Carney’s Second Budget Reveals his True Priorities | Budget 2026

The 2nd budget in any majority mandate is always the most forgettable come election time – but in many ways it is the most revealing.

The first budget delivers on the election promises cobbled together on the war room floor that got the government elected in the first place. The last budget is laden with voter friendly pre-election goodies, calibrated to return the party in power to office.

But that second budget reveals what the government really believes in. It contains the unsexy, roll-up-your-sleeves work that the government hopes will pay dividends in the long run. In this case, SME tax reform for the 98% of Canadian businesses that felt the “productivity mega deduction” wasn’t for them (even though they are eligible for it).  This year’s budget modernizes how Canada builds, finances, maintains and operates infrastructure – including private sector participation (such as airports – hardly a popular measure). A focus on homelessness, rental supply, affordable and non-market housing, and modern construction methods – all chipping away at Canada’s enormous housing shortfall. And details on the sovereign wealth fund, as exciting as a Canada savings bond in your Christmas stocking.

None of these items in isolation is going to make headlines. But taken together, they represent the next iteration of the Carney agenda that has sustained his extended honeymoon with Canadian voters. Delivering a competent government serves as a comforting counterpoint to the chaos marking the Trump Administration that was just repudiated by voters south of the border.

Against this test, the Carney government’s true priorities as revealed in this budget are:

• The Productivity Mega Deduction, giving Canada the lowest tax rate on new business investment in the G7 and providing businesses of all sizes and sectors a stronger incentive to invest, expand and produce more.
• New incentives for entrepreneurs and investors to build, grow and reinvest in eligible Canadian companies.
• More of Canada’s research and ideas turned into successful products and businesses.
• A stronger, larger electricity grid to meet growing demand and deliver more clean, affordable power.
• More Canadian critical minerals brought from mine to market.
• Stronger competition across the economy, including the financial sector, to support greater access to capital, encourage investment and innovation, and drive productivity
• A commitment to eliminate homelessness and expand non-market housing.
• Significant support for Canadian artists and journalists.
• Major investments in Indigenous education and training.

Here’s what stood out to Counsel’s team in the stakeholder lock-up:

 

Fiscal and economic Top Line

• Canada’s economic resilience is supporting better-than-forecasted fiscal results. The deficit is expected to be $27.5 billion lower in 2025-26 compared to the Spring Economic Update 2026, likely due to higher energy prices.
• Budget 2026 also respects the fiscal anchors laid out in Budget 2025. The deficit-to-GDP ratio is projected to decline over the budget planning horizon, and day-to-day operating spending is on track to be balanced by revenues by 2027-28, one year ahead of the target set in Budget 2025.
• Canada’s economy grew by 3.3% annualised in the second quarter of 2026, driven by higher exports, household spending and business investment.
• According to the International Monetary Fund, Canada is projected to grow at the second-fastest pace in the G7 in 2027.
• Canada has added 214,000 private sector and self-employed workers over the past year, while the unemployment rate has fallen to 6.5%—near its lowest level in two years.
• Business capital investment rose 9% annualised in the second quarter, including greater investment in engineering structures, machinery and equipment.
• Canada continues to have the lowest net debt-to-GDP ratio in the G7 and one of the smallest deficit-to-GDP ratios.
• Canada and Germany are the only G7 economies with AAA ratings from multiple major agencies.
• Canada also continues to borrow at relatively low rates compared to most G7 peers.

With all of these macroeconomic factors considered, the government has committed $151.5 billion in new spending focused on boosting private-sector investment with this budget, to expand and amplify its Build Canada Strong agenda.  The major items are:

 

Small Business Incentives

A new Canada Growth Incentive will help high-potential businesses attract investment and grow in Canada. Introducing a new tax exemption for Canadian builders on up to $15 million in capital gains earned from successful investments in eligible Canadian companies and enhancing the small business rollover to allow increased deferral of taxes on capital gains when proceeds are reinvested in another Canadian small business. This incentive would provide $715 million in tax relief over four years, starting in 2027-28.

