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From hearing policymakers describe the 2026 federal budget, you might think that affordability was the government’s top priority. Yet in truth, as my colleague David Macdonald writes, the “feds have produced a big business budget masquerading as the answer to cost of living.”
One-quarter ($36.1 billion) of all new spending over the next five year, announced in Budget 2026, is devoted to a single program: the new Productivity Mega Deduction. Another 42.4 per cent ($61.9 billion) is dedicated to other private sector opportunities and supports. Just one-third ($48 billion) of proposed new measures support individual Canadians and their families struggling in an uncertain economy.
In last year’s budget, the government signalled its intention “to spend less so we can invest more.” This year, it has set out a plan to make Canadians “masters of our destiny,” to “give us the freedom to live our lives as we choose.”
It’s betting big on big business to “supercharge” investment and generate great wealth, while reducing spending on essential public services and redefining federal responsibilities.
The government’s strategy, of course, presupposes that everyone has the same opportunities to live their lives as they choose, that the revenues generated through private investment will be re-invested in our communities.
But if the public systems that make choice possible are allowed to weaken, then what kind of destiny are we building? And for whom?
Positive steps in the budget
The government took some important steps in Budget 2026, most notably promising to create a 10-year plan to “set Canada on a path to end homelessness.” To this end, $29.1 billion over the next decade has been allocated to build new supportive and transitional housing and dedicated health facilities for people in crisis. The budget also renews funding for two programs—the Reaching Home and the Veterans Homelessness Program—and gives Canada Housing Benefit a modest boost to assist low-income renters access private market housing. And additional $13 billion will boost the capital available to Build Canada Homes for non-market housing.
The government has also announced another one-time 50 per cent top-up to the Canada Groceries and Essentials Benefit (CGEB), to be delivered in early 2027. The CGEB will give a financial lift to an estimated 12 million low and modest-income households.
The budget expands eligibility for the Canada Workers Benefit (to be now known as the “Build Canada Workers Benefit”), a refundable federal tax credit for low-income workers. Previously, workers needed to earn a minimum of $3,000 to be eligible, but this budget reduces the threshold to $500 and modestly increases the maximum benefit available. The budget also takes action on the 2021 promise to convert the non-refundable Canada Caregiver Credit into a refundable credit worth up to $1,260 for eligible families.
Budget 2026 includes $607.4 million over four years, announced this past summer, to renew bilateral agreements with provinces and territories under the National Action Plan to End Gender-based Violence, and $5.4 billion over two years to bolster the Canada-wide Early Learning and Child Care program falling behind on its expansion targets.
And it includes $60 million over four years for the Federal 2SLGBTQI+ Action Plan, starting in 2027-28, with $15 million per year ongoing, the result of relentless community advocacy in the face of rising hate and legislated discrimination.
Temporary measures and modest investments fail to meet the moment
These are all meaningful programs but none of them, as designed and resourced, are fit for the challenges at hand.
The expansion of desperately needed supportive and transitional housing, for example, may not actually come to pass—as it is contingent on the provinces stepping up with the necessary operating dollars for services. The provinces can apply to the new Integrated Supports Fund, but an average of $450 million per year across the whole country will only go so far.
The Canada Groceries and Essentials Benefit Supplement will provide crucial support—but it is again a one-time measure at a time when three in 10 people live in a household that is having difficulty meeting their financial needs each month, up two percentage points over 2025.
The Build Canada Worker Benefit better targets low-income workers, but the changes have been financed by eliminating the advanced payment aspect of the previous design. The overall program is actually expected to cost $1 billion less in 2027. The federal government could have used these funds to further improve the financial support on offer—or to expand and enhance the Canada Disability Benefit.
The government also could have moved forward with long-promised Employment Insurance reforms. Temporary measures are in place to support millions of workers and businesses impacted by high U.S. tariffs. But the current program itself, introduced back in 1996, remains riddled with problems—accessible only to roughly 40 per cent of unemployed workers and offering very low benefits compared to peer countries.
These examples speak to the government’s narrowly targeted approach to social spending. The budget acknowledges the cost-of-living pressures facing Canadians, but its response is largely a mix of modest and/or temporary measures focused on a small list of priorities. One and done—not the comprehensive plan or resourcing that’s needed to meet the moment.
Operating funds and transfers on a downward track
The limited scale of investment on offer is abundantly clear when compared to the scale of investment in large businesses. It is also evident in the declining share of federal resources devoted to federal program spending.
According to Budget 2026, federal expenditures including transfers to individuals, transfers to other orders of government, and direct program costs represented 15.4 per cent of GDP in the 2025-26 fiscal year, down sharply from 16.5 per cent forecast in Budget 2025. Over the forecast horizon, total expenditures are expected to decline further as a result of deep cuts in direct program expenses averaging $12.4-billion per year.
Total government spending has actually grown, but it is on the “capital” side of the budget ledger, with investments in the military and new infrastructure projects to be financed in part through spending cuts in “operating” budgets.
Military spending is already up significantly, and there’s more to come. Reaching NATO’s target of 3.5 per cent of GDP in core defence spending by 2035 could require over $65 billion per year in additional spending by 2035-36, according to the PBO.
With the large hits to revenues—including the estimated $7-8 billion a year for the new Productivity Mega Deduction and other budget giveaways—the pressure on other program areas will only continue to grow.
The government has spared transfers to individuals and the provinces and territories from cuts thus far, but how long will this last. There’s already talk about cutting seniors’ benefits. The fight around a new generation of health accords is now underway. The government is signalling that it will walk away from pharmacare and its agreements with the four provinces and territories that have signed on. This despite early evidence from British Columbia that shows the program is already generating significant benefits for residents as access to birth control has expanded and out-of-pocket costs declined.
Austerity for the rest of us
There are tough times ahead. High energy prices are moving their way through the economy, swelling the pockets of oil and gas companies. The Bank of Canada has just hiked interest rates to head off further increases, but such a move will also slow a struggling economy and raise costs for households.
With Budget 2026, the government confirms the profound shift in priorities it set in its first budget last year—placing a massive bet on the private sector and foreign investors to step up and deliver for Canada. Hardly a strategy for becoming “masters in our own house” (as hugely problematic as that label is).
This is textbook 1980s neoliberalism: gearing public policy to the benefit of big business with the promise that wealth will trickle down, that markets will provide. That hasn’t happened—as we’ve seen over the past forty years. A system designed to extract maximum profit for shareholders and constrain the role of governments was never going to deliver broad-based prosperity and a sustainable future.
Young people struggling to find an affordable apartment, single seniors and newcomers scrimping to afford groceries, someone with a chronic illness going without needed medications because of cost—they are all living the failures of 40 years of neoliberal economic policy.
These policies have simply transferred the costs, both in time and money, to families and unpaid caregivers, workers, community organizations, nonprofits, schools and hospitals. The costs don’t show up as government expenditures, but Canadians still pay them.
Federal policymakers are talking a good game, but the numbers tell a different story. Large cuts to future revenues on top of program cuts will significantly undercut the capacity of the federal government to meaningfully respond to the social, economic and environmental challenges ahead.
At a time when poverty is rising and the gap is growing between rich and the rest of us, the federal government missed the opportunity again to invest in social and physical infrastructure that can lift up everyone.
About the author
Katherine Scott
Katherine serves as the director for the CCPA’s gender equality and public policy work. She has worked in the community sector as a researcher, writer and advocate over the past 20 years, writing on a range of issues from social policy to inequality to funding for nonprofits.
