Budgets in government tend to creep like mould, not ebb like the tide.

Take the example of Indigenous occupational skills training. The Department of Employment and Social Development spends hundreds of millions of dollars a year funding Indigenous third parties who deliver the training. In 2017, the department was

hauled over the coals by the auditor general

because it did not collect data on performance indicators to demonstrate whether it was getting Indigenous people into stable employment.

At a parliamentary committee, the deputy minister said attempts to reform the system had been resisted by Indigenous partners because any adjustment would see them lose funding, and the Liberal government was reluctant to risk the political fall-out from erstwhile allies.

Consequently, the only solution was to

allocate $100 million in new funding in the 2018 budget

. “In my experience, that is what it takes to get movement,” the deputy minister admitted.

This trip down misery lane is illustrative of how difficult it is going to be for the Carney government to enact the program savings that the

finance minister last week asked all cabinet ministers to identify

.

It is particularly apt because there are so many areas of program spending that have already been ringfenced as “uncuttable” that Indigenous grants and contributions are likely to have a very large target painted on them.

In the last year of Stephen Harper’s Conservative government, the then Department of Indian and Northern Affairs was allocated $8 billion in the Main Estimates. This year the combined allocation for the departments of Indigenous Services and Crown-Indigenous Relations is $38 billion, more than the department of National Defence (and that doesn’t include the $400 million for skills training administered by ESDC, or the billions being invested in the Indigenous housing strategy by the Canada Mortgage and Housing Corporation).

This is not to suggest the money is being misspent: there were many years of underfunding in areas like First Nations education. But when the government says it is going to try to save more than $150 billion in spending over the course of three years — and

rules out reducing transfers to people or provinces, or on defence and security spending

— there are only so many options left.

“I see storm clouds ahead on the Indigenous front,” said Michael Wernick, the Jarislowsky Chair in public sector management at the University of Ottawa, and a former clerk of the Privy Council.

Spending down political capital with Indigenous groups and environmentalists might seem unlikely, but the government is already doing that with C-5, the recently passed major projects bill. Prime Minister Mark Carney is

meeting First Nations leaders at a summit on Thursday

and he will likely be lobbied heavily to move many of those grants and contributions from the “cuttable” column into the “uncuttable” one.

In a 

Policy Options article Wernick wrote in 2021

, and reposted this week, he said governments serious about program reviews have to “go where the money is”; accept that any changes will be fiercely contested; and ask fundamental questions about whether certain activities should be funded at all.

Wernick said in an interview with National Post this week that Carney’s efforts at spending restraint will not be a “one and done” exercise, but will more likely resemble then finance minister Paul Martin’s multi-year efforts in the 1995 and 1996 budgets that brought runaway deficits under control.

François-Philippe Champagne, the finance minister, indicated just such an approach in his letter to ministers that called on them to find savings of 7.5 per cent in the current year, 10 per cent next and 15 per cent in 2028–29.

This goes far beyond the productivity efficiencies that were included in the Liberal election platform.

But the need for more ambitious savings is apparent.

Recent projections by the 

C.D. Howe Institute

 and

by economist Trevor Tombe

 suggest the commitment to increase military spending to five per cent of GDP is likely to push deficits and debt to levels not seen outside the pandemic. Tombe’s model sees annual deficits of over $150 billion by 2035.

Wernick said the uncertainty surrounding the trade war with the U.S. means that fiscal forecasts are inherently unreliable. But he concedes “the arithmetic is relentless” and has even proposed a specific 

defence and security tax

 that would see the GST increased by two points and the funds allocated directly to military spending.

The public is onside with more expenditure on defence. A

recent Abacus Data poll

suggested two-thirds of Canadians back the Carney government’s announcements of more military spending.

But consumption-tax hikes in the current political climate are likely to prove as popular as taking a hatchet to Old Age Security payments.

Carney risks becoming the man who fell to earth if these cuts are miscalculated.

The prime minister does have a mandate to act, particularly if President Donald Trump follows through with his tariff threats.

A similar sense of crisis gave Martin leeway he might not have had in less straitened circumstances.

Over the course of three years, he reduced government spending by 19 per cent and reduced the federal headcount by 50,000 people. The budget was balanced within three years, the government’s popularity rarely dipped below 50 per cent and the Liberals won the 1997 election.