 

Expanding the SR&ED Tax Incentive Program

Budget 2026 proposes to further expand the SR&ED tax incentive program to include certain commercialisation expenses. Eligible expenditures would be expanded to include certain costs associated with bringing a new product or process to market, including obtaining necessary regulatory approvals or certifications, and securing and maintaining intellectual property protection. This measure is expected to provide support of $930 million over five years, with $235 million ongoing.

 

Airports

 

To prepare Canada’s air transportation system for the future, the government is seeking private investment through long-term operating concessions for our four largest airports. Budget 2026 announces the government’s intention to pursue additional measures—supported by concession proceeds—to improve the experience for travellers. These will prioritise regional connectivity, ensure air travel is affordable, and strengthen the governance and oversight of Canada’s airports.

Budget 2026 also proposes to provide $4.3 million over four years, starting in 2026-27, to Transport Canada to develop a Traveller Biometrics Strategy. The Strategy will make air travel faster and simpler, including through the potential use of digital credentials that can help travellers move through airports and other points of entry more efficiently. It will bring together airports, airlines, security screening, and border services, while protect in privacy, personal information, accessibility, cybersecurity, and individual choice.

 

Electricity Strategy

To provide the certainty needed for longer-term projects, Budget 2026 proposes to extend the Clean Technology and Clean Electricity investment tax credits to the end of 2040. For the Clean Technology investment tax credit, the phase-out to 15% would occur in 2040, rather than 2034. Combined, these measures are expected to cost $2.4 billion from 2027-28 to 2030-31 and $36.1 billion from 2031-32 to 2041-42.

To deliver more reliable power as electricity demand grows, Budget 2026 proposes to provide nearly $4 billion over 10 years, starting in 2027-28. This funding will support electricity infrastructure expansion, renewable energy, and priority electricity sector projects across Canada, including new funding for the Smart Renewables and Electrification Pathways Program.

To improve energy reliability in the North, Budget 2026 proposes to provide $1.6 billion over 10 years, starting in 2027-28. This includes $713.8 million for renewable energy and capacity-building projects that help Indigenous, rural and remote communities transition from diesel and fossil fuels to renewable energy sources, and $929.1 million to replace and upgrade aging electricity infrastructure in northern communities.

Nuclear Energy Strategy

The government will allocate $261 million over five years, starting in 2027-28, and $14 million ongoing, to Natural Resources Canada to develop nuclear supply chains, support research and development, and advance research reactor capacity and readiness. Further commitments include:

• $127 million over five years, starting in 2027-28, to Atomic Energy of Canada Limited for research infrastructure, research and development, workforce development, and other strategic nuclear capabilities.
• $131.1 million over five years, starting in 2027-28, to the Canadian Nuclear Safety Commission (CNSC) to prepare for new nuclear projects and become the sole federal regulator for nuclear energy projects.

EV Infrastructure

To support the installation of over 55,000 additional EV chargers in areas where the infrastructure is needed most, Budget 2026 proposes to provide $587 million over five years, starting in 2027-28, to Environment and Climate Change Canada to renew the Zero-Emission Vehicle Infrastructure Program.

 

Critical Minerals

The government commits to renewing the Canadian Critical Minerals Strategy, which supports strategic investments in the technology needed to mine and process our critical minerals, expands our geoscience and research capacity, provides targeted funding for priority critical minerals projects and keeps government priorities aligned with market needs. Budget 2026 proposes to provide Natural Resources Canada with $424.4 million over four years, starting in 2027-28, to support this renewal.

The government is extending the Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit for an additional five years, until March 31, 2032. These measures are expected to provide $956 million in support of mineral exploration investment over five years, starting in 2026-27.

Industrial Energy Efficiency

Budget 2026 proposes to provide $400 million over seven years, starting in 2027-28, to Environment and Climate Change Canada to support the renewal of the Green Industrial Facilities and Manufacturing Program, now named the Strategic High-efficiency Industrial Facilities Transition (SHIFT). SHIFT will de-risk projects and accelerate adoption of energy-saving technologies at industrial and manufacturing facilities, including small- and medium-sized enterprises.

Sustainable Investment

The government will develop a new Sustainable Bond Framework for government issuance, using the Made-in-Canada sustainable investment guidelines. This framework will be prepared by the Department of Finance Canada.

