Canadians responsible for $2.3 trillion in government debt

Commentary
By Jake Fuss, Tegan Hill and William Dunstan
The Fraser Institute

The Carney government plans to table its long-awaited federal budget on Nov. 4. In the summer, Prime Minister Carney announced billions of dollars in new spending that could push this year’s federal deficit above $90 billion, which would add significantly to the federal debt.
Indeed, the federal government, and the provincial governments, have racked up mountains of debt over the past decade and a half, with no end in sight.
According to a recent study, combined federal and provincial government net debt (total debt minus financial assets) nearly doubled (inflation-adjusted) from $1.2 trillion in 2007/08 to a projected $2.3 trillion at the end of 2024/25.
Putting this debt in per-person terms helps illustrate its scale.
Combined provincial and federal net debt per person ranges from a low of $40,939 in Alberta to a high of $68,861 in Newfoundland and Labrador. Combined federal and provincial net debt represents total provincial net debt plus each province’s share of federal net debt, which the study allocated to each province based on a five-year average (2020-2024) of their share of Canada's population.
Of course, Canadians are ultimately responsible for financing this debt. Indeed, governments, like households, must pay interest on their debt, and taxpayers fund these debt interest payments. When tax dollars are spent on debt interest payments, those same dollars cannot be spent on important programs such as health care or used to provide tax relief.
The federal government spent a projected $53.8 billion on debt interest payments in 2024/25, more than it spent on the Canada Health Transfer ($52.1 billion), which supports provincial health-care systems. For many provinces, debt interest costs are the fourth-largest expense after health care, education and social services.
Many governments do not plan to stop adding to their net debt. Federally, the government’s recent tax and spending commitments will likely result in deficits of more than $70 billion each year through 2028/29. Additionally, six provinces—Alberta, British Columbia, Quebec, New Brunswick, Nova Scotia and Prince Edward Island—project budget deficits each year from 2025/26 to 2027/28. All provinces except Saskatchewan project deficits in 2025/26.
But there’s good news. Past governments have shown it’s possible to restrain spending and reduce debt. In fact, the 2008/09 recession marked a turning point for government deficits and debt in Canada. From the mid-1990s to the late-2000s, it was a different story, as the federal government and many provincial governments sought to restrain spending, balance their budgets and limit debt accumulation.
But now and for many years, many governments across Canada have run deficits and accumulated debt, at great cost to taxpayers. It’s time governments develop real plans to address their ballooning debt burdens. The upcoming Carney budget is a good place to start.