The 2025 federal budget that Finance Minister François-Philippe Champagne delivered to parliament Tuesday marks a decisive lurch right by Prime Minister Mark Carney, his Liberal government and the Canadian ruling class as a whole.

Promoted under the nationalist slogan of “Canada Strong,” the budget is being cast as a demonstration of the government’s readiness to take “tough decisions” in the name of defending the nation. In reality, it lays out a program of rearmament and corporate enrichment to be paid for through the slashing of public sector jobs, the evisceration of public services, and other sweeping attacks on working people.

Introducing the budget, Champagne reiterated Carney’s repeated pledge that “Canada’s new government will spend less so that we can invest more.” The meaning of this formulation is unmistakable. The Liberals aim to spend less on healthcare, housing, education, public services and social supports—so they can funnel tens of billions more into weapons procurement, corporate tax incentives, resource extraction infrastructure projects, and the expansion of Canada’s military-industrial complex.

Carney and Champagne present this as a response to a rapidly changing and more threatening global environment. A key line in the budget document reprises Carney’s repeated warnings that the US-led world order has collapsed. Canada, it declared, must “redefine its international, commercial, and security relationships,” adding, “This is not a transition. It is a rupture—a generational shift taking place over a short period of time. This new reality is reshaping Canada’s economic foundations.”

While the trade war launched by President Donald Trump and the Liberal government’s retaliatory tariffs hammer workers in key sectors on both sides of the border, including steel, aluminum, lumber and auto production, the focus of the Canadian bourgeoisie is how they can use Trump’s actions and annexation threats as political cover to carry out a radical restructuring of class relations in the interests of Canadian capital and at the expense of the working class. The 2025 budget is a blueprint for girding Canadian imperialism for trade war and global war. Increased worker-exploitation to enhance corporate “competitiveness” and the diversion of social resources to fund the biggest military build-up in more than seven decades are at its heart.

Already, in the run-up to the tabling of the government’s “transformational budget,” the Liberals ordered Canada Post to implement a “restructuring” plan that will result in the elimination of all daily and home mail delivery and the elimination of tens of thousands full-time jobs. This, they have boasted, is proof of their readiness to make “tough choices” to realize “fiscal sustainability.”

By goring postal workers, long one of the most militant sections of the working class, and effectively blowing up the post office as a public service, Carney has signaled that all public services are on the chopping block. Backed by the financial oligarchy, the government intends to impose similar attacks across the board, slashing public services and the rights and jobs of the workers who administer them, to pay for militarism, war and enriching the capitalist elite.

Preparing Canada for world war

Military spending and the buildup of Canada’s war-making capacity are the central priorities of the budget, with the government detailing plans to increase military spending by $84 billion over the next five years.

In June, Carney announced an immediate 17 percent increase in military spending to ensure Canada met NATO’s 2 percent of GDP military spending target in the current 2025-26 fiscal year. Now the government is positioning the country to reach NATO’s new spending target of 5 percent of GDP, which will require raising the defence budget more than threefold from what it was last year, to $150 billion per annum by 2035.

To meet these targets will require not just massive increases in defence spending to be paid for by the working class in the form of reduced public services and social supports and higher taxes. They will require the militarization of the Canadian economy. Indeed, at a post-budget press conference, Champagne declared, “Every company in the country should basically have a defence strategy.”

As an initial step in the government’s Defence Industrial Strategy, Ottawa will invest $6.6 billion over five years in boosting arms manufacturers’ access to capital, military related research and innovation, bolstering supply chains and augmenting supplies of critical minerals.

The budget explicitly recommits Canada to a lead role in the US-NATO-instigated war against Russia. It declares, “As the world grows more volatile and dangerous, now more than ever, Canada must be ready and able to defend our territory, our people, and our values to secure our sovereignty and to protect and uphold our commitments to our allies. This includes helping to counter Russian aggression and to uphold Ukraine’s sovereignty and territorial integrity to ensure security across the Euro-Atlantic region.” 