The government will also showcase progress on the Made-in-Canada sustainable investment guidelines and connect investors with new opportunities through a Sustainable Finance Conference that the Canadian Climate Institute will host in February 2027.

Competition in the Financial Sector

The budget contains several measures to expand choice, lower prices and boost access to innovative financial services, including commitments to:

• Encourage the entry and growth of mid-sized challenger banks by amending the Bank Act to permit greater flexibility on ownership structures. This will be achieved by exempting foreign bank subsidiaries with less than $8 billion in equity from the public holding requirement, provided that their foreign parent is widely held and listed on a recognised foreign stock exchange, and raising the threshold at which banks must transition to widely held ownership from $12 billion to $25 billion in equity.
• Provide greater clarity and predictability for new and growing financial institutions through a policy statement issued by the Minister of Finance. The statement will provide guidance on how ministerial tools may be used to support the entry of federally regulated financial institutions, including credit union continuance, and promote a more proportionate and competition supportive financial institutions framework.
• Make it easier for federal credit unions to access capital and pursue growth opportunities by amending the Bank Act, to provide greater flexibility for qualifying cooperative shareholders to invest in and control a federal credit union. These changes will help credit unions expand their reach and serve more Canadians and businesses
• Modernise the deposit insurance framework by amending the Canada Deposit Insurance Corporation Act, including to increase the deposit insurance limit to $250,000, provide temporary high-balance coverage for certain life events, such as the sale of a home, and remove the limit for eligible deposits in registered and tax-free accounts.

 

Stablecoins

The government will require federally regulated financial institutions to issue stablecoins through non-financial institution subsidiaries regulated under the Stablecoin Act and extend the Stablecoin Act to foreign financial institutions that are not prudentially regulated in Canada, to promote consistent regulatory treatment across stablecoin issuers. It will continue to engage with stakeholders on options to strengthen consumer protections in the event of stablecoin issuer or custodian insolvency, while supporting responsible innovation in the stablecoin market.

Bank Fees

Budget 2026 announces the government’s intention to develop regulations requiring banks to provide consumers with a single clear annual statement of the fees paid on their chequing and savings accounts, as is currently the case in the European Union and the United Kingdom. By consolidating and calculating the true costs of an account, banking costs will become easier to understand, helping Canadians choose the accounts that best fit their needs.

Digital Credentials

The government intends to develop a pilot project for the use of voluntary digital credentials in financial services to support innovation and help combat identity fraud. The project would be developed by the Canadian Digital Service in collaboration with the Department of Finance Canada.

Financial Crimes and Anti-Fraud Strategy

The government will introduce a legislated Multi-Sector Anti-Fraud Framework, as a cornerstone of the National Anti-Fraud Strategy, to enhance fraud-related protections for Canadians across the financial and telecommunications sectors and on digital platforms. To protect Canadians, organisations will be required to prevent, detect, disrupt and respond to fraud, as well as collaborate with each other, across sectors, to resolve fraud-related complaints.

 Infrastructure Investment

The government will expand infrastructure investment opportunities for Canadian life insurers by amending the Insurance Companies Act and the Investments in Permitted Infrastructure Entities Regulations to broaden the scope of permitted infrastructure investments. This will unlock additional capital that can be invested over the long term for infrastructure projects and support the construction of transportation networks, energy infrastructure, and other assets that strengthen Canada’s economy, creating high-paying careers for Canadians.

 

Re-organizing Crown Corporations

• Business Development Canada and Export Development Canada will be consolidated under a single federal development bank.
• The Canadian Commercial Corporation will become a subsidiary of Export Development Canada.
• The Minister of Finance is now responsible for Canada Infrastructure Bank (CIB)
• The Canada Strong Fund will also become a Crown corporation.

Canada Strong Notes

Canadians will be able to benefit from the Canada Strong Fund’s investments through the issuance of Canada Strong Notes, an investment product tied to the Fund’s performance. These notes will enable Canadians to share in the Fund’s returns, giving them a direct stake in the nation-building projects and companies in which the Fund invests.

Modernizing Trade Systems

Budget 2026 proposes to provide $55.3 million over two years on a cash basis, starting in 2026-27, to Transport Canada to advance digital trade processes. This funding would bring government and industry together to guide the work, update legislation and regulations, test new digital tools, and help businesses adopt them for a more competitive and productive trading environment.

