Federal Budget 2026 vs Budget 2025: Canada Strong: Fiscal outlook, revenues, expenses, assumptions and measures
Budget 2026 vs Budget 2025: the 2026-27 deficit is $62.3 billion against $65.4 billion, and debt-to-GDP is 39.9% against 43.1%.
- Over the four years both budgets project, 2026-27 to 2029-30, deficits add up to only $7.6 billion less than Budget 2025 forecast, though better economic and fiscal forecasts were worth $168.5 billion over the same years (calculated).
- The day-to-day operating balance for 2027-28 moves $16.7 billion, from a $5.5 billion shortfall to an $11.2 billion surplus, and $12.1 billion of that move is a larger estimate of tax revenue that is never collected (calculated).
- Federal debt is 3.2 points of GDP lower in 2026-27 than Budget 2025 projected, but net debt ends the shared horizon $27.1 billion higher and debt charges are $2.3 billion higher in 2029-30 (calculated).
Headline Changes
| Measure | Budget 2025: Canada Strong | Budget 2026: Masters of Our Destiny | Change |
|---|---|---|---|
| Budgetary balance, 2025-26 | -$78.3B | -$39.3B | $39.0B smaller |
| Budgetary balance, 2026-27 | -$65.4B | -$62.3B | $3.1B smaller |
| Budgetary balance, 2029-30 | -$56.6B | -$53.4B | $3.2B smaller |
| Day-to-day operating balance, 2027-28 | -$5.5B | $11.2B | +$16.7B |
| Federal debt-to-GDP, 2026-27 | 43.1% | 39.9% | -3.2 points |
| Budgetary revenues, 2026-27 | $523.2B | $540.3B | +$17.1B |
| Total expenses, 2026-27 | $588.6B | $602.6B | +$14.0B |
| Capital investments (accrual), 2027-28 | $58.0B | $73.7B | +$15.7B |
| Public debt charges, 2029-30 | $76.1B | $78.4B | +$2.3B |
Billions of dollars. Changes are calculated from the printed figures. Budget 2025, Annex 1, Tables A1.4, A1.5, A1.7, A1.8 and A1.9. Budget 2026, Annex 1, Tables A1.5, A1.6, A1.8, A1.9 and A1.10.
Budget 2026 does not bridge its numbers back to Budget 2025. Its Table A1.4 starts from the Spring Economic Update 2026 (SEU 2026). Only Charts 40 and 42, and the budget in brief's repeat of Chart 42, show a Budget 2025 projection. The Spring Economic Update had already bridged from Budget 2025 in its own Table A1.3. Chaining the two tables gives the full path from one budget to the next (calculated).
| 2026-27 to 2029-30, four-year totals | Billions |
|---|---|
| Budget 2025 deficits | -243.4 |
| Economic and fiscal developments, at SEU 2026 | +42.6 |
| Economic and fiscal developments, in Budget 2026 | +125.9 |
| Policy actions between the documents | -22.7 |
| SEU 2026 measures | -28.0 |
| Budget 2026 measures | -110.3 |
| Budget 2026 deficits | -235.8 |
Calculated by chaining SEU 2026, Annex 1, Table A1.3 with Budget 2026, Annex 1, Table A1.4. Rows add to within $0.1 billion of the printed balance.
Forecast revisions improved the balance by $168.5 billion over the four shared years. Spending decisions taken in the spring update and in this budget used $161.0 billion of it, about 95 per cent (calculated). The remainder, about $7.6 billion, is the whole improvement in the deficit against Budget 2025 over those years. Most of the improvement arrived after the spring update. Budget 2026 counts $125.9 billion of new developments and then books $119.4 billion of policy actions and measures against them in the same years (calculated).
The budget's own headline, "the deficit is projected to be $34 billion lower than previously forecast", compares with SEU 2026 over six years. Of that $34.4 billion, $27.6 billion falls in 2025-26, the year just ended. The same pattern holds against Budget 2025. 2025-26 improves by $39.0 billion and the planning years barely move. For full detail of the fiscal outlook, see the fiscal deep dive.
