The Parliamentary Budget Officer (PBO) released a report on November 14, stating the Liberal government under Prime Minister Mark Carney incorrectly categorized $94 billion in operating expenses as capital investments in Budget 2025.
"No wonder Carney wants to fire the parliamentary budget officer," said Conservative Party of Canada Leader Pierre Poilievre in a social media statement.
"Canada’s top budget watchdog today published a brutal report exposing how Carney’s costly credit card budget cooks the books, doubles the deficit and promises fake savings."
Under Budget 2025's expansive framework, capital investments—now encompassing tax credits, subsidies, and transfers aiding private or Indigenous capital formation—balloon to over $311 billion from 2024-25 to 2029-30.
But the PBO, adhering to international System of National Accounts standards, reclassifies these as mostly operational, slashing the total to $217.3 billion—a 30% discrepancy.
"These measures do not constitute capital formation," the report asserts, warning of "subjectivity" that muddies fiscal performance assessments.
The fallout? The government's rosy $222 million operating surplus projection for 2028-29 evaporates into persistent deficits averaging $64.3 billion annually, driven by $87 billion in new operating measures and $38.7 billion in capital ones.
New fiscal anchors—balancing operations by 2028-29 and a declining deficit-to-GDP ratio—teeter on thin ice, with just a 7.5% chance of the latter holding, per PBO stress tests.
Federal debt-to-GDP, once eyed for decline, now stabilizes above 43% through 2029-30, up from 41.2%, eroding prior sustainability pledges.
Interim PBO Jason Jacques cautioned: "Budget 2025 projects the debt-to-GDP ratio will stay mostly stable... This is different from the last three years, when fiscal policy provided more flexibility."
He urged an "independent expert body" to vet capital qualifiers, decrying transparency gaps in expenditure reviews and delayed public accounts.
Critics decry the reclassification as "creative accounting" undermining accountability, while the report flags "limited fiscal room" for shocks, tilting debt risks upward.
