Rapid Recap: 2025 Federal Budget

Tuesday, November 4, 2025 – This afternoon, Minister of Finance François Philippe-Champagne released the federal government’s 2025 Budget, Canada Strong, focused on major, strategic investments to protect Canada’s economic sovereignty while trying to balance the country’s  operational deficit. This marks the first budget of the new Liberal government, providing new insight into their short- and medium-term priorities on a much deeper level. 

This budget calls for around $141 billion in new spending over the next five years, which will partially be offset by about $51.2 billion in cuts and other savings. The projected deficit is double that of the previous government’s at $78.3 billion. The budget projects the economy will grow by about 1% a year for the next two years. 

The Topline for Health Care

The 2025 Budget was not expected to be a health care budget, but there are modest investments in the sector  focusing on the core policies presented in this government’s mandate released on May 21, 2025. Aligned with the  Liberal Party of Canada’s (LPC) recent election platform, this government is going back to basics in order to strengthen what it sees as the fundamentals of Canada’s economy – such as infrastructure and natural resources – predominantly in response to the isolationist policies in the U.S, and includes the health care sector in those targeted investments. Notably, investments focus on attracting and retaining research talent, improving foreign credential recognition, health research, and some protection from government-wide cuts to health research institutions like the Canadian Institute for Health Research. Health Canada and the Public Health Agency of Canada (PHAC) are not spared from these mandated departmental spending reductions of 15%. As with all budgets, forthcoming details will reveal areas that require clarity – including “buy Canadian” provisions and any implications to the health care sector. 

In the short term, the government may get a break from provinces on a lack of new and significant health transfers and no new funding for pharmacare. However, the stage is set in the coming years for the traditional war of words and dollars between the federal government and the rest of Canada as some bilateral health agreements expire and the growth escalator to the Canada Health Transfer returns to pre-2023 levels. 

Unsure what today’s budget means for your organization? Join Santis Health for our upcoming webinar as we unpack Budget 2025 – and subsequent announcements and insights we will learn of in the days ahead. Register Now.

Santis Insights

• An investment budget can also be a health care budget: Overall, the health care sector will receive some of the most significant targeted spending from the federal government in decades – outside of health care transfers – and the first major investment in health care infrastructure since the 1960s. 

• Aligning with core mandate increases investment possibilities: Aligning advocacy priorities with the government’s mandate does provide an opportunity for investment for health care, as evidenced by an early announcement for the University Medical School in Brampton. 

• Stage is set for provinces to demand greater health transfer spending in the coming years: Transfers to provinces are protected, but the forward budget track assumes that the Canada Health Transfer escalator will go down from 5% to Gross Domestic Product (GDP) growth (i.e., no extension past the five-year commitment in the 2023 Working Together agreement) and that the home care and mental health funding from the 2017 agreement will sunset in 2027 (as planned). Provinces and territories will likely describe these measures as “cuts” to health care. Coupled with no new funding for Pharmacare, provinces without deals will further highlight inequities of health spending across jurisdictions.

• Health care infrastructure funding could barely constitute a down payment: $5 billion over three years will not go very far, considering it would need to be divided amongst all provinces and territories. The new Civic Hospital campus in Ottawa will cost $2.8 billion alone, and Ontario’s share would be less than $2 billion of the overall fund. Smaller jurisdictions will be left with a proportionally smaller benefit with similarly high costs.

• Modest health research investments, but cracks appear below the surface: Although the research funding is welcome, cracks appear factoring in the 10-year period (12 for the recruitment of international researchers) for the research chairs initiative and the fact that the Canadian Institutes of Health Research (CIHR) receives  about 40% of the total for the granting councils. The government has re-committed to moving forward with a Capstone organization, but it is unclear if there is a legislative agenda on health research (as was indicated in the 2024 budget). In addition, a large amount of the new health research funding initiatives focuses on attracting new talent and less on supporting current Canadian researchers.

• Few exemptions from mandated spending reductions requires deeper cuts in the next year: With only a few areas of government with some form of an exemption (ie., granting councils will face a 2% reduction in spending), meeting the government mandate of 15% spending reduction will mean further difficult decisions in the next budget – especially since the low hanging fruit is already gone.

