In a column earlier this month I posed a simple question: with Canada's 2025 federal election dominated by economic issues, where do our national finances stand?
Thanks to the detailed release of costed platforms by both the federal Liberals and Conservatives, we now have a better view than usual. But those numbers reveal a more sobering picture than either party likely intended.
To their credit, both major parties have delivered some meaningful fiscal transparency. The Liberals and Conservatives published program-by-program costings and deficit projections. This is not just good practice, it is essential in a campaign where economic claims dominate. The federal Conservatives, in fact, outpaced their Ontario Tory frenemies, who entered the provincial election armed with little more than a sparse table of fiscal figures delivered very late in the campaign.
Also encouraging is the fact that the platforms were quickly independently reviewed. The Institute of Fiscal Studies and Democracy gave the Liberal platform a "good" rating across all key dimensions: realistic assumptions, responsible fiscal management, and transparency. The Conservative plan earned a respectable "pass," though flagged for its heavy reliance on aggressive assumptions about growth and program efficiencies.
But here lies the uncomfortable truth: neither party plans to balance the federal budget.
The Liberals plan to run annual deficits of $50–60 billion throughout the next mandate. Their strategy focuses on infrastructure, housing, and trade diversification. The debt-to-GDP ratio is projected to hover near 42% — stable and in line with G7 standards — and the platform makes a welcome distinction between operating and capital spending. But the red ink flows indefinitely.
The Conservatives offer restraint. They propose a big income tax cut for middle earners and sizable reductions in federal spending, including cuts to consultants, foreign aid, and the CBC. Their plan projects a declining deficit, from $31 billion to $14 billion over four years. Still, again, there is no return-to-balance trajectory. Worse, much of the Conservative fiscal plan depends on a revenue dividend arising from economic growth unlocked by their plans for deregulation and a housing surge. These projections, flagged as overly optimistic by the IFSD and others, stretch the limits of credibility. They also lead to a question of what the alternatives are for the Conservatives. Given these revenues cannot be relied on for budgetary purposes, would they choose to cut expenditures more aggressively than planned, or would they have to do a mea culpa on their deficit commitment?
Furthermore, both parties are gambling on continued economic stability and growth that conveniently outpace their spending plans. Neither platform accounts for serious external shocks — be it another Trump-era trade war, a financial downturn, or a sustained interest rate spike.
For those needing a cautionary tale, look no further than Britain. In 2022, when Liz Truss’s government delivered a budget with big tax cuts without a clear and credible fiscal plan, the result was a sharp rebuke from financial markets and a crisis of confidence that led to the shortest prime ministerial term in U.K. history. Budgetary credibility is not optional; it is foundational.
So what should voters conclude?
First, a point of credit: given its rapid call, this election has delivered more fiscal disclosure than expected. The cost transparency is real, and independent assessments have added rigour. That allows for meaningful comparisons — not just of policy but of underlying philosophy.
Second, Canadians must recognize the limits. No party is offering a roadmap back to balance. That may be acceptable, even defensible, under current conditions. Canada’s debt remains serviceable, and capital investments in infrastructure and housing can yield long-term returns. But the days of balanced budgets as a baseline expectation are over. They are not even an aspiration.
Third, we must redefine what fiscal responsibility means in 2025. It is no longer about posting surpluses — it is about managing risk. Do parties model realistic scenarios? Do they build in cushions for volatility? Are trade-offs made clear? Do they explain their assumptions and own their constraints? These are the questions that will shape the next Parliament — and the next budget.
Finally, there is bad news for provinces and municipalities here. Ottawa's fiscal room seems spoken for. Calls for new federal money to shore up local responsibilities (housing, transit, health) will likely go unanswered. With Ontario's next budget rumoured for mid-May, the province will need to step up to the current economic turmoil without the expectation of a federal lifeline. Like British Columbia and Quebec, a record-setting deficit is a very real possibility for the province.
Overall, in this federal election, both parties are offering partial answers. The Liberals pitch a long-term structural shift with elevated federal deficits. The Conservatives promise discipline but without a credible map. Neither is reckless, but neither is entirely reassuring.
This election is primarily about the economy and how the nation responds to the disruption emanating from the White House. But it is also about trust: do voters believe these promises will hold in the face of external shocks and internal pressures? Whoever wins on Monday will face the reality of limited fiscal space, high public expectations, and a fragile global economy.
Brace for an action-filled and financially bruising federal budget, presumably within a few months of Monday’s election.