Affordability

Delivered in early 2027, Budget 2026 proposes to enhance the Canada Groceries and Essentials Benefit Supplement again, which would provide a one-time 50% increase for the 2026-2027 benefit year. The Supplement would provide up to $339 for a single person without children and up to $679 for a couple with two children. Combined with the June 2026 top-up and the 25% increase in the benefit as of July 2026, this supplement would bring total support in 2026-27 to up to about $1,290 for a single person without children and $2,570 for a couple with two children. It would provide $4.1 billion in additional support to Canadians and is expected to lift an additional 120,000 people out of poverty in 2027.

Budget 2026 also proposes to provide $610.3 million over four years, starting in 2027-28, $118.1 million in 2031-32, and $117 million ongoing, to ensure that Nutrition North Canada can maintain and enhance these essential supports.

Support for Caregivers

The government will make the Canada Caregiver Credit fully refundable, providing $845 million in additional support over four years, starting in 2027-28, and $245 million per year ongoing. 585,000 caregivers would receive support, including 180,000 who currently receive no benefit. Caregivers would receive up to $1,260 annually (for 2027, indexed thereafter). Making the credit refundable will lift an estimated additional 15,000 individuals out of poverty.

Emergency Treatment Fund

Budget 2026 proposes to provide $100 million over two years, starting in 2027-28, to renew Health Canada’s Emergency Treatment Fund. The Fund supports locally driven responses to urgent substance use and overdose needs, including mobile outreach, naloxone distribution, and land-based healing programs in municipalities and Indigenous communities across Canada.

Eliminating Homelessness

The government is committing to eliminate homelessness in Canada in 10 years.

Budget 2026 proposes to provide $1.8 billion over four years, starting in 2027-28, and $3.2 billion in future years to establish a new Integrated Supports Fund, delivered through Build Canada Homes. The Fund would support projects that bring housing together with health, mental health, addictions and social supports. The Fund would also help develop new transitional and supportive housing, adapt existing buildings, and mobilise public, private and philanthropic capital behind an integrated housing and care model.

Budget 2026 also proposes to provide an additional $3.6 billion over four years, starting in 2027-28, and $6.4 billion in future years, through Build Canada Homes to build new supportive and transitional housing across Canada. Federal funding will support capital costs, while provincial and territorial partners will be expected to fund ongoing operations and wraparound services, like job, training, income and health supports. This approach would help ensure that new housing is matched with the care and supports people need to remain housed.

Additionally, the government will build community mental health and addictions facilities. Budget 2026 proposes to provide $2 billion over two years, starting in 2027-28, for the Health Infrastructure Fund. Facilities funded will provide care before people reach a crisis point, helping address the mental health and substance use challenges that are contributing to homelessness, instability and growing pressures on communities across Canada.

Housing

Budget 2026 proposes to renew the Canada Housing Benefit for 10 years ($1.7 billion over 3 years, starting in 2028-29, and $3.9 billion in future years), providing direct monthly rental assistance to low-income Canadians, helping prevent homelessness and enabling vulnerable individuals and families to secure and maintain stable housing.

Budget 2026 proposes to provide an additional $13 billion over ten years, on a cash basis, starting in 2028-29, to boost the capital of Build Canada Homes and supercharge non-market housing across this country.

All told, the investments in this Budget will set Build Canada Homes on a path to deliver 200,000 new homes across the country in the next decade, making its total capitalisation $45 billion. At least 10% of Build Canada Homes’ expanded envelope will be dedicated to Indigenous housing projects using a distinctions-based formula.

Budget 2026 proposes to provide $1.5 billion over four years, starting in 2027-28, and $387.4 million in future years to prepare federal lands for housing by funding water, wastewater, roads and other enabling infrastructure. This investment will help turn underused federal properties into complete communities and lower the cost of delivering affordable homes.

Budget 2026 proposes $100 million over three years, starting in 2027-28, toward a partnership with the Federation of Canadian Municipalities to support municipal e-permitting and the adoption of artificial intelligence. Enabling more efficient and effective review and approval processes, to get homes built faster. Already, municipalities are demonstrating the efficiencies gained from digital and AI-enabled permitting: in Edmonton, Alberta, automated reviews have reduced approval times from two weeks to just one day.