The public accepted the need for action and sensed the Liberals would enjoy cutting spending far less than the opposition Reform party would.

The same logic applies for Carney.

But in the mid-1990s, the government of prime minister Jean Chrétien was able to demonstrate progress each year in the form of reduced deficits.

It is less clear how Carney will be able to claim victory. He has said the answer is faster growth and a balanced operating budget within three years.

Yet, growth will be hard to achieve if trade with the United States falls (it has dropped for four consecutive months this year), while GDP growth will result in increases to defence spending and fiscal transfers, which are linked to the size of the economy.

In addition, the definition of what constitutes “operating,” as opposed to “capital” spending (which Carney has tried to distinguish) is likely to muddy the picture.

Voters likely don’t need to see balanced budgets, if the Carney government can demonstrate it is making progress on its other priorities, such as using the public balance sheet to bring in investment for major projects, and, crucially, is able to convey that the public finances are under control.

One way to do that would be to shrink the public service.

A 

new report from the Parliamentary Budget Office

shows that the federal public service increased by 30 per cent between 2015–16 and the last fiscal year. It has topped out at 445,000 full-time equivalent positions, with a slight reduction expected over the next few years due to attrition.

Carney could chop a similar number that Martin did and still be left with a federal bureaucracy bigger than it was before the pandemic.

The problem for the government is not that bending the curve on program spending will lead to a rusting, hollowed-out public sector. Program spending reached 16 per cent of GDP in the last fiscal year, compared to 13 per cent in 2014–15 ($480 billion versus $329 billion in 2025 dollars).

The problem is that in the surreal economic milieu of Ottawa, the government and its provincial and Indigenous partners believe the only way to achieve lasting reform is to spend more money.

It will take a skilful, determined and politically secure prime minister to change that mindset.

jivison@criffel.ca

Twitter.com/IvisonJ

• NP View: Mark Carney needs a chainsaw, not a scalpel
• Poilievre says Carney lied about conflicts after ethics disclosure reveals investment portfolio

On Saturday, the Aircraft Accident Investigation Bureau of India

issued a preliminary report into the June 12 crash of Air India Flight 171 in Ahmedabad

. The crash was the first-ever fatal accident involving a Boeing 787 Dreamliner. Video of the doomed flight, which was bound for Gatwick Airport in London, England, shows the plane losing altitude just after liftoff despite remaining in level flight with the nose up. Of the 230 passengers, 229 were killed, along with 19 people on the ground at a medical college located 1,500 metres beyond the end of the runway.

This all adds up to a mystery of extraordinary urgency — but the terse investigation bureau report reveals a clear proximate cause for the disaster. The plane’s data recorder shows that the plane took off, and about three seconds later, the fuel cutoff switches to both engines were activated — independently and about one second apart. The engines, suddenly starved of fuel, began to lose thrust.

The report cites the cockpit voice recording, without providing a full transcription: “one of the pilots is heard asking the other why did he cutoff. The other pilot responded that he did not do so.” The switches were restored to their proper “RUN” setting about 10 seconds after being engaged, and the engines kicked into an automatic in-flight recovery mode, but it was too late. A “MAYDAY” call was issued from the cockpit a few seconds before impact.

Air India has a good safety record, and both pilots had oodles of experience.

The fuel cutoff switches

in all wide-body aircraft are, as you would expect, located far from the ordinary flight controls. Moreover, they cannot, in the ordinary course of operation, be engaged inadvertently. You have to pull up a locking bracket to activate the switches — each switch has its own independent lock — and the switches themselves are spring-loaded in case the bracket is in the unlocked position. Cutting off fuel to both engines immediately after takeoff is a suicidal action, as the crash itself demonstrates.

Could some mechanical defect still have been responsible for the accident?

Fleets that operate Dreamliners are checking

, and the U.S. Federal Aviation Administration (FAA) sent out a circular in 2018 warning that some fuel control switches in Boeing 737s had been installed with the locking mechanisms in the disengaged setting. But Western aviation experts find themselves at a loss to imagine why or how both cutoff switches could have been activated inadvertently (one after the other) — and the inevitable political firestorm is already whirling.

One group representing Indian pilots

is criticizing the “reckless and unfounded insinuation of pilot suicide” by observers, and

another is directly denouncing the report

, warning that “we feel the investigation is being driven in a direction presuming the guilt of pilots.”