Budgetary Balance and Fiscal Anchors
| Fiscal year | Balance, Budget 2025 | Balance, Budget 2026 | Deficit-to-GDP, Budget 2025 | Deficit-to-GDP, Budget 2026 | Debt-to-GDP, Budget 2025 | Debt-to-GDP, Budget 2026 |
|---|---|---|---|---|---|---|
| 2024-25 | -$36.3B | not printed | 1.2% | not printed | 41.2% | not printed |
| 2025-26 | -$78.3B | -$39.3B | 2.5% | 1.2% | 42.4% | 40.2% |
| 2026-27 | -$65.4B | -$62.3B | 2.0% | 1.8% | 43.1% | 39.9% |
| 2027-28 | -$63.5B | -$62.5B | 1.9% | 1.8% | 43.3% | 40.2% |
| 2028-29 | -$57.9B | -$57.6B | 1.6% | 1.6% | 43.3% | 40.4% |
| 2029-30 | -$56.6B | -$53.4B | 1.5% | 1.4% | 43.1% | 40.3% |
| 2030-31 | not projected | -$52.9B | not projected | 1.3% | not projected | 40.1% |
Budget 2025, Annex 1, Table A1.7. Budget 2026, Annex 1, Table A1.8 and Overview, Chart 40.
The shape of the deficit path has changed. Budget 2025 put the peak in 2025-26 at $78.3 billion and had the deficit falling every year after. Budget 2026 puts the 2025-26 deficit at $39.3 billion, then has it jump by $23.0 billion to $62.3 billion in 2026-27 (calculated). From 2026-27 on, the two paths sit within $3.2 billion of each other in every year. In 2028-29 they differ by $0.3 billion.
The 2025-26 gain reflects results for a year that has now ended. Budget 2026 says the strength comes partly from higher-than-expected preliminary 2025-26 results (Annex 1). Net actuarial losses work the other way. They are $13.6 billion in 2025-26 in Budget 2026 against $5.0 billion in Budget 2025. Before those losses, the 2025-26 balance is $47.7 billion better than Budget 2025 projected (calculated).
The day-to-day operating balance is the budgetary balance with capital investment taken out. Both budgets use the Capital Budgeting Framework that Budget 2025 introduced, so the measure is defined the same way. The numbers have moved a long way.
| Fiscal year | Operating balance, Budget 2025 | Operating balance, Budget 2026 | Forgone revenue counted (row E), Budget 2025 | Forgone revenue counted (row E), Budget 2026 |
|---|---|---|---|---|
| 2025-26 | -$33.0B | -$2.0B | $5.7B | $6.3B |
| 2026-27 | -$8.7B | -$3.5B | $6.4B | $9.9B |
| 2027-28 | -$5.5B | $11.2B | $4.7B | $16.8B |
| 2028-29 | $1.7B | $20.3B | $4.7B | $16.9B |
| 2029-30 | $3.0B | $24.6B | $4.9B | $14.9B |
Budget 2025, Annex 1, Table A1.5. Budget 2026, Annex 1, Table A1.6 and Overview, Chart 42.
Row E adds back an estimate of tax revenue the government gives up through capital-focused tax breaks. Budget 2026's own note says this revenue "is not recorded in the government's financial statements and is therefore not observed directly." The Productivity Mega Deduction is most of the increase. In 2027-28, row E rises by $12.1 billion between the two budgets, which is 72 per cent of the $16.7 billion improvement in the operating balance (calculated).
Take row E out and the picture changes. Revenues minus day-to-day operating expenses would be -$10.2 billion in 2027-28 and -$2.9 billion in 2028-29 under Budget 2025 (calculated). Budget 2025's anchor was therefore met only because of the add-back. Under Budget 2026 the same test gives -$5.6 billion in 2027-28 and $3.3 billion in 2028-29 (calculated). On that stricter reading, Budget 2026 balances in 2028-29, the original target year.
| Anchor | Budget 2025 wording | Budget 2026 wording | Status |
|---|---|---|---|
| Operating balance | "Balancing day-to-day operating spending with revenues by 2028–29" | "balancing operating spending with revenues by 2028-29", on track "by 2027-28, one year ahead of the target" | Kept, met a year early in the projection |
| Deficit-to-GDP | "Maintaining a declining deficit-to-GDP ratio" | "maintaining a declining deficit-to-GDP ratio", "from 1.8% in 2026-27 to 1.3% in 2030-31" | Kept, measured from 2026-27 |
| Capital covers the deficit | 100% of the deficit from 2028-29 | "fully accounted for by capital investments in 2027-28 and each subsequent year" | Moved a year earlier |
| Expenditure review | $13 billion a year by 2028-29, $60 billion over five years | Restated in Chapter 6 | Kept, no progress table |
| Private investment goal | $500 billion in new private investment over five years | "catalysing $500 billion in new private sector capital investment" | Kept |
| Debt-to-GDP | No debt anchor | No debt anchor | Unchanged |
Budget 2025, Economic and Fiscal Overview, s. 5. Budget 2026, Economic and Fiscal Overview, Annex 1 and Chapter 6.
