Federal budget includes significant promises for the North

Federal finance minister François-Philippe Champagne has proposed a 2025 budget that includes big investment in northern infrastructure, sweeping cuts to the public service and an increase in military spending.

Mark Carney’s minority Liberal government must now convince at least one other political party to help the budget pass by November 17, when a vote is expected to be held.

If the budget fails, that will trigger a new federal election within a year of the last one.

Tuesday’s budget contained some significant commitments for the North. Premier RJ Simpson said the territorial government was still studying the detail but, he concluded, “there’s a lot of stuff in here that is going to help us out.”

For example, Ottawa is promising to create an Arctic Infrastructure Fund that would invest $1 billion over four years.

The fund would be spent on major transportation projects such as airports, seaports, all-season roads and highways for both military and civilian use.

As part of that project, the federal government is proposing to allocate tens of millions of dollars to “help accelerate regulatory processes in Canada’s North.” Budget documents state that will include consultation with Indigenous governments and northern communities.

“Indigenous partnerships are critical to Canada’s sovereignty and security-related investments,” the budget stated.

A breakdown of how the fund might be distributed across the Arctic was not available during Tuesday’s budget presentation.

NWT finance minister Caroline Wawzonek said the $1-billion sum for the Arctic initially felt to her like “not a lot,” but she was heartened by the specificity of the fund.

“Since I’ve been in government, it’s the first time that the Arctic is getting its own specific carve-out” rather than competing with other jurisdictions for broader pots of money, Wawzonek said.

“To see a specific mention like this one, I think, is positive,” the minister added.

“It’s what we need for today. We’re not in a position to be spending $3 billion or $4 billion this fiscal year. So for this coming fiscal year, this is more than plenty.”

Separately, the budget promises a major federal assessment of northern healthcare with a view to addressing issues like the cost of medical travel.

The budget also promised the release of an external review of Nutrition North Canada, stating the government remains committed to addressing the high cost of living and affordability challenges that northerners face.

Military spending

The 2025 budget promises to rebuild and rearm the Canadian Armed Forces, which includes pay increases for CAF members described by Ottawa as the most significant “in a generation.” 

The federal government has earmarked $81.8 billion over five years to accomplish these goals.

At an Ottawa press conference on Tuesday, Champagne said this budget will allow Canada to boost military spending from two percent of GDP to 3.5 percent, a move toward Nato targets.

He said part of that spending will come in the form of “dual-use assets” that Ottawa has previously described as a key part of its Arctic sovereignty plans – infrastructure that can be used both by the military and by northern communities.

“This is going to be a way for us to build infrastructure in the North that northern communities will welcome, because we have a deficit of infrastructure in a number of places in the North,” said Champagne.

Cuts to the public service

Canada’s Department of Finance announced a “comprehensive expenditure review” focused on the public service earlier this summer.

On Tuesday, Ottawa said that exercise will save $60 billion over the next five years by “reducing inefficiency and focusing on core priorities.” Budget documents pledged to reduce the size of Canada’s public service in a way that it is more proportionate to the country’s population.

Currently, there are 497 federal public service employees in the Northwest Territories, accounting for less than one percent of the total federal workforce.

Overall, Ottawa wants to eliminated 16,000 full-time equivalent positions this year, rising to 40,000 by 2028-29. The Public Service Alliance of Canada described those as “reckless cuts.”

At the same time, Canada’s finance minister promised what he called “generational investments” in the shape of $25 billion for housing, $30 billion in defence-related capital spending and $115 billion for infrastructure over the next five years.

Despite the cuts set out, the budget projects the country’s deficit will grow to
$78.3 billion in the 2025-26 financial year, up from the $48.3 billion predicted for 2024-25 in last year’s fall economic statement.

As part of the expenditure review, the federal government is planning reductions almost across the board, with a plan to save 15 percent in areas such as agriculture and agri-food, Canadian heritage, employment and workforce development, energy and natural resources, environment and climate change, fisheries and oceans, global affairs and health.

Crown-Indigenous Relations and Northern Affairs is being asked to cut costs by two percent.

As part of the review, parts of the public service will integrate artificial intelligence into agencies such as Shared Services Canada, Transport Canada and the Department of Justice.

The latter will use AI to “streamline routine tasks, enhance decision-making and free employees to work on higher-value strategic work,” budget documents stated.

Building Indigenous housing

In September, the federal government announced Build Canada Homes, a new federal agency meant to “supercharge homebuilding across the country.” The agency would prioritize housing in Indigenous communities, an announcement said at the time.

Now, the budget is committing $2.8 billion for urban, rural and northern Indigenous housing, on top of the $3 billion previously available for First Nations, Inuit and Métis to advance housing priorities.

The budget indicates the agency will focus primarily on non-market housing (including co-ops, social housing and affordable homes) to address issues of supply and affordability and to reduce homelessness.

Build Canada Homes will prioritize projects that use Canadian lumber and other materials, the budget asserted, and the agency will double the rate of housing production over the next decade.

The federal budget is also promising to eliminate GST for first-time home buyers on homes up to $1 million.

The budget says the federal government will “streamline” programs by Natural Resources Canada, including the winding-down of the Canada Greener Homes Grant, which offered funding to individuals looking to make their homes more energy efficient. 

Critical minerals, wildfires and more

In the 2026-27 fiscal year, the federal government is providing $2 billion to Natural Resources Canada to create the Critical Minerals Sovereign Fund, which will invest in mining projects and companies, the opportunities for which exist in the NWT and beyond.

Starting in the next fiscal year, the federal government is promising to invest $257.6 million over four years for the lease of four aircraft to support the provinces and territories with aerial firefighting.

The budget is also promising to invest $2.7 billion over nine years to modernize the Meterological Service of Canada to allow for more reliable weather forecasts, better able to predict things like floods, fire and smoke.

Meanwhile, the Two Billion Trees program introduced by the last Liberal government – which has featured spending in the NWT – will be cancelled once contracts for the first billion trees are fulfilled. In response, one industry group – the Canadian Tree Nursery Association – said ending the program early “threatens the long-term environmental recovery of Canada’s forests [and] jeopardizes the livelihoods of workers.”

The 2025 budget proposes changes to the Canada Post Corporation Act to
deregulate the setting of postage rates. This would allow Canada Post to set postage rates, helping to improve the financial stability of the corporation, the federal government said.

“Canadians across all regions of the country, including in remote and underserved communities, who rely on the delivery of lettermail by Canada Post, will be positively impacted,” budget documents stated.

The federal government said it would continue to support the Inuit Child First Initiative and Jordan’s Principle, earmarking $122 million and $1.033 billion respectively for those programs.

There are several sitting days in Parliament for MPs to debate the budget in the first half of November.

The Carney government is expected to need the support of three MPs beyond the Liberal Party to pass the budget, though there are other circumstances – such as some MPs from other parties abstaining – that could also advance the budget.

Asked by reporters on Tuesday if Champagne expected to head into an election with this budget, the finance minister said that with significant investments in things like affordable housing, he felt the budget should be embraced across parties.

“I think we’re in a generational moment,” he said in French.

“Every political party can see themselves in it – in what we’re doing – and I think we need to think about the position that people will take, because Canadians will see themselves in this budget.”

Ollie Williams contributed reporting.