What’s going to be in Carney’s first budget?

After weeks of federal government spending announcements leading up to budget day, the biggest unknown remains how large the deficit will be and where and how deep the expected cuts will land.

Prime Minister Mark Carney and his finance minister, François-Philippe Champagne, have repeatedly characterized Tuesday’s budget as a generational one. In this time of “ruptured” global economics and geopolitical uncertainty, the’ve said Canada has to “spend less” to “invest more.” 

They have spoken of “tough choices” and “sacrifices” that will have to be made, laying the groundwork to brace Canadians for what could be some dramatic numbers.

“This is a unique budget because the circumstances necessitate we make some decisions that were not pressing before, the way they are now,” said a senior government official, who was not authorized to speak publicly about the budget. “For decades we relied on a partnership with the U.S. that seemed airtight, but is now fracturing.”

A recent prime-time speech by Carney framing the budget as one that will empower and protect Canadians while building the country from within has created high expectations.

“We’re looking for a serious budget at a serious time,” said Theo Argitis, senior vice-president for policy at the Business Council of Canada.

“We don’t have a shortage of ideas. We have a shortage of political courage in this country…. A test for seriousness is whether they are willing to make some trade-offs, prioritize certain things,” he said.

All the talk about “building Canada strong” has some stakeholders hopeful for a focus on building domestic capacity, not simply chasing more foreign business investment such as multinational-owned EV battery plants.

“My heart would sink if we saw … billions of dollars going towards programs and initiatives that don’t advance our economic strength and our sovereignty. That would be a huge red flag,” said Benjamin Bergen, president of the Council of Canadian Innovators (CCI).

“Our view is that economic strength comes from domestic firms that are scaling and growing.”

Bergen says that while the government has been tight-lipped on what’s actually going to be in the budget, the CCI has never had more engagement with Ottawa on building domestic capacity as it has in the last three months.

There have been several pre-budget announcements, as far back as June that include but are not limited to:

Of course, there will be a number of measures, investments, tax credits and the like that will only be revealed on budget day.

Clearly a big increase in defence spending will be part of Tuesday’s budget, with Canada pledging to reach NATO’s target of two per cent of GDP spending by March 31 and 3.5 per cent of GDP on core defence requirements by 2035.