Federal Budget 2025: Service Cuts, Capital Investments, and “Build, Baby, Build”

By Christina Gray, Maya Ollek, Mae Price, Whitney Morrison,

©Library of Parliament/Bibliothèque du Parlement

Introduction

On November 4, 2025, the federal Finance Minister delivered Budget 2025: Canada Strong (“Budget 2025”).[1]

Budget 2025 marks a shift in Canada’s economic policy, reflecting global pressures and changing public priorities. The budget emphasizes austerity measures and capital investments. In this post, we examine how Budget 2025 reshapes federal Indigenous policy. We also explore the budget’s implications for Indigenous Peoples, including a potentially significant shift in Canada’s approach to reconciliation with Indigenous Peoples.

Federal Priorities

Budget 2025 reflects a turning point in federal priorities and public sentiment. Recent polling indicates that 42% of Canadians wanted the budget to prioritize cost-of-living relief,[2] while only 44% believe government should do more on reconciliation with Indigenous Peoples.[3] Ongoing trade uncertainties have also shaped the budget’s direction, leading to a shift towards economic austerity.

Budget 2025 generally focuses on:

  • Significant spending cuts to federal programs and initiatives.
  • Investment in major capital projects and the economy, including through trade diversification measures and economic competitiveness initiatives.

Below, we elaborate on each of these areas of focus, and conclude by analyzing their potential impact on Indigenous peoples in Canada.

1.      Major Spending Cuts Across Departments

Government-Wide Spending Cuts. Earlier this year, the federal government launched the Comprehensive Expenditure Review (“CER”), with the government mandating a 15% spending reduction across federal departments.[4] The federal government confirmed two substantial austerity measures in Budget 2025 to achieve the CER spending targets.

First, it will shrink the public service by nearly 40,000 jobs –10% of the total public service – by 2028-2029.[5] It plans to do this primarily through incentivized retirement and attrition, though job cuts are possible.[6] Second, Budget 2025 confirmed the CER results informed decisions about which programs and activities are deemed to be underperforming, duplicative, or outside the core federal mandate and will likely be allowed to sunset or will not be renewed.[7]

Indigenous-based Program Spending Cuts. Programs and services for Indigenous peoples are also cut back under the federal budget, although political pressure from Indigenous representative organizations limited cuts to Indigenous Services Canada (“ISC”) and Crown Indigenous Relations and Northern Affairs Canada (“CIRNAC”) to 2%, rather than the 15%. This still amounts to an estimated $2.3 billion less spending by 2030. The specific Indigenous programs affected have not been identified.

The federal government has committed to reviewing ISC and CIRNAC programs that are legally and constitutionally required, including child and family services and primary health care, and to assess how these departments can deliver programs more efficiently with a 2% savings target.[8] It remains unclear whether the federal government plans to consult with Indigenous partners on its review and how it will incorporate Indigenous-based measures of success.

2.      A $280 Billion in “Generational Investments”

Budget 2025 announced $280 billion in capital investments over five years towards major infrastructure development, including implementing the Building Canada Act, S.C. 2025, c. 2, s. 4, and trade diversification through Canada’s new Climate Competitive Strategy, and large-scale investments in military and housing. Highlights of these investments are identified below.

Capital Investment Generally. The budget includes a range of major capital investments, including military and transportation infrastructure with a focus on the north. For example:

  • Northern Development Canada: Budget 2025 includes $1 to $3 billion over four years for Arctic infrastructure like airports, seaports, roads and expanded military infrastructure and $41.7 million over four years for Canadian Northern Economic Development Agency.
  • National Defense: Budget 2025 earmarks $81.8 billion over five years.

Indigenous Infrastructure Investments: Indigenous communities are explicitly included in the $115 billion announced under the Build Communities Strong Fund. They are eligible for $51 billion over 10 years for community infrastructure. This Fund is to revitalize local infrastructure: hospitals, universities and colleges, roads and bridges, and the water and transit systems.

