In his latest commentary, Lee Harding slams the Carney government for skipping the federal budget while plowing ahead with tax cuts and spending sprees. With no clear plan and ballooning deficits, Canadians wonder how these promises will be paid for—hint: more debt. Harding warns that Ottawa’s “figure it out later” approach is reckless, echoing past fiscal blunders that still haunt taxpayers today. Brace yourselves—this bill is coming.
The Carney government skipped the budget, but not the spending. And you’re on the hook
What’s better?
To spend and save without a plan, or to do so with accurate information and a focused strategy? The federal government has chosen the former, and one thing is certain: Canadians are going to pay.
Finance Minister François-Philippe Champagne announced on May 14 that the newly elected Carney government wouldn’t table a spring budget, opting instead to take things “step-by-step.” Parliament will sit until June 20, but aside from the throne speech, the only stated priority is to lower the first income tax bracket from 15 per cent to 14. That would slightly lower federal income taxes for most working Canadians by reducing the rate on the first $55,000 of income, saving up to about $550 a year.
That sounds good—until you ask how it’s being paid for. Without a budget, Canadians have no clear picture of the trade-offs or long-term costs.
Tabling a budget is the government’s formal presentation of its financial plan to Parliament. It outlines spending priorities, revenue forecasts and deficit projections for the year ahead. Skipping this step is no small matter.
“Cut taxes first, figure out how to pay later” isn’t the worst way to roll the dice, but it is far from the best. And we already know how Ottawa will cover the shortfall: more deficit spending. Canada hasn’t seen a balanced federal budget in nearly 20 years, and there’s no sign of one on the horizon.
Canadians will repay this tax cut with interest, sacrificing tomorrow’s services for today’s soundbites. This approach lacks fiscal prudence; doing it without a budget only compounds the recklessness.
Ottawa rarely fails to table a budget. The last time was during the height of the COVID pandemic in 2020. The results were disastrous: public debt surged and remains with us today. That was an unprecedented global crisis. There is no such emergency in 2025—only political calculation.
Carney claimed during the election campaign that proposed U.S. tariffs placed Canadians in “the greatest crisis of our lifetimes.” Yet, days later, he stood alongside U.S. President Donald Trump at the White House, smiling for photos and flashing a thumbs-up. For perspective, imagine Volodymyr Zelenskyy flying to Moscow to do the same with Vladimir Putin.
Some may argue the spring election left too little time before summer to draft a budget. But that doesn’t hold water. The Harper Conservatives won a majority on May 2, 2011, and still tabled a budget that spring. Carney’s cabinet includes many Trudeau-era veterans, and the Department of Finance remains staffed by experienced civil servants. The Liberals can and should produce a budget.
Parliament has even sat in July to pass urgent legislation. In 2020, MPs returned on July 20 to approve the Canada Emergency Wage Subsidy. In 1988, they stayed until July 7 to pass the Canada–U.S. Free Trade Agreement Implementation Act. There is precedent—and there is time.
Even when the Liberals do present budgets, they’ve only deepened Canada’s fiscal hole. On Dec. 31, 2015, the net federal debt stood at $693.8 billion. By the end of 2024, it had climbed to $953.9 billion—an increase of 37.4 per cent in just nine years. These debts will likely never be repaid.
A 2022 Fraser Institute study estimated that a 16-year-old Canadian will pay $29,663 in income taxes over her lifetime just to cover interest on the federal debt—money that won’t fund services but simply keep creditors happy.
The Liberals’ current platform is thin on discipline. It includes income tax cuts worth $4.2 billion and a GST exemption on first-time home purchases, costing $383 million. But these are overshadowed by broader spending.
Last year’s budget outlined $538 billion in spending, with $40 billion funded through borrowing. By fall, that deficit had grown past $60 billion. This year’s platform will make matters worse by $46.8 billion, even after factoring in $20 billion in retaliatory tariff revenues.
If the government struggles to follow its own budget when it sets one, how much damage might it do without one? Plenty.
Parliament must still approve any new spending through supplementary estimates—requests for additional funds beyond what’s already authorized. But without the context of a full budget, MPs will be asked to approve billions in spending without a clear picture of what’s affordable.
What would be refreshing, though unlikely, is for non-Liberal MPs to approve only measures that strengthen the Canadian economy, military and policing. They could reject everything else and argue that responsible spending can’t occur without a formal financial plan.
Governments should manage national finances like a responsible household: with a clear budget and the discipline to live within their means. Unfortunately, the Carney government appears unwilling—or unable—to do either.
Lee Harding is a research fellow with the Frontier Centre for Public Policy.
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For the summer leading up to the 2025 fall budget, the Carney government has launched a federal spending review aimed at finding savings that will help pay for recent major policy announcements. While this appears to be a step in the right direction, lessons from the past suggest the government must be more ambitious in its review to overcome the fiscal challenges facing Canada.
In two letters sent to federal cabinet ministers, Finance Minister François-Philippe Champagne outlined plans for a “Comprehensive Expenditure Review” that will see ministers evaluate spending programs in each of their portfolios based on the following: whether they are “meeting their objectives” are “core to the federal mandate” and “complement vs. duplicate what is offered elsewhere by the federal government or by other levels of government.” Ultimately, as a result of this review, ministers are expected to find savings of 7.5 per cent in 2026/27, rising to 10 per cent the following year, and reaching 15 per cent by 2028/29.
