Our response to Federal Budget 2025

Overview

At the heart of the government’s Federal Budget 2025 was the narrative that Canadians need to steel themselves for tough times, but that this budget represented “generational capital investment” for the future. That investment aims to total $1 trillion of public and private money in housing, defence and public infrastructure. There is a marked tonal shift across the budget that this capital investment is key to next steps, while operational costs are a challenge to be managed.

This budget’s largest investments are:

• Defence-related spending of $30 billion over five years, with specifics coming in future. Considerations for this spending should include ensuring spending is on good, healthy jobs in Canada. The government could also consider steps such as significant investment in home construction for members of the military (adding to our housing stock), and how expanding the number of healthcare workers in the military could contribute to future health human resource needs.
• Infrastructure spending of approximately $115 billion over five years, amounting to $9 billion in net-new money from 2025/26 to 2029/30.
• $6.5 billion in new money into housing, primarily through Build Canada Homes (discussed below).

The budget proposed three other noteworthy measures:

• A middle-class tax cut that represents just over $25 billion over five years. As low-income earners have less income on which to pay taxes, only a small portion of this will reduce poverty. Roughly nine million low-income Canadians see no benefit from this and the richest 40 per cent of Canadians would enjoy over 70 per cent of this saving.
• A focus on ‘protecting strategic industries,’ including pooling existing tax credits, an extension of tax credits for research and development accounts, and the creation of a $2-billion sovereign wealth fund for critical minerals.
• A substantial cut in the number of public service employees – the announced intention to eliminate 40,000 positions. While some of those reductions in headcount will come from retirement and some from broader public sector redeployment, this will result in less good federal jobs. Unemployment is already a challenge in Canada, and reduction in the size of government staffing can be expected to exacerbate that challenge. We hope for future information from the government on how this will be handled.

Wellesley Institute’s budget recommendations emphasized that the economic measures announced to address global uncertainty should not, and need not, place our most vulnerable residents in jeopardy for the sake of that aim. There were signs for hope in some areas, and we are optimistic that the federal government can look to the next budget as a chance to take care of those in need in Canada. Below, we examine this budget’s commitments in the areas of thriving, housing and inequality.

Economic measures to address global uncertainty should not, and need not, place our most vulnerable residents in jeopardy for the sake of that aim.

Thriving

Everyone in Canada needs to have access to the resources they need to thrive – to live a healthy, meaningful life. This can mean higher income but also can be addressed in many other ways.

We welcome the measures in this budget that will improve things for some of those in need of support to thrive. These include the $150 credit towards disability certification, the proposal for a permanent school lunch program, tax credits for personal support workers, and advances on automatic tax filing (which we hope will improve access to other benefits). We hope a presumed spring economic statement and future budgets will do more on thriving, beginning with establishing it as a national goal. We can have a Canada in which everyone has what they need to thrive.

More about thriving in the budget

• The budget sets approximately $116 million over four years for a one-time supplemental payment of $150 for persons who need to secure the required Disability Tax Credit certification. This reduces the cost of applying for the Canada Disability Benefit (CDB) and can be expected to very modestly aid in alleviating disability-related poverty.

• Included in the budget is the previously announced investment in making the National School Food Program permanent, meaning more children will get the food they need on an ongoing basis. We urge the federal government to collaborate with the provinces and territories to ensure this program does as much as possible to improve the health of children in need, and reduce costs for families, through future enhancements.

• The budget includes a $1,100 tax credit for Personal Support Workers (PSWs). This credit is refundable, meaning it can be accessed even if workers owe no income tax. This is good news for health equity in Canada as PSWs are typically low-income, racialized, feminized, and have significant workplace challenges that Wellesley looks forward to examining in a current research project.

• The budget promises action on wage theft for federally regulated workers. It is essential that employers follow the rules and pay their workers what they are owed, and all employees deserve a level playing field. As most workers in Canada are not federally regulated, the government could consider taking a leadership role with the provinces in improving enforcement and recovery of funds owed to workers no matter where they work.

• There are some small investments of new money, mixed with existing money, in youth jobs programs. With youth unemployment in Toronto at 15.2 per cent, Wellesley welcomes all initiatives to support paths to employment for young people in Canada and would welcome detail on how this will be designed to centre racialized and Indigenous youth, who are more likely to be un- or under-employed.

Housing

The federal government’s overall $13-billion commitment to housing includes $7 billion to Build Canada Homes (BCH). This, combined with BCH’s primary focus on non-market community housing, represents a substantial opportunity to build genuinely affordable non-market community housing. A significant proportion of those new builds must be affordable units to genuinely ensure everyone in Canada can afford an adequate, healthy home.

The budget did not include immediate and urgent measures to address, then eliminate homelessness. As it begins its work, BCH having an ambitious definition of “affordability” would also alleviate homelessness. Since the budget, BCH’s Investment Priority Framework has been published and while it expands on the detail of the budget, it still lacks the specific commitments to @affordability that is crucial to improving health equity in Canada.

More about housing in the budget

• BCH is set to build 4,000 homes in its first year in operation. Estimates of overall housing need across Canada vary, but significantly more than 4,000 will be needed annually.

• The subsequently published Investment Priority Framework sets out general criteria for projects; being construction-ready within 12 months, depth and duration of affordability, collaborative partnerships, and Canadian-made materials. It sets affordability benchmarks for regions that head in the right direction ($784 a month for a one-bedroom unit in Toronto), but we have yet to see detail on targets for the percentage of fully affordable developments and or mixed-income developments to know if the overall impact will help those on the lowest incomes at a great enough scale.

• The budget referred to managing immigration levels to alleviate pressures on housing. We are concerned this contributes to an increase in negative sentiments that  impacts the well-being of newcomers to Canada, particularly those who are racialized.

Inequality

The Prime Minister previously committed to “ensure households are immediately better off, following the removal of the [carbon] rebate.” This budget does not provide the measurement or the measures that would ensure this is the case. We hope the government will consider creating a cohesive, publicly accessible and up-to-date household economy dashboard to allow them to track and demonstrate their successes on inequality and ensure future governments will also be held accountable. With the emphasis on defence and infrastructure spending in this budget and the large middle-class tax cut, it is vital that we have transparency on the impacts of government budgets on every household.

Amid the deprioritizing of operating budgets, we recognize the restoration of funding to Women and Gender Equality Canada and welcome further announcements on the impact and monitoring of their work. We hope such efforts can provide insights for other equity-deserving communities and continue to build the evidence base for centring marginalized people in public policy making.

Conclusion

At this volatile geopolitical moment, the public is prepared to contribute to a resilient and thriving future. But it needs federal programs that are designed to meet their needs. Programs that are robust, equitable and appropriately funded. We hope future fiscal efforts look beyond short-term survival strategies to focus on thriving, affordability and inequality to create a stronger Canada for all.