Canadians have been put on notice that Finance Minister François-Philippe Champagne will deliver the 2025-26 federal budget during the fall session of Parliament, sometime in October. This budget will be the first statement on Ottawa’s books in well over 500 days, since April 16, 2024. Our elected parliamentarians will finally get a chance to see the numbers associated with the final year of the Justin Trudeau government’s operations and the official projections for the first year of the new Mark Carney government.
On Labour Day weekend George Athanassakos, a contributing financial writer for the Globe and Mail, wrote a sobering piece warning Canadians that “higher taxes and higher inflation are coming”, adding, “both are unavoidable.” He shared a few disturbing facts. In 2000, Canada’s public debt was US$426 billion, public debt per person was $13,948 USD and public debt-to-GDP was 59 per cent. In 2022, Canada’s public debt had quadrupled to $1.67 trillion USD, public debt per person had almost tripled to $41,794 USD, and public debt-to-GDP stood at 86 per cent.
Athanassakos highlighted the point that public debt and public debt per person in Canada is at historically high levels. He made the following observations about the options available for Canada’s indebted governments, “In my opinion, governments will try to tax to the max, either directly via income tax changes or indirectly via tariff increases or via increasing consumption taxes…. Governments will also try to cut spending. Good luck with this, too. Looking around the world, the U.S. and Canada included, one can see how resistant people are to cuts to their entitlements and how difficult it is to cut the bloated public sector.”
This is foreboding insight from Athanassakos given recent news and fiscal reports from Ottawa. For example, the federal government reported out that it had posted a $6.5 billion deficit in the first two months of the fiscal year (April and May 2025). These early months of Prime Minister Mark Carney at the helm compare rather poorly with the Trudeau government’s fiscal record when it posted a $3.8 billion deficit in the first two months of last year.
In early July, absent of any budgetary statement from the Carney government for this fiscal year, the C.D. Howe Institute forecasted the federal government’s 2025-26 fiscal year and the three following years. It factored the government data from the December 2024 Fall Economic Statement and the Liberal election campaign promises, as well as the announcements of additional government spending made by Carney since his election, and it has delivered an alarming report. C.D. Howe Institute foresees a deteriorating fiscal outlook: “Implementation of the Liberal election platform along with subsequent announcements, would yield a cumulative deficit of $311 billion over four years for an annual average of $77.7 billion.” Apparently, given Carney’s commitments to NATO, the European Union and to Ukraine, this is an “optimistic scenario”.
There has also been two recent reports from the Fraser Institute that show higher government spending and increased debt will lead to a lot more money being spent on debt servicing interest payments. The institute calculates that Canada’s combined federal-provincial government debt is estimated to reach $2.3 trillion this fiscal year. It has factored that Canadian governments will pay a combined $92.5 billion on debt interest alone this fiscal year.
Canadians should be concerned that the federal government is spending more than a billion dollars a week on interest payments servicing its debt. Ottawa is projecting a total of $53.8 billion on debt service charges this year and many financial analysts believe that that final figure when it is tallied on March 31, 2026, will be much higher.
In “The Growing Debt Burden for Canadians: 2025 Edition,” the Fraser Institute report observes that the governments’ continuous annual budget deficits and the increasing debt load have become serious fiscal challenges. The actual numbers are alarming. Through the last five years, the federal and provincial governments have collectively accumulated in total net debt a remarkable $493.2 billion (inflation-adjusted) – that is an increase of 27.4 percent. The report comments on the heavier burden of interest charges on this mounting debt, “Governments across Canada have decisively broken from the era of fiscal prudence. Debt levels have increased rapidly, and without a course correction, interest payments will consume a growing share of revenues.”
The fiscal reality of continuous deficit spending and increased interest charges is that current Canadian taxpayers should expect no relief, and future taxpayers will bear the brunt of today’s governments’ overspending. It is hard to imagine the tax bill can get any bigger as Canadians currently pay 42.3 per cent of their income to taxes, and that is more than they spend on the necessities of life. Because of years of unbridled spending, Canada’s governments are now in a fiscal straight jacket. As Fraser Institute director Jake Fuss states, “Interest must be paid on government debt, and the more money governments spend on interest payments, the less money is available for the programs and services that matter to Canadians.”