• The budget is light on the life sciences sector: Without a specific call out as a strategic growth industry, or language on securing supply chains – especially in the midst of a trade war with the United States, including on pharmaceuticals – the life sciences sector will have to get its elbows up to raise its profile in this government. While further investment tools for Health Emergency Readiness Canada (HERC) are absent, the new Strategic Response Fund is accessible to all sectors.

• Productivity of government, including in health, is a key feature – and how they get there will be a bumpy but necessary road: Many organizations of government, including PHAC, Health Canada and the Patented Medicine Prices Review Board (PMPRB), were highlighted as requiring necessary modernization to improve customer service and deliver on their mandate through increased productivity. This is a positive step, but will require both creative thinking and an adjustment to traditional risk tolerance and management within government.

• Budget features progressive health care initiative: There are signals of the former government’s progressive health agenda coupled with necessary system improvement initiatives. These include a review of health care in the north (including Indigenous populations), fast tracking internationally-trained health care providers, several mentions of investing in health services for the Canadian Armed Forces, a Personal Support Worker tax credit, mental health counselling for youth as part of the youth employment and skills strategy.

Health and Life Sciences Highlights

Health Research

Budget 2025 outlines the federal government’s strategy to invest in the Canadian economy through investments in research and talent. A significant focus is placed on talent recruitment, with relatively significant funding also allocated to the Canada Foundation for Innovation—a move that aligns with this government’s priority of infrastructure investment. The Budget also lays out plans to entice greater industry investment in health research through various incentives, including tax credits and support for firms conducting research and development. 

While these investments are positive for the health research sector, it is worth noting that the budget also indicates the tri-council will face a 2% cut in funding overall. With a cross-government directive to cut spending by up to 15%, however, this target is significantly less than the spending reductions being faced by other departments and agencies. 

Key highlights with regards to health research investment include:

• Investment of $1 billion over 13 years, starting in 2025-26, to the tri-council to launch an accelerated research Chairs initiative to recruit exceptional international researchers to Canadian universities.
• Starting in 2025-26, the federal government will invest $400 million over seven years to the Canada Foundation for Innovation to establish a complementary stream of research infrastructure support to ensure these recruited Chairs have the equipment they need to conduct research in Canada.
• To support Canadian businesses’ ability to conduct innovative research, the government is proceeding with the following previously proposed enhancements to the SR&ED program:
  • Increasing the prior-year taxable capital phase-out thresholds for the SR&ED program’s enhanced 35-per-cent tax credit. 
  • Increasing the annual expenditure limit on which the enhanced credit can be earned, from $3 million to $4.5 million.
  • Extending the enhanced credit to eligible Canadian public corporations.
  • Restoring the eligibility of SR&ED capital expenditures. 
• The government also proposes to increase the annual expenditure limit on which the SR&ED program’s enhanced credit can be earned even further from $4.5 million (as previously announced) to $6 million, effective for taxation years that begin on or after December 16, 2024. 

Health Infrastructure

Since its formation, the new government has emphasized an interest and priority in infrastructure. Budget 2025 details how their plans will benefit the health sector, with significant focus on working with provinces and territories to help update critical health infrastructure across the country. 

Key highlights include:

• New funding of $51.0 billion over 10 years, starting in 2026-27, and $3 billion ongoing for a Build Communities Strong Fund, administered by Housing, Infrastructure and Communities Canada. 
  • Of this funding, $17.2 billion over 10 years, starting in 2026-27, will be invested in a Provincial and Territorial Stream to support their prioritized projects, including health-related infrastructure. Provinces and territories will need to match federal funding. 
  • Of the above amount, $5 billion over three years, starting in 2026-27, will be dedicated to a Health Infrastructure Fund to help ensure that health infrastructure will be able to respond to the health care needs of Canadians.
  • Budget 2025 announces support for the Toronto Metropolitan University’s School of Medicine campus and teaching infrastructure.

Health Human Resources

Investments in the health workforce were limited in Budget 2025–something that is understandable as the new government has signalled an intention to move away from stepping into provincial and territorial health jurisdiction. 

