2026 Federal Budget

“A boost today, a bridge to tomorrow…”

THE TOPLINE

• $62.3 billion deficit in 2026–27, declining to $52.9 billion by 2030–31.
• Capital investments: $403.9 billion projected over six years, including $10.5 billion for housing and $9.5 billion for Indigenous housing.
• Productivity Mega Deduction: $36.1 billion in tax incentives to encourage business investment in machinery, equipment, technology and productivity-enhancing assets.
• Canada Strong Fund: $25 billion over three years to establish Canada's first sovereign wealth fund, investing alongside private capital in major projects and high-growth Canadian companies.
• Affordability measures: Nearly $22 billion over five years in new measures, including grocery benefit supplements, support for low-income workers, home energy retrofits and housing affordability initiatives.
• Public service: Approximately 40,000 positions (10%) targeted for elimination by 2028–29, alongside broader federal spending restraint.

SUMMARY

This afternoon in the House of Commons, Finance Minister François-Philippe Champagne presented the 2026 Budget “Masters of our own Destiny”, built around a central proposition from the government: that Canada must become more resilient, more competitive, and more self-reliant in an era of heightened geopolitical uncertainty. Framed around the pillars of growth, affordability, and sovereignty, the budget reflects the Prime Minister's view that Canada's long-term economic strategy should be guided less by developments in foreign capitals and more by domestic priorities. Throughout the fiscal plan, the government argues that Canada can strengthen its prosperity and security by investing in its own economic foundations, regardless of future political or economic developments in the United States or elsewhere.

More than a fiscal update and spending map, the budget serves as a statement of the government's broader economic and political agenda. A recurring theme is the idea that a more fragmented global economy, growing geopolitical competition, and increasing uncertainty in international trade require Canada to exercise greater control over its own economic future. In this context, sovereignty is presented not only as a matter of national identity or foreign policy, but also as an economic objective. The budget links sovereignty to measures intended to strengthen domestic supply chains, accelerate major projects, build strategic infrastructure, attract investment, and leverage Canada's natural and industrial advantages.
Within that framework the budget outlines measures aimed at improving productivity, reducing barriers to investment, streamlining project approvals, and directing public spending toward assets that support long-term growth. Particular attention is given to small and medium-sized businesses, which the government identifies as being on the front lines of ongoing trade tensions with the United States, supply chain disruptions, and broader geopolitical instability. Support for SMEs is elevated as part of a broader effort to strengthen Canada's economic capacity and reduce vulnerability to external shocks.

Affordability remains a central theme, although many of the budget's measures are presented as part of a longer-term economic strategy rather than stand-alone cost-of-living interventions. The government's stated objective is to provide near-term support to households while advancing reforms and investments intended to improve economic performance over time.
The budget also places a notable emphasis on electricity as a strategic national asset. Consistent with broader government messaging on economic growth and nation-building, investments in generation, transmission, grid modernization, and interprovincial connectivity are positioned as foundational to industrial development, advanced manufacturing, major projects, and Canada's broader economic transition. The prominence of electricity throughout the fiscal plan reflects a government view that access to reliable, affordable, and abundant power will increasingly shape Canada's competitiveness and investment attractiveness.
Taken together, Budget 2026 presents the government's vision for navigating an increasingly uncertain global environment. The underlying narrative is that Canada cannot control external events but can take steps to better position itself for them. Through a combination of competitiveness measures, infrastructure investments, support for businesses and households, and a strong emphasis on economic sovereignty, the budget seeks to advance what the Prime Minister has described as a more self-reliant Canada, one increasingly capable of shaping its own economic future and becoming, in effect, "master of its own destiny."
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COMMENTS OF NOTE

With this context in mind, the following section outlines the key commitments announced in today’s budget. While many details will unfold in the days and weeks ahead, these measures reflect the government’s stated priorities: targeted investments to drive long-term growth, disciplined spending controls within the federal public service, and strategic interventions to bolster Canada’s competitiveness in a shifting global environment.
The list is not exhaustive but is intended to capture the most significant spending announcements:
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INVESTMENT AND COMPETITIVENESS

The Budget positions Canada as the best place in the G7 to invest, pairing aggressive tax incentives with a leaner, more coordinated set of federal financing tools. The aim is to keep capital, companies and returns in Canada.

