Carney budget doubles down on Trudeau-era policies

From the Fraser Institute

By Kenneth P. Green and Elmira Aliakbari

The Carney government tabled its first budget, which includes major new spending initiatives to promote a so-called “green economy,” and maintains greenhouse gas (GHG)-emission extinction as a central operating principle of Canadian governance.

The budget leaves untouched most of the legislative dampers on Canada’s fossil fuel sector (oil, gas, coal) of the last 10 years, while pouring still more money into theoretically “green” projects such as additional (and speculative new types) of nuclear power, electrical transmission to service “green” energy production, continued tax credits for alternative fuels such as hydrogen, and more. Adding insult to injury, the budget discusses “enhancing” (read: likely increasing) the carbon tax on industrial emitters across Canada, and tightening controls over provinces to ensure they meet new federal tax targets.

Over the past decade, Ottawa introduced numerous regulations to restrict oil and gas development and again accelerate the growth of the green sector. Key initiatives include Ottawa’s arbitrary cap on GHG emissions for the oil and gas sector, which will restrict production; stricter regulations for methane emissions in the oil and gas industry, which will also likely restrict production; “clean electricity” regulations that aim to decarbonize Canada’s electricity generation; Bill C-69 (which introduced subjective ill-defined criteria into the evaluation of energy projects); and Bill C-48, known as the oil tanker ban on the west coast, which limits Canadian exports to Asian and other non-U.S. markets.

At the same time, governments launched a wide range of spending initiatives, tax credits and regulations to promote the green economy, which basically includes industries and technologies that aim to reduce pollution and use cleaner energy sources. Between 2014/15 and 2024/25, federal spending on green initiatives (such as subsidizing renewable power, providing incentives for electric vehicles and charging infrastructure, funding for building retrofits, and support for alternative fuels such as hydrogen, etc.) went from $0.6 billion to $23 billion—a 38-fold increase. Altogether, since 2014, Ottawa and provincial governments in the country’s four largest provinces (Ontario, British Columbia, Quebec and Alberta) have spent and foregone revenues of at least $158 billion to promote the green sector.

Yet, despite the government’s massive spending and heavy regulation to constrain the fossil fuel industry and promote the green sector, the outcomes have been extremely disappointing. In 2014, the green sector accounted for 3.1 per cent of Canada’s economic output, and by 2023, that share had only slightly grown to 3.6 per cent. Put simply, despite massive spending, the sector’s contribution to Canada’s economy has barely changed. In addition, between 2014 and 2023, despite billions in government spending to promote the green sector, only 68,000 new jobs were added in this sector, many of them in already established fields such as waste management and hydroelectric power. The sector’s contribution to national employment remains small, representing only 2 per cent of total jobs in the country.

Not surprisingly, this combination of massive government spending and heavy-handed regulation have contributed to Canada’s economic stagnation in recent years. As documented by our colleagues, Canadian living standards—measured by per-person GDP—were lower in the second quarter of 2025 than six years earlier, suggesting we are poorer today than we were six years ago.

But for Prime Minister Carney, apparently, past failures do not temper future plans, as the budget either reaffirms or expands upon the failed plans of the past decade. No lessons appear to have even been considered, much less learned from past failures.

There had been some hope that Carney’s first budget would include some reflection of how badly the natural resource and energy policies of the Trudeau government have hurt Canada’s economy.

But other than some language obfuscation—“investment” vs. “spending,” “competitiveness” of GHG controls (not economy), and the “green” energy economy vs. the “conventional” energy economy—this is a Trudeau-continuance business-as-usual agenda on steroids. Yes, they will allow some slight deceptive rollbacks to proceed (such as rolling the consumer carbon tax into the industrial carbon tax rather than eliminating it), and may allow still more carbon taxes to render at least one onerous Trudeau-era regulation (the oil and gas cap) to be rendered moot, but that’s stunningly weak tea on policy reform.

The first Carney budget could and likely will, if passed, continue the economic stagnation plaguing Canada. That does not bode well for the future prosperity of Canadians.

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Here’s what pundits and analysts get wrong about the Carney government’s first budget

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Carney budget continues misguided ‘Build Canada Homes’ approach

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Carney budget doubles down on Trudeau-era policies

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Here’s what pundits and analysts get wrong about the Carney government’s first budget

Published on November 6, 2025

Todayville

From the Fraser Institute

By Jason Clemens and Jake Fuss

Under the new budget plan, this wedge between what the government collects in revenues versus what is actually spent on programs will rise to 13.0 per cent by 2029/30. Put differently, slightly more than one in every eight dollars sent to Ottawa will be used to pay interest on debt for past spending.

The Carney government’s much-anticipated first budget landed on Nov. 4. There’s been much discussion by pundits and analysts on the increase in the deficit and borrowing, the emphasis on infrastructure spending (broadly defined), and the continued activist approach of Ottawa. There are, however, several critically important aspects of the budget that are consistently being misstated or misinterpreted, which makes it harder for average Canadians to fully appreciate the consequences and costs of the budget.

One issue in need of greater clarity is the cost of Canada’s indebtedness. Like regular Canadians and businesses, the government must pay interest on federal debt. According to the budget plan, total federal debt will reach an expected $2.9 trillion in 2029/30. For reference, total federal debt stood at $1.0 trillion when the Trudeau government took office in 2015. The interest costs on that debt will rise from $53.4 billion last year to an expected $76.1 billion by 2029/30. Several analyses have noted this means federal interest costs will rise from 1.7 per cent of GDP to 2.1 per cent.

