Dramatic reform was needed, but not found, in Carney’s federal budget

For all of the talk of fiscal restraint and plans for Canadians to be “Masters of Our Own Destiny,” the federal budget was long on big rhetoric but short on the tough choices needed to accomplish the government’s stated mission. 

The Carney government, buoyed by increased oil and tax revenues, decided to turn on the spending taps, increasing program spending by more than $14 billion this fiscal year alone. Because of all of the increased tax revenue, the deficit went down modestly, but it remains well above $60 billion. And there’s no end in sight to deficits of more than $50 billion per year. 

But the federal budget was full of details that should cause Canadians concern. Spending on Old Age Security is set to soar to nearly $90 billion, while interest payments on the federal debt are well over $1 billion per week and climbing. By 2030, 14 per cent of the federal budget will have to be spent on debt interest payments. If ever there was a time for bold fiscal policy choices for the feds to get Ottawa’s fiscal house in order, now is it. But instead, the Carney government opted to increase program spending in Trudeau-like fashion. 

There were also small changes on the tax side, but no dramatic tax reform. Prime Minister Mark Carney has hinted at the need for significant tax reform in recent months, but no base rates, either for individuals or for businesses, were changed. The Carney government did add a one-time top-up of 50 per cent to the Groceries and Essentials Benefit, which is received by more than 10 million Canadians, but that hardly represents significant relief, and it certainly isn’t broadscale reform. The Carney government ought to have lowered income taxes instead but in its place chose one-time aid that simply represents more government spending, not tax relief. 

There were a few encouraging points for businesses, namely the Productivity Mega Deduction, which allows Canadian businesses to immediately write off 100 per cent of certain eligible capital property costs the year they are acquired, rather than spreading deductions over several years, as well as the new Canada Growth Incentive, which encourages investors to reinvest capital gains back into new domestic businesses via a conditional capital gains exemption of $15 million. But no base rates were lowered, which is something the Canadian economy desperately needs. 

Carney could have used his second budget as an opportunity for genuine reform. Now with a majority government and with an election still years away, Carney has the political capital to spend on tough choices. But he decided to spend the oil and tax windfall on things like increasing spending on the CBC and the arts, making the Canada Strong Pass Permanent, and celebrating Canada’s 160th birthday. Carney decision not to be bold in his second budget by slashing spending, reforming the tax code, and delivering permanent relief for individuals and businesses is a major mistake. 

The prime minister may look back on this budget years from now and regret his choices. This could have been a hinge moment for Canada. But, instead, Carney went back to the old Liberal approach of rolling out more government spending without choosing to tackle the major issues that are holding Canada’s economy back. Sure, this was not a Trudeau budget, with some relief included for select individuals and businesses, but it also wasn’t the budget that Canada’s economy desperately needs.