However, with a workforce crisis ongoing there were some investments worth noting: 

• Investment of $1.48 billion over six years, starting in 2025-26, for the introduction of a temporary Personal Support Workers (PSWs) Tax Credit to be available for the 2026 to 2030 taxation years. 
  • Eligible PSWs in provinces and territories that have not signed bilateral agreements to support wage increases will be able to claim a refundable tax credit equal to 5% of their eligible earnings, up to $1,100/year. 
  • Of this amount, $1.17 billion will be sourced from previously allocated but unutilized funding. 
• $97 million over five years, starting in 2026-27, to Employment and Workforce Development Canada to establish the Foreign Credential Recognition Action Fund, through which the federal government will work with provinces and  territories to improve fairness, transparency, timeliness, and consistency of foreign credential recognition, with a focus on health and construction sectors.
  • Funding will be sourced from existing departmental resources. 

Artificial Intelligence

While the new federal government has indicated that it would prioritize investments in artificial intelligence (AI) in an effort to capitalize on the economic opportunities the sector provides, Budget 2025 allocates significantly less to this sector than may have been expected. 

Key highlights with regards to AI include: 

• Investment of $925.6 million over five years, starting in 2025-26, to support a large-scale sovereign public AI infrastructure that will boost AI compute availability and support access to sovereign AI compute capacity for public and private research.
  • $800 million of this will be sourced from funds previously provisioned in the fiscal framework. 

Manufacturing Incentives

A changing economy and ongoing trade disputes with the United States have resulted in challenges in trade-exposed sectors such as manufacturing. In an effort to protect and grow Canada’s economy, the federal government has committed to a number of investments in the manufacturing industry, including: 

• Introduction of a Productivity Super-Deduction, consisting of a set of tax incentives covering new capital investment that allows businesses to write off a larger share of the cost of investments. 
• $656.9 million over five years, starting 2025-26, to ISED to develop and commercialise dual civilian-military technologies in a range of industries, including aerospace, automotive, marine, cybersecurity, artificial intelligence, biodefence, and life sciences.

Provincial and Territorial Transfers and Agreements

The projected spend on the Canada Health Transfer and the Canada Social Transfer did not change, sitting at $54.7 million and $17.4 million for 2025-26, respectively. Notably, there was no new funding provided for a variety of programs and bilateral agreements announced by the previous government, including: 

• Canadian Dental Care Plan
• Working Together Agreements
• Aging with Dignity Agreements
• National Pharmacare Program

As the $1.5 billion in funding allocated for the National Pharmacare Program in Budget 2024 was mostly expended under the existing four agreements, the lack of additional funding in Budget 2025 signals there is no intention to sign additional agreements with remaining provinces and territories. 

There is also no new funding allocated for mental health or substance use and addictions, despite this being a priority for federal Minister of Health Marjorie Michel. Budget 2025 proposes to provide $307.9 million over two years, starting in 2026-27, for the horizontal Youth Employment and Skills Strategy to provide employment, training, and wraparound supports (which includes  mental health counselling) to around 20,000 youth facing employment barriers annually.

Budget 2025 solidified that the National School Food Program would be made permanent, allocating $216.6 million/year starting in 2029-30.

Departmental Savings Targets

Shortly after forming government, Prime Minister Mark Carney and Minister François-Philippe Champagne directed the Cabinet to reduce spending by 15% by fiscal year 2028-29. Departments were required to submit their cost reductions plans to the Minister of Finance ahead of Budget 2025, and some details have started to take shape. 

Health Canada

• The budget does not detail how Health Canada plans to cut expenses. It explains improved regulatory processes will lead to reduced spending, and that the “activities” which are undefined, have “consistently shown low demand, overlap with other jurisdictions or sectors, or provide minimal health benefits”. Health Canada will also recalibrate internal science and research activities to better align them with the department’s regulatory and policy mandates.