Budget 2026 also proposes $300 million over three years, starting in 2028- 29, and $200 million in future years, to Innovation, Science and Economic Development Canada for the Strategic Response Fund to build and expand industrial capacity to accelerate the adoption of modern methods of construction and help lower construction costs.

Budget 2026 proposes new targeted investments to improve the efficiency of the homebuilding sector, accelerate home construction and increase housing supply, including: $67.7 million over four years, starting in 2027-28, and $101.2 million in future years to modernise housing data and establish common standards for modern methods of construction. The National Research Council of Canada will also provide more timely updates to the National Model Codes to support the faster adoption of innovative building methods.

Budget 2026 announces that the government is delivering on the commitment in the Spring Economic Update 2026 to change mortgage insurance rules to help unlock financing for “missing middle” homes. Changes include new mortgage insurance flexibilities for three- and four-unit homes, and permitting private mortgage insurers to offer mortgage loan insurance on five- to fifty-unit residential properties.

Immigration Levels Plan

The government will implement the 2027-2029 Immigration Levels Plan, setting targets of 370,000 new temporary resident arrivals and 380,000 permanent resident admissions in each of 2027, 2028, and 2029.

The plan will help transition the many longstanding temporary residents to permanent residency. Up to 200,000 temporary residents already in Canada would have the opportunity to become permanent residents by the end of 2027. Through collaboration with provinces and territories, this measure would transition 100,000 workers eligible for Express Entry or the Provincial Nominee Program, increasing provincial and territorial share of permanent economic immigration and providing greater flexibility to respond to regional labour market needs.

The government will also reform the Temporary Foreign Worker Program to better align with regional labour market needs, in collaboration with provinces and territories, while improving processing time and strengthening employer compliance.

Culture and Identity

Budget 2026 proposes to provide $1.5 billion over nine years through the Build Communities Strong Fund to support the construction, expansion, retrofit and rehabilitation of community recreational facilities and ice rinks across Canada. This includes $750 million for the ice rinks and $750 million in additional funding for other community recreational facilities. These investments will help extend the life of aging facilities and ensure communities have modern, welcoming places to come together, compete and play.

The Canada Creative Credit

Budget 2026 announces the government’s intention to consult with Canadians and the cultural sector on a new Canada Creative Credit, a new form of tax relief that could support artists as they foster creativity, artistic production and cultural entrepreneurship in Canada. This credit is expected to take the form of a non-refundable personal income tax credit that would, combined with the Basic Personal Amount, provide tax recognition on up to $45,000 of annual qualifying net business income derived from original and creative artistic works. Details will be announced in the Spring Economic Update 2027.

Other Culture and Identity Initiatives

Budget 2026 proposes to permanently make admission to Canada’s national museums free year-round for children and youth under 25.

Budget 2026 also proposes to provide $783.1 million over five years, on a cash basis, starting in 2026-27, to support Canada’s national museums, the National Battlefields Commission, the National Arts Centre, and Library and Archives Canada. This investment will help repair and renew aging facilities, protect national collections, and sustain the exhibitions, performances, and services that connect Canadians to our history and culture.

Budget 2026 proposes to provide $32.2 million over four years, starting in 2027-28, and $9.5 million in future years, to make it easier for Canadians to discover and borrow books by Canadian authors by establishing a free national digital collection. Launching with at least 200 titles in 2027-28, the collection will grow to more than 2,000 titles, with capacity for up to 2 million loans annually by 2031-32. Funding will support licensing, an online lending platform, promotion, and outreach to help Canadian stories reach more readers.

Budget 2026 also proposes to provide $20 million over four years, starting in 2027-28, and $5 million ongoing to renew the Canada Book Fund, so Canadian publishers can bring more Canadian-authored books to readers at home and abroad and give authors, illustrators, translators and other creators more opportunities to build lasting careers.

Budget 2026 proposes to provide an additional $300 million over two years, starting in 2026-27, to CBC/Radio-Canada to strengthen its capacity to meet the evolving needs of Canadians across the country.