• Productivity Mega Deduction: immediate expensing for roughly two-thirds of capital assets acquired on or after September 15, 2026, cutting the marginal effective tax rate on new investment from 13% to 6.4%, the lowest in the G7.
• Canada Growth Incentive: a new capital gains exemption of up to $15 million on successful investments in eligible Canadian companies, plus an enhanced small business rollover ($715 million over four years).
• SR&ED expansion: certain commercialization expenses become eligible ($930 million over five years, $235 million ongoing).
• Canada Strong Fund: $25 billion over three years to seed a commercially driven national wealth fund that co-invests alongside other federal support and makes selective strategic investments. Canadians will be able to invest directly through retail Canada Strong Notes, planned for 2027.
• Streamlined federal financing: BDC and EDC to be merged into a single federal development bank; the Canada Growth Fund's mandate broadened; and the Canada Infrastructure Bank moved under the Minister of Finance, refocused on loans and loan guarantees, with the Indigenous Loan Guarantee Program consolidated inside it.
• Investment attraction: $181.4 million over four years to expand Invest in Canada, which will also run future Investment Summits.
• Sustainable finance: a new Sustainable Bond Framework for federal issuance, built on the Made-in-Canada sustainable investment guidelines (draft criteria for electricity, transportation and buildings expected by end of 2026).

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ELECTRICITY

The Budget casts the grid as the modern equivalent of the national railway, committing over $50 billion through the National Electricity Strategy to double grid capacity by 2050. Climate action is reframed almost entirely around electricity and affordability under four pillars (Build, Switch, Transform, Innovate), with investment favoured over regulation.

Tax credits

• Clean Technology and Clean Electricity ITCs extended to the end of 2040 (the CT ITC phase-down to 15% moves from 2034 to 2040). Combined cost: $2.4 billion to 2030-31 and $36.1 billion from 2031-32 to 2041-42.
• Clean Electricity ITC expanded to each province's highest-voltage intra-provincial transmission lines, for property in use on or after Budget Day.
• 60-day targeted consultation on a domestic content bonus of up to 10 points under the CT ITC and up to 5 points under the CE ITC.

Building and Connecting the Grid

• Nearly $4 billion over 10 years for electricity infrastructure, renewables and priority projects, including new money for the Smart Renewables and Electrification Pathways Program.
• $37 million for cost-benefit analysis of proposed interties and cross-border cost allocation.
• $26.4 million over 10 years for NRCan system planning, data and modelling.
• The CIB's $20 billion clean energy allocation to be leveraged for transmission (per the companion Action Plan).
• Intent to work with interested provinces and territories on new ways to finance the largest electricity projects.

North and Remote Communities

• $1.6 billion over 10 years: $713.8 million to move Indigenous, rural and remote communities off diesel, and $929.1 million to replace aging northern infrastructure (including Yukon's Mayo and Atlin hydro projects).

Switching Homes and Industry

• National Heat Pump Rebate (over $2 billion) for up to 820,000 households, alongside support to retrofit one million homes, projected to save households more than $1 billion a year.
• $400 million over seven years for SHIFT (the renamed Green Industrial Facilities and Manufacturing Program) to cut industrial energy costs.
• Renewal of the IRAP Clean Technology Initiative for SMEs.

Regulation

• $22.9 million to update the Clean Electricity Regulations and negotiate provincial equivalency agreements. No new commitments beyond the June electricity strategy, leaving room for natural gas while keeping the 2050 net-zero goal.
• Industrial carbon pricing (OBPS) to be "updated" with provinces and territories; no details provided.

TRANSPORTATION

Transport electrification

• EV Charging: $587 million to renew the Zero-Emission Vehicle Infrastructure Program (55,000+ new chargers, roughly doubling the public network), plus $45 million for charging R&D.
• Government Vehicle Fleet: $2.2 million over five years, starting in 2027-28, to renew the Greening Government Operations Fleet Program.

Aviation

• Airports: $37.6 million over three years to develop private operating concessions for Canada’s four largest airports. The government also intends to support regional routes and smaller airports, review ground rent, and improve airport fee transparency and governance.
• Air Travel: Passenger processing: $4.3 million over four years for Transport Canada to develop a Traveller Biometrics Strategy focused on digital credentials and more efficient passenger movement.

MAJOR PROJECTS AND NUCLEAR ENERGY

The Budget presents speed and certainty of approval as a competitive advantage, building on the Major Projects Office and Bill C-39's "one project, one decision, one year" approach. Nuclear is positioned as a cornerstone of Canada's clean energy future and an export strength.

