No Budget, No Plan – So We Did the Math

July 3, 2025 – With no federal budget in sight until the fall, and many recent expensive fiscal initiatives, including a massive increase in defence spending, Canadians are left without a clear picture of the country’s fiscal trajectory, according to a new report from the C.D. Howe Institute.

In “The Fiscal Update the Government Should Have Produced and the Budget Canada Needs,” William B.P. Robson, Don Drummond, and Alexandre Laurin construct an independent outlook for the 2025/26 fiscal year and the three years that follow.

Implementation of the Liberal election platform along with subsequent announcements, would yield a cumulative deficit of $311 billion over four years for an annual average of $77.7 billion. The net debt-to-GDP ratio would flat line at the elevated level of 2025/26, 12 percentage points higher than pre-pandemic. If the savings portrayed in the election platform from penalties, fines and spending cuts are not realized, the cumulative deficit would be $342.7 billion for an annual average of $85.7 billion. The ratio of debt to GDP would trend up.

The Institute’s fiscal update does not split the budget into operating and capital components as per the Government’s intent. Attempting to obscure new spending by classifying it as capital, or as growth-enhancing “investment”, would break the connection between Parliament’s budget process and the government’s audited financial statements, which already have separate treatment of capital, and make budget-making more subjective and open to abuse. 

To set Canada on a sustainable fiscal course, the report calls for scaling back the long list of expensive platform commitments yet to be acted upon – the platform envisioned $28.3 billion of measures in 2025/26 alone –finding much deeper savings within current operations, relying on less economically damaging sources of revenue – such as a modest increase in the GST rate – and reconsidering how Ottawa transfers funds to the provinces and territories.

“The Liberal election platform along with the commitment to much higher defence spending amounts to a radical change in the nation’s finances with long-lasting adverse consequences,” says Robson, the Institute’s President & CEO.

Fellow-in-Residence Drummond adds “Canadians need to be engaged now in a debate over Canada’s fiscal future and that must begin by the Government providing the information needed.”

Read the Full Report

For more information, contact William B.P. Robson, President & CEO, C.D. Howe Institute; Don Drummond, Fellow-in-Residence, C.D. Howe Institute; Alexandre Laurin, Vice-President & Director of Research, C.D. Howe Institute; Percy Sherwood, Associate Editor and Communications Officer, C.D. Howe Institute, 416-407-4798, psherwood@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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