Unfortunately,

murder-suicides by pilots are hardly unknown to aviation

, although they are inherently hard to establish in technical investigations. The involvement of impulsive humans in aircraft command may in fact be one of the largest remaining dangers in ordinary commercial aviation, although the possibility of murder-suicide is still contested in cases like the vanishing of

Malaysia Airlines Flight 370

and even, rather absurdly, the crash of

EgyptAir 990

.

It is perhaps natural for pilots’ unions to defend their members instinctively, considering the enormous political power of flag-carrier airlines and aviation manufacturers — not to mention sovereign states and their bureaucracies. But the instinct is one that ought to be suppressed: apolitical, transparent investigations of air-accident circumstances are a miracle of modernity, one of humanity’s great silent successes.

Pilots are themselves the most important beneficiaries. It’s not a bad thing that the technical risks of aviation may have been depleted to the point at which “Someone flies the plane into the ground intentionally in a spasm of despair or rage” is one of the last, most intractable hazards that passengers and crew face. (And, in the case of Air India 171, let’s not forget those victims who were doing no more than existing on the Earth’s surface near a runway.)

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Having grown disillusioned with Russia, U.S. President Donald Trump
said Monday
that he will expand arms shipments to Ukraine and tariff Moscow’s trading partners if no peace deal is signed by September. While this is a welcome development, Trump should’ve seen through the Kremlin’s lies much earlier, and the depth of his foreign policy pivot remains unclear.
 
 

The new armament strategy will allow NATO members to purchase American weapons at scale for donation to Kyiv. While Trump has said that these weapons will be “top-of-the-line,” he has yet to specify what exactly will be provided, beyond
Patriot missiles
that can protect Ukrainian cities from Russia’s ever-worsening terror bombings.
 

Media reports suggest that Trump is considering
supplying long-range missiles
that can strike military bases, airfields and production facilities deep within Russian territory. The provision of these offensive weapons would be a game changer, as Ukrainian officials
have repeatedly
said that the destruction of these targets, which currently remain out of reach, are essential to eroding Moscow’s war machine.
 

Additionally, Trump said that he will
impose 100 per cent tariffs
upon Russia’s trading partners if Moscow does not sign a peace deal within the next 50 days. His ability to impose these tariffs, at his discretion, would be
granted by a bipartisan bill
championed by Republican Sen. Lindsey Graham, which reportedly already has overwhelming support within the U.S. Senate.
 

Trump’s newfound enthusiasm for arming Ukraine, and his burgeoning antipathy towards Russia, is a major pivot for both himself and his administration. Earlier this year, Trump spent months
vilifying Volodymyr Zelenskyy
, whom he blamed for the war’s continuation, while
winding down support
for Kyiv. Meanwhile, Russia was
inexplicably exempted
from the United States’ reciprocal tariffs, which punished most of America’s traditional allies, as top White House officials rhapsodized about
expanding economic cooperation
with Moscow.
 

The Trump administration’s recent rapprochement with the Kremlin was so intense that
some security analysts speculated
that its underlying purpose was to establish a Russo-American alliance against China. In the end, it seems that there were no deeper geopolitical calculations at play, and that the United States’ foreign policy frameworks have truly been dependent upon Trump’s personal relationships.
 

Trump spent the
past decade
praising and appeasing Putin, and seemingly believed that their friendship meant that Russia could be a trusted political partner. Yet, according to
American media reports
, Putin’s repeated disregard for American-led peace efforts this spring left Trump
increasingly exasperated
, culminating in the belated realization that the Russians were only leading him on. Disillusioned, Trump began to fear that Putin was making him look weak, subordinate and foolish.
 

An inflection point
came,

according to reporting by Axios,

during a July 3 phone call, wherein Putin told Trump that he intended to escalate his invasion and fully conquer the four Ukrainian provinces Russia unilaterally “annexed” in late 2022. The message had an effect on Trump:
he called
French President Emmanuel Macron later that night and told him “he wants all of it.”
 

The following day,
via a phone call
, Trump privately urged Zelenskyy to intensify his attacks on Russia, and even asked whether Moscow and St. Petersburg could be bombed if long-range missiles were provided.
 