Major Projects

• 28 initiatives referred to the Major Projects Office since September 2025; the 18 projects with clear proponents represent over $194 billion in investment.
• $187.4 million over five years to create a new major projects management entity with technical and delivery expertise, starting with the Mackenzie Valley Highway and Taltson Hydro Expansion.
• Full federal funding for construction of the Mackenzie Valley Highway (about 800 km, Wrigley to Inuvik), opening a year-round northern economic corridor.
• Insurance rules to be amended so life insurers can invest more in infrastructure such as transport and energy assets.
• Plan to identify non-core federal commercial assets for possible divestment, with proceeds reinvested in priorities.

Nuclear Energy Strategy

$518.5 million over five years to implement the June 2026 Strategy, including:

• $261 million to NRCan for supply chains, R&D and research reactor readiness;
• $127 million to AECL for research infrastructure and workforce;
• $131.1 million to the CNSC to prepare for new projects and become the sole federal regulator for nuclear projects;
• $14.4 million to Global Affairs for nuclear export promotion.

Recaps existing Darlington New Nuclear support: up to $2 billion from the Canada Growth Fund and $970 million in CIB financing.

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INDIGENOUS RECONCILIATION AND ECONOMIC PARTNERSHIP

The Budget pairs more than $50 billion over 10 years in long-term, predictable funding for core community needs with a push for Indigenous equity ownership in major projects. Reconciliation is framed as both a social commitment and an economic partnership.

• Ownership in major projects: an approximately $715 million federal-provincial loan guarantee lets seven Ontario First Nations take a significant minority stake in the Darlington New Nuclear Project, the largest Indigenous loan guarantee in Canadian history. Loan guarantees will now sit within the CIB.
• Workforce: $260 million Partnerships for Indigenous Workforce Readiness Fund to connect Indigenous workers to major project jobs.
• Housing and infrastructure: $32 billion over 10 years, including $18.5 billion for a new First Nations On-Reserve Infrastructure Program and $11 billion to maintain, build and renovate on-reserve homes.
• New financing models: a $500 million First Nations-led infrastructure Monetization Pilot and a $7.5 million Surety-Bonding Pilot to help First Nations contractors bid on large contracts.
• Core services: $5.8 billion for on-reserve K-12 education, $6 billion for Jordan's Principle and $2.9 billion for First Nations and Inuit health benefits.
• Emergency management: $865.6 million in 2026-27 for on-reserve emergency response, with $446.2 million ongoing.

AI, DATA CENTRES AND DIGITAL SOVEREIGNTY

The Budget argues Canada's clean power, land and talent make it a natural home for AI infrastructure, but that Canadian firms are being crowded out of compute by large tech players. It builds on the June 2026 AI for All strategy ($2.7 billion) with a focus on sovereign capacity and safe adoption.

• Sovereign compute: new financial tools (backstops, offtake agreements) to give Canadian AI companies access to 500 MW of sovereign AI compute, building on agreements to advance a small number of large-scale sovereign AI data centers.
• Semiconductors: continued work to commercialize the NRC's Canadian Photonics Fabrication Centre, North America's only end-to-end pure-play compound semiconductor facility.
• AI in government: about $1 billion over five years for a Government Transformation Fund for major IT projects, and a planned Digital Transformation Canada Act.
• AI for housing approvals: $100 million over three years with the FCM to help municipalities adopt e-permitting and AI.
• Online safety: $176.3 million over five years for a new Digital Safety and Data Protection Commission to enforce the Safe Social Media Act.

SMALL BUSINESS

The Budget calls small and medium-sized businesses the backbone of the economy and focuses on cutting red tape, easing cash flow and helping them weather tariffs. Most support comes through tax simplification and easier access to existing programs rather than large new spending.

• Simpler tax filing: self-employed owners can make a single December 31 instalment of two thirds of net tax owing, and instalment thresholds rise.
• Less compliance burden: dividends paid by Canadian-controlled private corporations exempted from the taxable preferred share regime, with the dividend allowance tripled to $1.5 million.
• Growth capital: an enhanced small business rollover lets entrepreneurs defer more capital gains tax when they reinvest in another Canadian small business.
• Immediate expensing: the Productivity Mega Deduction applies to businesses of every size, from kitchen equipment to farm machinery.
• Tariff relief: easier access to BDC's Pivot to Grow (minimum revenue lowered to $1 million) and the Regional Tariff Response Initiative, plus more flexibility for regional development agencies to tailor support to smaller firms.

CULTURE, STORYTELLING AND CREATIVITY

The Budget treats culture as a pillar of sovereignty and national unity, investing in Canadian stories, institutions and creators ahead of Canada's 160th anniversary.

