Tough Love Economics: Texture’s Budget Analysis
Prime Minister Mark Carney’s government has released its first budget amid a trade war with the United States, lagging productivity, rising youth unemployment, and an affordability crisis that has pushed everyday Canadians’ household expenses skyward. While the budget is presented by Finance Minister François-Philippe Champagne, it was Carney himself taking to national airwaves two weeks ago to sell this tough-news budget as an investment in the future, with short-term pain required to get there.
This budget is the first test of the doctrine previewed in Carney’s national address: build, protect and empower. The promise is to spend less on operations, invest more in productive capacity, and talk to Canadians like adults about trade-offs. Texture’s pre-Budget analysis laid out how Ottawa is shifting from a branch-plant mindset to build-at-home pragmatism.
The Numbers
$141 billion in new spending over the next five years.
$73 billion for new defence spending, $30 billion of which will go to capital investments.
$5 billion over seven years for a national trade diversification corridor.
$1 billion for Arctic infrastructure.
$32.5 billion in net-new capital spending over five years.
Spending is partially offset by $51.2 billion in cuts and savings.
The elimination of up to 40,000 public service positions over three years through restructuring, consolidating, rightsizing and attrition.
$25 billion in annual savings progressively over the next three years from operational spending cuts.
Two per cent slashes at both Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada, which takes a $2.3 billion bite out of those ministries by spring 2030.
$78 billion deficit.
Nearly double the last federal budget deficit of $42.9 billion.
The macro frame is tough-love economics. To pay for it, Ottawa will lean on a Comprehensive Expenditure Review. Ministers were tasked to find 7.5 per cent, then 10 per cent and 15 per cent program savings over three years. But it’s a risk, as public service reductions at this level will create political turbulence for Carney’s government when dealing with major public sector unions and advocacy organizations going forward.
The Message: What does the government want to talk about?
Carney wants to sell this budget as a sure bet on a long-term payoff. Look for the government to highlight a $280-billion expenditure over five years on capital investments in new infrastructure, productivity and competitiveness measures, defence and security, and housing.
There are some hidden gems worth talking about.
The creation of a Critical Minerals Sovereign Fund, providing $2 billion over five years, on a cash basis, starting in 2026-27. The fund will make strategic investments in critical minerals projects and companies, including equity investments, loan guarantees, and offtake agreements. Other countries have been moving in this direction, including the U.K., Ireland and the U.S. in the past year.
The budget bets big on keeping emerging technologies in Canada, including spending $925 million over five years on sovereign compute capacity and AI infrastructure, and carving $334.3 million out of the forthcoming Defence Industrial Strategy to grow and secure Canada’s quantum ecosystem.
The budget invests $1.7 billion to attract the world’s best and brightest to Canadian universities and labs. That message will compete with the tougher stance on immigration – capping permanent residents to the new, lower 380,000 total, 240,000 of which will be economic immigrants, and dropping the cap on international students (again) down to just 155,000.
Carney’s team has also been consistently trying to communicate the repudiation of the Trudeau era through policy changes. For months, it has been one reversal after another of hallmark Trudeau initiatives in climate change, Indigenous reconciliation, and immigration. This budget is yet another proof point - from cancelling the two-billion tree-planting commitment, to cutting Indigenous programming, to even deeper cuts to immigration and foreign aid. As a communications tactic, the Liberals want to put the contrast between Carney and Trudeau in the window, and they will continue to do so at every opportunity. This is aimed at neutering the Conservative narrative that Carney’s government is just like Trudeau’s.
Will the budget pass?
In a word, yes.
This budget is at best a mixed bag. But the final vote, likely during the week of November 17, is a confidence motion, so Carney needs to find a couple of votes to make sure it passes.
The Leader of the Official Opposition, Pierre Poilievre, has legitimate gripes from the right about the large deficit. He quickly released a statement saying his caucus will vote no because, he says, big spending will drive more inflation. But Poilievre won’t be able to get a clean message out. Within hours of the budget release, then-Conservative MP Chris d’Entremont (Acadie-Annapolis) announced he will cross the floor to join the Liberals, putting the governing party just two seats shy of a majority.
On top of that, speculation about who might be next will swirl – rumours of d’Entremont’s possible floor-crossing have been hot on the Hill for two weeks, and d’Entremont is only one of about four names that have been passed around press gallery and political staff circles.
The Conservatives will vote no. d’Entremont will join the Liberals and vote yes. Carney needs one more vote or two abstentions - either scenario would result in a hung Parliament, enabling the Speaker (Liberal) to vote to break the tie. Or, three abstentions would achieve a majority. An abstention could simply look like an MP failing to appear in the House or log in to their app to vote at the right time. Those abstentions are most likely to come from the NDP.
From the left, the NDP will like the commitment to create good, unionized jobs through large construction projects. But with no new concrete affordability measures, plus public service job cuts and cuts to services, working and middle-class families won’t see much in this budget for them, and the NDP won’t like that.
The Carney government will be accused by the NDP of choosing to help corporations with lower tax burdens and less red tape, while leaving working people to fend for themselves amid high prices and growing unemployment. But the leaderless NDP is in the middle of a leadership race, and they’ve seen polling that shows Canadians do not want an election during a trade war. So look to the NDP to either vote in support of the budget, or for the NDP to vote no – but leave two or three MPs at home.
The Bloc Québécois issued a list of six demands that must be met in order for them to vote in support of the budget. All six were ignored – requests like increased health transfers and the end of fossil fuel subsidies. The Bloc will vote no.
Advocacy Post-Budget
If there’s a funding bucket in the budget for your work, let’s go after it.
But the Budget is not the final word – mid-term Budget updates exist to absorb all the changes that happen over the course of the fiscal year. There is always room to advocate against a cut. Cuts always mean unintended consequences, and sometimes those can blow up in a government’s face. If you believe a cut will have a significant, negative unforeseen consequence, a public relations and government relations strategy go hand-in-glove to convince the government to walk it back. Elevating third-party voices of those who would be hurt by the cut is always going to have an impact.