Afterwards, Putin intensified his attacks on Ukraine’s civilian population, sending
record-breaking swarms of kamikaze drones
that left Kyiv burning. This only deepened Trump’s distrust: “We get a lot of bullshit thrown at us by Putin,”
said Trump last week
. “He’s very nice all the time, but it turns out to be meaningless.”
 

The president echoed these sentiments during his announcement of enhanced weapons sales to Ukraine. “I’ve been hearing so much talk. It’s all talk. It’s all talk, and then missiles go into Kyiv and kill 60 people,”
said Trump
, who recounted how his wife, Melania,
played a role
in opening his eyes. “I’d go home, I’d tell the First Lady: ‘You know, I spoke to Vladimir today. We had a wonderful conversation.’ She said, ‘Oh really? Another (Ukrainian) city was just hit.’”
 
 

Having realized that peace talks with Putin “don’t mean anything,” Trump found a compromise. Europe is wealthy, but
lacks the production capacity
to adequately arm Ukraine. Conversely, the United States has a formidable defence industry, but
Republican voters balk
at paying for European security. By selling weapons to NATO members for redistribution, the United States can arm Ukraine without footing the bill — if anything, the scheme stimulates the American economy and ensures that alienated European allies
don’t migrate to other suppliers
.
 

While these arms sales are undoubtedly good, Trump’s tariff strategy leaves much to be desired. Top EU officials have said that 50 days is a “
very long time
” for an ultimatum. If the White House fears that Russia’s summer offensive will break through Ukraine’s defences, or that countless Ukrainian civilians will suffer amid Russian bombings, why not impose a shorter deadline? Putin is a cunning man, so why give him extra time to strategize, obfuscate and stall?
 
 

If anything, the American president may have inadvertently helped Russia by undermining support for more immediate, European-led sanctions — as he did
earlier this year
during the Istanbul peace talks.
 

It is reassuring that Trump has belatedly gained some moral clarity on Ukraine, but his response is too timid. Russia’s stock market
rose by 2.7 per cent
after Trump’s announcement, suggesting that local investors were unperturbed. For now, America’s roar remains only a mew.
 

National Post

• Jamie Sarkonak: Non-citizen johns shouldn’t get sentence discounts for their crimes
• Michael Higgins: Mark Carney’s ethical guardrails more of a smokecreen

If Prime Minister Mark Carney is truly serious about making sure he does not breach the Conflict of Interest Act then he is going to be exiting cabinet meetings on a regular basis.

Carney has pledged to literally leave the room if a discussion starts involving matters that he has placed behind a conflict-of-interest screen.

But the 103 companies behind that screen are extensive and have tentacles stretching far and wide in the business world.

And it is not just the screen that is problematic, but also a blind trust in which Carney has shares in hundreds of different companies, a full 16 pages worth, everything from Adobe through to Zoom Communications.

Such is the extent of Carney’s business dealings that no matter how scrupulous and ethical he tries to behave, the man is bound to breach the Conflict of Interest Act in some way.

However, worryingly, Carney in his

statement

to the ethics commissioner’s office, has inserted certain caveats that could act as loopholes.

Carney has agreed to put a conflict-of-interest screen between himself and investment firm Brookfield Asset Management, Brookfield Corporation, financial services company Stripe Inc. and another 100 companies owned or controlled by them.

Before running for the Liberals, Carney was chairman of Brookfield Asset Management, a company that loudly boosts about all the investments under its umbrella.

“We are one of the world’s largest infrastructure investors,” says the Brookfield

website

. “We are a large-scale global investor focused on acquiring high-quality businesses that provide essential products and services,” it adds.

With $1 trillion of assets under management, Brookfield has its fingers in a lot of pies.

And when it comes to Brookfield, Carney has always been cagey and defensive.

When

asked

in March about Brookfield moving their headquarters to New York from Toronto, the prime minister essentially said it had nothing to do with him — before it was revealed he played a key part in the decision.

Again, in March, Carney’s transition team was playing coy

refusing to reveal

whether he still had any assets with Brookfield.

For the record, as National Post

reported

, Brookfield’s annual report said Carney was entitled to 209,300 stock options at $35.13 each and 200,000 options at $40.07 each, for a market value of more than $6.8 million as of Dec. 31, 2024.

It was also in March that the prime minister took umbrage at reporters questioning him about conflicts of interests.