To this end, Ottawa is allocating an additional $2.7 billion over three years to fund Operation Reassurance, the Canadian Armed Forces’ largest overseas deployment, supporting NATO’s forward military presence on Russia’s borders through its battlegroup in Latvia. In parallel, the government is launching a new $1 billion Arctic Infrastructure Fund to build airports, deep-water ports and all-season road networks across the North—dual-use projects designed to facilitate civilian logistics and military force projection toward the Arctic frontier, where resource extraction and strategic conflict with Russia and other global powers are intensifying.

But even these massive increases represent only a down payment. The government is already laying the groundwork for the next stage: a new fleet of submarines, expanded Arctic military bases, long-range strike capabilities and dramatically increased integration with US defence structures, including Trump’s $175 billion “Golden Dome” missile project directed at Russia and China. 

The budget allocates billions to expand weapons production, munitions manufacturing, drone warfare systems, naval shipbuilding, cyberwarfare capabilities and space-based surveillance.

Sweeping cuts to the public sector and social services to pay for war

At the same time, to pay for this massive rearmament the government has initiated a sweeping program of cuts and restructuring across the public sector.  

The most immediate and devastating measure is the planned elimination of 40,000 federal public service jobs by 2028. The government plans to use attrition and buyouts, but has already signaled that it will invoke the public sector “workforce adjustment” clause to impose layoffs where voluntary measures fall short.

The consequences will be far-reaching: reduced access to income support programs, longer processing times for immigration and citizenship applications, deteriorating workplace safety enforcement, weakened environmental monitoring and the erosion of federal capacity in health, science, transportation and infrastructure. The goal is not to improve efficiency, but to shrink public services so that resources can be diverted to the military and corporate sector.

The main other cuts and structural shifts announced in Tuesday’s budget include:

• Real-term cuts to provincial transfers for healthcare, education and social services, which will fall behind inflation and population growth.

• Sharp reductions to operational budgets at key departments, including Immigration, Refugees and Citizenship; Employment and Social Development; Environment and Climate Change; Transport; and Fisheries and Oceans.

• Reduced support for public and affordable housing, replaced with public-private partnership financing structures designed to guarantee developer and investor profit.

• Corporate tax incentives and accelerated capital write-offs, marketed as “productivity investment,” which further reduce already historically low corporate taxation levels.

• Redirection of public research funding toward defence-related innovation, “dual-use” technology development and supply chains for munitions and advanced weapons manufacturing.

In his budget speech, Champagne boasted that Canada is “one of the best places to invest in the world,” pointing to the budget’s reduction of the marginal effective tax rate to 13.2 percent. This is the lowest in the G7, even lower than the United States after Trump’s reactionary One Big Beautiful Bill extended his 2017 tax cuts.

Embracing the type of immigrant-bashing associated with the fascist US President Donald Trump and far-right Tory leader Pierre Poilievre, the Liberals included in their budget a series of vicious attacks on immigrants. Under the targets announced in the budget, temporary-resident admissions, including temporary foreign workers and international students, will be almost halved from 2024.

Asylum-seekers and refugees, that is the most vulnerable sections of the population, will henceforth face copays for medicines, vision-care and other health services. This goes hand in hand with the Liberals’ deepening of their collaboration with Trump, through the strengthening of the Canada Border Services Agency and further restrictions on who can apply for refugee status contained in Bill C-12.

The government is pairing austerity with nationalist propaganda aimed at rallying public support around patriotic sacrifice. The working class is being told that hardship is necessary to defend the nation’s future. This rhetoric is not new. It is the language used by every imperialist ruling elite as they prepare for shooting wars to defend their economic interests.

Big business and unions see 2025 budget as a first step

Sections of the business press acknowledge the rightward shift being spearheaded by the Liberals under the former central banker Carney but are already demanding even more.

