Image credit: Lt Jennifer Kusche, Canadian Forces Combat Camera, Canadian Armed Forces Photo

POLICY PERSPECTIVE

by Paul Maddison, David Fraser, and John Scott Cowan
April 2024

The authors are grateful to numerous defence and security strategists including academics, policy analysts, business leaders and former senior military commanders who contributed to this paper.

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Table of Contents

• Executive Summary
• Introduction
• The Math
• The Annual Two-Per-Cent-of-GDP Defence Spending Pledge and its Management
• Avoiding the Boom-Bust Cycle
• Envisioning a Canadian Military Funded at Two Per Cent of GDP
• Multiple Missions Capability
• Reserve Force Reform
• Defending the Arctic
• A Three-Ocean Navy
• Emerging Technology and the Unforeseen
• Large Conflict is Back
• Positive Impact on Industry and Academia
• Conclusion: A Better Canadian Armed Forces and a More Secure Canada
• About the Authors
• Canadian Global Affairs Institute

Executive Summary

The latest NATO defence spending data (2023 estimates) show Canada standing alone as the only country in the then-31-member Alliance not meeting both NATO investment pledges: spending at least two per cent of gross domestic product (GDP) on defence and spending at least 20 per cent of the defence budget on equipment and research and development. Still, by spending 1.33 per cent of its GDP on defence, Canada ranks as the seventh largest spender (in actual dollars) on defence in NATO and the 14^th largest in the world. Since 2006, though, successive Canadian governments have agreed to the NATO metric of spending two per cent of GDP on defence and since 2023, the Alliance considers this financial obligation to be a minimum level of investment. Canada has not honoured this commitment and has no plan to do so. This situation will feature prominently in military-related public discussion in Canada around the upcoming budget, the “expected soon” defence policy update, and at the 75^th NATO anniversary summit this July and beyond.

This paper’s purpose is to describe the difference that a minimum two-per-cent-of-GDP annual allocation would make to defence capability, capacity and preparedness aggregated over time for the Department of National Defence (DND) and the Canadian Armed Forces (CAF), and to Canada’s broader national interests and security. Meeting our NATO agreed-upon commitment would force multiple government departments to do more to obtain much better outcomes for the money spent. This will require a change in culture and thinking by our political leaders and within government to meet the range of threats and potential dangers at our doorstep. This certainty in defence budgeting would set conditions for improved partnerships with Canadian industry, help secure Canada’s borders including the Arctic, strengthen our military alliances, and improve our credibility with the U.S. and other NATO members and partners.

It would also allow for an armed forces rebuild, including recruiting at least 25,000 Regular Force personnel besides the 71,000 called for under the current (2017) defence policy. Such funding would make the CAF more consistently dependable, relevant, modern and capable. It would set conditions for Canada to once again credibly meet its Alliance obligations and contribute directly to Canadian security and prosperity, as well as to a safer and more prosperous global commons. Such a policy would also have a positive cascading effect on Global Affairs and all other departments and agencies in the Canadian intelligence, policing and national security space.

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Introduction

Many voices – and not just from the usual quarters – across a wide spectrum of Canadian society are urging the government to follow through on a long-standing financial commitment to our allies to spend a minimum of two per cent of gross domestic product (GDP) year over year on national defence, which also includes a minimum of 20 per cent of that budget to buy major new equipment. This clarion call and the underlying impetus for action appears to be finding traction among the public, with three recent public opinion surveys showing – unusually for Canada – elevated concern respecting the state of national security generally, and growing support for increased spending on the Canadian Armed Forces (CAF) specifically.

NATO members, including Canada, first agreed upon the guideline linking this financial obligation to national GDP in 2006 and reiterated it as a discrete pledge at the NATO summit in Wales in 2014, following Russia’s attack on and illegal annexation of Crimea. Alarmed by the full Russian invasion of Ukraine in February 2022, NATO leaders agreed at the 2023 NATO summit in Vilnius that this spending commitment should be promised as a minimum level of investment. Canada has not honoured this commitment. The funding discussion will feature prominently in public discourse this year, given the release “soon” of the long-delayed defence policy update, the April 2024 federal budget and the NATO summit in Washington in July marking the Alliance’s 75^th anniversary (Canada is one of the original 12 members).