“I’m complying with all the rules,” said Carney.

The CBC’s Rosemary Barton pressed the prime minister saying, “For a guy who has spent most of his life in the private sector, there’s no possible conflict of interest in your assets? That’s very difficult to believe.”

“Look inside yourself, Rosemary. You start from a prior of conflict and ill will,” replied Carney with a comment that tended more towards the condescending than the introspective.

But Barton hit the nail on the head. It will be difficult for Canadians to believe that Carney is not in some way in a conflict of interest because of his extensive business dealings. And it will be more difficult now we know just how vast and sprawling those dealings are.

“This screen will prevent me from giving preferential treatment to any of the Companies while I exercise my official powers, duties, and functions as a reporting public office holder,” says Carney in a statement to the ethics commissioner.

But the very next paragraph raises two very serious concerns.

“This screen is administered by my Chief of Staff and by the Clerk of the Privy Council,” says Carney.

Marc-André Blanchard, the chief of staff, and Michael Sabia, the Clerk to the Privy Council, were both hired by Carney.

Having people so intimate with the prime minister running the screen is troublesome, but the paragraph goes on to insert a major loophole for Carney.

“I may, however, participate in a discussion or decision on a matter that is of general application or that affects the Companies’ interests as a member of a broad class of persons unless those interests are disproportionate to the other members of the class,” says Carney.

Who decides whether something is of a general application? Presumably Carney or one of his minions. Who decides whether the interests are disproportionate? Probably the prime minister and his inner circle.

“The loophole is that as long as the decision applies generally or affects a broad group of people or entities, then PM Carney is allowed to participate in the decision even though it will affect a business he is invested in, and even though he can profit from the decision,” says a

statement

from Duff Conacher, co-founder of Democracy Watch, an organization devoted to government accountability.

This is no way to run a conflict-of-interest screen. Canadians are supposed to be able to trust public officials are not abusing their position.

As the ethics commissioner makes

clear

, “Canadians must feel confident that those officials do not use their public office for private gain. The things they do in their jobs should be to benefit the public, not themselves or someone they know. Competing interests must not interfere with their ability to be fair and objective.”

In the event that someone in a meeting points out that Carney may be in a conflict of interest he has promised, “to recuse myself from that matter by removing myself from the room where the discussion or decision is taking place.”

But will he really leave?

Conacher called the “ethics” screen “a loophole-filled, unethical smokescreen that allows him to participate in, and hide that he is participating in, almost every decision that affects the companies in which he is invested.”

Conacher was also scathing of the so-called blind trust.

“Prime Minister Carney has as many financial conflicts of interest as Trump, and his blind trust isn’t blind at all because he knows what stocks he put in it, including stock options he will definitely own for years, and he chose his own trustee and was allowed to give the trustee instructions such as don’t sell anything, and his trustee is allowed to give him regular updates on his investments,” says Conacher.

For Conacher the answer is for Carney to sell, sell, sell as “the only effective way to end the serious … financial conflicts of interest caused by his investments in more than 550 companies.”

Conacher suggests putting the money instead into government bonds or GICs until the prime minister — or any elected official – leaves office.

It is unlikely that Carney will take such a courageous action. But we have not heard the last of Carney’s blind trust or his conflict-of-interest screen, they will hang over him for his whole tenure like a Sword of Damocles.

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We’ve lost sight of where Prime Minister Mark Carney is pointing his elbows as U.S. President Donald Trump keeps smacking Canada with more economic threats. Brian talks this week about Carney’s erratic political shapeshifting with Conservative adviser Ginny Roth and veteran Liberal adviser Warren Kinsella, and asks: Is our new prime minister emerging as a progressive, a conservative, or someone who will just say anything to placate the public? They also discuss the not-so-certain future of Conservative Leader Pierre Poilievre, now boxing against a shadow opponent while his party members try to decide if he’s the right man to keep leading them. And, if so, what will he stand for if Carney keeps stealing his ideas? (Recorded July 11, 2025)

First Reading is a Canadian politics newsletter curated by the National Post’s own Tristin Hopper. To get an early version sent directly to your inbox, sign up here.

TOP STORY

A series of leaked letters sent out by the Prime Minister’s Office indicate that Prime Minister Mark Carney is seeking to slash government spending by 15 per cent over the next three years. If the targets are met, this could work out to about $25 billion in savings per year.

