Days before Members of Parliament are scheduled to vote on the Liberal budget, the interim Parliamentary Budget Officer (PBO) Jason Jacques has raised concerns about the government’s financial management. Jacques suggests that there is a less than 10 percent likelihood that the government will meet its deficit targets.
Contrary to his previous remarks in September labeling Canada’s spending as “unsustainable” and “shocking,” Jacques now asserts that, based on the PBO’s framework, the government’s finances are sustainable in the long term, albeit tight. The report criticizes Finance Canada for altering the way it reports deficit financing by segregating capital from operational expenditures.
According to the report, the PBO believes the government’s definition of capital investments is overly broad. While the government plans $311 billion in capital spending from 2024-25 to 2029-30, the PBO’s analysis indicates that only $217.3 billion should be considered capital spending. The report recommends the establishment of an independent expert body to determine which federal spending categories qualify as capital investments due to the subjective nature of defining them.
The budget watchdog also highlights that operational spending could have been in surplus by 2026-27 without the measures introduced in the 2024 fall economic statement and the 2025 budget. The report indicates that these measures will keep the operating budget in deficit until 2028-29, a year longer than the government’s projections.
Although the federal government predicts that its deficit-to-GDP ratio will rise to 2.5 percent in 2025-26 before decreasing to 1.5 percent by 2029-30, the PBO report casts doubt on this projection, suggesting a mere 7.5 percent chance of a yearly decline in the ratio through 2029-30. However, Jacques’s report projects that Canada’s debt as a share of GDP will decrease over the next three decades, placing the Liberal government in a sustainable fiscal position.
Finance Minister François-Philippe Champagne’s press secretary, John Fragos, acknowledged the PBO’s work but emphasized that the report does not consider the anticipated economic growth resulting from the budget measures, potentially providing more fiscal flexibility in the future. Fragos emphasized that Budget 2025 addresses Canada’s long-standing growth and productivity challenges with a sustainable and ambitious outlook.
Kevin Page, the first parliamentary budget officer, graded the Liberal budget with a B for fiscal responsibility, noting that Canada’s fiscal structure remains sustainable despite increased debt and limited fiscal capacity to tackle financial crises. Jacques, appointed by the Liberal government for six months in early September, is now being sought to be replaced permanently with someone possessing “tact and discretion.”
During a speech in Calgary, Conservative Leader Pierre Poilievre criticized Prime Minister Mark Carney for mislabeling day-to-day operating expenses as investments, accusing the government of failing to meet deficit targets, which he believes will negatively impact Canadians’ cost of living and future tax burdens.
