In many respects, Tuesday’s federal budget is expected to change a long-established script for the Canadian military and the Department of National Defence.
Instead of being the institutional embodiment of Charles Dickens’ character Oliver Twist (the orphan who asked for more), they will likely find themselves in the awkward position of having so much cash that it will be difficult to keep up.
That will contrast with other federal departments that have been asked to tighten their belts to help pay for what Prime Minister Mark Carney has called “generational investments” not only in the military but also in federal infrastructure.
Those investments will be made assuming the Liberal government can muster enough votes among opposition parties to get the measures passed.
But that is a debate that will play out over the next month.
The pressure for Canada to spend more on defense (coming from allies and even the general public) is enormous and would be there regardless of who is in charge.
After decades of moving forward slowly, Canada is suddenly investing billions in defence, and quickly. For The National, CBC News chief correspondent Adrienne Arsenault looks at how the industry is preparing and meets with companies eager to show off what’s on sale.
It is one of the key demands of the Trump administration and an expectation of NATO allies, who have collectively agreed to spend five percent of gross domestic product on defense (3.5 percent directly on the military and 1.5 percent on defense-related infrastructure).
And it comes in front of a hot the war in Ukraine and the latent dispute in the Middle East.
“I think what we will do in the budget is pave the way to reach the five per cent goal by 2035,” Defense Minister David McGuinty said recently after touring the Hanwha Ocean Ltd. shipyard in Geoje, South Korea, which is bidding for Canada’s multibillion-dollar submarine program.
“I think we are very clear about this commitment, not only for ourselves but for all of our NATO partners. We are committed to achieving that goal,” he said.
Submarine replacement program
The submarine replacement program is a perfect snapshot of where the Canadian military is right now and the type of challenges it faces.
Although he has dominated the headlines recently, he is one of those fiscal orphans within the Department of Defense because he has no money allocated to him at this time.
“I’m not sure when the government will make a decision on fully funding the submarine program,” said Vice Admiral Angus Topshee, also after visiting the same shipyard and spending a day at sea aboard one of the South Korean Navy’s KSS-III submarines, the kind they want to sell to Canada.
“At this point we are still working to refine the costs and make sure we understand what this program will cost and I would expect this to fit within the government’s commitment to achieving the NATO five per cent target.”
Defense analyst Dave Perry said the prime minister has spent a lot of time talking about purchasing new submarines. “By the time the budget is published, he will have visited both potential suppliers, but the submarine project does not yet have a budget for the project,” Perry said.
“So I’m going to look for, hopefully, a measure in the budget that will provide the funds necessary to acquire the submarines that the prime minister has been looking for.”
Beyond submarines, he added, there are a number of important equipment projects and initiatives that require funding, dating back to the 2017 defense policy.
Looking for a ‘real financial commitment’
The Liberals, under former Prime Minister Justin Trudeau, often made promises to revitalize the Canadian military, but never allocated money to them.
The Parliamentary Budget Office recently quantified the underspending. Between 2017 and 2023, the Defense Department’s efforts to purchase new equipment fell short by $18.3 billion.
Since the prime minister has placed political importance on rearmament, Perry said it will be up to the government to not just allocate money in the fiscal framework, the long-term federal budget, but to “put it somewhere where someone can point to a section of the budget and see the actual financial commitment that’s being made, not just a word that says we’ll get there, but actually presents a forecast of how spending will increase over time.”
Similarly, Perry said, he hopes the budget explains how the federal government intends to boost the country’s defense industrial base.
During last spring’s federal election, Carney emphasized that developing the defense industry was key to growing the economy and creating jobs. In June it signed a framework agreement with the European Union that will eventually allow Canadian companies more fluid access to the European market.
Recently, a defense cooperation agreement was signed in South Korea that will help open access to that market.
Several experts have said that for the industry to fully recover, federal investment will be needed. To stabilize the National Shipbuilding Strategy, hundreds of millions of dollars were invested in the first two shipyards.
More recently, ammunition makers have said it will take at least $800 million to open new production lines.
“Given how often the prime minister has talked about this, I think it would make a lot of sense for them to have something in the budget that gives more weight to what they’re looking to do specifically in terms of those capability investments and the broader defense industrial strategy,” Perry said.
The only limitation in that regard is that the Carney government has yet to implement its defense industrial strategy. This is not expected until the end of this year at the earliest.
“Even if they haven’t finalized the full strategy yet,” Perry said. “The budget would be a pretty logical place to develop this a little bit.”