Local Journalism

Budget 2026 proposes to provide $134 million over four years, starting in 2027-28, and $41 million ongoing to Canadian Heritage for the Local Journalism Initiative, supporting independent, reliable and diverse local news organisations across the country.

Budget 2026 also proposes to extend the Canadian Journalism Labour Tax Credit to qualifying private audio and audiovisual news organisations, in line with support provided to news organisations that produce written news. They would be eligible for the same temporarily enhanced credit rate of 35% and annual labour expenditure limit of $85,000 per employee.

For print journalism, Budget 2026 proposes to renew the temporarily enhanced 35% credit rate for two more years, until December 31, 2028— providing greater stability as the sector adapts to a changing media landscape. These measures would cost an estimated $501 million over five years, starting in 2026-27, and $85 million ongoing.

First Nations Housing and Infrastructure

To improve First Nations infrastructure on reserve, Budget 2026 announces the government’s intention to launch a First Nations On-Reserve Infrastructure Program and proposes to support the new program with $18.5 billion over 10 years, starting in 2027-28. This funding will support the construction and maintenance of a broad range of assets, from roads and bridges to schools and health facilities, while extending investments in water and wastewater infrastructure for six years beyond funding announced in June 2026.

To improve First Nations housing, Budget 2026 proposes to provide $11 billion over 10 years, starting in 2027-28. This funding will help communities manage and preserve 119,000 existing housing units through regular maintenance and repairs, construct more than 6,900 new homes, and renovate more than 10,900 existing homes over the next decade.

To accelerate housing construction, Budget 2026 also proposes to provide an additional $1.7 billion over five years, starting in 2027-28, for housing in First Nations communities on reserve. This funding will enable faster delivery of shovel-ready housing projects while freeing up core funding to plan, deliver and maintain housing over the next 10 years.

Transforming First Nations Financing

To explore new approaches that could transform how we support First Nations housing and infrastructure in the future, Budget 2026 proposes to provide $657.5 million over 10 years, starting in 2027-28.

$150 million over five years, starting in 2027-28, for the Yänonhchia’ Revolving Housing Finance Fund, a First Nation-led initiative that works with Indigenous Financial Institutions to provide First Nations individuals with housing loans, helping them on the path to home ownership. This funding would help Yänonhchia’ initiate lending activities, supporting an estimated 825 housing loans in 60 to 100 First Nations communities.

$500 million over 10 years, starting in 2027-28, for a Monetisation Pilot to test a First Nations-led model for financing infrastructure projects. The Pilot would use federal funding to secure upfront financing through the First Nations Financial Authority, with support from the First Nations Infrastructure Institute. It would test to what extent access to upfront financing enables First Nations communities to deliver infrastructure projects sooner and with fewer cost increases caused by delays. This would provide First Nations communities with a financial tool currently used by municipalities for infrastructure and could inform more effective approaches to delivering infrastructure projects in the future.

First Nations Community Development

To support high-quality, culturally relevant education and improve long-term outcomes for First Nations students, Budget 2026 proposes to provide $5.8 billion over five years, starting in 2027-28, for the Elementary and Secondary Education Program on reserve. This includes the renewal of targeted funding for adult education and will help ensure First Nations students have access to educational opportunities comparable to those available elsewhere in Canada while providing communities with the certainty needed for long-term planning.

To maintain access to post-secondary education and support the next generation of First Nations leaders, professionals, and skilled workers, Budget 2026 proposes to provide $437.9 million over five years, starting in 2027-28, through the Post-Secondary Student Support Program.

To ensure First Nations children continue to receive the services and supports they need, Budget 2026 proposes to provide $6 billion over six years, starting in 2026-27, for Jordan’s Principle. This funding will support continued access to health, social, and educational services for First Nations children and ongoing work to address barriers.

Launching a new Partnerships for Indigenous Workforce Readiness Fund

Alongside the existing Indigenous Skills and Employment Training Program, the new Fund would continue to support foundational skills and employment training through Indigenous service delivery organisations and provide a streamlined and flexible mechanism to align Indigenous workforce investments with national economic priorities. Budget 2026 proposes to provide $451.8 million over four years beginning in 2027-28, and $48 million ongoing (including new and existing funding) to launch the Fund.

