Why? 

Because while $60 billion in savings may sound impressive (the government repeatedly uses the term “ambitious”), the government will not actually cut annual spending by that amount. Instead, it plans to slow the growth rate of spending. That means the government won’t actually reduce how much it will spend; it just won’t increase spending as much as it would have. 

For example, the Carney government still plans to increase annual program spending (total spending minus debt interest costs) by 14.2 per cent (a nominal increase of $69.9 billion) from 2024/25 to 2029/30. For comparison, as part of its spending review that brought Canada back from the brink of a fiscal crisis, the Chrétien Liberal government actually cut annual program spending by 9.7 per cent (a nominal decrease of $11.9 billion) from 1994/95 to 1996/97. 

In fact, due to the combined effects of the Carney government’s planned spending increases and slower growth in revenue, total annual deficits over the next five years will reach a projected $321.7 billion—more than double the size of combined deficits the Trudeau government planned for that same period.

The Carney government’s spending review also excludes all major cash transfers to individuals or other levels of government, despite the fact that these categories represent nearly half of the budget—in 2024/25, major transfers equaled a combined $236.7 billion or 48 per cent of total program spending in that year. 

To compare again, the Chrétien government reviewed all spending categories with no exceptions, and reformed how it delivered welfare transfers to the provinces to simultaneously reduce spending while giving provinces more flexibility to tailor social assistance programs to local needs. Simply put, the Chrétien government’s review reassessed the government’s role in delivering programs and services as a whole to Canadians. The Carney review does not.

Consequently, the government will continue to run massive deficits and add to the mountain of federal debt, which will reach a projected $2.35 trillion this year. And the government will spend a projected $55.6 billion this year on debt interest, which is more than it plans to collect from the federal Goods and Services Tax (GST) this year ($54.4 billion). In other words, every hard-earned dollar Canadians pay in GST will be consumed by the interest on federal debt, as opposed to being used to pay for government programs and services.

Although the Carney government’s spending review falls well short of what’s needed to solve Ottawa’s spending problem, the government seems content with the level of savings it has found. Unfortunately, Canadians will bear the consequences for this lack of ambition.

Grady Munro and Jake Fuss are senior analysts at the Fraser Institute. 

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