Mark Carney, candidate for the leadership of the Liberal Party of Canada, speaks during a news conference in Vancouver on Feb. 13.ETHAN CAIRNS/The Canadian Press
Former central banker Mark Carney says he would tighten the reins on federal spending to free up more dollars to boost economic growth if he becomes Liberal Leader and prime minister on March 9.
Calling his plan a spend-less and invest-more strategy, Mr. Carney said he will split Ottawa’s capital and operating budgets. This will allow for greater spending on capital projects, such as ports, rail and infrastructure to get Canadian goods to overseas markets in the face of U.S. President Donald Trump’s “America First” economic policy.
Operational spending represents continuing federal expenses and program spending while capital investments include money devoted to infrastructure, tax incentives and direct spending on housing and military hardware.
He told a news conference in Toronto on Wednesday that the new approach will save taxpayers money through stronger fiscal management, allowing a Carney-led government to also cut taxes for the middle class while balancing the operating budget within three years.
“That means reining in government spending so that Canada can invest more as a country,” Mr. Carney said, noting this strategy is needed at a time when the country faces potential U.S. tariffs of 25 per cent.
“It also puts us in a stronger position in our negotiations with the United States,” he said. “We will work as appropriate with the provincial premiers, with other stakeholders, to get the best deal in the fullness of time with the United States, but very importantly to also expand our trading partnerships around the world.”
The former governor of the Bank of Canada and Bank of England criticized the government of Prime Minister Justin Trudeau for spending too much. Total federal spending has jumped by about 9 per cent on average since the Liberals took office in 2015 and the federal work force has grown by 40 per cent, he said.
“It is clear that the federal government is spending too much,” he said. “At the same time Canada as a whole is investing too little.”
The overall business investment in Canada has fallen from 14 per cent of GDP in 2014 to 11 per cent in 2024, which he said undermines long-term economic growth and workers’ wages.
If he becomes prime minister, Mr. Carney vowed to cap the size of the public service and slash wasteful spending, creating the fiscal room for private-sector investment and to help Canadians deal with rising costs.
“That will help create the room for personal income tax cuts so Canadians can keep more of their hard-earned money and cope with the higher cost of living,” he said.
Mr. Carney said Canada needs major investments in energy infrastructure so the country can sell its oil and natural gas to world markets and become less dependent on the U.S.
He also promised to turn Canada into a clean energy superpower through investments in nuclear power, hydro, wind, hydrogen, battery storage and carbon capture.
“We will focus on catalyzing unprecedented levels of private investment to create jobs, to grow workers' income and drive the productivity that we need,” he said.
Conservative Leader Pierre Poilievre, who has also promised to cut taxes, rein in spending and balance the budget, accused Mr. Carney of tricky economics.
“Mark Carney is planning to cook the books with a sneaky accounting trick to take billions of dollars of new Liberal spending off the budget records,” he said, noting that capital investments are already amortized over the life of assets based on generally accepted accounting principles.
“That is not what Mr. Carney is proposing. Instead, he wants tens of billions of dollars of new spending to be hidden from budget altogether despite the fact that Canadians will have to pay for every penny of them.”
Mr. Poilievre said it was “déjà vu all over again,” saying the Trudeau Liberals promised to run small deficits when they were elected in 2015 but the deficit hit $62-billion for the fiscal year 2023-2024.
“Now, his economic adviser is making exactly the same promise. Only this time, Mark Carney says he wants to hide billions of dollars in government spending from the books,” he said. “All money borrowed will need to be paid back, with interest. Mark Carney cannot change this fact.”
At his news conference, Mr. Carney opened the door to increased trade with China, despite an icy bilateral relationship as a result of foreign interference in Canadian domestic affairs and Beijing’s imprisonment of Michael Kovrig and Michael Spavor from 2018 to 2021.
“We have stood up rightly for Canadian rights and Canadian values and that provides a basis from a Canadian perspective on which to build if it is in the interests of China to accept that,” he said.
Mr. Carney said he would increase the budget and oversight powers of the Parliamentary Budget Office, which holds the government to account for spending. It is independent of the government and reports directly to Parliament.