Consistent with the federal focus on infrastructure development, Budget 2025 also confirmed ongoing program funding in the following infrastructure-related areas:

  • $2.3 billion over three years to renew the First Nations Water and Wastewater Enhanced Program
  • $2.8 billion from a previous $4.3 billion commitment for urban, rural, and northern Indigenous housing
  • $3 billion remains available for Indigenous housing priorities under local strategies

Economic and Natural Resource Development. Budget 2025 also reflects and advances the federal prioritization of natural resource and infrastructure development within their territories. For example:

  • Critical Minerals: Building on the federal government’s 2023 announcement of the 1.5 billion Critical Minerals Infrastructure Fund,[9] Budget 2025 introduces additional funding measures to accelerate development of critical mineral projects focusing on lithium, nickel, cobalt, and rare earth elements essential for clean technology and electric vehicles. First, $2 billion over five years starting in 2026-2027 to Natural Resources Canada to create the Critical Minerals Sovereign Fund.
    • The Critical Minerals Sovereign Fund: will be used for strategic investments to minerals projects and companies, including equity investments, loan guarantees, and offtake agreements. Second, an additional $371.8 million over four years will be allocated to the First and Last Mile Fund to support development of critical mineral projects, supply chains, and clean energy transportation infrastructure projects.
  • Fast-Tracked Project Approvals: Under Budget 2025, the Major Projects Office (“MPO”) will receive $213.8 million over five years to implement the Building Canada Act. Of this amount, $19.8 million will be sourced from existing departmental resources. This includes a 60-day review to improve regulatory effectiveness and efficiency, with amendments expected to fast-track reviews and approvals.
  • Crown Indigenous Relations: Budget 2025 proposes to provide CIRNAC with $10.1 million over three years, starting in 2025-26, to continue leading the Federal Initiative on Consultation. This funding is to support the meaningful participation of Indigenous rightsholders in consultation processes for national interest projects, including through Indigenous-led resource centres and consultation protocols.
  • Loan Guarantee Program: Budget 2025 confirmed the federal government’s pre-budget commitment to expand the Indigenous Loan Guarantee Program from $5 to $10 billion to support Indigenous equity participation in clean energy and resource projects.
3. Impact of this Fundamental Policy Shift on Indigenous Peoples

Budget 2025 marks a significant shift in government policy, with a new focus on fiscal austerity and broad capital investments. This is coupled with a reduction in funding to programs to support Indigenous communities and governance. This shift may translate into less money for negotiation tables, funding initiatives, and programs to support Indigenous communities.

Conversely, Indigenous communities may experience new economic opportunities as a result of significant investments in major capital projects, the Building Canada Act and the creation of the MPO. These opportunities will undoubtedly prompt different reactions across communities.

From a legal perspective, one area of potential concern is the comparative emphasis on project and resource development without commensurate funding for Indigenous jurisdiction, safeguards and oversight. For example, the overhaul of the federal consultation program has received only $10m in funding – in contrast, the MPO has received over 20 times that amount. As we have written in other posts,[10] there is significant uncertainty regarding whether and how fast-tracked and expedited approval processes will comply with Canada’s legal obligations to Indigenous peoples, such as the duty to consult, and the implementation of UNDRIP. In relation to that issue, this budget raises more questions than it answers.

 

[1] Canada, Department of Finance, Budget 2025: Canada Strong (Ottawa: Department of Finance Canada, 4 November 2025), online: https://budget.canada.ca/2025/home-accueil-en.html [“Budget 2025”].

[2] Sean Boynton, “Ahead of budget, Canadians want cost of living help, not deficits: poll” Global News (2 November 2025), online: <https://globalnews.ca/news/11505236/canada-budget-cost-of-living-spending-ipsos-poll/>.

[3] Leger, Truth and Reconciliation Day 2025 (Montreal: Leger, September 2025), online: <https://leger360.com/wp-content/uploads/2025/09/Truth-and-Reconciliation-Day_2025.pdf>.

[4] Budget 2025 at 207; Jessica Murphy and Nadine Yousif, “Six takeaways from Canada’s federal budget” (5 November 2025), BBC News, online: https://www.bbc.com/news/articles/ce8zzv1ypkpo.

[5] Budget 2025 at 206.

[6] Budget 2025 at 213.

[7] Government of Canada, Budget 2025: Chapter 5 – Creating a More Efficient and Effective Government, (10 November 2025).

[8] Canada, Office of the Auditor General, “2025 Report of the Auditor General of Canada to the Parliament of Canada: Follow-up on Programs for First Nations” (Ottawa: Office of the Auditor General, 2025).

[9] Government of Canada, Critical Minerals Infrastructure Fund.

[10] Christina Gray, Blair Feltmate and Chantelle La Rocque, “Canada’s Bill C‑5: Continuing the Legislative Trend of Undermining Indigenous Rights” (18 June 2025), JFK Law LLP.