These are all worrying statistics about the indebtedness of the federal government. However, they ignore a key statistic—interest costs as a share of revenues. When the Trudeau government took office, interest costs consumed 7.5 per cent of revenues. This means taxpayers were foregoing 7.5 per cent of the resources they sent to Ottawa (in terms of spending on actual programs) because these monies were used to pay interest on debt accumulated from previous spending.

Under the new budget plan, this wedge between what the government collects in revenues versus what is actually spent on programs will rise to 13.0 per cent by 2029/30. Put differently, slightly more than one in every eight dollars sent to Ottawa will be used to pay interest on debt for past spending. This is one way governments get into financial problems, even crises, by continually increasing the share of revenues consumed by interest payments.

A second and fairly consistently misrepresented aspect of the budget pertains to large spending initiatives such as Build Canada Homes and Build Communities Strong Fund. The former is meant to increase the number of new homes, particularly affordable homes, being built annually and the latter is intended to provide funding to provincial governments (and through them, municipalities) for infrastructure spending. But few analysts question whether or not these programs will produce actual new spending for homebuilding or simply replace or “crowd-out” existing spending by the private sector.

Let’s first explore the homebuilding initiative. At any point in time, there are a limited number of skilled workers, raw materials, land, etc. available for homebuilding. When the federal government, or any government, initiates its own homebuilding program, it directly competes with private companies for that skilled labour (carpenters, electricians, etc.), raw materials (timber, concrete, etc.) and the land needed for development. Put simply, government homebuilding crowds out private-sector activity.

Moreover, there’s a strong argument that the crowding out by government results in less homebuilding than would otherwise be the case, because the incentives for private-sector homebuilding are dramatically different than government incentives. For example, private firms risk their own wealth and wellbeing (and the wellbeing of their employees) so they have very strong incentives to deliver homes demanded by people on time and at a reasonable price. Government bureaucrats and politicians, on the other hand, face no such incentives. They pay no price, in terms of personal wealth or wellbeing if homes, are late, not what consumers demand, or even produce less than expected. Put simply, homebuilding by Ottawa could easily result in less homes being built than if government had stayed out of the way of entrepreneurs, businessowners and developers.

Similarly, it’s debatable that infrastructure spending by Ottawa—specifically, providing funds to the provinces and municipalities—results in an actual increase in total infrastructure spending. There are numerous historical examples, including reports by the auditor general, detailing how similar infrastructure spending initiatives by the federal government were plagued by mismanagement. And in many circumstances, the provinces simply reduced their own infrastructure spending to save money, such that the actual incremental increase in overall infrastructure spending was negligible.

In reality, some of the major and large spending initiatives announced or expanded in the Carney government’s first budget, which will accelerate the deterioration of federal finances, may not deliver anything close to what the government suggests. Canadians should understand the real risks and challenges in these federal spending initiatives, along with the debt being accumulated, and the limited potential benefits.

Jason Clemens

Executive Vice President, Fraser Institute

Jake Fuss

Director, Fiscal Studies, Fraser Institute

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Carney budget continues misguided ‘Build Canada Homes’ approach

Published on November 6, 2025

Todayville

From the Fraser Institute

By Jake Fuss and Austin Thompson

The Carney government’s first budget tabled on Tuesday promises to “supercharge” homebuilding across the country. But Ottawa’s flagship housing initiative—a new federal agency, Build Canada Homes (BCH)—risks “supercharging” federal debt instead while doing little to boost construction.

The budget accurately diagnoses the root cause of Canada’s housing shortage—costly red tape on housing projects, sky-high taxes on homebuilders, and weak productivity growth in the construction sector. But the proposed cure, BCH, does nothing to fix these problems despite receiving a five-year budget of $13 billion.

BCH’s core mandate is to build and finance affordable housing projects. But this mission is muddled by competing political priorities to preference Canadian building materials and prioritize “sustainable” construction materials. Any product that needs a government preference to be used is clearly not the most cost-effective option. The result—BCH’s “affordable” homes will cost more than they needed to, meaning more tax dollars wasted.

Ottawa claims BCH will improve construction productivity by “generating demand” (read: splashing out tax dollars) for factory-built housing. This logic is faulty—where factory-built housing is a cost-effective and desirable option, private developers are already building it. “Prioritizing” factory-built homes amounts to Ottawa trying to pick winners and losers—a strategy that reliably wastes taxpayer dollars. The civil servants running BCH lack the market knowledge and cost-cutting incentives of private homebuilders, who are far better positioned to identify which technologies will deliver the affordable homes Canadians need.

The government also insists BCH projects will attract more private investment for housing. The opposite is more likely—BCH projects will compete with private developers for limited investment dollars and construction labour. Ottawa’s intrusion into housing development could ultimately mean fewer private-sector housing projects—those driven by the real needs of homebuyers and renters, not the Carney government’s political priorities.

Despite its huge budget and broad mandate, BCH still lacks clear goals. Its only commitment so far is to “build affordable housing at scale,” with no concrete targets for how many new homes or how affordable they’ll be. Without measurable outcomes, neither Ottawa nor taxpayers will know whether BCH delivers value for money.

You can’t solve Canada’s housing crisis with yet another federal program. Ottawa should resist the temptation to act as a housing developer and instead create fiscal and economic conditions that allow the private sector to build more homes.