The deficit-to-GDP anchor now starts from a different base. Budget 2025's ratio fell every year from 2.5 per cent. Budget 2026's ratio rises from 1.2 per cent in 2025-26 to 1.8 per cent in 2026-27 and holds at 1.8 per cent in 2027-28. The decline the budget claims runs from 2026-27.
Federal debt-to-GDP is 2.2 to 3.2 points lower in every shared year. Two things drive it. Federal debt is $45.9 billion lower in 2026-27 and $50.4 billion lower in 2029-30 (calculated). Nominal GDP, the denominator, is much larger (see Assumption Changes). Net debt moves the other way. It is total liabilities less financial assets, and it does not subtract buildings, equipment and other non-financial assets. Net debt is $21.6 billion lower in 2026-27 but $27.1 billion higher than Budget 2025 projected by 2029-30 (calculated). Non-financial assets are $77.4 billion higher in 2029-30, at $284.8 billion against $207.4 billion (calculated). The government is borrowing more in total and recording more of it as assets.
Revenue Comparison
| Revenue line, 2026-27 | Budget 2025 | Budget 2026 | Change | Change (%) |
|---|---|---|---|---|
| Personal income tax | $244.9B | $258.7B | +$13.8B | +5.6% |
| Corporate income tax | $96.7B | $102.7B | +$6.0B | +6.2% |
| Non-resident income tax | $14.0B | $14.8B | +$0.8B | +5.7% |
| Goods and Services Tax | $56.5B | $51.5B | -$5.0B | -8.8% |
| Customs import duties | $6.3B | $11.1B | +$4.8B | +76.2% |
| Other excise taxes and duties | $13.3B | $7.7B | -$5.6B | -42.1% |
| Other taxes (Pillar Two minimum tax) | $2.7B | $2.7B | $0.0B | 0.0% |
| Pollution pricing proceeds | $0.0B | no separate line | n/a | n/a |
| Employment Insurance premiums | $33.3B | $34.3B | +$1.0B | +3.0% |
| Enterprise Crown corporations | $14.8B | $13.0B | -$1.8B | -12.2% |
| Other programs | $34.0B | $37.0B | +$3.0B | +8.8% |
| Net foreign exchange and return on investments | $6.7B | $6.9B | +$0.2B | +3.0% |
| Total budgetary revenues | $523.2B | $540.3B | +$17.1B | +3.3% |
Budget 2025, Annex 1, Table A1.8 (The Revenue Outlook). Budget 2026, Annex 1, Table A1.9 (The Revenue Outlook). Changes calculated.
Income taxes account for more than the whole increase. Personal and corporate income tax together are $19.8 billion higher in 2026-27 than Budget 2025 projected (calculated). Budget 2026 attributes the strength to higher-than-expected preliminary 2025-26 results and a stronger nominal GDP outlook, with upward revisions to corporate profits and wages (Annex 1). It names higher oil prices as the driver of the nominal GDP revision.
Measures and trade actions move three lines in 2026-27. GST falls to $51.5 billion because of the Canada Groceries and Essentials Benefit top-up payments (Annex 1). Other excise taxes fall to $7.7 billion because of the fuel excise tax relief and its extension. Both are explained on the tax measures page. Customs duties are $4.8 billion higher, reflecting new and increased counter-tariffs on U.S. goods applied as of September 8, 2026. Annex 1 assumes they stay in place into 2027-28.
The revenue gain is smaller as a share of the economy. Revenues are 15.8 per cent of GDP in 2026-27 against 16.0 per cent in Budget 2025. Nominal GDP was revised up by proportionally more than revenues.
By 2029-30 the corporate gain is gone. Corporate income tax is $100.6 billion in both budgets that year. Budget 2026 has it falling from $104.2 billion in 2025-26 to $97.1 billion in 2027-28 as the Productivity Mega Deduction lets firms write off investment immediately. Personal income tax carries most of the gap at the end of the shared horizon, $18.1 billion of a $24.4 billion revenue increase (calculated).
