Federal Budget 2026
“Masters of our destiny,” tabled November 5 by François-Philippe Champagne. These are the Finance Department’s projections, compared with its April update.
A $62.3B deficit this year: Ottawa sees its books improve by $158B over five years and spends $152B of it.
The numbers
$62.3B
2026-27 deficit
1.8% of GDP.
The April update projected $65.3B.
| Improvement since April, over 5 years | $158.3B | From 2026-27 to 2030-31, before new measures. About 70% comes from revenue and 30% from lower spending, according to the budget. |
|---|---|---|
| New spending, over 5 years | $151.5B | $142.1B in budget measures and $9.5B announced since April. That is 96% of the improvement (our calculation). |
| 2025-26 deficit (preliminary) | $39.3B | 1.2% of GDP. April projected $66.9B. |
| 2030-31 deficit | $52.9B | 1.3% of GDP. April: $53.2B. The PBO, before this budget: $67.8B. |
| 2027-28 operating balance | +$11.2B | Balance comes one year ahead of the Budget 2025 commitment. |
| 2030-31 debt charges | $85.5B | $60.2B this year. From 11% to 14% of revenue (our calculation). |
| Financial requirements, over 5 years | $764.7B | $288.7B in deficits, plus loans to Crown corporations and capital assets. |
| 2030-31 federal debt | 40.1% of GDP | $1,593B. It was 40.2% in 2025-26. |
Our reading
Nearly all the room is spent
The 2025-26 deficit comes in at $39.3B on preliminary results, $27.5B less than projected in April. The budget also lowers the next five years of deficits by $158.3B before any new measure. Without measures, this year’s deficit would be $43.8B.
Ottawa spends $151.5B of that room. Cumulative five-year deficits go from $295.5B to $288.7B, $6.8B less than in April.
$62B in savings with no program named
Nearly 40% of the improvement comes from a $62B cut to projected direct program expenses. The budget describes it as an aggregate adjustment of about $12.4B a year: it targets no department or program and does not change approved funding. Ottawa justifies it with 2025-26 spending, which came in well under forecast.
The adjustment reaches $17.3B in 2030-31. The gap between the budget and the latest projection from the Parliamentary Budget Officer (PBO), published before tabling, is $14.9B that year. If the money gets spent as previously expected, the final deficit will look more like the PBO’s (our reading). The PBO has not yet assessed this budget.
The operating balance rests on two lines
The budget announces an $11.2B operating surplus in 2027-28. Two lines weigh heavily that year: $16.8B in revenue Ottawa forgoes, notably through the Productivity Mega Deduction, is counted as capital investment, and direct program expenses are revised down by $14.4B. Each is larger than the surplus.
The deficit as a share of GDP rises from 1.2% to 1.8% this year, then falls to 1.3% by 2030-31. The government says it is meeting its target of a declining ratio over the planning horizon.
The deficit does not tell the whole borrowing story
Over five years, financial requirements reach $764.7B, more than two and a half times the deficits. The gap comes mostly from loans to Crown corporations and purchases of capital assets. Debt charges rise from $60.2B to $85.5B in 2030-31. Ottawa points out that Canada keeps the lowest net debt-to-GDP ratio in the G7, according to the IMF.
Reactions
Conservatives
Pierre Poilievre, on X
He says the budget should be called “Mastered by Debt” and predicts more inflation and interest now, then higher taxes.
Bloc Québécois
Yves-François Blanchet and Jean-Denis Garon
The Bloc estimates Quebec could lose nearly $14B in health funding over five years and that the Mega Deduction will cost it $1B a year. It wants nearly $700M for hosting asylum seekers. It says it is satisfied with the higher groceries benefit. The budget projects the Canada Health Transfer rising from $57.4B to $67.7B in 2030-31, with guaranteed growth of at least 5% through 2027-28, then at least 3%.
NDP
Avi Lewis, before tabling
The day before, he criticized tax cuts for big businesses and asked for money for housing and health, along with a wealth tax. We have not yet found his reaction to the tabled budget.
Small business
Dan Kelly, CFIB
CFIB regrets the lack of tax cuts and tariff relief. It backs the idea of the Canada Growth Incentive but says its rules exclude about half the businesses that could use it. It welcomes the Mega Deduction and tax simplification.
Economists and tax advisers
Rebekah Young, Scotiabank; Brian Ernewein, KPMG
Rebekah Young warns the economy could run short of labour and capacity if investment plans take off. Brian Ernewein considers the tax package constructive.
Parliamentary Budget Officer
November 5 news release
The PBO says it will analyze the budget in the coming days. We will add its findings here.
For you
You are…
The supplement arrives in early 2027 and raises the 2026-27 benefit by 50%. It is a one-time payment.
What the budget changes for you
- Couple with two children: supplementUp to $679
Canada Groceries and Essentials Benefit.
- Single person: supplementUp to $339
Without children.
- 2026-27 total, couple with two childrenUp to $2,570
Including the June and July 2026 increases.
By sector
Investment and business taxes
$51.9B over 5 years (chapter 1). Mega Deduction: $36B.
This is the largest chapter. The Productivity Mega Deduction lets businesses immediately deduct the cost of about two thirds of capital assets, compared with about 15% before, for purchases made since September 15, 2026. The budget estimates the effective tax rate on new investment falls from 13% to 6.4%.
The details
- The measure is permanent. Ottawa estimates its effect at $22B of GDP a year and up to 80,000 jobs after 10 years.
- Canada Growth Incentive: a tax exemption on up to $15M in capital gains on certain eligible investments.
