Budget watchdog slams Carney for overinflating capital spending by nearly $100B

The Parliamentary Budget Officer just blew the whistle on the Carney government’s shady accounting, catching the Liberals trying to hide billions in operating costs by burying them in the budget.

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The Parliamentary Budget Officer just blew the whistle on the Carney government’s shady accounting, catching the Liberals trying to hide billions in operating costs by burying them in the capital budget.

The Liberals’ Budget 2025 introduces a new split between “operating” and “capital” spending, with a promise to balance the operating budget by 2028-29.

However, a PBO report published Friday calls the government’s definition of capital investments “overly expansive,” saying it includes spending not considered capital formation under well-established international frameworks.

“Capital investments would total $217.3 billion over 2024-25 to 2029-30—approximately 30 per cent ($94 billion) lower compared to Budget 2025. Moreover, based on PBO’s definition, the day-to-day operating balance after new measures would remain in a deficit position,” the report states.

It also suggests the Liberals would run an $18-billion operating deficit by 2028-29.

“The PBO is sounding the alarm on this government’s accounting practices,” said Gabriel Giguère, senior policy analyst at the Montreal Economic Institute. “Jamming billions of dollars in day-to-day spending into the ‘capital’ column to make the government look like a responsible fiscal steward is really playing fast and loose with the facts.”

According to Budget 2025, tax credits, subsidies and other forms of corporate welfare are now considered capital investments—a framework the PBO said “blends policy measures with capital formation.”

The MEI pointed to the budget defining corporate income tax credits as capital spending, while considering corporate income tax revenue as operational, as an example of the Liberals “blurring” the lines between operational and capital spending.

“The reality is that Carney is continuing on a course of unaffordable borrowing and the PBO report shows government messaging about ‘balancing the operating budget’ is not credible,” said Franco Terrazzano, federal director of the Canadian Taxpayers Federation. “Carney is using creative accounting to hide the spiralling debt.”

While the budget claims it will spend $311.5 billion on capital over the next five years, the PBO recalculated that figure to be $217.3 billion using conventional definitions.

“What’s especially worrying is that the government’s claim of reaching an operational surplus in 2028 hinges entirely on this reclassification, shifting roughly $100 billion of operational spending into the capital category,” said Giguère.

For example, Budget 2025 claims an operational deficit of $33 billion for this fiscal year; the PBO places it at $45.8 billion.

The Carney government is using “a definition of capital investment that expands beyond the current treatment in the Public Accounts and international practice,” the report states.

The Liberals’ budget plans to borrow roughly $80 billion in 2025, with taxpayers facing debt interest charges of $55.6 billion for this year alone.

“Carney isn’t balancing anything when he borrows tens of billions of dollars every year,” Terrazzano said. “Instead of applying creative accounting to the budget numbers, Carney needs to cut spending and debt.”

The PBO is calling on the government to establish an independent body of experts to determine which spending measures fall under capital, to eliminate “subjectivity” from the Liberals’ projections.

Meanwhile, Fitch Ratings estimated that Canada’s rising debt and massive spending have “weakened” its credit profile and may damage future ratings over the medium term.

“The PBO’s message is crystal clear: this flies in the face of accountable and transparent government,” said Giguère. “This isn’t just a continuation of the previous government’s high-spending habits; it’s worse, because now they’re trying to obscure the truth.”