Expense Comparison
| Expense line, 2026-27 | Budget 2025 | Budget 2026 | Change | Change (%) |
|---|---|---|---|---|
| Elderly benefits (Old Age Security program) | $88.8B | $89.4B | +$0.6B | +0.7% |
| Employment Insurance benefits | $31.9B | $32.9B | +$1.0B | +3.1% |
| Canada Child Benefit | $31.0B | $31.2B | +$0.2B | +0.6% |
| Major transfers to persons | $151.8B | $153.4B | +$1.6B | +1.1% |
| Canada Health Transfer | $57.4B | $57.4B | $0.0B | 0.0% |
| Canada Social Transfer | $17.9B | $17.9B | $0.0B | 0.0% |
| Equalization | $27.2B | $27.2B | $0.0B | 0.0% |
| Territorial Formula Financing | $5.8B | $5.8B | $0.0B | 0.0% |
| Health agreements | $4.3B | $4.3B | $0.0B | 0.0% |
| Canada-wide early learning and child care | $7.9B | $10.3B | +$2.4B | +30.4% |
| Canada Community-Building Fund | $2.5B | $2.5B | $0.0B | 0.0% |
| Other fiscal arrangements | -$8.0B | -$8.5B | -$0.5B | n/a |
| Major transfers to provinces, territories and municipalities | $115.0B | $116.9B | +$1.9B | +1.7% |
| Pollution pricing proceeds returned | $0.2B | no separate line | n/a | n/a |
| Other transfer payments | $117.3B | $122.4B | +$5.1B | +4.3% |
| Other direct program expenses | $144.0B | $150.0B | +$6.0B | +4.2% |
| Direct program expenses | $261.3B | $272.4B | +$11.1B | +4.2% |
| Total program expenses | $528.4B | $542.7B | +$14.3B | +2.7% |
| Public debt charges | $60.0B | $60.2B | +$0.2B | +0.3% |
| Net actuarial losses (gains) | $0.2B | -$0.4B | -$0.6B | n/a |
| Total expenses | $588.6B | $602.6B | +$14.0B | +2.4% |
Budget 2025, Annex 1, Table A1.9 (The Expense Outlook). Budget 2026, Annex 1, Table A1.10 (The Expense Outlook). Changes calculated.
Direct program expenses explain most of the increase. They are $11.1 billion higher in 2026-27 and $14.6 billion higher in 2029-30 than Budget 2025 projected (calculated). This is after a cut Budget 2026 makes to its own forecast. Annex 1 lowers projected direct program expenses by about 4.5 per cent, or approximately $12.4 billion a year. The budget calls this "an aggregate forecasting adjustment" that "does not change approved funding." Without it, the gap with Budget 2025 would be larger by roughly that amount. The expenditure review page covers it in detail.
2025-26 runs the other way. Program expenses for 2025-26 are $26.7 billion below what Budget 2025 projected, and other direct program expenses alone are $19.2 billion lower (calculated). Budget 2025's 2025-26 figure included $5.0 billion of pollution pricing proceeds returned, a line Budget 2026 no longer prints. Direct program expenses then run above Budget 2025's path from 2026-27.
Transfers to provinces are almost untouched. The Canada Health Transfer, Canada Social Transfer, Equalization and Territorial Formula Financing are identical to Budget 2025 in 2026-27. The main change is early learning and child care, $2.4 billion higher in 2026-27 from a temporary top-up of $5.4 billion over two years. It ends inside the horizon. The line is $8.5 billion in 2029-30 in both budgets. Details by province are on the provinces and territories page.
Transfers to persons are $1.6 billion higher in 2026-27 and $3.0 billion higher in 2029-30 (calculated). Budget 2026 attributes the rise against SEU 2026 largely to indexation to inflation and nominal GDP. Higher CPI assumptions are consistent with that.
The Comprehensive Expenditure Review does not grow. Budget 2025 booked it as a five-year saving of $44,217 million. Budget 2026's Chapter 6 adds $2,053 million of net savings and new revenue over five years. It then subtracts $2,064 million that Budget 2025 had already provisioned "for future reviews", so the new savings fill a placeholder and do not lower the deficit. The budget says $0.5 billion in 2027-28 and an average of $1.8 billion a year from 2028-29 to 2030-31 remain to be identified.
