Federal government’s accounting change reduces transparency and accountability

Carney’s deficit-spending plan over the next four years dwarfs the plan from Justin Trudeau, the biggest spender (per-person, inflation-adjusted) in Canadian history, and will add many more billions to Canada’s mountain of federal debt. Yet Prime Minister Carney has tried to sell his plan as more responsible than his predecessor’s.

All Canadians should care about government transparency. In Ottawa, the federal government must provide timely and comprehensible reporting on federal finances so Canadians know whether the government is staying true to its promises. And yet, the Carney government’s new spending framework—which increases complexity and ambiguity in the federal budget—will actually reduce transparency and make it harder for Canadians to hold the government accountable.

The government plans to separate federal spending into two budgets: the operating budget and the capital budget. Spending on government salaries, cash transfers to the provinces (for health care, for example) and to people (e.g. Old Age Security) will fall within the operating budget, while spending on “anything that builds an asset” will fall within the capital budget. Prime Minister Carney plans to balance the operating budget by 2028/29 while increasing spending within the capital budget (which will be funded by more borrowing).

According to the Liberal Party platform, this accounting change will “create a more transparent categorization of the expenditure that contributes to capital formation in Canada.” But in reality, it will muddy the waters and make it harder to evaluate the state of federal finances.

First off, the change will make it more difficult to recognize the actual size of the deficit. While the Carney government plans to balance the operating budget by 2028/29, this does not mean it plans to stop borrowing money. In fact, it will continue to borrow to finance increased capital spending, and as a result, after accounting for both operating and capital spending, will increase planned deficits over the next four years by a projected $93.4 billion compared to the Trudeau government’s last spending plan. You read that right—Carney’s deficit-spending plan over the next four years dwarfs the plan from Justin Trudeau, the biggest spender (per-person, inflation-adjusted) in Canadian history, and will add many more billions to Canada’s mountain of federal debt. Yet Prime Minister Carney has tried to sell his plan as more responsible than his predecessor’s.

In addition to obscuring the amount of borrowing, splitting the budget allows the government to get creative with its accounting. Certain types of spending clearly fall into one category or another. For example, salaries for bureaucrats clearly represent day-to-day operations while funding for long-term infrastructure projects are clearly capital investments. But Carney’s definition of “capital spending” remains vague. Instead of limiting this spending category to direct investments in long-term assets such as roads, ports or military equipment, the government will also include in the capital budget new “incentives” that “support the formation of private sector capital (e.g. patents, plants, and technology) or which meaningfully raise private sector productivity.” In other words, corporate welfare.

Indeed, based on the government’s definition of capital spending, government subsidies to corporations—as long as they somehow relate to creating an asset—could potentially land in the same spending category as new infrastructure spending. Not only would this be inaccurate, but this broad definition means the government could potentially balance the operating budget simply by shifting spending over to the capital budget, as opposed to reducing spending. This would add to the debt but allow the government to maneuver under the guise of “responsible” budgeting.

Finally, rather than split federal spending into two budgets, to increase transparency the Carney government could give Canadians a better idea of how their tax dollars are spent by providing additional breakdowns of line items about operating and capital spending within the existing budget framework.

Clearly, Carney’s new spending framework, as laid out in the Liberal election platform, will only further complicate government finances and make it harder for Canadians to hold their government accountable.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute

Related Topics:#FraserInstitute #GovernmentSpending #GradyMunro #JakeFuss CarneyBudget CarneyDebt CarneyDeficit CarnyFiscalTransparency

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Canada’s critical minerals are key to negotiating with Trump

Published on June 18, 2025

Todayville

From Resource Works

By Geoff Russ

The United States wants to break its reliance on China for minerals, giving Canada a distinct advantage.

Trade issues were top of mind when United States President Donald Trump landed in Kananaskis, Alberta, for the G7 Summit. As he was met by Prime Minister Mark Carney, Canada’s vast supply of critical minerals loomed large over a potential trade deal between North America’s two largest countries.

Although Trump’s appearance at the G7 Summit was cut short by the outbreak of open hostilities between Iran and Israel, the occasion still marked a turning point in commercial and economic relations between Canada and the U.S. Whether they worsen or improve remains to be seen, but given Trump’s strategy of breaking American dependence on China for critical minerals, Canada is in a favourable position.

Despite the president’s early exit, he and Prime Minister Carney signed an accord that pledged to strike a Canada-US trade deal within 30 days.

Canada’s minerals are a natural advantage during trade talks due to the rise in worldwide demand for them. Without the minerals that Canada can produce and export, it is impossible to power modern industries like defence, renewable energy, and electric vehicles (EV).

Nickel, gallium, germanium, cobalt, graphite, and tungsten can all be found in Canada, and the U.S. will need them to maintain its leadership in the fields of technology and economics.

