Touted as a “generational” plan, Budget 2025 faces the daunting task of balancing bold, long-term investments with a pledge to reduce spending. The central plot twist is the new Capital Budgeting Framework, which separates day-to-day expenditures from capital investment.

Then, there are the line items themselves. Domestically, the budget seeks to cut departmental expenses, boost business investment and competitiveness, and tackle housing supply and affordability for families. Geopolitically, Carney’s team wants this budget to be seen as a direct response to external threats; cue the anticipated boost to defence spending to exceed NATO targets, and strategic investments meant to pivot Canada towards greater economic self-reliance.

Indeed, this year’s budget brings a new approach to both budgeting and the budget cycle itself  — one that stakeholders and the public will need to adapt to. 

A historic new approach

The move to delineate operational and capital spending in the Capital Budgeting Framework will prompt a rethink in how budgets are analyzed. How are efficiencies measured in this system? Is it more transparent or more opaque? Watch government and opposition politicians spar over those questions. 

The pivotal changes this budget represents have knock-on effects for the bureaucracy and for stakeholders who must engage with government policy as part of their advocacy.   

Deficit and fiscal projections 

Champagne revealed a larger deficit of $78.3B in this year’s budget. It was above projections from the 2024 Fall Economic Statement and above Conservative Leader Pierre Poilievre’s stated ceiling for his party’s support, $42 billion (the self-imposed limit from Trudeau’s government in the last fall economic statement). Expect opposition leaders to squeeze the government from the right and left over spending levels. The Conservatives will focus on the size of the deficit and resulting impacts on the economy, although it may be a struggle for them to stay on message after a sudden floor-crossing by one of their caucus members to the Liberal party ranks. Meanwhile, progressives will call out cuts impacting programs and services Canadians rely on. 

What we don’t know

There are still quite a few known unknowns with respect to this budget, and probably some lurking “unknown unknowns”, too, with respect to the challenges this budget is meant to address.

A major milestone will be the first confidence vote on the budget, which could come as early as Thursday.

Next up: budget implementation legislation. In previous budget cycles, it was easier to predict when implementation legislation would be tabled and passed — former Prime Minister Justin Trudeau’s government gravitated toward passing legislation to implement spring budgets using a two-part approach: Part I before the summer recess and then passage of a second implementation act in the fall. 

It remains to be seen whether Carney and Champagne will seek to pass a budget implementation bill before the holidays. 

What are opposition leaders saying?

Budget 2025 is less a policy test than a strategic calculation. Pierre Poilievre’s Conservatives have set the stage to vote no, backing it only if it “brings down the cost of living.” The $78.3B deficit, Poilievre’s view of Liberal historical “inflationary deficit” framing, and grassroots opposition leave Conservatives little room to compromise, a stance he reinforced with a brief “No More Sacrifices” campaign directed at younger Canadians. It is unlikely that the departure of MP Chris d’Entremont from their caucus will impact the party’s position on the budget vote. 

Meanwhile, NDP interim leader Don Davies told reporters that in the past, NDP members have been allowed to not vote, hinting that members of his caucus could abstain. The Bloc Québécois and the Green Party said they would vote against.  

Even having gained one caucus member, the Liberals need at least a few members outside of their caucus to either abstain, or vote alongside them for Budget 2025 to pass. Soft public opinion numbers and uncomfortable political realities should curb appetite for brinksmanship. All the same, misreads or miscalculations could turn procedural skirmishes into an election trigger.