Debt charges rise despite lower debt. They are $1.1 billion higher in 2027-28 and $2.4 billion higher in 2028-29 than Budget 2025 projected (calculated). Higher assumed long-term interest rates are the likely cause. The 10-year bond rate is 3.8 per cent in 2027 against 3.5 per cent in Budget 2025.
Assumption Changes
| Variable | Calendar year | Budget 2025 | Budget 2026 | Change | What Budget 2026 says about the effect |
|---|---|---|---|---|---|
| Real GDP growth | 2026 | 1.2% | 1.0% | -0.2 points | One-point drop in real growth costs $5.6B in year 1 (Table A1.16) |
| Real GDP growth | 2027 | 2.0% | 1.7% | -0.3 points | Not quantified against Budget 2025 |
| Nominal GDP growth | 2026 | 3.0% | 5.6% | +2.6 points | Supports income tax growth, "driven by higher oil prices" |
| GDP inflation | 2026 | 1.8% | 4.6% | +2.8 points | One-point drop in GDP inflation costs $2.4B in year 1 (Table A1.17) |
| Nominal GDP level | 2026 | $3,276B | $3,427B | +$151B | Lowers every ratio to GDP |
| Nominal GDP level | 2029 | $3,686B | $3,826B | +$140B | Gap persists to the end of the shared horizon |
| CPI inflation | 2026 | 2.0% | 2.8% | +0.8 points | Raises indexed transfers to persons |
| Unemployment rate | 2026 | 6.8% | 6.6% | -0.2 points | Not quantified |
| 3-month treasury bill | 2027 | 2.5% | 2.6% | +0.1 points | Little change |
| 10-year bond | 2027 | 3.5% | 3.8% | +0.3 points | 100-basis-point rise costs $4.1B in year 1, $7.9B in year 4 (Table A1.18) |
| Exchange rate (US cents) | 2027 | 76.4 | 72.4 | -4.0 cents | Not quantified |
| WTI oil (US$ per barrel) | 2026 | 65 | 85 | +20 | Main source of higher GDP inflation |
| WTI oil (US$ per barrel) | 2027 | 67 | 79 | +12 | Equal in 2028, lower by 2029 |
| U.S. real GDP growth | 2026 | 1.6% | 2.1% | +0.5 points | Not quantified |
Budget 2025, Annex 1, Table A1.1 (August 2025 survey). Budget 2026, Annex 1, Table A1.2 (September 2026 survey) and Tables A1.16 to A1.18. Changes calculated.
The fiscal improvement comes from prices. Real growth is lower than Budget 2025 assumed in 2026 and 2027. Nominal growth in 2026 is 5.6 per cent against 3.0 per cent because GDP inflation is 4.6 per cent against 1.8 per cent. Budget 2026 ties that to higher oil prices and domestic price pressures. WTI is assumed at US$85 in 2026 against US$65 in Budget 2025.
The price gain is front-loaded. GDP inflation is at or below the Budget 2025 path from 2027, 1.6 per cent against 2.0 per cent in 2028. Oil is US$67 in 2029 against US$71. The higher nominal GDP level persists because it is a level. Revenues keep the gain even after inflation slows.
Part of the $151 billion difference in 2026 nominal GDP is statistical. Statistics Canada revised the historical National Accounts after Budget 2025, on February 27, 2026 and again on August 28, 2026. Budget 2026 restates SEU 2026 for those revisions but does not restate Budget 2025. Budget 2026 also does not compare its assumptions with Budget 2025 at all. Its Table A1.2 shows only SEU 2026.
The dollar is weaker. It is 72.4 U.S. cents in 2027 against 76.4 cents. Long-term rates are higher, which shows up in debt charges from 2027-28.
New Measures
Budget 2026's measures are larger than Budget 2025's and more of them count as capital. Budget 2025 stated "a net cost of $89.7 billion over five years", of which $32.5 billion was capital investment. That total was net of the expenditure review savings it booked as measures. Budget 2026's six chapter cost tables add to $142.0 billion over 2026-27 to 2030-31, of which $83.4 billion is capital, 58.7 per cent (calculated). The windows differ by a year. Over the same four years, 2026-27 to 2029-30, Budget 2025's measures cost $69.6 billion and Budget 2026's cost $110.3 billion (calculated).
