Matthew Lau: How much will taxpayers lose in budget roulette?

In some game shows, contestants try to guess the value of the prizes they might win. With the federal budget due Nov. 5, it’s the opposite, as taxpayers are left to guess how much we are going to lose. It is a guessing game because the Liberal government’s past fiscal projections have proven thoroughly unreliable. Whatever the government says it will spend, the actual cost comes in much higher.

Ahead of the budget, the government’s most recent fiscal projection was the Spring Economic Update, released in April. Back then, the government said program expenses excluding net actuarial losses would be $536.1 billion in 2026-27, rising to $543.9 billion in 2027-28, $555.9 billion in 2028-29, $575.4 billion in 2029-30 and $591.6 billion in 2030-31. The budget’s new estimates remain to be seen, but the Parliamentary Budget Officer’s October fiscal outlook provides an early indication. It estimates program spending will hit $543.1 billion in 2026-27, or $7.0 billion higher than the federal government said in April.

To make matters worse, according to the PBO’s estimates the spending miss will widen so that, in addition to overspending its previous target by $7.0 billion this year, Ottawa will overspend by $51.5 billion cumulatively over five years. Moreover, while the Spring Economic Update said the budget deficit would decline each year beginning in 2026-27, the PBO’s outlook projects a $63.3-billion deficit in 2026-27 and a deficit larger than that in each of the next four years.

To fully appreciate the unreliability of the Liberal government’s fiscal plans, consider its earlier multi-year projections. In Budget 2022, the Liberals said program spending in 2026-27 would be $463.3 billion. That was revised upward to $489.2 billion in Budget 2023, then to $509.6 billion in Budget 2024. A year ago, in Budget 2025, Carney’s first, the government projected $528.4 billion in program spending in 2026-27.

This means that if next week’s Budget 2026 aligns with the PBO’s fiscal outlook, the Liberal government’s projected 2026-27 spending will not only be $7.0 billion higher than its previous estimate, but $14.7 billion higher than Carney’s projection a year ago and a whopping $79.8 billion higher than what the government had first suggested 2026-27 spending would be four years ago. Therefore, if any taxpayers are trying to guess how much they stand to lose in the next budget, a helpful hint is this: probably quite a lot more than what the Liberal government said last time.

To be sure, government spending is not “lost” money if it is spent wisely and effectively on things taxpayers need. The federal government has recently increased defence spending, which was much needed in an increasingly dangerous world, but whether the money is being used wisely is a separate issue. The government has established numerous agencies and councils to support its “Defence Industrial Strategy,” raising questions as to whether the strategy is actually to strengthen defence or expand the bureaucracy.

In announcing increased defence spending the government has also often touted economic benefits and “job creation” — a serious mistake. The purpose of more defence spending is stronger national defence. The government should not turn defence spending into a Keynesian enterprise to create jobs or stimulate the economy. That would be a recipe for weaker defence and wasted money.

In addition to defence spending, the PBO outlook identifies the Liberal government’s increased support for tariff-affected industries as a driver of spending growth. But a reduction in foreign purchases of Canadian goods is a bad reason for special government spending, even when the reduction is caused by misguided tariffs. Many other things, such as technological advances and shifting consumer preferences, also destroy jobs or affect industries. If people decided to eat more bagels and fewer ice cream cones, jobs would be created at bagel shops and lost at ice cream shops. Should the government then give special support to ice cream shops and ice cream workers? If not, why is it appropriate for governments to spend billions in special support for Ontario’s tariff-impacted automobile industry?

According to the PBO, another area of spending growth is child care. But expanded government control over child care has plainly been a disaster. In recent years, access to child care has become significantly worse in every province, particularly for the most disadvantaged families. More government spending and control compounds the disaster by increasing the cost.

Time for the Liberal government to end this unhappy guessing game and give taxpayers a pleasant surprise. For once, it should cut spending and let taxpayers lose less.