Business
Carney government plans to muddy the fiscal waters in upcoming budget
From the Fraser Institute
By Jake Fuss and Grady Munro
Rather than directly spend money on critical infrastructure such as roads, bridges, ports or even electricity grids—things that traditionally are considered capital investments—the government plans to spend money on subsidies and tax breaks to corporations (i.e. corporate welfare) under the umbrella of “capital investment”
The Carney government’s long-awaited first budget is almost here—expected Nov. 4—but Canadians may not recognize what they get. Early on, the new government promised a new approach to spending. Thanks to a decade of record-breaking spending under Justin Trudeau, the federal deficit sits at a projected $48.3 billion while total debt has eclipsed $2.1 trillion. But the Carney government’s plan announced this week appears to rely on accounting maneuvers rather than any substantive spending reductions.
According to the latest details released by the government, the Carney government will separate spending into two categories: “operating spending” and “capital investment.” Within this framework, the government plans to balance the “operating budget” within three years.
But of course, if the government eventually balances the operating budget, that doesn’t mean it will stop borrowing money to pay for“capital investment”—a new category of spending the government can define and expand whenever it deems necessary.
Currently, according to the government, capital investment will include any spending or tax expenditures (e.g. tax credits and deductions) that “contribute to capital formation”—the creation of assets (such as machinery or equipment) that improve the ability of workers to produce goods and services.
In other words, rather than directly spend money on critical infrastructure such as roads, bridges, ports or even electricity grids—things that traditionally are considered capital investments—the government plans to spend money on subsidies and tax breaks to corporations (i.e. corporate welfare) under the umbrella of “capital investment,” so long as this spending will somehow “encourage” capital formation. But clearly, corporate welfare doesn’t belong in the same category as the expansion of a critical port, for example, and the government shouldn’t pretend that it does.
Put simply, because the term “capital investment” is so broad and malleable, the government can seemingly use it whenever it wants. For example, to meet NATO’s spending target of 2 per cent of GDP, a key point of contention in Carney’s negotiations with President Trump, the Carney government could (inaccurately) categorize some defence spending as capital spending. And in fact, the Parliamentary Budgetary Officer—Ottawa’s fiscal watchdog—views the Carney government’s definition as “overly expansive” and suggests the inclusion of corporate tax breaks and subsidies will “overstate” the government’s actual contribution to the creation of capital.
This approach by the Carney government will not help Canadians understand the true state of federal finances. While Finance Minister François-Philippe Champagne recently said that the “deficit and the debt will be recorded in the same manner as in previous budgets,” on budget day and beyond the government will undoubtedly focus on the operating budget when communicating to Canadians. So, the government will only tell part of the story.
After years of fiscal mismanagement with large increases in spending and debt under the Trudeau government, Canadians need a government willing to make the tough decisions necessary to get federal finances back in shape. But the Carney government appears poised to shirk accountability and use tricks to cloud the true state of federal finances.
Jake Fuss
Director, Fiscal Studies, Fraser Institute
Grady Munro
Policy Analyst, Fraser Institute
Haultain’s Substack is a reader-supported publication.
To receive new posts and support our work, please consider becoming a free or paid subscriber.
Try it out.
The Justin Trudeau and Jagmeet Singh charges of “greedflation” collapses under scrutiny.
“It’s not okay that our biggest grocery stores are making record profits while Canadians are struggling to put food on the table.” —PM Justin Trudeau, September 13, 2023.
A couple of days after the above statement, the then-prime minister and his government continued a campaign to blame rising food prices on grocery retailers.
 |
The line Justin Trudeau delivered in September 2023, triggered a week of political theatre. It also handed his innovation minister, François-Philippe Champagne, a ready-made role: defender of the common shopper against supposed corporate greed. The grocery price problem would be fixed by Thanksgiving that year. That was two years ago. Remember the promise?
But as Ian Madsen of the Frontier Centre for Public Policy has shown, the numbers tell a different story. Canada’s major grocers have not been posting “record profits.” They have been inching forward in a highly competitive, capital-intensive sector. Madsen’s analysis of industry profit margins shows this clearly.
Take Loblaw. Its EBITDA margin (earnings before interest, taxes, depreciation, and amortization) averaged 11.2 per cent over the three years ending 2024. That is up slightly from 10 per cent pre-COVID. Empire grew from 3.9 to 7.6 per cent. Metro went from 7.6 to 9.6. These are steady trends, not windfalls. As Madsen rightly points out, margins like these often reflect consolidation, automation, and long-term investment.
Meanwhile, inflation tells its own story. From March 2020 to March 2024, Canada’s money supply rose by 36 per cent. Consumer prices climbed about 20 per cent in the same window. That disparity suggests grocers helped absorb inflationary pressure rather than drive it. The Justin Trudeau and Jagmeet Singh charges of “greedflation” collapses under scrutiny.
