Budget watchdog says key details missing in Liberal government’s fiscal plans

OTTAWA — Parliamentary Budget Officer Annette Ryan says key details are missing from the federal government’s spending plans and its comprehensive expenditure review.

The PBO released four notes on Monday to assess measures laid out in the Spring Economic Update, which was tabled on April 28.

One report highlighted the lack of details on the long-term spending path for defence. Canada has committed to spending $82 billion on defence over the next five years to meet its latest NATO spending pledge of five per cent of GDP, with 3.5 per cent in core defence spending and up to 1.5 per cent in defence-adjacent expenditures.

“The signal is that we will be looking for those types of detailed estimates as the government goes along, from initial priorities, for example, as were set forth in Budget 2025,” said Ryan, during a media briefing on Monday.

Ryan, who was appointed to the PBO position on April 22, said requests for information from the Department of National Defence are ongoing. The report added that the defence spending plan will require an additional $159 billion on core defence spending in 2035–36, increasing the deficit by $63 billion and the debt‑to‑GDP ratio by 6.3 percentage points.

The fiscal watchdog also highlighted the lack of details in the federal government’s progress to save $60 billion in operational spending over the next five years. Budget 2025 laid out $8.553 billion in reductions for 2026-27, but there were few details in last week’s fiscal update on whether departments are on track to meet that target.

“In as much as our function as a budget office is to keep watch on government finances and major priorities, to the extent that the comprehensive expenditure review was a major priority of the government in March 2025,” said Ryan.

Ryan said the lack of detail makes it difficult to “follow the money” and determine which departments are showing spending reductions in the first year of the government’s spending review.

The reports also highlighted the lack of transparency around how operational versus capital spending is classified. Last year, the federal government decided to split expenditure into two categories.

Operational spending includes day-to-day government operations, transfer payments, and public services. Capital spending includes transfers to provinces for infrastructure investments, tax incentives, funding for private sector research and development and measures to grow the housing stock.

The PBO reiterated that the definitions around capital spending remain too broad and the lack of transparency on the classification of the two spending categories makes it difficult to evaluate its key fiscal anchor of balancing operational spending with operational revenue by 2028-2029.

“As such, it is not possible to advise in depth as to how updates to specific revenue and expenditure items presented in the [Spring Economic Update] contribute to the government’s assertion that this fiscal anchor remains in balance,” the report said.

The PBO said public debt charges are largely unchanged from Budget 2025 but is still showing “a concerning upward track.”

Finally, the PBO did highlight the creation of a Sovereign Wealth Fund, which was announced by Prime Minister Mark Carney on April 27.

The report noted that the trade-offs of seeding the fund with $25 billion in public funds over the next three years, at the same time as the government’s attempts to find savings, remain unaddressed.

In addition, because the fund would not be the result of a budget surplus, the report referred to the initial funding as “leveraged investment for taxpayers” and it remains unclear if interest charges on the debt to finance the fund will be included in the calculation on returns.

During question period on Monday, Conservative Deputy Leader Melissa Lantsman said Canadian families will write a cheque for $3,400 this year just to pay the interest on the federal debt.

“The prime minister actually told Canadians that he was the guy you hired in a crisis and then spent double what the last guy spent,” she said.

Speaking to reporters in Winnipeg on Monday, Finance Minister François-Philippe Champagne said he welcomed comments by the PBO and said additional details on the creation of a sovereign wealth fund are forthcoming.

“There will be additional details coming, because we want to consult with experts, with partners around the world,” he said. “To make sure it’s best in class, that it’s easy and accessible for folks.”

Champagne also defended Canada’s growing debt, pointing out Canada’s net debt to GDP remains one of the lowest in the G7 and maintains a AAA credit rating.

“If you invest in housing, if you invest in infrastructure if you invest in productivity and innovation, you’re going to grow the economy,” said Champagne.

“Canada has a strong fiscal position,” he added.

Ryan warned that risks to Canada’s fiscal sustainability do not remain constant, adding that the federal government may want to consider additional metrics when it evaluates its fiscal position, such as value for taxpayer funds and how pensions are included in Canada’s debt position and debt-per-capita.

National Post

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