Public Health Agency of Canada

• PHAC plans to achieve cost savings by streamlining program delivery. This will involve consolidating grants and contributions into “larger funds.” While the overall funding envelope for these new funds will be “lower once temporary funding ends,” PHAC anticipates increasing the impact by “targeting investments to core federal public health priorities” that align with the Agency’s central mandate. PHAC will also reduce its back-office costs by standardizing administrative processes, streamlining roles and responsibilities, and leveraging enhanced IT solutions.

In addition, the Patented Medical Prices Review Board will modernise its hearings by leveraging existing technology, enabling faster and more cost-effective processes.

Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) and Indigenous Services Canada (ISC) 

• CIRNAC and ISC deliver important programs that are legally or constitutionally required, including child and family services, primary health care, and essential community infrastructure. The government will review how these organizations can deliver these programs more efficiently, with a 2% savings target.

Employment and Social Development Canada (ESDC) 

• To meet up to 15% in savings targets over three years, ESDC will implement operational efficiencies and a targeted recalibration of its programs and its approach to delivering them. These efficiencies will be advanced while continuing to empower workers in Budget 2025 by expanding programs like the Foreign Credential Recognition Action Fund to help qualified foreign-trained professionals contribute more quickly to Canada’s workforce.
• Budget 2025 proposes legislative amendments to the Department of Employment and Social Development Act to enable the delivery of more integrated and efficient services across government.
• Modernising legislative authorities to support information sharing and digital services would particularly benefit groups facing barriers due to outdated, paper-based processes, particularly seniors, newcomers, persons with disabilities and rural residents.

Opposition Response

In a surprise move, former Conservative MP, Chris d’Entremont crossed the floor to join the Liberals. This significantly changes the parliamentary math, as the government now requires only two opposition votes to pass the budget.

However, securing those votes remains a challenge. The Bloc Québécois  have stated that they were disappointed with the details of the Budget, in particular the lack of increased health transfers to Québec and will likely not support it. Similarly, the Green Party will not support the Budget due to the current lack of climate change policies. 

At this point, the New Democratic Party (NDP)  presents the more likely path to passing the budget. The party has  not officially confirmed their position but stated “it would appear on first review that there are measures in this budget that we welcome and indeed have advocated for” but that they will need to do a more in depth review to see if it would “meet the needs of Canadians.” 

However, even if the budget passes the House of Commons (likely with NDP support), the Liberals will face another hurdle at the Committee stage, where they will still require the support of either the Bloc or the Conservatives.

What’s Next?

• With the Budget Implementation Act (BIA) now tabled, there will be four days of debate while the House of Commons sits. 
• The first vote on the BIA  is scheduled to take place on November 17 and is typically considered a “confidence vote”, meaning that if the vote fails the government would fall and an election would be called.
• If the BIA passes, it will go through the typical legislative process which means it will go to second reading, followed by committee, report stage and third reading. 
• However, as previously mentioned, the legislation can stall at Committee who can report back to the House without amendments, with amendments or with a recommendation that the Bill not proceed which could lead to loss of support of the Bill.  

Have questions about the 2025 federal budget? Reach out to our federal political experts at jill.pilgrim@santishealth.ca, danielle.flieler@santishealth.ca or peter.cleary@santishealth.ca. 

Appendix: Full List of Federal Health and Life Sciences Budget Commitments

Health Research

Recruiting Talent

• Budget 2025 proposes to provide $1 billion over 13 years, starting in 2025-26, to the Natural Sciences and Engineering Research Council, Social Sciences and Humanities Research Council, and Canadian Institutes of Health Research to launch an accelerated research Chairs initiative to recruit exceptional international researchers to Canadian universities.
• Budget 2025 proposes to provide $400 million over seven years, starting in 2025-26, to the Canada Foundation for Innovation to establish a complementary stream of research infrastructure support to ensure these recruited Chairs have the equipment they need to conduct research in Canada. 
• Budget 2025 proposes to provide $133.6 million over three years, starting in 2026-27, to the Natural Sciences and Engineering Research Council, Social Sciences and Humanities Research Council, and Canadian Institutes of Health Research to enable top international doctoral students and post-doctoral fellows to relocate to Canada.
• Budget 2025 proposes to provide up to $120 million over 12 years, starting in 2026-27, to the granting councils to support universities’ recruitment of international assistant professors, as appropriate.

