Budget 2025: Canada Plans Workforce Reductions, Spending Shifts, and Tighter Immigration

The federal government’s Budget 2025: Canada Strong sets out a plan to curb operational costs, reduce the federal workforce, and tighten immigration levels while investing heavily in infrastructure, defence, and productivity.

Per the new release, two fiscal anchors guide the plan: balancing operating spending with revenues by 2028-29, and maintaining a declining deficit-to-GDP ratio.

The plan also anticipates $60 billion in savings and new revenues over five years, part of a broader goal to enable $1 trillion in total investments through what it calls “smarter public spending.”

Spending and Deficit

• Total planned investments amount to $1 trillion over five years, with funding directed toward housing, infrastructure, defence, productivity, and competitiveness.
• The government projects a $78.3-billion deficit for 2025-26 or 2.5 per cent of GDP  with a target to reduce it to 1.5 per cent by 2029-30.
• A Comprehensive Expenditure Review aims to modernize government operations and improve efficiency, generating $60 billion in savings and new revenues over five years.

• $51 billion is earmarked for infrastructure, including projects such as high-speed rail, new ports, and carbon capture and storage.
• Defence spending rises to $81.8 billion over five years, including more than $9 billion in 2025-26. A “Buy Canadian” plan will prioritize domestic procurement for the Canadian Armed Forces.

Public Service Cuts

• The federal workforce, which peaked at 368,000 employees in 2023-24, is expected to fall to about 330,000 by 2028-29,  a reduction of 40,000 jobs, or 10 per cent.
• The initial phase will see 16,000 full-time positions cut, including 650 executive roles, accounting for 4.5 per cent of the total workforce.
• Reductions will come mainly through attrition, retirements, and voluntary departures.
  • • Budget introduces a voluntary Early Retirement Incentive under the Public Service Pension Plan for eligible employees aged 50 or 55 and older with at least ten years of service. Participants can retire early with a full pension. The program, costing $1.5 billion over five years, begins by January 2026 and aims for $82 million in annual savings.
• The government says automation and artificial intelligence will help sustain service delivery despite the smaller workforce.

Immigration Measures

On immigration, the government announced significant changes aimed at restoring what it described as “sustainable levels.”

• The 2026–2028 Immigration Levels Plan will stabilize permanent resident admissions at 380,000 per year, down from 395,000 in 2025.
• The share of economic migrants will increase from 59 per cent to 64 per cent of total permanent residents.
• Temporary resident admissions, including international students and foreign workers, will fall from 673,650 in 2025 to 385,000 in 2026, and 370,000 in 2027 and 2028.

• The fiscal cost of reduced temporary admissions is estimated at $168.2 million over four years, mainly from lost fee revenue.
• Asylum claims have already fallen by one-third, while temporary foreign worker arrivals are down 50 per cent, and new international student arrivals have dropped 60 per cent from 2024 levels.

• A one-time initiative will grant permanent residency to eligible Protected Persons, at a cost of $120.4 million over four years, beginning in 2026-27.
• Up to 33,000 work-permit holders will be transitioned to permanent residency between 2026 and 2027, costing $19.4 million over four years.
• The government aims to keep temporary residents below five per cent of Canada’s population by 2027 and permanent resident arrivals below one per cent beyond that year.

“The global uncertainty we are facing demands bold action to secure Canada’s future. Budget 2025 is an investment budget. We are making generational investments to meet the moment and ensure our country doesn’t just weather this moment but thrives in it,” said François-Philippe Champagne, Minister of Finance and National Revenue.

“This is our moment to build Canada Strong and our plan is clear – we will build our economy, protect our country, and empower you to get ahead. When we play to our strengths, we can create more for ourselves than can ever be taken away.”

 Remarks by the Minister of Finance and National Revenue

Budget 20225