• Canada 160 Fund: $300 million in 2027-28 for programs, stories and spaces that bring Canadians together, including Heritage Minutes and the Trans Canada Trail.
• Canada Creative Credit: consultation on a new non-refundable tax credit recognizing up to $45,000 a year of artists' net creative income (details in Spring 2027).
• Media and journalism: $300 million over two years for CBC/Radio-Canada; $134 million over four years (and $41 million ongoing) for the Local Journalism Initiative; the 35% journalism labour tax credit extended to private audio and audiovisual news outlets.
• National institutions: $783.1 million over five years for national museums, the NAC and Library and Archives Canada, with free museum admission for everyone under 25.
• Books: a free national digital collection of Canadian books ($32 million over four years), plus added Canada Book Fund support.
• Francophonie: Canada to host the 2028 Francophonie Summit, the first time in two decades.

COMMUNITIES AND HOUSING

The Budget commits $44.7 billion over 11 years to expand non-market housing and set a path to end homelessness within 10 years. It links housing directly to health, mental health and addictions supports and invests in the places where communities gather.

• Build Canada Homes: an additional $13 billion over 10 years in capital to scale up non-market housing.
• Ending homelessness: $11.2 billion over four years, including $3.6 billion for supportive and transitional housing, a new $1.8 billion Integrated Supports Fund pairing housing with health and social services, and a 10-year renewal of Reaching Home.
• Faster, cheaper building: $1.5 billion over four years to service federal lands for housing; $300 million for modern methods of construction through the Strategic Response Fund; and new mortgage insurance products for 3- to 50-unit "missing middle" housing starting February 1, 2027.
• Renters: 10-year renewal of the Canada Housing Benefit ($1.7 billion over three years from 2028-29).
• Community spaces: $1.5 billion over nine years through the Build Communities Strong Fund for recreation facilities and ice rinks, and $3.6 billion over 10 years for national parks and historic site infrastructure.

DEFENCE, SECURITY AND ARCTIC SOVEREIGNTY

The Budget positions defence modernization and Arctic sovereignty as central to Canada's national security and economic resilience, prioritizing advanced military capabilities, domestic industrial capacity and strategic northern infrastructure.

• Defence Drone Initiative: $2.3 billion over five years, beginning in 2027–28, to accelerate the development, acquisition and deployment of drone and counter-drone technologies.
• Advanced defence technologies: Up to $2.7 billion over five years in previously announced funding for strategic capabilities, including industrial-scale quantum computing, domestic space launch vehicles, rocket propulsion systems and federal testing infrastructure.
• Defence, Security and Resilience Bank: Establishment of a new Canada-headquartered multilateral financial institution to mobilize public and private capital for defence production, procurement and allied supply chains, with operations targeted for 2027.
• Arctic infrastructure: The Budget highlights the Grays Bay Road and Port and Mackenzie Valley Highway as strategic investments supporting Arctic sovereignty, critical minerals development and northern connectivity.

NATURAL RESOURCES

• $424.4 million over four years, starting in 2027-28, to renew the Canadian Critical Minerals Strategy.
• Extension of the Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit for five years, to March 31, 2032.

CONCLUSION

Budget 2026 marks another significant step in Prime Minister Carney's effort to reshape Canada's economic and political direction. The government is making a calculated bet that public investment can unlock private capital, strengthen Canada's economic sovereignty and restore long-term competitiveness. Against the backdrop of continued trade tensions with the United States and growing geopolitical uncertainty, the message is clear: Canada can no longer afford to rely on the economic assumptions of the past.

Politically, the Budget reinforces Carney's determination to define his government around economic growth, supporting Canadians through the affordability crisis, nation-building and national security. But ambition comes with risk. With billions committed and federal deficits remaining substantial, the government will face increasing pressure to demonstrate that its investments are delivering tangible results. Unlike last year, however, the

Prime Minister has the security of a majority government. There is therefore no suspense over whether the government will lose a confidence vote. Announcing projects is one thing; financing, permitting and building them is another. The real test will be whether Ottawa can turn its economic ambitions into shovels in the ground, private investment and lasting prosperity.

For businesses and stakeholders, the direction is increasingly clear; Ottawa is signaling where it intends to deploy capital, exercise influence and prioritize its efforts. The opportunity now lies in understanding not simply what the government has announced, but how decisions will be made and which projects and sectors will benefit. Sussex will continue to help clients navigate these decisions, position their priorities and turn federal policy into meaningful outcomes.