Liberals Slash Capital Funding for Defence by $3.7 Billion

by Peter Diekmeyer (feat. David Perry)

Canadian Defence Review
March 23, 2106

Defence stakeholders got a stark warning today following the tabling of the Liberal government’s first budget, which slashed projected capital procurement funding by a stunning $3.7 billion over the next five years.

“This is not a reduction in the National Defence budget,” reads the document, tabled by Finance Minister Bill Morneau in Parliament this afternoon. “This will ensure that funding is available for large-scale projects when it is needed.”

The budget resurrects an old Conservative Party trick of “promise and delay.” For example $84.3 billion in funds are allocated to National Defence large-scale capital projects over the next 30 years.

However, the Liberals, like their predecessors, aren’t spending the money in envelopes, that were previously proffered.

David Perry, a senior analyst with the Canadian Global Affairs Institute, who tracks defence outlays closely, was not impressed. “The procurement schedule that the current and previous governments have committed to are far too ambitious relative to the amounts of money they are allocating,” said Perry. “The good news is that they are keeping the escalator clause, which commits them to increases during future years.”

Perry also detected a subtle distinction between the Trudeau administration and the Harper regime. “Under the previous government there was a sense that they were delaying spending in order to balance the budget,” said Perry.

“But the current budget includes large spending increases in a variety of non-defence areas. So it looks more like a conscious decision to de-prioritize defence procurement.”

Perry may be right. Despite the cuts to defence capital budgets, the new government’s total spending is expected to explode by 6.9% to $317.1 billion during the 2016-2017 fiscal year.                         

What makes the current budget particularly hard to assess is the fact that provisions related to defence matters are opaque, unclear and inadequately documented and referenced. For example the 240 page document contains no specific departmental projections on how much was projected to be spent on defence during the 2016-2017 fiscal year, nor how those totals will be adjusted following the new changes.

Canadian defence spending already lags below NATO’s 2% of gross domestic product target and the new measures suggest that is unlikely to change during the Liberals’ first mandate.

In a press conference prior to his budget speech, Morneau denied that the cuts amounted to a reneging on the Liberal Government’s previous promises, noting that the current Minister of National Defence would conduct a review of operational and capital requirements during the coming years.

During the election campaign, Prime Minister Justin Trudeau had promised to maintain the former Conservative government’s defence spending levels and to increase funding in 2017, as laid out in last year’s federal budget. He also promised to scrap the purchase of Lockheed-Martin’s expensive F-35 fighter and to move funds allocated to that to Canada’s navy.

Morneau’s budget renews certain specific equipment upgrade commitments “including Canada’s aging fleets of CF-18 fighter aircraft and maritime warships.” The document also notes that Canada will, “continue to play an important role in the coalition against the Islamic State,” and “reaffirms Canada’s contribution to support Ukrainian forces, through military training and capacity building.”

All in all, there is not very much for defence stakeholders to be excited about in this budget, but more importantly, if the budget sets the tone for what the government of the day sees as its priorities, then this document certainly indicates that capital spending on defence will not be at the top of the government`s to do list.

During the election, the Liberals talked positively about equipping Canada`s military, but the reality is that when it comes to stepping up and paying for its promises the Liberals are kicking that ball further on down the road - much further - so CDR views this as the first concrete sign that this Liberal government is not as big a friend of Canada`s military as it has said it is.