Figure 1: Defence Expenditure of NATO Members as a Share of GDP, and Equipment Expenditure as a Share of Defence Expenditure (2023 estimated)

Source: The NATO Secretary General’s Annual Report, 2023 (released March 14, 2024)

The latest NATO defence spending data from 2023 (Figure 1) show Canada as the only country in the 31-member Alliance (32 with Sweden’s accession on March 7, 2024) not meeting both NATO investment pledges: spending at least two per cent of GDP on defence and spending at least 20 per cent of the defence budget on equipment and research and development. Canada’s defence spending as a proportion of its GDP has varied in the past decade from a low of .97 per cent under Stephen Harper’s Conservative government to the present amount of 1.33 per cent. Much of the public discussion by commentators and critics about Canada’s defence spending as a proportion of GDP revolves around whether meeting the two-per-cent commitment is necessary, affordable or both and – given their track record – whether the Department of National Defence (DND) and other implicated departments can even feasibly and responsibly spend that allocation.

Often missing from that discussion is what a consistent two-per-cent-of-GDP spend tangibly means in terms of additional defence capability, capacity and preparedness aggregated over time. This paper’s purpose is to describe in concrete terms the difference that a minimum two-per-cent-of-GDP spend would make to the DND/CAF and the defence of our national security, and Canada’s broader national interests. Specifically, what would meeting that commitment allow the Canadian military to do more of, faster, better and with more obvious impact than what is now the case? And how would that new spending improve our national security and positively affect our national interests?

Defence is just one big piece of the broader suite of capabilities needed for adequate national security. As several senior government officials including three former national security advisers have recently counselled, Canada’s national security strategy urgently requires a radical re-think. Given Canada’s recalcitrance at meeting its NATO agreed-upon obligations, the subject will remain a focus of pointed concern, commentary and pressure by NATO and other allies, particularly the U.S., with whom we share the longest undefended border in the world. The approaches to North America are a vital interest to the U.S. and Canada, and the latter’s failure to provide adequate defence of its territory will be construed as a real threat regardless of the winner of the next U.S. presidential election. Canada should be more attuned to the defence nexus with the U.S. and seek to avoid a trade and security backlash from its most important security and economic partner.

However, even if significant new money were to be immediately available to the DND along with the political will to effect change, the lag time would still be at least a decade during which Canada would be vulnerable in terms of equipment, physical infrastructure, recruiting and training. This would directly affect the CAF’s general preparedness, readiness and responsiveness for many years. Much evidence of the lamentable situation is accumulating and being publicly reported – a shortage of 16,000 in the CAF, almost half of its equipment assessed as unserviceable and unavailable and even the RCAF ceasing pilot training in Canada for the foreseeable future in favour of schools in the U.S., Finland and Italy.

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The Math

In June 2022, the Parliamentary Budget Officer (PBO) released Canada’s Military and the NATO 2% Spending Target, a report that set out the historical expenditure and forecasted defence funding between fiscal years 2014 and 2027. Those figures were drawn from and assessed against the 2017 Strong, Secure, Engaged defence policy. The government promised a defence policy update in April 2022 for release in fall 2022 but it has been delayed repeatedly.

Two key conclusions from the PBO report stand out. First, Canadian defence spending grew 67 per cent between 2014 and 2021. As a percentage of GDP, Canada’s spending on defence rose by 40 per cent in the same period (from 1.0 to 1.4 per cent) and the proportion of money for equipment purchases increased. According to the PBO, at least $7 billion of this increase is due to the rightful inclusion of expenses which Canada did not previously count as defence costs, such as veterans’ benefits. This revised approach is perfectly in line with other allies and in agreement with NATO guidelines even if some of the additions do not speak to adding actual obvious capability. Canada’s recent exhaustive re-litigation of what costs to attribute to defence, such as directly related elements of Canadian Coast Guard activities like northern icebreakers, means no additional items can be claimed and counted against our share.

Second, under current plans the projected GDP figure in 2026/27 would increase to a maximum of 1.59 per cent, then decrease significantly thereafter (Figure 2). The PBO determined that to achieve the two-per-cent-of-GDP target, Ottawa would need to spend an extra $57 billion on defence from 2023–24 to 2026–27 ($15.5 billion more in 2023–24; $14.5 billion more in 2024–25; $14.1 billion more in 2025–26; and $13 billion more in 2026–27).