- Canada Strong Fund: $25B invested only in Canada, in minority stakes. Individuals will be able to invest through notes.
- Scientific Research and Experimental Development: $930M to extend the program to commercialization.
Electricity and major projects
Over $50B for electricity (cash basis).
The National Electricity Strategy aims to double the grid by 2050. The budget adds, on a cash basis, a $6.5B nuclear strategy and $2.3B for critical minerals. Twenty-eight initiatives have been referred to the Major Projects Office.
The details
- September summit: nearly $500B in commitments according to the budget, which notes they are not additive and cover different timeframes.
- Heat pumps: $2B for up to 820,000 households.
- Auto: $9B. Forestry: $6.5B, on top of $2.9B announced since August 2025.
Housing and homelessness
Nearly $45B (cash basis).
The plan has three parts: end homelessness within 10 years, build non-market housing and make buying easier. Build Canada Homes gets another $13B over 10 years, bringing its capital to $45B and its target to 200,000 homes in a decade. Ottawa expects provinces to fund services and operations.
The details
- Homelessness: $11.2B over 4 years starting in 2027-28, then $17.8B in later years.
- The ban on foreign purchases of existing homes is extended to January 1, 2029. New homes are exempt.
- Optional mortgage insurance: the cap rises from $1M to $1.5M, with 30-year amortization for first-time buyers and new homes.
Cost of living
$30.6B over 5 years (chapter 3, which includes housing and skills).
The most immediate measure is a one-time supplement in early 2027, paid to over 12 million people with low and modest incomes. It costs $4.1B. The fuel excise suspension ends in stages: 50% relief from February to March 2027.
The details
- Non-sufficient funds fees capped at $10.
- National Food Security Strategy: $3.2B.
- Canada Strong Pass renewed for summer 2027. National museums permanently free for those under 25.
Defence and security
Over $700B over 5 years in total (cash basis). New chapter 5 measures: $6.5B (accrual).
Canada reached 2% of GDP in 2025-26, more than $65B. The government says it has a funded plan to reach 4% by 2030, on the way to NATO’s 5% pledge for 2035. The five-year total is on a cash basis, so it does not compare directly with the accrual figures in the fiscal framework.
The details
- Defence Industrial Strategy: $7.7B. Target of 70% of acquisitions going to Canadian firms.
- Drones: $2.3B over 5 years. CSIS: $6B over 10 years.
- Up to 12 new submarines are planned.
Immigration
380,000 permanent residents and 370,000 new temporary residents a year.
The budget includes the 2027-2029 levels plan, with the same targets in each of the three years. Up to 200,000 temporary residents already in Canada could become permanent residents by the end of 2027, including 100,000 workers eligible through Express Entry or provincial nominee programs.
The details
- Details will follow in the annual report to Parliament on immigration.
- This transition costs $302.3M over 4 years, starting in 2027-28.
Indigenous Peoples
Over $32B over 10 years for First Nations housing and infrastructure.
The envelope includes $18.7B for infrastructure and $12.7B for housing. The budget also offers a $64M loan guarantee for the Tla’amin Nation to acquire a forestry operation.
The details
- At least 10% of Build Canada Homes’ expanded envelope goes to Indigenous housing.
Size of government
$2.6B in measures over 5 years (chapter 6).
The budget keeps the target of saving $13B a year by 2028-29 through the expenditure review. More than 10,000 applications were filed under the early retirement program, and savings beyond planned reductions may be applied to operating budgets.
The details
- Ottawa also announces a tax simplification project, with a first package of changes in this budget.
Before / after
| April 2026 | Budget 2026 | |
|---|---|---|
| 2025-26 deficit | $66.9B | $39.3B |
| 2026-27 deficit | $65.3B | $62.3B |
| 2027-28 deficit | $63.1B | $62.5B |
| 2028-29 deficit | $57.7B | $57.6B |
| 2029-30 deficit | $56.2B | $53.4B |
| 2030-31 deficit | $53.2B | $52.9B |
| 2030-31 federal debt | 41.6% of GDP | 40.1% of GDP |
Stakeholders
Provinces and territories
The housing plan asks them to fund services and operations, and to remove barriers with municipalities, while Ottawa provides capital, land and financing.
Key issues
- Ottawa also wants to discuss a ban on non-compete clauses and property controls in the grocery sector with them.
Parliamentary Budget Officer
Before tabling, the PBO projected a $63.3B deficit this year and $67.8B in 2030-31. Its assessment of the budget will test the $62B adjustment and the line between operating and capital spending.
Key issues
- The PBO has said the capital definition inflates this spending by nearly $100B over six years.
Glossary
Operating balance
Revenue minus day-to-day spending, excluding spending classified as capital investment. Ottawa adds the revenue it forgoes through certain tax measures that encourage investment.
Cash and accrual basis
Cash counts money when it goes out. Accrual spreads the cost of an asset over its life. The fiscal framework figures are accrual, while several announcements are cash, so the two cannot be added together.
Financial requirements
The money the government must find beyond its revenue. They include the deficit, loans to Crown corporations and purchases of capital assets.
Productivity Mega Deduction
An immediate, permanent deduction of the cost of most capital assets. A business pays less tax in the first year instead of spreading the deduction over time.
Direct program expenses
Transfer payments run by departments and the operating costs of departments, agencies and Crown corporations. They went from about $150B in 2019-20 to $242B in 2025-26.
Parliamentary Budget Officer (PBO)
The independent officer who analyzes federal finances for Parliament.