons to that era can easily be drawn; whereas Chrétien had to contend with an ever-growing federal deficit in the mid-1990s and Mr. Carney has to face U.S. tariffs, it is fair to say that these are both examples of national crises in their own right. As the adage goes: drastic times call for drastic measures, and so Chrétien downsized employee headcount in the public service by 19% from 1994 to 1999. However, he had also delivered the first budgetary surplus in 28 years by the 1997-1998 fiscal year.
All this to say, although it appeared to have achieved its desired outcome, it also came at the cost of public sector jobs. With this historical outlook in mind, Mr. Carney will need to be cognizant of the ramifications of his fiscal policies on government workers. To that end, the Nepean MP pledged not to reduce federal transfers to provinces, while also keeping1 flagship social programs from the Trudeau era (i.e., child care, pharma care and dental care), and relying on attrition rather than layoffs in the public sector.
Coalition-Building
Comparisons with the PM from Shawinigan end when factoring current party standings. Unlike Mr. Chrétien, Mr. Carney leads a minority government, which means he will need to find opposition parties willing to vote in favour of his party’s fiscal plan. As budgets are a confidence matter2, doing as such will guarantee the survival of his own government (at least until the next confidence vote).
With this in mind, coalition-building will likely force the Liberals to compromise. For instance, when Jagmeet Singh led the NDP, he supported Justin Trudeau’s Liberal Party of Canada (LPC) on confidence matters, but the Liberals would have to work towards enacting some to the NDP’s priorities (i.e., pharmacare and dental care) in return. Although the fourth-largest party in the House of Commons has often been viewed as the Liberals’ most natural partner, developments such as Singh’s decision to pull out of the agreement with the LPC, has jeopardized the relationship.
To that end, current NDP Leader Dan Davies (Vancouver Kingsway, BC) met with Prime Minister Mark Carney in late September to discuss his party’s priorities. Davies stressed the importance of stemming the recent uptick in job losses amidst U.S. tariffs and lower immigration. He also warned against government spending reduction, which he fears may lead to austerity. However, Davies was rather tight-lipped on his party’s support of the Liberals’ budget, with some members of the governing party pointing out the futility in voting down the budget a few months after the 2025 election.
As for the other opposition parties, Bloc Québécois Leader Yves-François Blanchet (Beloeil—Chambly, QC) declared his opposition to the budget over the growing size of the deficit. Green Leader Elizabeth May (Saanich—Gulf Islands, BC) is set to meet with the Prime Minister, though the exact meeting date remained unknown as of early October. As for the Conservative Party, it will most likely vote down the budget, as is convention with the Official Opposition.
As parties currently stand in the 45th legislature, Liberals are only three seats shy of forming a majority government, holding 169 out of 343 seats. They must therefore find the support of at least one opposition party with at least three MPs, so this excludes the Green Party’s lone MP. As such, they need someone. Barring floor crossings from the NDP (or any opposition party for that matter), or if vacancies arise and the Liberals win additional seats, they will need seats.
At any rate, the Liberals will certainly need to be disciplined when unveiling Budget 2025. It’s no secret that implementing a federal budget is a balancing act between various competing interests. In a minority parliament, seeking alliances with different parties just adds a layer of complexity as one political miscalculation can result in the Carney government’s demise.
Edited by Catriona Hayes Morris
The argument defended in this article is solely that of the author and does not reflect the position of the McGill Journal of Political Science, the Political Science Students’ Association, or the McGill Department of Political Science.
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- Limiting rather than cutting public service spending was a key electoral promise of the Carney Liberals. ↩︎
- In Canada’s parliamentary system, both the Prime Minister and the Cabinet are answerable to the House of Commons. In order to stay in power, they must command the approval of a majority of MPs (50%+1). ↩︎