Another challenge Athanassakos opined on in his Globe and Mail column was the government’s need to cut the size of the public sector. In the Carney government’s Throne Speech there was a pledge to cap Ottawa’s public service and, this summer, Carney signaled that he was calling for significant savings from departmental budgets, $6 billion next year and $13 billion in 2028-29.
The bloated bureaucracy in Ottawa is a huge issue. During Trudeau’s decade in office the federal bureaucracy grew by over 110,000 people. Last week a PBO report was released that revealed the cost of maintaining this oversized government has exploded by nearly 80 per cent since 2016. The federal personnel costs associated with salaries, pensions, and benefits rang in at $71.1 billion last year – and that is up from $40.2 billion in 2016-17.
To address this bureaucrat bloat and achieve the savings the prime minister is looking for, the obvious approach is to downsize. The Canadian Centre for Policy Alternatives is estimating the government will need to cut 24 per cent of the public service spending. Economist David Macdonald of this think tank points out that this is “dramatically worse than Stephen Harper’s 10 per cent cuts on some departments” and it is more than Jean Chrétien’s record-setting 19 per cent cuts made in 1995. In terms of actual numbers of pink slips, the Montreal Economic Institute has estimated eliminating about 64,000 federal government jobs, which could achieve a permanent reduction in public spending of nearly $10 billion a year by 2029. The Institute called for “decisive action” with the oversized bureaucracy, but it remains to be seen whether the Carney government has the stomach to battle the bulge. (One rather ironic suggestion is for Carney to assign Carleton riding MP Bruce Fanjoy to co-opt the Ottawa union leaders that helped get him elected so that they might jointly communicate the cuts).
Two recent news stories that were brought to Canadians’ attention by Blacklock’s Reporter signal how the Carney government is carefully treading with the details of its spending and taxing plans.
First, this summer Carney made much noise lowering the tolls on PEI’s Confederation Bridge and doing so without disclosing how many millions of dollars the taxpayer will need to pay to subsidize this action. Carney sealed the files to keep secret the details of the closed-door deal for the Strait Crossing Development, the toll bridge operators. He did so when media learned that Foreign Affairs Minister Anita Anand’s husband is managing director of an investors’ group holds a large share of the toll bridge company.
Second, the federal government has made calculations that show the new clean fuel regulations (also known as the industrial carbon tax) will add 13 cents to a litre of gasoline and 16 cents for diesel. An internal memo suggests the government positions its mandatory tax as “a market-based mechanism designed to spur innovation of clean technologies.” Furthermore, it suggests there is no need to reveal the calculated increases to fuel costs because the new tax “may not be noticeable by most consumers, including farmers.”
These news stories – not covered in the government-subsidized legacy media – illustrate a less-than-forthright government, being less than transparent with its expenditures and taxation. These are the kinds of stories that Canadians should be more alert to when Parliament returns later this month. It is disconcerting to see that the practices of the Trudeau Liberals are being carried forward by the Carney Liberals.
Canadians must brace themselves for the ugly fiscal news from Ottawa this fall: news of increased government spending, a higher than reported deficit, growing national debt and, consequently, higher interest payments and the inevitable increased taxes.
Chris George is an advocate, government relations advisor, and writer/copy editor. As president of a public relations firm established in 1994, Chris provides discreet counsel, tactical advice and management skills to CEOs/Presidents, Boards of Directors and senior executive teams in executing public and government relations campaigns and managing issues. Prior to this PR/GR career, Chris spent seven years on Parliament Hill on staffs of Cabinet Ministers and MPs. He has served in senior campaign positions for electoral and advocacy campaigns at every level of government. Today, Chris resides in Almonte, Ontario where he and his wife manage www.cgacommunications.com. Contact Chris at chrisg.george@gmail.com.