The largest Budget 2026 lines with no Budget 2025 equivalent, by chapter (five-year net cost, millions):
Chapter 1, Canada's Investment Supercycle ($52,018 million in total). The Productivity Mega Deduction costs $36,055 million, a quarter of all Budget 2026 measures by itself (calculated). It is explained on the tax measures page. Powering Canada Strong costs $8,747 million and extends the clean technology and clean electricity investment tax credits to 2040 (electricity and nuclear). Strengthening Canada's forest sector costs $2,216 million (forestry).
Chapter 2, A more competitive and connected Canada ($14,983 million). The "Supporting Canadian workers and businesses" row costs $11,324 million. It bundles tariff packages announced between May 4 and October 21, 2026, so it is re-announced money on budget day (steel and aluminum). The Mackenzie Valley Highway costs $3,100 million (infrastructure and transit).
Chapter 3, A more affordable life ($30,715 million). The homelessness plan costs $11,224 million over four years from 2027-28, plus $17.8 billion in future years (housing and construction). The child care top-up costs $5,416 million (child care). The one-time Canada Groceries and Essentials Benefit supplement costs $4,665 million. The fuel excise tax extension costs $2,870 million, all in 2026-27. Both are tax measures (tax measures).
Chapter 4, A strong and united Canada ($34,613 million). This chapter has no Budget 2025 counterpart. Five of its lines are among the 25 largest measures, all for First Nations and Indigenous communities. Housing and infrastructure costs $7,913 million, children and families $5,253 million, student success $4,796 million, clean water $4,611 million and health and safety $3,998 million (Indigenous economy and reconciliation).
Chapter 5, A safe and sovereign Canada ($6,593 million). The largest line is emergency preparedness in First Nations communities at $2,710 million. AI for All costs $2,038 million (tech and AI).
Chapter 6, A more efficient government ($3,091 million). Section 6.3 is a net saving of $2,053 million that fills a Budget 2025 placeholder (expenditure review).
The first year is light. Budget 2026 measures cost $15.2 billion in 2026-27 and then $33.8 billion in 2027-28. More than half of the 2026-27 amount is Chapter 3 affordability spending, at $8.6 billion. The investment measures arrive from 2027-28.
Dropped and Restated Measures
| Budget 2025 item | Budget 2025 amount | Budget 2026 treatment | What changed |
|---|---|---|---|
| Productivity Super-Deduction | $1,490M | Productivity Mega Deduction, $36,055M | Extended and rescoped. Budget 2026 says it "builds on" the Super-Deduction |
| Rebuilding, Rearming, and Reinvesting in the Canadian Armed Forces | $55,883M | Restated as a NATO spending path (Table 5.1) | Re-announced. No large new defence cost line |
| Comprehensive Expenditure Review | -$44,217M | Chapter 6, s. 6.3, -$2,053M | Fills an existing placeholder. No progress table |
| Extending Early Learning and Child Care Agreements | $1,535M | Temporary top-up, $5,416M | Topped up for two years, then back to the Budget 2025 level |
| First Nations infrastructure financing and clean water | $2,331M | Clean water, $4,611M | About twice the amount, plus $7,913M for housing |
| Tariff support for workers in strategic industries | $4,939M | Supporting Canadian workers and businesses, $11,324M | Enlarged after packages announced since May 2026 |
| Launching Build Canada Homes | $6,696M | Expand non-market housing, $1,498M | Agency continues and also delivers homelessness capital |
| A New Trade Infrastructure Strategy | $4,150M | $5B and $1B funds reported as launched | Delivered, no new cost line |
| Pollution pricing proceeds returned (expense line) | $5.0B in 2025-26 | No separate line | Folded into direct program expenses (Table A1.10 note 5) |
| Elderly benefits (line name) | n/a | "Old Age Security program" | Renamed, same content (Table A1.10 note 1) |
| Canada Community-Building Fund (line name) | n/a | Build Communities Strong Fund, Community Stream | Renamed, same amounts |
| Annex 2, Capital budgeting framework | n/a | No annex. Tables A1.5 and A1.20 in Annex 1 | Referred back to Budget 2025 |
| Annex 3, Expenditure review by organisation | n/a | No annex | Silent |
Five-year net costs in millions as printed in each budget's cost tables. Budget 2025, Chapters 1 to 5 and Annex 1. Budget 2026, Chapters 1 to 6 and Annex 1.