The fallout from Trump’s tough talk on tariff policy and his musings about annexing Canada have only increased the importance of mineral security. The president’s plan extends beyond the economy and is vital for his strategy of protecting American geopolitical interests.

Currently, the U.S. remains dependent on China for rare earth minerals, and this is a major handicap due to their rivalry with Beijing. Canada has been named as a key partner and ally in addressing that strategic gap.

Canada currently holds 34 critical minerals, offering a crucial potential advantage to the U.S. and a strategic alternative to the near-monopoly currently held by the Chinese. The Ring of Fire, a vast region of northern Ontario, is a treasure trove of critical minerals and has long been discussed as a future powerhouse of Canadian mining.

Ontario’s provincial government is spearheading the region’s development and is moving fast with legislation intended to speed up and streamline that process. In Ottawa, there is agreement between the Liberal government and Conservative opposition that the Ring of Fire needs to be developed to bolster the Canadian economy and national trade strategies.

Whether Canada comes away from the negotiations with the US in a stronger or weaker place will depend on the federal government’s willingness to make hard choices. One of those will be ramping up development, which can just as easily excite local communities as it can upset them.

One of the great drags on the Canadian economy over the past decade has been the inability to finish projects in a timely manner, especially in the natural resource sector. There was no good reason for the Trans Mountain pipeline expansion to take over a decade to complete, and for new mines to still take nearly twice that amount of time to be completed.

Canada is already an energy powerhouse and can very easily turn itself into a superpower in that sector. With that should come the ambition to unlock our mineral potential to complement that. Whether it be energy, water, uranium, or minerals, Canada has everything it needs to become the democratic world’s supplier of choice in the modern economy.

Given that world trade is in flux and its future is uncertain, it is better for Canada to enter that future from a place of strength, not weakness. There is no other choice.

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Rhetoric—not evidence—continues to dominate climate debate and policy

Published on June 18, 2025

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From the Fraser Institute

By Kenneth P. Green

Myths, fallacies and ideological rhetoric continue to dominate the climate policy discussion, leading to costly and ineffective government policies,
according to a new study published today by the Fraser Institute, an independent, nonpartisan Canadian public policy think-tank.

“When considering climate policies, it’s important to understand what the science and analysis actually show instead of what the climate alarmists believe to be true,” said Kenneth P. Green, Fraser Institute senior fellow and author of Four Climate Fallacies.

The study dispels several myths about climate change and popular—but ineffective—emission reduction policies, specifically:

• Capitalism causes climate change: In fact, according to several environment/climate indices and the Fraser Institute’s annual Economic Freedom of the World Index, the more economically free a country is, the more effective it is at protecting its environment and combatting climate change.

• Even small-emitting countries can do their part to fight climate change: Even if Canada reduced its greenhouse gas emissions to zero, there would be
little to no measurable impact in global emissions, and it distracts people from the main drivers of emissions, which are China, India and the developing
world.

• Vehicle electrification will reduce climate risk and clean the air: Research has shown that while EVs can reduce GHG emissions when powered with
low-GHG energy, they often are not, and further, have offsetting environmental harms, reducing net environmental/climate benefits.

• Carbon capture and storage is a viable strategy to combat climate change: While effective at a small scale, the benefits of carbon capture and
storage to reduce global greenhouse gas emissions on a massive scale are limited and questionable.

“Citizens and their governments around the world need to be guided by scientific evidence when it comes to what climate policies make the most sense,” Green said.

“Unfortunately, the climate policy debate is too often dominated by myths, fallacies and false claims by activists and alarmists, with costly and ineffective results.”

Four Climate Fallacies

This study examines four climate narratives circulating in public discourse regarding climate change.
Fallacy 1: Climate Change Is Caused by Capitalism. As we will observe, this is backward: the more capitalist a country is, the more effective it is at protecting its environment and combatting climate change.
Fallacy 2: Even Small-Emitting Countries Can Do Their Part to Fight Climate Change. Again, in reality, even a casual inspection of the emission trends and projections of large-emitting countries such as China would reveal that for small-emitting countries like Canada, even driving their greenhouse gas emissions to zero would have no measurable impact in reducing climate risk.
Fallacy 3: Vehicle Electrification Will Reduce Climate Risk and Clean the Air. However, when looking beyond the hype, it becomes evident that vehicle electrification presents an array of climate and environmental benefits and harms that extend beyond climate change.
Fallacy 4: Carbon Capture and Storage Is a Viable Strategy to Combat Climate Change. This fallacy, most popular with those in the fossil fuel industry and those of a more market-oriented and politically conservative bent, is no more realistic than the previous three. An examination of the history, effectiveness, and efficiency of carbon capture and storage suggests that it is a far more limited approach to regulating greenhouse gas concentrations in the atmosphere than proponents suggest.