Spending reductions at the Department of National Defence will be limited to two per cent. (Canadian Forces photo)
By David Pugliese
Spending reductions at the Department of National Defence will be limited to two per cent, with equipment and other key portions of the budget entirely exempt from the federal government’s cost-cutting exercise.
Prime Minister Mark Carney’s government has ordered all departments to find significant savings over the next two years. Departments will have to find savings totalling 7.5 per cent for the upcoming budget. The savings target increases to 10 percent for 2027-2028 and then to 15 per cent in 2028-2029.
Carney’s government needs to find massive savings to finance his unprecedented increase in defence spending over the next decade. Initial savings are required to be identified by federal departments by the end of the summer as the Carney government prepares its budget that will be released sometime in the fall.
The Royal Canadian Mounted Police, the Canadian Border Services Agency and the Department of National Defence will all go through a different exercise than other departments during the forthcoming expenditure review, the Ottawa Citizen newspaper confirmed July 8.
That was followed by a message from Chief of the Defence Staff Gen. Jennie Carignan and DND deputy minister Stefanie Beck on July 9 outlining what the military and department will have to deal with during the government’s savings initiative.
Federal organizations are being asked to bring forward savings proposals to spend less on the day-to-day running of government by targeting programs and activities that are not core to their federal mandate, or not aligned with government priorities.
“Recognizing the importance of the Defence mandate and recent investments, the Department of National Defence has a savings target of 2% starting next fiscal year, lower than most organizations,” the CDS and DM pointed out in their message. “This target does not impact the funding received following the Prime Minister’s announcement in June of new investments in the Canadian Armed Forces.”
Capital budgets, such as for major equipment, infrastructure, and technology, are also not included in the review, according to Carignan and Beck.
The two officials noted that their focus will be on “prioritizing and streamlining activities, reallocating where possible, and reducing unnecessary duplication of effort.”
Sharon DeSousa, head of the Public Service Alliance of Canada, also noted in an interview with the Ottawa Citizen that DND managers don’t have to consult with the union as they go through their cost-cutting exercise. That could in future months become a source of controversy.
What is driving the push to cut spending?
It is largely coming from the need to finance the massive increase in military spending.
Carney first announced an immediate $9-billion spending increase June 9 that will hike Canada’s defence and security budget to an all-time high of $62.7 billion annually by next year. In the announcement, Carney repeated his election promises that his government would purchase new submarines and other equipment as well as improve military housing and benefits.
The prime minister also noted the money would go to military salary increases, which he pointed out were well-deserved and would contribute to retaining personnel in the ranks as well as to attracting new recruits.
In addition, it is expected that around 1,400 new staff will be hired at the Department of National Defence. More health-care workers will be hired for the Canadian Forces and the civilian workforce will be expanded so military personnel can focus on operations. Specific details, however, are lacking, according to June Winger, national president of the Union of National Defence Employees.
During his June 9 speech, Carney also repeated his promise that Canada would cut back on using its defence dollars to purchase U.S. military equipment. The U.S. has become increasingly hostile to Canada, with U.S. President Donald Trump continuing with his economic efforts to punish Canada and push for this country to become the 51st state.
“We should no longer send three-quarters of our defence capital spending to America,” Carney said. “The transformation of our military capabilities can help with the transformation of our economy.”
Whether that will be accomplished remains to be seen.
A short time later Carney made even more promises to boost military spending. Canada signed on to the NATO pledge to increase defence spending to 5 per cent of annual GDP by 2035. That means that Canadians at that point will be spending $150 billion annually on defence and security.
The last time the country has seen such an increase in military spending was during the Second World War.
The NATO plan involves investing 3.5 per cent of GDP into core military needs, which includes armaments and equipment. Another 1.5 per cent will be spent on related infrastructure, cyber defence and security.
The spending hike is a direct result of ongoing pressure from U.S. President Donald Trump who floated the idea in January that alliance countries need to spend 5 per cent of their GDP on defence. Trump has repeatedly focused his ire on a number of nations, including Canada, claiming they are taking advantage of the U.S. by not spending enough on their militaries.
Prime Minister Carney has said that Canada should have no problem reaching the 1.5 per cent infrastructure portion by concentrating on projects that are already under way or currently being planned. That would include the development of the mining and stockpiling of critical minerals, an initiative that could see Canada becoming a trusted supplier to western nations for such material. Finding money to fund the other 3.5 per cent will be a problem, defence analysts say.
Yves Giroux, Canada’s parliamentary budget officer, has suggested that the cutbacks will result in job losses for federal public servants. “To balance or to pay for these types of additional spending there would need to be severe cuts to the public service, significant cuts,” Giroux told the Ottawa Citizen.
Other savings could be found in cutting federal programs but whether taxpayers support such an initiative is unknown.
Not every NATO nation has given into Trump’s demands. Before the NATO meeting, Spain had told the alliance it would not agree to the 5 per cent spending target.
Spain’s Prime Minister Pedro Sánchez outlined his concerns that he would have to cut social programs to fund the NATO target and that would create a backlash among the public. Sanchez also warned that such an increase would force his government to increase taxes on the middle class and scale back other key programs. “It is the legitimate right of every government to decide whether or not they are willing to make those sacrifices,” he wrote to NATO.
Spain wanted to stick to the 2 per cent GDP figure that was originally agreed upon. The country’s government believes that the 2 per cent GDP spending level would fulfill its defence needs.
