Torys On Budget 2025: Infrastructure And Nation-Building Projects

On November 4, the federal government released its long-awaited budget, Canada Strong (Budget 2025), which announced several measures to catalyze major capital projects across the country. In the lead-up to Budget 2025, industry stakeholders identified at least three critical success factors: (1) reducing regulatory burden and lengthy permitting timelines; (2) catalyzing private investment to meet infrastructure needs; and (3) addressing labour shortages in the construction sector. This bulletin examines each of these challenges and outlines how Budget 2025 proposes to address them.

What you need to know

• Budget 2025 announcement: Through generational investments over 5 years in infrastructure ($115B), defence and security ($30B), and housing ($25B), the government aims to impel projects, catalyze private co-investment, and increase GDP. The federal government introduced measures to address industry concerns over permitting, funding and labour shortages in the construction sector.
• Permitting and regulatory reform: Market participants have raised concerns about the lengthy timelines and regulatory complexity involved in securing permits for major infrastructure projects in Canada. The Major Projects Office (MPO) was established prior to Budget 2025 with a mandate to reduce permitting timelines and complexity. Budget 2025 sharpens this focus by proposing legislation to grant the MPO greater independence and flexibility, and by tasking the MPO with leading a comprehensive review of regulatory processes to reduce red tape and fast-track nation-building projects. Budget 2025 also proposes new legislation to expedite the development of Alto High-Speed Rail—Canada's first high-speed railway, connecting Toronto and Québec City. While the direction is promising, until further details on the proposed programs and legislation are provided, it remains unclear whether these initiatives will sufficiently address Canada's regulatory bottlenecks and lengthy permitting timelines.
• Funding and investment: Budget 2025 proposes increasing the Canada Infrastructure Bank's (CIB) total funding to $45B, establishing a strategic financing framework for Crown corporations, and committing significant infrastructure funding across key areas, including housing, regional and local projects, healthcare, defence, the North and AI compute capacity. Budget 2025 also emphasizes provincial participation and catalyzing private sector investment through programs like the Build Communities Strong Fund, which ties federal funding to provincial or private contributions. The balance between shorter term local infrastructure and longer-term national infrastructure projects appears thoughtful, although further detail will help to assess the viability of concurrent initiatives at a much increased cumulative scale.
• Labour and skills: Deloitte estimates Canada will need 410,000 to 520,000 additional construction workers by 2030 to address the projected swell of project volume. Budget 2025 responds by (1) proposing amendments to the Canada Labour Code to restrict non-compete clauses for federally regulated businesses; (2) launching a $97M Foreign Credential Recognition Action Fund to ensure immigration can help address labour shortages; and (3) investing $75M in union-led apprenticeship training. While these initiatives mark a positive start in tackling construction labour shortages, it remains to be seen whether, and how quickly, they will sufficiently close the projected gap.
• Next steps in the budget process: With the government tabling Budget 2025, a Budget Implementation Bill will follow, likely including draft Bills for the announced legislative amendments. With a minority government, passage will require cross-party support.

Three challenges and how Budget 2025 addresses them

Challenge one: regulatory process and permitting

Market participants have raised concerns about the lengthy timelines and regulatory complexity involved in securing permits for major infrastructure projects in Canada. According to the Canada Electricity Advisory Council's Final Report, Canada ranks second-worst among OECD countries for the time required to obtain a general construction permit¹. Budget 2025 also notes that federal regulatory burden rose 37% between 2006 and 2021. The federal government has focused attention on this issue, particularly through the introduction of the Building Canada Act (the Act) and the establishment of the MPO. By designating certain projects as being in the national interest, the Act aims to accelerate regulatory processes and "enhance regulatory certainty and investor confidence, while protecting the environment and respecting the rights of Indigenous peoples"². Industry proponents have welcomed these new measures; however, it remains to be proven whether they will be fully effective in reducing regulatory complexity and the permitting timeline.

Budget 2025 introduces several initiatives aimed at accelerating major project development, streamlining regulatory processes and strengthening Indigenous consultation capacity, including:

• Legislating greater independence and flexibility for the MPO: Budget 2025 emphasizes the role of the MPO as a central driver of regulatory reform and project coordination³. The government intends to introduce legislation granting the MPO "greater independence and managerial flexibility to facilitate its work to advance major projects and streamline federal regulatory project approval"⁴.
• MPO-led regulatory review and financing coordination: The MPO will lead a comprehensive review of regulatory processes to reduce red tape and fast-track nation-building projects. Budget 2025 allocates $213.8M over five years to the MPO and this work⁵. The MPO will also help structure and coordinate financing from private and public sources, including the Canada Infrastructure Bank (CIB), Canada Growth Fund, Export Development Canada and the Canada Indigenous Loan Guarantee Corporation⁶. These actions should strengthen coordination of government funding. Further details are likely to follow on the intended process to coordinate private financing.
• Accelerating the Alto High-Speed Rail: Budget 2025 proposes to introduce new legislation to expedite the development of the Alto High-Speed Rail—Canada's first high-speed railway connecting Toronto and Québec City. The project is expected to create 51,000 construction jobs and contribute $35B to Canada's GDP. Details on the proposed legislation are limited; its gender and persity impact summary is the only p of Budget 2025 that notes that new legislation will aim to "streamline approval processes and reduce regulatory uncertainties" for the project⁷.
• Strengthening Indigenous consultation capacity: Budget 2025 strengthens Indigenous consultation capacity through continued support for the Indigenous Advisory Council, which supports the MPO, provides $10M over three years for the Federal Initiative on Consultation and provides $40M over two years for the Strategic Partnership Initiative⁸.
• Leveraging cooperation agreements: Budget 2025 also emphasizes the use of federal-provincial cooperation agreements under ps 16 and 31 of the Impact Assessment Act to streamline project assessments through a "one project, one review" approach, enabling early decisions and full substitution to harmonize provincial processes⁹.

Budget 2025 outlines the right ambition to accelerate infrastructure permitting through targeted reforms. While the direction is promising, until further details on the proposed programs and legislation are provided, it currently remains unclear whether these initiatives will sufficiently address Canada's regulatory bottlenecks and lengthy permitting timelines.

Challenge two: public funding and catalyzing private investment

Market participants have expressed an eagerness to understand how major infrastructure projects will be financed. Ambitious goals require significant capital; for instance, according to a recent RBC report, Canada will need approximately $2T in new investments over the next 30 years to modernize its energy infrastructure and transition to clean energy, in addition to broader infrastructure needs¹⁰. While governments are well-positioned to directly invest in infrastructure project development due to their higher risk tolerance, government funding alone will be insufficient to achieve Canada's ambitious infrastructure agenda. Private capital is abundantly available if projects are effectively structured. The federal government must leverage its unique position to invest directly to reduce inertia and mitigate the highest early-stage project risks, while also creating conditions that attract both private and provincial investment on reasonable terms without crowding it out.

The federal government made several pre-budget funding announcements for major projects and infrastructure incentives, including $2B for small nuclear reactors at Darlington, Ontario, as well as $370M for a new biofuel production incentive. While these commitments signal strong public investment, market participants were keen to understand how the government plans to encourage private investment in supporting large-scale initiatives.

In addition to several new tax measures designed to encourage private investment, Budget 2025 outlines a series of initiatives to strengthen infrastructure financing, enhance coordination across Crown corporations and support long-term infrastructure investments, including:

• "Generational Infrastructure Investments"¹¹: Notably, Budget 2025 commits $115B towards federal infrastructure investments over the next five years. This includes $5B over seven years for the Trade persification Corridors Fund (targeting airport, port and rail infrastructure to improve access to overseas markets)¹², and $51B over ten years for the new Build Communities Strong Fund, which will support a wide range of regional and local infrastructure projects¹³. Budget 2025 also provides $25B for housing initiatives, including launching Build Canada Homes¹⁴. Lastly, as part of a broader defence package, Budget 2025 allocates $30B in capital investments over five years, including $1B over four years to Transport Canada for a new Arctic Infrastructure Fund. This Fund will support dual-use transportation projects in the North for both civilian and military purposes¹⁵.
• Build Communities Strong Fund: Budget 2025 provides $51B over ten years for the new Build Communities Strong Fund, which will support a wide range of regional and local infrastructure projects¹⁶. The new Fund outlines three streams, of which two streams require co-investment from other parties. The Provincial and Territorial Stream of the Fund ($17B over ten years) requires the provinces and territories to match federal investments, ensuring a role for the provincial level of government¹⁷. Additionally, for proponents to be eligible under the Direct Delivery Stream ($6B over ten years), proponents are required to seek private sector investment, including private sector investment leverage by the CIB¹⁸.
• Crown corporation leadership and coordination: Budget 2025 places increased emphasis on key federal funding entities—including the Canada Growth Fund, the CIB and Export Development Canada. In addition to the MPO's coordination role, the government intends to establish guidance through a strategic financing framework for these Crown corporations. The purpose is to ensure greater coordination, and ensure these entities are "prioritizing nation-building projects where possible"¹⁹.
• Expanding CIB's total funding and scope: The government proposes amending the Canada Infrastructure Bank Act to increase the CIB's total funding from $35B to $45B. This expansion will enable CIB to invest in nation-building projects referred by the MPO (provided they fall within the Bank's legal mandate), unlocking more opportunities for private sector partnerships²⁰. Additionally, the government announced its intention to enable the CIB to invest in AI infrastructure projects²¹.
• Enabling lending to Indigenous special purpose vehicles: The government intends to amend the First Nations Fiscal Management Act to allow the First Nations Finance Authority to lend to Indigenous special purpose vehicles. This change will improve access to capital for Indigenous groups seeking equity participation in development projects.