The Globe and Mail editorial board criticized the budget for “prevarication and sleight of hand,” noting that the government’s capital investment program is “a mere pittance” compared to what would be required to fundamentally reorient the economy. Their frustration is revealing: they want deeper cuts and faster military expansion.

Theo Argitis of the Business Council of Canada summarized the critique from Bay Street and the corporate boardrooms: “This isn’t a generational budget. It moves in the right direction on some fronts, but the government was not as ambitious as it could have been. If you’re looking to transform the economy, this budget will not do it.”

In Parliament, Conservative leader Poilievre denounced the budget for creating “the most costly and largest budget deficit in history outside of COVID,” pointing to the projected budget deficit of $78 billion. Poilievre’s comments made clear that the faction of the ruling class he speaks for is demanding even more rapid and brutal cuts to social spending.

Meanwhile, the trade union bureaucracy is already moving to enforce working class compliance with the budget. The Canadian Labour Congress issued a statement calling on the big business parties in Parliament to come together to “strengthen this budget” by taking stronger action to protect jobs and public services. This is a signal of their intent: the unions and their allies in the New Democratic Party (NDP) will facilitate passage of the budget while posing as critics.

At the unions’ behest, the NDP has propped up minority Liberal governments under Trudeau and now Carney as they have shifted ever further right. This has included: enforcing a murderous profits-before-lives policy at the height of the COVID-19 pandemic; massively increasing military spending; waging war in all but name on Russia; backing Israel’s genocidal assault on the Palestinians; and unilaterally arrogating the power to illegalize strikes of railway, port, Air Canada and Canada Post workers.

Prior to Tuesday’s announcement, the Liberals needed at least three opposition votes—or abstentions—to secure a majority. In the hours following the budget, Conservative Nova Scotia MP Chris d’Entremont crossed the floor to join the Liberals, reducing the threshold to just two votes. With the other opposition parties all indicating their intention to vote against the budget, the NDP’s votes (or abstentions) are likely to prove decisive in ensuring the budget’s passage.

The Public Service Alliance of Canada, which bargains on behalf of over 165,000 federal workers, reserved itself to expressing “deep concern” over the plan to slash tens of thousands of jobs. PSAC committed only to “protect public services and the people who provide them by enforcing the provisions of our collective agreements and the rights enshrined in labour law,” meaning they will work to keep workers subordinated to the pro-employer collective bargaining system and prostrate before “legal” attacks on their jobs. 

The union apparatus will attempt to suppress opposition as layoffs begin and living conditions deteriorate. The bureaucracy’s response to the Liberals’ declaration of war makes clear that their role is not to defend workers, but to police them on behalf of the state and corporations.

Global capitalist crisis and working class opposition

Carney’s budget must be understood within the context of global capitalist breakdown and imperialist war preparations. Across North America and Europe, ruling classes are dismantling what remains of social welfare structures in order to funnel public resources into military buildup. The movement toward authoritarian rule—enhanced police powers, the outlawing of strikes, ever-wider restrictions on the right to protest, intensified border controls—is part of the same process.

The working class faces the same enemy and the same struggle in every country.

The way forward cannot be found through the NDP, the union bureaucracy, or appeals to the Liberal Party’s “better nature.” None of these forces oppose the militarist and austerity agenda, they are pushing it forward.

The defence of jobs, living standards and democratic rights requires the formation of rank-and-file committees in workplaces, schools, hospitals and neighborhoods; the linking of struggles across Canada, the United States and internationally; and the development of an international socialist movement aimed at reorganizing the economy based on human need, not corporate profit or imperialist conquest.

The choice posed by Carney’s 2025 budget is not one of fiscal strategy. It is between capitalist barbarism and socialist transformation. The working class has the power to stop the assault now unfolding. What it requires is organization, political perspective and independent leadership through the building of the Socialist Equality Party, the Canadian section of the International Committee of the Fourth International.