MEI: Carney government attempting to hide day-to-day spending in capital budgets, PBO reveals

Montreal, November 14, 2025 – The Carney government is attempting to quietly shift billions of dollars of operational spending into the capital budget, reveals a Parliamentary Budget Officer (PBO) report released this morning.

“The PBO is sounding the alarm on this government’s accounting practices,” says Gabriel Giguère, senior policy analyst at the MEI. “Jamming billions of dollars in day-to-day spending into the ‘capital’ column to make the government look like a responsible fiscal steward is really playing fast and loose with the facts.”

In its latest budget, released last week, the Carney government introduced a new split between “operating” and “capital” spending. In its report, the PBO notes that the government’s definition of capital investments is “overly expansive,” and includes spending that would not be considered capital formation under well-established international frameworks.

The Carney government notably now includes elements such as tax credits, subsidies, and other forms of corporate welfare as capital investments.

For example, the definition of corporate income tax credits as capital spending, whereas corporate income tax revenue is considered operational, shows the blurring of the line between operational and capital spending.

Ottawa’s 2025 budget claims it will spend $311.5 billion on capital over the next five years. But when the PBO recalculates the same category using conventional definitions, capital spending totals just $217.3 billion.

The PBO thus finds that capital spending would be some $94 billion lower than what the Carney government claims—30 per cent less.

“What’s especially worrying is that the government’s claim of reaching an operational surplus in 2028 hinges entirely on this reclassification, shifting roughly $100 billion of operational spending into the capital category,” highlights Mr. Giguère.

The discrepancy is apparent in this upcoming fiscal year alone: while Budget 2025 reveals an operational deficit of $33 billion, the PBO’s calculation puts it much higher, at $45.8 billion. And instead of achieving a day-to-day operating surplus by 2028-29, Ottawa will still be posting a deficit that year.

Last week, Fitch Ratings estimated that rising debt and substantial increases in spending has “weakened” Canada’s credit profile and could hurt future ratings over the medium term.

The Carney government projected a deficit of $78.3 billion for 2025-2026.

This leaves little fiscal breathing room, notes the PBO, as cutting taxes or increasing spending would push Canada’s debt even higher. This also deviates from the projections of the past three years, which would have allowed for space to grapple with future challenges and risks.

“The PBO’s message is crystal clear: this flies in the face of accountable and transparent government,” says Mr. Giguère. “This isn’t just a continuation of the previous government’s high-spending habits; it’s worse, because now they’re trying to obscure the truth.”

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The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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