As in past budgets, Budget 2025 places great emphasis on federal funds for infrastructure programs. However, Budget 2025 also signals a shift in direction through measures such as coordinating federal Crown corporations under a strategic financing framework and expanding the role of the CIB, both aimed at encouraging private investment in infrastructure. Additionally, programs like the Build Communities Strong Fund, which ties federal funding to provincial or private contributions, further suggest that the federal government wants other capital investors at the table.

Challenge three: labour shortage and skills-training

Canada's infrastructure ambitions face not only regulatory and financial constraints but also labour shortages. Deloitte estimates Canada will need 410,000 to 520,000 additional construction workers by 2030—a one-third increase over the current 1.7 million workforce²². Several solutions have been proposed, including persifying the trades workforce, improving credential recognition for immigrants, and expanding apprenticeship programs. Budget 2025 addresses these challenges through targeted labour mobility improvements, foreign credential recognition and training:

• Limiting non-compete provisions: Budget 2025 announces a proposal to amend the Canada Labour Code to restrict the use of non-compete agreements in employment contracts for federally regulated businesses. The goal is to enhance labour mobility and improve market efficiency by enabling workers to move more freely between employers. Public consultations on the proposed changes will begin in early 2026²³.
• Launching the Foreign Credential Recognition Action Fund. Budget 2025 introduces a new $97M fund over five years to accelerate the recognition of internationally trained workers' credentials, with a particular focus on healthcare and construction sectors²⁴. This is intended to ensure targeted immigration can help address labour shortages.
• Expanding the Union Training and Innovation Program. Budget 2025 allocates $75M over three years to expand this program, which supports union-led apprenticeship training in Red Seal trades²⁵.

While Budget 2025 takes steps to address labour shortages in the construction sector, it also introduces policies that may create competing pressures. For example, the budget proposes stabilizing permanent resident admissions over the next three years while significantly reducing temporary resident admissions—by nearly 57%, from 673,000 in 2025 to 385,000 in 2026²⁶. Additionally, the federal government places a greater emphasis on recruiting international researchers to Canada with the new International Talent Attraction Strategy and Action Plan²⁷. While the above-listed initiatives mark a positive start in tackling construction labour shortages, it remains to be seen whether they will sufficiently close the projected gap.

Next steps

Following the release of Budget 2025, a Budget Implementation Bill will be introduced in the House of Commons. We anticipate that proposed legislative amendments—such as changes to the Canada Infrastructure Bank Act and enhancements to the MPO's mandate—will be included in this Bill. As the governing Liberal Party holds only a minority of seats, support from other parties will be required for the Bill to pass. In the wake of Budget 2025's "generational" investments, industry participants should stay alert to its key measures and track the Implementation Bill's progress. One thing that Budget 2025 does make clear is that project proponents now find themselves in a transformative moment to seize emerging opportunities across Canada's infrastructure pipeline.

Footnotes

1. Government of Canada, The Canada Electricity Advisory Council, "Powering Canada: A blueprint for success", May 2024.

2. Building Canada Act, SC 2025, c 2, p 4.

3. Budget 2025, p. 81.

4. Budget 2025, Annex 5, p. 16.

5. Budget 2025, p. 81.

6. Budget 2025, p. 83.

7. Budget 2025, Annex 5, p. 12.; Annex 6, p. 42.

8. Budget 2025, p. 81.

9. Budget 2025, p. 82.

10. Royal Bank of Canada, "The $2 Trillion Transition: Canada's Road to Net Zero", October 2021.

11. Budget 2025, p. 101.

12. Budget 2025, p. 136.

13. Budget 2025, pp. 102-103.

14. Budget 2025, p. 155.

15. Budget 2025, p. 137.

16. Budget 2025, pp. 102-103.

17. Budget, p. 102.

18. Budget, p. 102.

19. Budget 2025, p. 83-84.

20. Budget 2025, p. 84.

21. Budget 2025, p. 92.

22. Trevin Stratton, Alicia Macdonald and Theo Argitis, Deloitte, "Builders, Baby, Builders? The Half a Million Worker Question".

23. Department of Finance Canada, "Budget 2025 to invest in Canadian workers", October 2025. Budget, p. 121.

24. Budget 2025, p. 98.

25. Budget 2025, p. 157-158.

26. Budget 2025, p. 96.

27. Budget 2025, p. 99.

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