Incentivizing Investment from Industry

• The Budget will encourage companies to invest and innovate in Canada through investment tax credits, the Productivity Super-Deduction, and improvements to the Scientific Research and Experimental Development (SR&ED) tax incentives. 
• The government is proceeding with previously proposed enhancements to the SR&ED program, including:
  • Increasing the prior-year taxable capital phase-out thresholds for the SR&ED program’s enhanced 35-per-cent tax credit. 
  • Increasing the annual expenditure limit on which the enhanced credit can be earned, from $3 million to $4.5 million.
  • Extending the enhanced credit to eligible Canadian public corporations.
  • Restoring the eligibility of SR&ED capital expenditures. 
• To encourage investment in Canadian innovation, Budget 2025 also proposes to increase the annual expenditure limit on which the SR&ED program’s enhanced credit can be earned from $4.5 million (as previously announced) to $6 million, effective for taxation years that begin on or after December 16, 2024. 
• Budget 2025 confirms the implementation of previously announced SR&ED enhancements and proposes to further increase the enhanced rate expenditure limit, to help innovative businesses scale up and grow. This additional government investment of $440 million on an ongoing basis is expected to catalyse private sector R&D investment, generating an economic output of $1.2 billion a year—about a three-time return for Canada’s economy. These enhancements are on top of revamping the SR&ED administration process—providing businesses with greater certainty and speed when making investment and R&D decisions.

Health Infrastructure

• New funding of $51.0 billion over 10 years, starting in 2026-27, and $3 billion ongoing for a Build Communities Strong Fund, administered by Housing, Infrastructure and Communities Canada. 
  • Of this funding, $17.2 billion over 10 years, starting in 2026-27, will be invested in a Provincial and Territorial Stream to support their prioritized projects, including health-related infrastructure. Provinces and territories will need to match federal funding. 
  • Of the above amount, $5 billion over three years, starting in 2026-27, will be dedicated to a Health Infrastructure Fund to help ensure that health infrastructure will be able to respond to the health care needs of Canadians.
  • Budget 2025 announces support for the Toronto Metropolitan University’s School of Medicine campus and teaching infrastructure.

Health Human Resources

• As announced on October 27, 2025, Budget 2025 proposes to provide $97 million over five years, starting in 2026-27, to Employment and Social Development Canada to establish the Foreign Credential Recognition Action Fund to work with the provinces and territories to improve the fairness, transparency, timeliness, and consistency of foreign credential recognition, with a focus on health and construction sectors. 
  • This funding will be sourced from existing departmental resources.
• Budget 2025 proposes to introduce a temporary Personal Support Workers Tax Credit, under which eligible personal support workers employed in the remaining provinces and territories could claim a refundable tax credit equal to 5 per cent of their eligible earnings, providing support of up to $1,100 per year.
  • This measure to support front-line health care workers would be available for the 2026 to 2030 taxation years and is estimated to cost $1.48 billion over six years, starting in 2025-26. Of this amount, $1.17 billion would be sourced from the funding previously committed but unutilised to support wage increases for personal support workers.

Artificial Intelligence

• Budget 2025 proposes to provide $925.6 million over five years, starting in 2025-26, to support a large-scale sovereign public AI infrastructure that will boost AI compute availability and support access to sovereign AI compute capacity for public and private research. 
  • Of this amount, $800 million will be sourced from funds previously provisioned in the fiscal framework. 
• Budget 2025 announces that the Minister of Artificial Intelligence and Digital Innovation will engage with industry to identify new promising AI infrastructure projects and enter into Memoranda of Understanding with those projects. 
• Budget 2025 also announces the government’s intention to enable the Canada Infrastructure Bank to invest in AI infrastructure projects.
• Budget 2025 proposes to allocate $25 million over six years, starting in 2025- 26, and $4.5 million ongoing for Statistics Canada to implement the Artificial Intelligence and Technology Measurement Program (TechStat). 
  • TechStat will use data and insights to measure how AI is used by organisations, and understand its impact on Canadian society, the labour force, and the economy. This amount will be fully sourced from existing departmental resources.