The Canadian Centre for Policy Alternatives, for one, said that these would represent the “worst cuts to the public service in modern history,” and would “rival” the aggressive reductions to government spending that Canada undertook in the 1990s.

But the spending of the Trudeau era was so profligate and so unprecedented, that even after these supposedly draconian cuts, the Government of Canada would still be spending money at record highs.

Below, a cursory summary of how, even if Carney does meet his austerity targets, Canada would still be spending well beyond its means … and well beyond what was considered normal federal spending just a few years ago.

Government expenditures would still be a fifth higher than the pre-COVID era and 25 per cent higher than before the Liberals were first elected

The COVID-19 pandemic was the point when most world governments abandoned any notion of fiscal prudence. This was more true for Canada’s Liberal government than almost anyone else. Even without accounting for the extraordinary expenses of the pandemic itself, the COVID-19 era witnessed an expansion of the federal service that really hasn’t abated since.

In the last full year before the COVID-19 pandemic (2018-2019),

federal program spending was $338.5 billion

. In the most recent fiscal year (2024-2025),

it was $485.7 billion

.

If you slash 15 per cent from $485.7 billion, you’re still looking at federal program spending of $412.9 billion. Thus, even if the Carney government met all their austerity targets, they’d still be overseeing a federal government that is 22 per cent more expensive than it was just six years ago.

And that’s if they just cut 15 per cent off the status quo. It doesn’t factor in the massive spending proposals being proposed by Carney just in the last few months — all of which are hard to tally up because his government hasn’t prepared a budget.

In an email to National Post, Fraser Institute budget analyst Jake Fuss said he doubts the 15 per cent target will end up yielding a smaller government. “Federal program spending will still likely increase year-over-year, but the 15 per cent savings will scale back the magnitude of the increase in spending,” he wrote.

In the

last year of the Harper government

, federal program spending

came in

at $256.2 billion. Even when accounting for the inflation of the last 10 years, that’s still equivalent to just $331.7 billion in 2025 dollars.

Even if the Carney government can get annual program spending down to $412.9 billion, Canada would still be spending 25 per cent more than what was the norm under the Conservatives.

We’d still have 50,000 extra civil servants

As of the most recent count, there were 357,965 people working for the federal public service. When the Liberals first took power in 2015, that

number stood

at 257,034. In just 10 years, the number of federal bureaucrats has swelled by almost 40 per cent.

Government employment has not only grown way faster than population growth, but public sector hiring has vastly outstripped hiring in the private sector. According to a

December study by the C.D. Howe Institute,

Canada has been hiring two government workers for every one worker getting a job in the private sector.

This explains some of why government has gotten so expensive under the Liberals. The average federal civil servant is paid

about $125,000 per year

in salary and other benefits. So those extra 100,000 bureaucrats could be costing an extra $12.5 billion per year just in compensation.

However, let’s say that the federal civil service rolls are reduced only by the 15 per cent target now being proposed by Finance Minister François-Philippe Champagne.

That would yield layoffs of about 53,700 civil servants. But the bureaucrats left would still number 304,265; a workforce that would still be 20 per cent larger than in 2015.

Even if the 15 per cent target was met, Canada would still have a higher per-capita rate of civil servants than in 2015 — and a higher per-capita rate of bureaucrats than

in peer countries such as the U.K. or Germany

.

Per-capita government spending would still be way above its pre-COVID totals

Canada’s population has massively increased over the past four years, almost entirely as a result of a record-breaking post-COVID immigration surge. From 2019 to 2025, the Canadian population grew

from 37.6 million

to 41.5 million — an increase of about 650,000 per year.

This somewhat explains the expansion of government, but not entirely. On a per-capita basis, federal program spending in the last year before the COVID-19 pandemic was about $9,000 per person.

In 2024, by contrast, per capita federal program spending topped out at $11,700 per person. So, even if that per-capita number goes down by 15 per cent, it’s still going be to $9,950 per year — about $1,000 higher than it was in 2019.

And the contrast is about the same when compared to the pre-Trudeau era.

The Canadian population stood at about 35.8 million the last time there was a Conservative government in charge. So the $256.2 billion spent in 2014/2015 under the Harper government worked out to about $7,156 per person — or $9,265 per person if you’re factoring in inflation.

