2025 Federal Budget highlights

A summary of key measures affecting the financial inclusion, protection and health of people with low and moderate incomes.

Prime Minister Carney’s first federal budget, Budget 2025: Canada Strong, was tabled on November 4th, 2025 against the backdrop of a challenging global economy and growing pressure from U.S. trade tariffs. The government is framing it as a generational budget focused on long-term investments to strengthen Canada’s economy, while also scaling back parts of the public service and consolidating spending.

Despite early signals of austerity, the budget includes $90 billion in new spending alongside $50 billion in program and workforce reductions, resulting in a $78.3 billion deficit that Finance Minister Champagne argues is necessary to protect core social programs and spur private-sector investment.

The budget is anchored around three themes — Build, Empower, and Protect — emphasizing national resilience, productivity, and security. It also introduces a new capital budgeting framework that separates day-to-day operating costs from longer-term infrastructure and investment spending, a shift meant to highlight investments that drive future growth.

You can read the full budget here:
Budget 2025: Canada Strong

About this Summary

This summary highlights sections of Budget 2025 that are most relevant to Prosper Canada’s work and our national Financial Empowerment (FE) partner network. It focuses on measures that directly or indirectly impact the financial well-being of low- and moderate-income Canadians, including policy changes and investments related to tax filing, benefit access, employment and training programs, affordability initiatives, and updates to financial services and consumer protection initiatives. 

Overview: 

1. Comprehensive Expenditure Review (CER)

The government is undertaking one of the most extensive expenditure reviews in recent decades to rein in spending and reallocate funds toward productivity and nation-building priorities. This reflects a shift from broad program expansion to targeted efficiency and measurable impact.

• $60 B in total savings and new revenues over five years, including $13 B annually by 2028–29.

• Focus on three themes: modernising government operations, streamlining program delivery and recalibrating government programs. 

• Includes workforce adjustment and attrition, 40,000 cuts to return the public service to “a more sustainable level.”

2. Direct program expenses & departmental efficiencies (ESDC)

Budget 2025 signals a structural shift in how departments deliver programs, emphasizing digital automation, leaner operations, and consolidation of duplicative efforts to achieve savings under the CER.

• Growth in direct program expenses capped at under 1% through 2029–30 (down from an 8 % average in the past decade).

• ESDC is projected to achieve up to 15% savings through AI-driven automation, reduced office footprint, lower consultant use, and program consolidation (e.g. merging Canada Service Corps and Supports for Student Learning).
   

3. Empowering Canadians / cost-of-living measures

Against the backdrop of affordability challenges, Budget 2025 includes measures with the goal of easing household financial pressure while maintaining social infrastructure that supports low- and middle-income Canadians.

• Middle-class tax cut: first tax bracket reduced from 15% to 14.5% in 2025 and 14% in 2026 (saving two-income families up to $840/year).

• Top-up Tax Credit (2025–2030) a temporary, non-refundable tax credit for individuals whose non-refundable credits exceed the first tax bracket and who could owe more tax due to the reduction of the first personal tax rate and related credit rate.  

• Consumer carbon price eliminated, cutting gas prices by ~18¢/L in most provinces and territories.

• National School Food Program is made permanent, supporting 400,000 children and saving participating families ~$800/year.

4. Automatic Federal Benefits for lower income individuals 

Building on earlier commitments to make benefits more automatic, Budget 2025 introduces legislative measures to expand CRA’s discretionary authority to file taxes for eligible low-income non-filers. 

• Up to 5.5 million low-income Canadians could be reached by 2028.

• Individuals will receive pre-filled information and have 90 days to confirm or modify it. If the individual does not respond after 90 days, CRA could file on their behalf and issue a Notice of Assessment and determine credit and benefit entitlements. 

5. Labour market amid trade uncertainty

U.S. tariffs and global trade tensions have disrupted hiring in key Canadian industries, especially manufacturing. The government is intervening to cushion workers and promote reskilling as economic growth slows.

• ~30,000 manufacturing jobs lost since early 2025; unemployment peaking around 7.2%.

• Youth unemployment climbed to 14.7 %, the highest since 2010 outside the pandemic.

• Budget introduces a reskilling package for 50,000 workers, more flexible EI rules, and a digital training platform.

6. Youth employment & training (2026–27 onward)

Recognizing persistent youth unemployment and underemployment, Budget 2025 expands federal work-integrated learning and early-career programs.

• 175,000 placements through Canada Summer Jobs (~100,000), Youth Employment & Skills (~20,000/year), and Student Work Placements (~55,000).

• Launch of a Youth Climate Corps ($40 M over two years) for paid green-skills training.
  

7. Worker protections & EI flexibility

In response to rising layoffs in trade-exposed sectors and growing job insecurity, Budget 2025 strengthens income supports and enforcement to protect workers. The measures aim to help employers avoid layoffs, stabilize household incomes, and address wage theft and misclassification, which often impact lower-wage and contract workers.

• Work-sharing flexibilities: $370.5 M over 5 years to allow reduced hours with partial EI benefits.

• Temporary EI supports: $3.7 B over 3 years for workers affected by tariffs and trade disruptions.

• Stronger enforcement: Higher penalties for wage theft and $77 M over 4 years for a new CRA–ESDC initiative tackling worker misclassification.
  

8. Disability & care workforce measures

The government is aiming to strengthen income security for persons with disabilities and essential care workers as part of its “fairer Canada” agenda.

• Canada Disability Benefit: $150 supplemental payment per DTC certification (retroactive); legislation to exempt the benefit from income tests.

• Personal Support Workers Tax Credit (2026–2030): refundable credit equal to 5% of earnings (up to $1,100/year).
  

9. Payments modernization & consumer-driven banking

Canada’s financial system is entering a major modernization phase aimed at improving speed, security, and competition in how people move and manage money. These reforms will make digital payments faster and more accessible while expanding open banking so consumers can safely share financial data and initiate transactions across platforms.

• Real-Time Rail (RTR): Launching in 2026, RTR will be Canada’s first real-time payments system, allowing individuals and businesses to send and receive money instantly, 24/7, every day of the year. It will enable faster bill payments, payroll transfers, and peer-to-peer transactions, reducing reliance on cheques and outdated batch-payment systems.

• Consumer-Driven Banking: Oversight for this framework is shifting from the Financial Consumer Agency of Canada (FCAC) to the Bank of Canada, reflecting its expanded role in regulating payment systems and financial data-sharing. The framework will expand by 2027 to include payment initiation, allowing consumers to authorize direct payments from their bank accounts within third-party apps — a key step toward full open banking.

• Cheque-hold rules updated: The immediate-funds threshold will increase to $150, with shorter hold periods, giving consumers quicker access to deposited funds.

10. Fraud & economic abuse protections

Financial abuse and scams are rising alongside digitalization. The federal government is responding with new frameworks for prevention and accountability.

• Launch of a National Anti-Fraud Strategy.

• Introduction of a Voluntary Code of Conduct for Prevention of Economic Abuse (banks, overseen by FCAC).

• Establishing a new Financial Crimes Agency to investigate complex cases of money laundering, organised criminal activity, and online financial scams, and to recover illicit proceeds.
  

11. Productivity & competition agenda

Chronic low productivity and high consumer costs have spurred a broad competition agenda targeting telecoms, banking, and regulatory barriers.

• New “dig once” policy to coordinate fibre installation, streamline tower siting, and expand telecom access.

• Banking reforms: ban on transfer fees for registered accounts by spring 2026; transparency on cross-border and foreign transaction fees; simplified chequing-account switching.