From the Fraser Institute

By Jake Fuss and Grady Munro

The Parliamentary Budget Officer (PBO)—which acts as the federal fiscal watchdog—released a new report highlighting concerns with the Carney government’s fiscal plan. Key among these concerns is the fact that the government’s promise to balance its “operating budget” does not actually ensure the nation’s finances are sustainable. Instead, the plan to balance the operating budget by 2028/29 gives the appearance of fiscal prudence, but allows the government to continue running large deficits and borrow more money.

First, what’s the new government’s fiscal plan?

While the Carney government has chosen to delay releasing a budget until the fall—leaving Canadians and parliamentarians in the dark about the state of government finances and where we’re headed—the Liberal platform and throne speech lay out the plan in broad strokes.

The Carney government plans to introduce a new framework that splits federal spending into two separate budgets: The operating budget and the capital budget. The operating budget will include “day-to-day” spending (e.g. government salaries, cash transfers to provinces and individuals, etc.) while the capital budget will include spending on “anything that builds an asset.” Within this framework, the government has set itself an objective—also called a ‘fiscal anchor’—to balance the operating budget over the next three years.

Fiscal anchors help guide policy on government spending, taxes and borrowing, and are intended to prevent government finances from deteriorating while ensuring that debt is sustainable for future generations. The previous federal government made a habit of violating its own fiscal anchors—to the detriment of national finances—but the Carney government has promised a “very different approach” to fiscal policy.

The PBO’s new report highlights two critical concerns with this new approach to finances. First, the federal government has not yet defined what “operating” spending is and what “capital” spending is. Therefore, it’s difficult to know whether any new spending policies—such as the recently announced increase in defence spending—will hurt efforts to achieve the government’s goal of balancing the operating budget and how much overall debt will be accumulated. In other words, the government’s plan to split the budget in two simply muddies the waters and makes it harder to evaluate federal finances.

The PBO’s second, and more alarming, concern is that even if the government achieves its goal to balance the operating budget, federal finances may still continue to deteriorate and debt may rise at an unsustainable rate (growing faster than the economy).

While the Liberal election platform does outline a fiscal path that appears to balance the operating budget by 2028/29, this path also includes higher deficits and more borrowing than the previous government’s plan once you factor in capital spending. Specifically, the Carney government plans to run overall deficits over the next four years that are a combined $93.4 billion more than was previously planned in last year’s fall economic statement. This means that rather than the “very different approach” that Canadians have been promised, the Carney government may continue (or even worsen) the same costly habits of endless borrowing and rising debt.

The PBO is right to call out the major transparency issues with the Carney government’s new budget framework and fiscal anchor. While the devil will be in the details of the government’s fiscal plan, and we won’t know those details until it releases a budget, the government’s new fiscal anchor gives the appearance of prudence without the substance to back it up.

From the Fraser Institute

By Tom Flanagan

Since 2015, the federal government has paid nearly $18 billion settling an increasing number of ‘specific claims’ by First Nations, including more than $7 billion last year alone, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think tank.

“Specific claims are for past treaty breaches, and as such, their number should be finite. But instead of declining over time, the number of claims keeps growing as lucrative settlements are reached, which in turn prompts even more claims,” said Tom Flanagan, Fraser Institute senior fellow, professor emeritus of political science at the University of Calgary and author of Specific Claims—an Out-of-Control Program.

The study reveals details about “specific claims,” which began in 1974 and are filed by First Nations who claim that Canadian governments—past or present—violated the Indian Act or historic treaty agreements, such as when governments purchased reserve land for railway lines or hydro projects. Most “specific claims” date back 100 years or more. Specific claims are contrasted with comprehensive claims, which arise from the absence of a treaty.

Crucially, the number of specific claims and the value of the settlement paid out have increased dramatically since 2015.

In 2015/16, 11 ‘specific claims’ were filed with the federal government, and the total value of the settlements was $27 million (in 2024 dollars, to adjust for inflation). The number of claims increased virtually every year since so that by 2024/25, 69 ‘specific claims’ were filed, and the value of the settlements in 2024/25 was $7.061 billion. All told, from 2015/16 to 2024/25, the value of all ‘specific claims’ settlements was $17.9 billion (inflation adjusted).

“First Nations have had 50 years to study their history, looking for violations of treaty and legislation. That is more than enough time for the discovery of legitimate grievances,” Flanagan said.

“Ottawa should set a deadline for filing specific claims so that the government and First Nations leaders can focus instead on programs that would do more to improve the living standards and prosperity for both current and future Indigenous peoples.”

Specific Claims: An Out-of-Control Program

• Specific claims are based on the government’s alleged failure to abide by provisions of the Indian Act or a treaty.
• The federal government began to entertain such claims in 1974. The number and value of claims increased gradually until 2017, when both started to rise at an extraordinary rate.
• In fiscal year 2024/25, the government settled 69 claims for an astonishing total of $7.1 billion dollars.
• The evidence suggests at least two causes for this sudden acceleration. One was the new approach of Justin Trudeau’s Liberal government toward settling Indigenous claims, an approach adopted in 2015 and formalized by Minister of Justice Jodi Wilson-Raybould’s 2019 practice directive. Under the new policy, the Department of Justice was instructed to negotiate rather than litigate claims.
• Another factor was the recognition, beginning around 2017, of “cows and plows” claims based on the allegation that agricultural assistance promised in early treaties—seed grain, cattle, agricultural implements—never arrived or was of poor quality.
• The specific-claims process should be terminated. Fifty years is long enough to discover legitimate grievances.
• The government should announce a short but reasonable period, say three years, for new claims to be submitted. Claims that have already been submitted should be processed, but with more rigorous instructions to the Department of Justice for legal scrutiny.
• The government should also require more transparency about what happens to these settlements. At present, much of the revenue paid out disappears into First Nations’ “settlement trusts”, for which there is no public disclosure.

Read The Full Study

Tom Flanagan

Professor Emeritus of Political Science and Distinguished Fellow, School of Public Policy, University of Calgary