Ottawa should unveil a budget Canadians won’t recognize

As Ottawa prepares its fall budget, Canadians should demand a clean break from the status quo. After a decade of unrestrained deficit spending, we are fiscally adrift — burdened by costly new programs and a bloated bureaucracy with little to show for it.

This is why Prime Minister Mark Carney’s government must not simply tinker around the edges but present the kind of budget Canadians haven’t seen in a while.

The previous government left office with a national debt nearing $1.4 trillion, having failed to balance the budget in its nine years in power. More and more taxpayer dollars are now being redirected to service that debt.

While the government has pledged to reduce program spending by 15% in the 2028-2029 fiscal year through shrinking departments and cutting waste (after smaller reductions the previous two years), it is still on track to post a sizeable deficit of $92 billion for 2025–2026, according to projections published by the C. D. Howe Institute.

What is needed is a comprehensive review of both the bureaucracy and federal programs to restore sound public finances.

Here is what the Carney government must do to get its finances in order.

First, it needs to roll back costly programs and reduce the size of government.

Under Carney’s predecessor, the number of federal bureaucrats grew by nearly 100,000 — a 38% increase. Yet, despite a considerable hike in personnel costs, Canadians would be hard-pressed to point to noticeable improvements in service delivery.

Real reform would look like the Chretien model from the 1990s. Faced with persistent deficits, the Chretien government acted decisively, cutting over 42,000 public sector jobs. A comparable 17.4% reduction today could eliminate 64,000 jobs and save almost $10 billion annually.

This review must also extend to new programs that have been announced but can only be funded through deficits, many of which encroach on provincial jurisdiction.

For example, the federal dental plan is projected to cost taxpayers $13 billion over five years, while the proposed pharmacare plan will cost $13.4 billion per year by 2027-2028. Rolling back such initiatives could yield substantial savings.

This fall, Canadians should not be presented with a budget that doubles down on the same policies that have already strangled business creation, driven away investment and suppressed living standards.

Second, the government must remove excessive regulation that is strangling Canadian business.

Between 2006 and 2021, federal regulations increased by 37%, reaching 320,000 in total. Statistics Canada estimates that this reduced real gross domestic product (GDP) growth by 1.7 percentage points, employment growth by 1.3 percentage points and labour productivity growth by 0.4 percentage points over the same period.

Canadian businesses spend an exorbitant amount of time on compliance — some 768 million hours a year, which is equivalent to almost 394,000 full-time jobs.

The costs to businesses in 2024 alone were almost $51.5 billion.

Is anyone surprised that entrepreneurship in Canada is on the decline? In the year 2000, three out of every 1,000 Canadians had started a business. By 2022, that rate had fallen to just 1.3 per 1,000, representing a nearly 57% drop

Had Ottawa maintained 2006 regulation levels, Canada would have seen a 10% higher rate of new businesses entering the market in 2021.

Finally, the Carney government must scrap harmful policies that undermine our energy sector.

Certain regulations that specifically target Canada’s oil and gas sector are setting us up for a rude awakening.

Take Ottawa’s oil and gas emissions cap, set to take effect next year. It aims to reduce emissions from this sector to 35% below 2019 levels, but reports from Deloitte and the parliamentary budget officer (PBO) confirm that it is effectively a production cap.

Oil and gas account for 3.3% of the national GDP in 2024, but the emissions cap would change that. Deloitte estimates that by 2040, this regulation would lower Canada’s GDP by 1%, representing a $34.5-billion loss in constant 2017 dollars. The cap would also cost 112,900 Canadian jobs by 2040.

Similarly, the PBO projects that to meet Ottawa’s emissions goal, oil and gas production would need to be 4.9% lower than current forecasts over 2030-2032.

For a country with the world’s fourth-largest natural gas reserves and the third-largest exporter, such policies are simply reckless.

This fall, Canadians should not be presented with a budget that doubles down on the same policies that have already strangled business creation, driven away investment and suppressed living standards. We are ready to be surprised by something we haven’t seen in a while — a responsible budget.

Samantha Dagres is Manager, Communications at the MEI. The views reflected in this opinion piece are her own.