Yet Ottawa pressed ahead with its chosen solution: the Grocery Code of Conduct. It was crafted in the wake of pandemic disruptions and billed as a tool for fairness. In practice, it is a voluntary framework with no enforcement and no teeth. The dispute resolution process will not function until 2026. Key terms remain undefined. Suppliers are told they can expect “reasonable substantiation” for sudden changes in demand. They are not told what that means. But food inflation remains.
This ambiguity helps no one. Large suppliers will continue to settle matters privately. Small ones, facing the threat of lost shelf space, may feel forced to absorb losses quietly. As Madsen observes, the Code is unlikely to change much for those it claims to protect.
What it does serve is a narrative. It lets the government appear responsive while avoiding accountability. It shifts attention away from the structural causes of price increases: central bank expansion, regulatory overload, and federal spending. Instead of owning the crisis, the state points to a scapegoat.
This method is not new. The Trudeau government, of which Carney’s is a continuation, has always shown a tendency to favour symbolism over substance. Its approach to identity politics follows the same pattern. Policies are announced with fanfare, dissent is painted as bigotry, and inconvenient facts are set aside.
The Grocery Code fits this model. It is not a policy grounded in need or economic logic. It is a ritual. It gives the illusion of action. It casts grocers as villains. It gives the impression to the uncaring public that the government is “providing solutions,” and that “it has their backs.” It flatters the state.
Madsen’s work cuts through that illusion. It reminds us that grocery margins are modest, inflation was monetary, and the public is being sold a story.
Canadians deserve better than fables, but they keep voting for the same folks. They don’t think to think that they deserve a government that governs within its limits; a government that accept its role in the crises it helped cause, and restores the conditions for genuine economic freedom. The Grocery Code is not a step in that direction. It was always a distraction, wrapped in a moral pose.
And like most moral poses in Ottawa, it leaves the facts behind.
Haultain’s Substack is a reader-supported publication.
To receive new posts and support our work, please consider becoming a free or paid subscriber.
Try it out.
The Canadian Taxpayers Federation is criticizing Prime Minister Mark Carney for announcing that the government is expanding automatic tax filing within hours of the government’s consultation ending.
“There’s no way government bureaucrats pulled an all-nighter reading through thousands of submissions and survey responses before sending Carney out to make an announcement on automatic tax filing the next morning,” said Franco Terrazzano, CTF Federal Director. “Asking Canadians for their opinion and then ignoring them isn’t a good look for Carney, it makes it look like the government is holding sham consultations.”
The government of Canada announced consultations on automatic tax filing so Canadians could give the government “broad input through an online questionnaire.”
The government’s consultation ended on Thursday, Oct. 9, 2025.
Hours after the consultation ended, Carney today announced the government would expand automatic tax filing.
The CRA is already one of the largest arms of the federal government with 52,499 bureaucrats.
The CRA added 13,015 employees since 2016 – a 33 per cent increase. For comparison, America’s Internal Revenue Service has 90,516 bureaucrats. The CRA has one bureaucrat for every 800 Canadians. The IRS has one bureaucrat for every 3,800 Americans.
“The CRA can barely answer the phone, so Carney shouldn’t be giving those bureaucrats more busy work to do,” Terrazzano said. “The CRA is a bloated mess, and Carney should be cutting the cost of bureaucracy not scheming up ways to give the bureaucracy more power over taxpayers.”
The CRA only answered about 36 per cent of the 53.5 million calls it received between March 2016 and March 2017, according to a 2017 Auditor General report. When Canadians were able to get the CRA on the phone, call centre agents gave inaccurate information about 30 per cent of the time.
“The CRA acting as both tax collector and tax filer is a serious conflict of interest,” Terrazzano said. “Trusting the taxman to do your tax return is like trusting your dog to protect your burger.
“Carney should stop the CRA power grab and instead cut taxes and simplify the tax code.”
Canadian Sovereignty at Stake: Stunning Testimony at Security Hearing in Ottawa from Sam Cooper
Finance Minister ducks deficit questions, talks down to critics, and rebrands reckless spending as ‘transparency’.
BC NDP Premier Opposing a New Oil Pipeline to Tidewater
Call for Federal Inquiry as Pressure Mounts for Release of Buried Report on Buddhist Land Transactions in PEI
-
Energy2 days agoIn the halls of Parliament, Ellis Ross may be the most high-profile advocate of Indigenous-led development in Canada.
-
Alberta1 day agoFact, fiction, and the pipeline that’s paying Canada’s rent
-
Energy2 days ago“It is intellectually dishonest not to acknowledge the … erosion of trust among global customers in Canada’s ability to deliver another oil pipeline.”
-
Aristotle Foundation2 days agoEfforts to halt Harry Potter event expose the absurdity of trans activism
-
International13 hours agoTrump gets an honourable mention: Nobel winner dedicates peace prize to Trump
-
Bruce Dowbiggin2 days agoCanada’s Humility Gene: Connor Skates But Truckers Get Buried
-
International1 day agoTrump-brokered Gaza peace agreement enters first phase
-
Alberta1 day agoAlberta Is Where Canadians Go When They Want To Build A Better Life