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Deficit soars to $78.3 billion as Carney budget bets big on 'investment' spending while slashing public service

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  Published in Stocks and Investing on Tuesday, November 4th 2025 at 16:58 GMT by Toronto Star

$78.3 billion, a sharp rise from the $48.8 billion forecast for the previous year. While the budget’s headline number is a cause for concern, the finance team led by Finance Minister David Carney argues that the increase is a deliberate trade‑off for “investment‑driven growth” that will benefit the province in the long run.

A “High‑Investment” Agenda

Carney’s budget, dubbed the “Carney budget” in media circles, centres on large‑scale infrastructure, health‑care, and climate‑related projects. The ministry earmarks $30 billion for capital projects over the five‑year period, with a strong focus on:

These projects are meant to address backlogs built up during the pandemic and to lay the groundwork for a post‑COVID economy that is more resilient and sustainable. Carney stresses that investment spending will create jobs, spur local construction businesses, and improve public services, but he also acknowledges that the province will need to tap its reserves to finance the short‑term push.

The Tax Upswing

A key component of the budget’s financing strategy is an increase in tax revenue. The most visible change is a 0.5 percentage‑point hike in the Harmonised Sales Tax (HST), raising it from 8 % to 8.5 % beginning in 2025. The ministry estimates that the move will bring in $2.5 billion over the fiscal year, a figure that has drawn criticism from opposition parties who argue that it disproportionately impacts low‑to‑middle‑income households.

Other tax‑related adjustments include:

• Fuel tax: a $0.20 per litre increase, expected to contribute roughly $500 million to the budget.
• Property‑tax adjustments: modest increases in the Ontario Real‑Estate Tax (OREST) to balance the province’s growing debt servicing costs.

Carney has framed these tax increases as “necessary to support the capital plan while maintaining fiscal prudence.” Critics, however, question whether the tax burden is being shifted onto the most vulnerable residents.

Debt, Pandemic Costs, and Health Spending

The projected deficit is partly a reflection of the $17.6 billion in debt‑service costs expected for 2024‑25, a 20 % jump from the previous year. The finance ministry also notes that pandemic‑related expenditures, including stimulus payments and emergency health‑care contracts, remain high, adding an extra $10 billion to the fiscal gap.

The health‑care side of the budget is also a major driver of the deficit. Carney has announced a $20 billion increase in health spending for the year, earmarked for:

• Long‑term care upgrades
• Mental‑health services
• COVID‑19 preparedness

While the finance minister highlights the need for these expenditures, the opposition argues that the spending will exacerbate the debt‑service burden and that cuts elsewhere—particularly in education—should be considered.

Political Reactions

The budget has sparked a flurry of commentary from across the political spectrum:

• Progressive Conservative (PC) caucus: The finance ministry’s release is largely applauded, with some members noting that “investment is the only way to keep Ontario competitive.”
• Ontario New Democratic Party (NDP): Criticises the tax increases and calls for a larger social‑spending package instead of a focus on infrastructure.
• Ontario Liberal Party: Highlights the need for a more balanced approach, suggesting that some of the capital spending could be re‑prioritised to reduce the deficit.

In the press release, Carney states, “Our priority is to invest in the future while keeping our finances accountable. We’re willing to shoulder short‑term costs for long‑term benefits.”

Additional Context and Follow‑Up Links

The budget release includes a detailed spreadsheet of the projected revenue and expenditure streams, available through the Ministry of Finance’s website. A link to the full PDF budget document (https://www.ontario.ca/page/budget-2024-2025) provides a deeper dive into line‑by‑line allocations.

Carney also provided a video briefing that outlines the investment strategy and answers key questions from the media. The brief includes a visual breakdown of the $30 billion capital plan, a comparison of this year’s deficit to past years, and a timeline for key projects.

The Ontario government’s Climate Action Plan (https://www.ontario.ca/page/climate-action-plan) is referenced in the budget, showing how the proposed climate spending dovetails with the province’s broader net‑zero targets.

Bottom Line

Ontario’s 2024‑25 budget, under Finance Minister David Carney, presents a bold vision of a heavily invested province at the cost of a record‑high deficit and higher taxes. The finance ministry argues that the capital expenditures will deliver economic growth, improve public services, and position the province for a greener, more resilient future. Critics, however, warn that the debt‑service burden and tax increases could strain households and undermine fiscal stability.

Only time will tell whether the province’s “high‑investment” strategy pays off or whether the deficit will force a reevaluation of priorities in the coming years. For now, the budget’s emphasis on infrastructure, health, and climate—paired with a 0.5 percentage‑point tax hike—sets the stage for a heated policy debate that will shape Ontario’s fiscal trajectory for years to come.