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OTTAWA — The parliamentary budget officer projects the federal Liberals will narrowly maintain long-term fiscal sustainability with their new budget, but day-to-day spending measures mean Ottawa will blow past its new fiscal anchors.
In a new analysis of the budget published Friday, interim budget officer Jason Jacques said Ottawa is set to run an average deficit of $64.3 billion over the next five years — double the level set out in the federal government’s last fiscal update in late 2024.
Speaking to a business audience on Friday, Prime Minister Mark Carney again pitched Budget 2025 as a plan for “generational” investments to pivot Canada’s economy away from reliance on the United States in response to U.S. President Donald Trump’s trade war.
He said the budget makes “tough, responsible choices” to “right-size” the government after years of growth in the public service outpacing the size of the economy.
Despite Carney’s talk of shifting government spending to capital investment rather than operating costs, Jacques said deeper deficits are being driven by new day-to-day program spending.
Jacques blamed $87 billion in net new operating spending over five years for the deficit deterioration, as well as the $65 billion set aside for contingent liabilities like court settlements, environmental obligations or tax-related provisions.
According to the Liberals’ definition, “capital spending” refers to direct investments in assets like infrastructure and housing, or measures that encourage such spending from the private sector or other levels of government.
But Jacques said that definition is “overly expansive” because it includes program spending like corporate income tax expenditures, investment tax credits and subsidies.
According to the PBO’s calculations, capital spending amounts to $217.3 billion through to 2030. That’s 30 per cent, or $94 billion, lower than Ottawa’s projection in the budget.
The PBO calls on the government to establish an independent body of experts to determine which spending measures count as capital as a way to eliminate “subjectivity” from the government’s projections.
John Fragos, press secretary for Finance Minister François-Philippe Champagne, pushed back on the PBO’s framing.
“While we respect the PBO and the work they do to provide timely reports to Parliamentarians, the report in question takes a narrow outlook of Canada’s fiscal and economic policy trajectory, looking at Canada’s budget in isolation — absent longer-term considerations and knock-on-effects,” he said.
He said the budget is focused on broader growth and productivity challenges facing Canada and “balances ambition with responsible governance.” He pointed to an op-ed earlier this week from former PBO Kevin Page which gave Ottawa solid grades for its strategy and relative fiscal prudence.
Conservative Leader Pierre Poilievre said in a social media post that the PBO report reveals the Liberals’ “phoney accounting.”
“No wonder Carney wants to fire the Parliamentary Budget Officer,” Poilievre said — an apparent reference to a job listing posted earlier this week for the permanent PBO position.
Jacques was appointed as the interim PBO for a six-month term before the House of Commons resumed sitting in September. A budget officer must get Parliament’s approval for a full seven-year tenure.
The Conservatives have accused the Liberals of keeping Jacques — who has been highly critical of the government’s spending plans — on a short leash with the “interim” label.
Heading into the Nov. 4 budget release, the federal Liberals set fiscal anchors — benchmarks to show prudent financial management — to balance the operating side of the budget in three years and maintain a declining deficit-to-GDP ratio over the planning horizon.
Jacques said the federal government would be in an operating surplus in the coming years if measures announced since the fall economic statement from 2024 were eliminated.
He said he now expects the federal government will only balance the operating side of the budget in 2028-29 — a year later than the timeline set by the government’s fiscal anchor.
While the budget included analysis of the effect on federal finances of various economic outcomes, the PBO found those scenarios “provide a limited range of possible economic shocks.”
The PBO’s “stress test” of the budget found only a 7.5 per cent chance of the government meeting its fiscal anchor of shrinking the deficit as a share of GDP. The office also projects the government likely won’t lower its debt-to-GDP ratio — previously a fiscal anchor for the federal government — over the forecast horizon.
While the fiscal watchdog is raising the alarm about the government’s fiscal sustainability in the near term, the PBO’s long-term outlook is somewhat rosier.
Jacques’ report said that, based on a modest decline in the debt-to-GDP ratio projected over the next 30 years, “current fiscal policy in Budget 2025 would be deemed sustainable over the long term.”
But the report notes that budgets from the previous three years had debt as a share of GDP shrinking at a much faster rate than the timeline set in Budget 2025.
The PBO also said projections in the latest budget would leave little wiggle room to decrease revenues or increase program spending in the coming years while maintaining fiscal sustainability.
Monday sees the final day of debate on the budget in the House of Commons, with a vote on the proposed legislation expected later that evening.
The minority Liberals will need to secure at least two votes or abstentions from opposition MPs to pass the budget. A failed confidence vote could defeat the government and lead to an early election.
This report by The Canadian Press was first published Nov. 14, 2025.
Craig Lord, The Canadian Press