In other words, even the most streamlined version of the Carney government’s spending plans is still going to represent at least $700 more per Canadian per year over what was typical just 10 years ago.

Deficits would still be massive

Even if Carney’s proposed cuts could instantaneously disappear $25 billion from federal spending, we could still be looking at federal deficits in excess of $50 billion for the foreseeable future. Or, if a recent tally of federal spending by the C.D. Howe Institute is to be believed, this year’s deficit (even with a sudden $25 billion reduction)

would still be about $67 billion

. That would put it in the running as one of the highest non-emergency budget deficits in Canadian history.

For comparison, in the last budget before the COVID-19 pandemic, the deficit

was just $14.9 billion

— less than a fifth of the deficits now shaping up under Carney. And in the last year before the Liberals took power in 2015, there wasn’t a budget deficit at all; Canada

actually ran a $1.9 billion surplus

.

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• ‘We never technically said we would elbow anybody’: The imagined thoughts of Mark Carney’s elbow
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If the Carney government is going to follow through on its plan to make Canada an “energy superpower” and a world leader in “responsible energy production,” it will need to take a more pragmatic approach to spurring private investment and innovation in cleaner energy production than its predecessor.

The Trudeau government’s Bill C-59 received royal assent just before the Calgary Stampede kicked off last summer. It included the government’s signature decarbonization policy initiative: a massive set of tax credits designed to reduce the upfront costs of investments in carbon-capture equipment. Over $12 billion has been earmarked to pay for these credits, making it one of the country’s largest decarbonization outlays.

Remarkably, one of the distinctive features of Bill C-59 was that it took pains to specifically exclude a tested and proven method of carbon sequestration that has the added benefit of extracting hard-to-reach oil and delivering it to the surface in a way that’s significantly cleaner than oilsands development.

The Trudeau government chose to exclude CO2-enhanced oil recovery (EOR), a process in which CO2 is pumped into oil reservoirs to increase production, from being eligible for its Carbon Capture Utilization and Storage Investment Tax Credit scheme because it did not want to support increased oil production with tax credits designed to incentivize emissions reductions.

In the oil and gas industry in western Canada, this approach is seen as the application of a “purity test” against an industry that, while responsible for roughly a third of Canada’s greenhouse gas emissions, remains vital to the Canadian economy.

The Carney government could easily remove this small exclusionary clause, which could unleash billions in investments in EOR and contribute massively to its energy superpower ambitions. For now, though, this potential capital — both foreign and domestic — is sitting on the sidelines.

As an example of how EOR could help Canada reach both its climate and economic goals, consider that Saskatchewan’s Weyburn-Midale fields stores an estimated three-million tonnes of CO2 annually from upstream emitters.

Canada not only has the know-how and wherewithal to use these complex carbon-sequestration methods to further exploit depleted reservoirs, it is also home to some of the world’s most amenable geology for it. According to the Canada Energy Regulator, it’s theoretically possible to store hundreds of years’ worth of the country’s annual emissions using geological storage techniques.

Incentivizing carbon capture and storage across a range of energy sectors — including oil, gas, lithium and geothermal — would accordingly make a lot of pragmatic sense. Especially considering that EOR leverages existing wells, roads and infrastructure connected to legacy oil reservoirs and delivers low-carbon oil. Yet the current legislation allows for none of this.

So when folks out West say the federal government is anti-oil and gas, the exclusion of EOR from the carbon capture tax credits backs up the point. Freeing energy from Canadian reservoirs by replacing it with CO2 should be considered a win-win scenario, as it makes both environmental and economic sense.

Smart policy at home can result in enhanced status abroad, and by making this change, Canada can make itself more competitive in the race to attract scarce global capital, while fuelling its clean-energy ambitions.

While it may be optimal if we could depend entirely on clean sources of energy, the reality is that we live in a world that’s still addicted to oil. Given that this isn’t likely to change any time soon, we need to look for pragmatic ways to produce that oil more cleanly and store the carbon it emits safely. CO2-enhanced oil recovery is a way to do both.

National Post

Patrick Lennox is the author of “At Home and Abroad: The Canada-US Relationship and Canada’s Place in the World” (UBC Press). He ran as the Liberal candidate in Edmonton Griesbach in the 2025 federal election.

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