Canada’s Fiscal Anchors Under Scrutiny Ahead of Budget

Interim PBO Highlights Early Stage of Budget Planning
Interim Parliamentary Budget Officer Jason Jacques appeared before the government operations and estimates committee to discuss preparations for the upcoming federal budget. Appointed for six months by Prime Minister Mark Carney, Jacques will provide independent economic analysis during this crucial period.

Jacques said his office has been consulted by the Finance Department, but described the budget planning as being in the “early days.” MPs were keen to understand whether the government is on track to meet its fiscal anchors, which are financial rules set to control spending and avoid inflation.

Concerns About Undefined Fiscal Anchors
When asked by Conservative MP Kelly Block if the government currently has fiscal anchors, Jacques admitted uncertainty. “I don’t know if the government currently has fiscal anchors, which of course causes the people we work with considerable concern,” he said.

Former Finance Minister Chrystia Freeland had previously established fiscal anchors in response to pressure from the Bank of Canada to prevent excessive spending that could increase inflation. Jacques noted that the 2025 federal budget, expected to be tabled on November 4, will provide a clearer picture of the government’s financial guardrails.

Budget Delay Raises Uncertainty
The government had initially indicated the budget would be tabled in October, but the date was later moved to November 4. Jacques said delays increase uncertainty. “Uncertainty is always elevated in a period of low transparency. That’s well researched and well demonstrated,” he told MPs.

Canada has not presented a full federal budget since spring 2024. A fall economic update in December showed the deficit had risen to $61.9 billion. Finance Minister Mark Carney has warned that the deficit for the coming year is expected to grow due to U.S. tariffs and additional government spending.

Capital vs. Operating Budget Plans
A central promise of the Carney government was to increase investment while reducing operating costs. The government intends to separate capital and operating spending in the budget and introduce legislation to support this change.

Jacques said he met with Finance Department officials to discuss definitions of capital and operating budgets. The department is still consulting internally and is in the early stages of developing this framework. This separation is expected to improve transparency and align Canada’s public finance practices with those of other advanced economies, such as the United Kingdom.

Looking Ahead to November Budget
The upcoming budget will reveal how the Carney government plans to manage spending, investment, and deficit control. Until then, Jacques and his office will continue to monitor progress and provide independent analysis to Parliament. The lack of clearly defined fiscal anchors remains a concern for financial stability and public accountability.