Manufacturing Incentives

• To boost productivity and attract investment, this new government is introducing a Productivity Super-Deduction—a set of enhanced tax incentives covering all new capital investment that allows businesses to write off a larger share of the cost of these investments right away. The government will move ahead with previously announced measures: 
  • Reinstatement of the Accelerated Investment Incentive, which provides an enhanced first-year write-off for most capital assets.
  • Immediate expensing (i.e., 100-per-cent first-year write-off) of manufacturing or processing machinery and equipment.
  • Immediate expensing of clean energy generation and energy conservation equipment, and zero-emission vehicles.
  • Immediate expensing of productivity-enhancing assets, including patents, data network infrastructure, and computers.
  • Immediate expensing of capital expenditures for scientific research and experimental development.
• $656.9 million over five years, starting 2025-26, to ISED to develop and commercialise dual civilian-military technologies in a range of industries, including aerospace, automotive, marine, cybersecurity, artificial intelligence, biodefence, and life sciences.

Provincial and Territorial Transfers and Agreements

• Health agreements with provinces and territories are projected to remain at $4.3 billion in 2025-26 and 2026-27, reflecting $2.5 billion per year for tailored bilateral agreements, and $1.2 billion per year in transfers supporting home and community care and mental health and addictions services that expire after 2026-27. 
• Another $600 million per year in transfers for long-term care expires after 2027-28.
• Budget 2025 proposes to introduce legislation and provide $216.6 million per year, starting in 2029-30, to Employment and Social Development Canada, Indigenous Services Canada, and Crown-Indigenous Relations and Northern Affairs Canada, to make the National School Food Program permanent.

Health Care in the Arctic and the North

• Budget 2025 announces the government’s intention to undertake a comprehensive assessment of health care and health infrastructure needs in the North, to identify innovative ways to increase access to health care in northern communities and reduce medical travel costs through engagement with Northern and Arctic Indigenous Peoples. 
• Special Representatives will release their external review of Nutrition North Canada. The government will take this review seriously and remains committed to co-developing with Inuit and Northern Indigenous leaders, evidence-based food security approaches that better meet the high cost of living and affordability challenges faced by many Inuit and Northerners.

Canadian Armed Forces (CAF) and Veterans

• Budget 2025 proposes to provide $184.9 million over four years, starting in 2026-27, and $40.1 million ongoing for Veterans Affairs Canada (VAC) to stabilise their processing capacity for disability benefits applications and to modernise operational processes and IT infrastructure for their disability benefits program.
  • This measure will benefit CAF members and veterans who have been diagnosed with a medical condition or disability related to their military service, such as a physical injury, chronic illness, or mental health disorder, by ensuring they receive timely decisions on their disability benefit applications and faster access to financial support and associated services. This measure will also indirectly benefit the families and caretakers of veterans and military members by improving the quality of VAC’s services and making it easier to access eligible benefits and supports.

Interim Federal Health Program

• Immigration, Refugees and Citizen Canada (IRCC) will readjust the Settlement Program to implement limits to program eligibility for economic immigrants. The program will continue to support most recent arrivals to overcome barriers in integrating into Canadian society. IRCC will also introduce a modest co-payment model to its Interim Federal Health Program for supplemental health products or services (such as prescription medication and dental care).

Tobacco and Vaping

• Budget 2025 proposes legislative amendments to the Tobacco and Vaping Products Act to extend the legislative review cycle from two to five years
  • According to the government, the amendments would benefit all Canadians by allowing Health Canada more time to consult broadly and consider more complex aspects of the legislation. Extending the review cycle would also provide more time to engage Indigenous communities, which have historically had lower participation rates in regulatory processes. Individuals who smoke and vape would also benefit from the amendments, with particular benefits for lower-income Canadians, who smoke at higher rates than the general population.

Global Health 

• There will be reductions in development funding to global health programming, where Canada’s contribution has grown disproportionately relative to other similar economies, and to some international financial institutions, which receive significant support through other sources, and where Canada’s contributions can be leveraged further. Some bilateral development programs will also be refined and adjusted. These changes are expected to rebaseline the International Assistance Envelope to pre-COVID levels.