Defence is the biggest change in emphasis. Budget 2025's largest measure was $55,883 million for the Canadian Armed Forces. Budget 2026 restates that commitment, which it puts at $81.8 billion on a cash basis, plus $2.4 billion from SEU 2026. It then reports defence as a path to NATO targets, with core defence spending in Table 5.1. The whole of Chapter 5 adds $6,593 million of new net cost over five years. Readers looking for new defence money in the cost tables will find little. The defence industry page covers the spending path.
The expenditure review is restated without an update. Budget 2025 had a full annex listing reductions by organisation. Budget 2026 has none and prints no year-by-year table of review savings. It repeats the $13 billion-a-year target by 2028-29. It also reports that the public service had fallen to about 332,000 employees by August 2026, from a peak of about 368,000 in 2023-24. It is silent on how much of the $44,217 million is on track.
Budget 2026 explains its presentation changes in table notes. It does not explain any program dropped from Budget 2025's plan, and this comparison did not find one among Budget 2025's 25 largest measures.
Language and Emphasis Changes
The organising idea has moved from resilience to independence. Budget 2025 opened with "A Changing World, A New Opportunity" and promised "the strongest economy in the G7." Budget 2026 opens with "A stronger, more independent, and more affordable Canada" and is titled Masters of Our Destiny.
Affordability gets a chapter of its own. Budget 2025 folded it into "Empowering Canadians." Budget 2026's Chapter 3 is "A more affordable life" and is the most expensive chapter in 2026-27, at $8.6 billion. The word stem "affordab" appears 39 times in Budget 2026's overview and 6 times in Budget 2025's.
Investment moves to Chapter 1. "Building a stronger Canadian economy" becomes "Canada's Investment Supercycle." "Productivity" appears 74 times in the overview against 46. Budget 2025 introduced the capital budgeting framework in an annex. Budget 2026 uses it to claim the operating anchor a year early.
Tariffs recede. They appear 31 times in Budget 2026's overview against 64 in Budget 2025's. Chapter 2 goes from "Shifting from reliance to resilience" to "A more competitive and connected Canada," with Canada-EU and domestic trade items.
A new chapter, "A strong and united Canada," carries the First Nations and Indigenous spending. Six of Budget 2026's 25 largest measures are for First Nations and Indigenous communities. Budget 2025 had no chapter for them.
Defence drops from Chapter 4 with the largest measure to Chapter 5 with one of the smallest chapter totals. The section titles on fiscal policy also soften. Budget 2025's "Economic Strength Through Fiscal Discipline" becomes Budget 2026's "Responsible fiscal management creates room to invest."
Budget 2026 also changes its point of reference. Budget 2025 measured itself against FES 2024. Budget 2026 measures itself against SEU 2026 and cites Budget 2025 mainly for the anchors, the debt chart and the operating-balance chart. Against SEU 2026 the planning-year improvement is about the same, $6.5 billion over 2026-27 to 2029-30 (calculated). SEU 2026 had already spent nearly all of the gain it booked.
Net Assessment
In dollars, the trajectory is stable. From 2026-27 to 2029-30, Budget 2026's deficits are within $3.2 billion of Budget 2025's in every year and $7.6 billion lower in total (calculated). Revenues are much stronger than Budget 2025 expected. The government spent nearly all of it.
In ratios, the trajectory improves. Debt-to-GDP is about 3 points lower from 2026-27 on. The deficit-to-GDP ratio is slightly lower in most years. The operating balance turns positive in 2027-28 and reaches $20.3 billion in 2028-29, against $1.7 billion in Budget 2025.
Three caveats weigh on the ratio gains. First, nominal GDP is $151 billion higher in 2026, and part of that is a statistical revision. Second, the operating surplus leans on $16.8 billion of estimated forgone revenue in 2027-28, up from $4.7 billion in Budget 2025. Without that add-back the operating balance is still negative in 2027-28 (calculated). Third, net debt and debt charges are higher by the end of the shared horizon than Budget 2025 projected, even with lower federal debt.
The price gains behind the revenue improvement are front-loaded. They rest on oil at US$85 in 2026 and GDP inflation of 4.6 per cent. Spending commitments run to 2030-31 and beyond. If oil and inflation return to Budget 2025's path sooner than assumed, the revenue gain shrinks while the new measures remain. Budget 2026's sensitivity tables put a one-point drop in GDP inflation at $2.4 billion in the first year.
This comparison uses Budget 2025's own tables throughout. Budget 2026 does not restate Budget 2025, so Budget 2025 figures have not been adjusted for later accounting or statistical revisions.