En politique, une semaine est une éternité, mais un jour peut être plus long : Énoncé économique de l’automne et turbulences politique

After a day that will be long remembered in Canadian political history, stakeholders and officials alike are pondering the path forward. The day before Parliament was set to adjourn for its lengthy winter break, Canadians witnessed a sudden cabinet shuffle, a high-stakes Premiers meeting, and calls from across the political spectrum for the Prime Minister’s resignation.

Instead of tabling her Fall Economic Statement (FES), on December 16, Deputy Prime Minister and Finance Minister Chrystia Freeland abruptly resigned from Cabinet. Stating that she and the Prime Minister were “at odds about the best path forward for Canada,” and expressing grave concerns about the “incoming administration in the United States…pursuing a policy of aggressive economic nationalism.”

Both her resignation letter and approach may be perceived as the opening of a future Liberal leadership bid. Freeland took the opportunity to scold the Prime Minister for his “costly political gimmicks” saying “Canadians know when we are working for them…and for ourselves.” The Prime Minister spent the ensuing hours behind closed doors in a lengthy cabinet meeting, while journalists were left waiting in the embargoed reading without access to documents.

Amidst the uncertainty, opposition party leaders—including NDP Leader Jagmeet Singh—called for the Prime Minister to resign and call an early election. Liberal members of Parliament who had signed a previous letter calling for his resignation joined in, publicly stating their dissent. Ontario Premier Doug Ford used the “chaos” in Ottawa to emphasize the importance of the work of the 13 premiers in planning and preparing for the tariff threat.

By mid-day, the Prime Minister’s Office began advancing its plan to proceed with the economic update by swearing in Public Safety Minister—and Trudeau loyalist—Dominic LeBlanc as Finance Minister. According to the Globe, former Bank of Canada governor Mark Carney was meant to be Trudeau’s choice, but it is unclear whether or not Carney accepted the initial offer to join the Trudeau government and backtracked.

This is the latest evidence that Trudeau’s inner circle is shrinking at a rapid rate, with three ministers now carrying more than one file, and five other ministers who have announced they don’t plan to run in the next election. All signs point to a final major cabinet shuffle in the coming weeks, but this won’t be an easy task for a Prime Minister who is quickly losing the confidence of his party.

Despite the turmoil, the federal government moved ahead with tabling the economic update without a speech or time for debate, which was met with confusion and criticism in the House of Commons. As highlighted in the summary below, the government has vastly exceeded a key “fiscal guardrail” pledged by our now former Finance Minister, reporting a deficit over $48 billion for this fiscal year.

Opposition and business groups alike have critiqued the fiscal update, raising concerns with the spending plan. However, a confidence vote has not been set, and the House of Commons has risen for its lengthy winter recess.

These events drew international attention—including from U.S. President-elect Donald Trump, who took the opportunity to double down on his “joke” about Canada being a U.S. state while taking swings at Freeland on her way out. This latest hit from the President-elect comes as Ipsos reports that most Canadians believe Conservative Leader Pierre Poilievre is best able to deal with the Trump administration.

There are two likely paths ahead. The first, the Prime Minister, after reflecting on the state of his government, decides to resign his leadership. This would result in proroguing parliament while the Liberal Party elects a new leader to take them into the 2025 election. The other path sees the Prime Minister gloss over these events and continue to believe he is the best placed to lead the country through the choppy waters ahead of the next U.S. administration. Ultimately, this path could lead to a lost confidence vote if not when Parliament returns, then following the 2025 Budget. What remains to be seen is when the NDP will follow through on their calls for an early election and vote against the Liberals on a confidence issue.

Summary of the 2024 Fall Economic Statement

The 2024 Fall Economic Statement well exceeds the now-former-Finance Minister’s pledge to keep the deficit at, or below, $40.1 billion. For the current 2024-25 fiscal year, the update projects a $48.3 billion deficit, close to $10 billion beyond the deficit projected in the 2024 Budget.

The 2024-25 deficit is pegged at 41.9 per cent of GDP, with budgetary balance at -1.6 per cent of GDP. The total federal debt level is now $1.28 trillion.