This news comes after the federal government has recently made several major policy announcements that will significantly impact the bottom line. Most notably, the government added an additional $9.3 billion to the defence budget for this fiscal year, and committed to more than double the annual defence budget by 2035. Without any policies to offset the fiscal impact of this higher defence spending (along with other recentchanges), this year’s budget deficit (which the Liberal’s election platform initially pegged at $62.3 billion) will likely surpass $70.0 billion, and potentially may reach as high as $92.2 billion.
A spending review is long overdue. Recent research suggests that each year the federal government spends billions towards programs that are inefficient and/or ineffective, and which should be eliminated to find savings. Moreover, past governments (both federal and provincial) have proven that fiscal adjustments based on spending reviews can be very successful—just look at the Chrétien government’s 1995 Program Review.
In its 1995 budget, the federal Chrétien government launched a comprehensive review of all federal spending that—along with several minor tax increases—ultimately balanced the federal budget in two years and helped Canada avert a fiscal crisis. Two aspects of this review were critical to its success: it reviewed all federal spending initiatives with no exceptions, and it was based on clear criteria that not only tested whether spending was efficient, but which also reassessed the federal government’s role in delivering programs and services to Canadians. Unfortunately, the Carney government’s review is missing these two critical aspects.
The Carney government already plans to exclude large swathes of the budget from its spending review. While it might be reasonable for the government to exclude defence spending given our recent commitments (though that doesn’t appear to be the plan), the Carney government has instead chosen to exclude all transfers to individuals (such as seniors’ benefits) and provinces (such as health-care spending) from any spending cuts. Based on the last official spending estimates for this year, these two areas alone represent a combined $254.6 billion—or more than half of total spending after excluding debt charges—that won’t be reviewed.
This is a major weakness in the government’s plan. Not only does this limit the dollar value of savings available, it also means a significant portion of the government’s budget is missing out on a reassessment that could lead to more effective delivery of services for Canadians.
For example, as part of the 1995 program review, the Chrétien government overhauled how it delivered welfare transfers to provincial governments. Specifically, the federal government replaced two previous programs with a new Canada Health and Social Transfer (CHST) that addressed some major flaws with how the government delivered welfare assistance. While the transition to the CHST did include a $4.6 billion reduction in spending on government transfers, the new structure gave the federal government better control over spending growth in the future and allowed provincial governments more flexibility to tailor social assistance programs to local needs and preferences.
In addition to considering all areas of spending, the Carney government’s spending review also needs to be more ambitious in its criteria. While the current criteria are an important start—for example, it’s critical the government identifies and eliminates spending programs that aren’t achieving their stated objectives or which are simply duplicating another program—the Carney government should take it one step further and explicitly reflect on the role of the federal government itself.
Among other criteria that focused on efficiency and affordability of programs, the 1995 program review also evaluated every spending program based on whether government intervention was even necessary, and whether or not the federal government specifically should be involved. As such, not only did the program review eliminate costly inefficiencies, it also included the privatization of government-owned entities such as Petro-Canada and Canadian National Railway—which generated considerable economic benefits for Canadians.
Today, the federal government devotes considerable amounts of spending each year towards areas that are outside of its jurisdiction and/or which government shouldn’t be involved in the first place—national pharmacare, national dental care, and national daycare all being prime examples. Ignoring the fact that many of these areas (including the three examples) are already excluded from the Carney government’s spending review, the government’s criteria makes no explicit effort to test whether a program is targeting an area that’s outside of the federal purview.
For instance, while the government will test whether or not a spending program fits within the federal mandate, that mandate will not actually ensure the government stays within its own jurisdictional lane. Instead, the mandate simply lays out the key priorities the Carney government intends to focus on—including vague goals including, “Bringing down costs for Canadians and helping them to get ahead” which could be used to justify considerable federal overreach. Similarly, the government’s other criterion to not duplicate programs offered by other levels of government provides little meaningful restriction on government spending that is outside of its jurisdiction so long as that spending can be viewed as “complementing” provincial efforts. In other words, this spending review is unlikely to meaningfully check the costly growth in the size of government that Canada has experienced over the last decade.
Simply put, the Carney government’s spending review, while a step in the right direction, is missing key elements that will limit its effectiveness. Applying key lessons from the Chrétien government’s spending review is crucial for success today.
President Donald Trump on Saturday said he will impose 30% tariffs on imported goods from the European Union and Mexico in his latest move to balance trade between the U.S. and other countries.
The tariffs are set to go into effect Aug. 1.
Saturday’s announcement comes a day after the U.S. Department of Treasury released a report Friday showing that tariff revenue helped revenue in the month of June exceed expenses by $27 billion.
“We have had years to discuss our Trading Relationship with The European Union, and we have concluded we must move away from these long-term, large, and persistent, Trade Deficits, engendered by your Tariff, and Non-Tariff, Policies, and Trade Barriers,” Trump wrote in the letter to the EU and posted on his Truth Social account. “Our relationship has been, unfortunately, far from Reciprocal.”
The 30% tariff on EU goods is higher than expected. EU trade ministers are scheduled to meet Monday and could agree to increase tariffs on U.S. goods as retaliation.
In his letter to Mexico, Trump said the U.S. neighbor to the south has helped stem the flow of illegal narcotics and people from entering the country but added that it needed to do more to prevent North America from being a “Narco-Trafficking Playground.”
Earlier in the week, Trump announced new tariffs on several other countries, including 20% tariffs on imports from the Philippines; 25% on Brunei and Moldova; 30% on Algeria, Iraq and Libya; and 50% on Brazil.
All of the new tariffs announced this week are scheduled to go into effect Aug. 1.
• The Center Square reporters Therese Boudreaux and Andrew Rice contributed to this report.