New Digital Safety and Data Protection Commission

The government will establish the new Digital Safety and Data Protection Commission of Canada to enforce the Act, ensure compliance, and work toward creating a safer online space for Canadians.

Budget 2026 proposes to provide $176.3 million over five years, starting in 2026-27, and $29.3 million ongoing to Canadian Heritage for this work.

Child Protection Online

The government will provide $8.4 million over three years, starting in 2027-28, to Public Safety Canada to support the Canadian Centre for Child Protection’s ongoing work in child protection.

Advancing artificial intelligence in government through Digital Transformation Canada

Digital Transformation Canada will bring together key digital groups across the public service, including Shared Services Canada and the Canadian Digital Service. It will also recruit private-sector experts on a short-term basis through a new fellowship program, bringing specialised skills into government while building expertise within the public service.

Building on this progress, Budget 2026 proposes to provide approximately $1 billion over five years, on a cash basis, starting in 2026-27, to establish a Government Transformation Fund that will accelerate transformative Information Technology (IT) projects to improve service delivery for Canadians and help make the public service more productive.

To deliver on Digital Transformation Canada’s transformative mandate, Budget 2026 announces the government’s intention to introduce the Digital Transformation Canada Act. The Act would establish a legislative framework for the delivery, governance, and management of digital and information technology services and capabilities across the Government of Canada.

Sovereign AI

Budget 2026 announces that Canada’s new government will enable Canadian AI companies to access 500 MW of sovereign AI compute through new financial tools, such as backstops and offtake agreements, to mobilise private capital and expand compute capacity.

Defense

Budget 2026 proposes to provide $2.3 billion over five years, starting in 2027-28, on a cash basis to the Department of National Defence for the Defence Drone Initiative to accelerate the discovery, acquisition and deployment of uncrewed and counter-uncrewed capabilities. A portion of funding for this initiative would be sourced from funding already provisioned in the fiscal framework.

It will also provide $7.6 billion over five years, starting in 2026-27, on a cash basis to the Department of National Defence and Global Affairs Canada for the extension and expansion of Operation REASSURANCE in Latvia.

Space & Quantum

The government will direct up to $2.7 billion over five years, starting in 2026-27, on a cash basis, from previously announced funding, including toward the following priority measures:

• Advance Phase 2 of the Canadian Quantum Champions Program to support leading Canadian quantum companies in scaling up the development of industrial-scale quantum computers capable of solving real-world problems across industries, including in cryptography, advanced materials, signal processing and pattern recognition. This will help ensure that Canada retains its quantum firms.
• Expand the Launch the North initiative to establish a sovereign, medium-lift Canadian space launch capability through the development of domestic launch vehicles, a national rocket propulsion ecosystem, and dedicated Government of Canada launch and testing infrastructure managed by the Department of National Defence. This will be delivered through competitive, milestone-based support to Canadian industry to mature propulsion systems, vehicle architectures and launch technologies.
• Further develop Canadian space technology by helping firms scale up development and capacity for launch in space missions. The Canadian Space Agency’s Space Technology Development Program provides direct support to Canadian industry with a return on investment of over 3 to 1. Fully operationalise the National Research Council’s drone innovation hubs and enable the Department of National Defence to create competitions for industry to advance technologies for uncrewed vehicles and air systems.

Sovereign Intelligence

Fresh off the release of a new National Security Strategy, Budget 2026 proposes to provide $6 billion over 10 years, starting in 2027-28, on a cash basis, and $579.5 million ongoing to CSIS to expand its presence and capabilities. This funding would help CSIS engage with Canadians in their communities; better protect Canadians from terrorism, foreign interference, espionage and other evolving threats; and reduce reliance on foreign partners. It would also help CSIS deepen and diversify security relationships around the world.

Conclusion

With the Trump administration stymied by a Democratic sweep of Congress down south—where the poor treatment of Canada became an election issue— the existential crisis facing Canada over the past two years may have abated.  But there is no course correction planned by a Carney government, which is still riding high in the polls and keen to spend its considerable political capital on reshaping the economy, while making major down payments on some of its most troublesome political issues.  In that light, the focus of this budget on business investment, overhauling the national electricity grid and solving homelessness shows us what Prime Minister Carney truly cares about.