Highlights of the new spending commitments and economic measures include:

• Investment Incentive for AI Data Centres: $300 million over three years starting in 2025-26 to help small- and medium-sized businesses, $700 million over five years starting in 2024-25 to grow the Canadian AI ecosystem, and up to $200 million over two years starting in 2025-26 for targeted compute infrastructure investments. Additionally, $800 million over four years starting in 2025-26 will be allocated for large-scale public compute infrastructure.
• Defence Spending: No additional spending commitments, however, a recognition that Canada “needs to build up its own military industrial capacity.” In support of economic security, a policy framework will be developed “to mitigate risks posed by foreign entities owned by jurisdictions of concern,” with details to be announced in Budget 2025.
• Border Security: $1.3 billion comprehensive border security package over six years, starting in 2024-25.
• Pension Funds Investments: the government announced its intent to move forward with recommendations emerging from the consultation led by Stephen Poloz on pension fund investments, including: removing the 30 per cent rule for investments in Canadian entities, exploring lowering the 90 per cent threshold that currently limits municipal-owned utility corporations from attracting more than 10 per cent private sector ownership, and consulting on proposed regulations to increase public transparency of pension investments for large federally regulated plans.
• GST Holiday: in addition to reaffirming these consumer-focused measures, the Fall Economic Statement commits to action on predatory lending and stricter penalties for unlicensed debt advisors. The status of the $250 rebate cheques remains unclear, but it is unlikely to move forward, with no mention of the proposal included in the FES.
• Procurement: the government announced its intent to introduce the Small Business Innovation and Procurement Act that would obligate federal government departments and agencies to procure a minimum of 20 per cent of goods and services from small- and medium sized Canadian businesses and a minimum of 1 per cent of goods and services from innovative firms.
• Energy Security: the government affirmed commitment to strengthening North American nuclear supply chains to reduce dependence on Russia, announcing changes to simplify the regulatory process and intent to backstop up to $500 million in enriched nuclear fuel purchase contracts from the United States or other allied countries.
• Accelerated Investment Incentive: The government commits to fully reinstating the accelerated investment incentive, at a cost of $17.4 billion over five years.

Stakeholder and opposition response

Stakeholders and opposition parties were quick to criticize the economic update, specifically due to the government’s inability to stick to its fiscal guardrails ahead of a potential tariff war with the U.S. Opposition parties were particularly critical of the way in which the Liberal’s tabled the document—which did not include a speech or time for questions and debate.

Conservative Party: Conservative MPs were outraged with the lack of debate following the tabling of the FES. Several MPs asked for Speaker Greg Fergus to find the Liberals in contempt of their parliamentary duties, and to allow opposition parties their allotted time to speak on the Fall Economic Statement. Conservative Leader Pierre Poilievre stood to criticize the size of the deficit, especially considering the tariff threats.

NDP: After reinforcing calls for opposition parties to ask for a full debate in the House, NDP House Leader Peter Julian stated in an interview that if it came to it, the NDP would vote against the Liberal government in a non-confidence vote in early 2025. NDP Leader Jagmeet Singh affirmed that “all options are on the table.”

Bloc: Bloc MPs were quick to join the chorus of outrage over the lack of debate. The party also criticized the Liberal government’s “over the top” spending and ballooning deficit.

Canadian Chamber of Commerce: Reinforced concerns that the government is underestimating the threat of tariffs and criticized the lack of plan to tackle the deficit. The group also criticized the government’s failure to address the affordability crisis.

Business Council of Canada: Criticized the government for failing to keep the deficit at the promised 40.1 billion, stating that “By not keeping its economic promises, the federal government is sending the message that it can’t be trusted to manage the public finances.”

Council of Canadian Innovators: Expressed concern over the deficit, noting it raised “serious concerns among innovators and business leaders.”

What’s next?

Given the dynamic nature of the political landscape, NATIONAL Public Relations will continuously monitor and evaluate emerging developments as they occur. Amidst the current short-term federal political uncertainty, NATIONAL recommends a strategic public affairs approach that not only addresses immediate concerns but also prepares for the upcoming election and the subsequent formation of the next federal government.

Our Public Affairs experts stand ready to support our clients navigate this uncertainty and provide additional insights on the Fall Economic Statement.