Figure 2: Cash Flow Planned for DND under Strong, Secure, Engaged 

Source: Parliamentary Budget Office, Planned Capital Spending under Canada’s Defence Policy: 2024 Update (February 28, 2024)

In 2026–2027, at the 1.59 per cent peak, defence expenditures are forecast to be $51 billion, which is still $13 billion short of the NATO two-per-cent target of $64 billion, followed by a drop. All recent major announcements of much-needed equipment for the CAF, including fighters, air-to-air refuellers, army vehicles, ships, NORAD investments, anti-submarine platforms and armed drones – to name a few – are part of the Strong, Secure, Engaged programming work begun several years ago. These programs require long lead times to plan, obtain approvals and execute.

This suggests that under current conditions, defence can absorb an additional 0.1 per cent of GDP increase a year, reaching two per cent around 2032. Under different conditions and subject to robust defence management practices (as detailed below), defence could reasonably absorb two per cent of GDP around 2027, the end of the 10-year Strong, Secure, Engaged cycle. Given the extended timelines to buy major defence equipment, an intent to fund the CAF at two per cent of GDP should be announced as a commitment in the upcoming defence policy update with a plan for how long it will take to get there. Further, minimum spending at that level and every year thereafter should begin no later than fiscal year 2027. This approach would avoid a sudden drop in funding and a repeat of circumstances that hollowed out the force and contributed to a situation that the chief of the defence staff assessed as putting the CAF in an “existential crisis.”

In 2021, the Organization for Economic Cooperation and Development (OECD) grimly predicted that Canada will be the lowest performing advanced economy through to 2060. If true, this obviously puts great pressure over a sustained period on a succession of Canadian governments regarding discretionary spending. In view of this and the many demands on a budget, we should expect that the upcoming defence policy update should at least set out a substantive first phase or immediate set of spending priorities to help re-establish the much-needed equipment and readiness foundational base, and a second phase of short- to medium-term investments. Such an effort will help Canadian policy-makers, defence planners and defence industries determine an achievable approach, rather than articulating simply an aspirational strategy.

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The Annual Two-Per-Cent-of-GDP Defence Spending Pledge and its Management

NATO heads of government, including our own respective prime ministers, adopted the two-per-cent spending target as a way to easily measure relative contributions, to ensure NATO members’ commitment to build necessary military capability to face current and future threats and to share the financial burden among allies. The two-per-cent-of-GDP metric is not without its critics. This includes respective Canadian governments and senior military leaders who argued that this imperfect measure does not reliably account for actual capability and the prospective value of military contributions to the Alliance. Nor does it account for a nation’s willingness to send military forces into combat on such NATO operations as those in Afghanistan or Libya (as Canada did), or whether those assets are subject to debilitating caveats on the use of forces placed under NATO command, as some NATO contributors, except Canada, did in Afghanistan.

Canada is a NATO laggard in terms of its percentage of GDP spent on defence. It is tied with Slovenia and ahead of just Spain and Belgium, with Luxembourg on the bottom rung. However, Canada is still the seventh largest spender on defence in NATO (actual dollars, NATO 2023 estimates) behind the U.S., U.K., France, Germany, Italy and Poland. Canada is also the 14^th largest spender on defence in the world. This can be explained by our immense geography, including being bordered by three oceans, our location relative to allies and trouble spots where the CAF deploys, our population and its distribution and our economic reliance on secure international trade. Although imperfect, two per cent serves as a useful expression of political will, is a solid figure inferring a notable level of military capability and is easier to calculate and practically measure than any other model proposed to date. Thus, Canada and all its allies have repeatedly agreed to this formulation.

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Avoiding the Boom-Bust Cycle

Historically, defence spending on four key components – people, operations and readiness training, equipment and infrastructure – has been quite consistent regardless of the budget level. This breaks down to approximately 50 per cent spent on personnel costs including pay and a variety of benefits such as health care, 25 per cent for operations and readiness training, 18-20 per cent on capital equipment (such as ships, planes, trucks) and five per cent on infrastructure (bases, hangars, ranges). While these relative percentages vary, particularly during periods of major capital acquisition, they offer important insight into what the composition of any future budget growth is likely to be, such as more and better-compensated military personnel, higher quality training, new equipment and improved infrastructure. But this tells only part of the story.

Governments have provided multi-decade financial commitments to DND, but defence has not been allocated a sufficient budget to allow for, and ensure, effective long-term planning. Under current policy, spending on capital is slated to ramp up to replace part of the force, but then ramp down, without replacing all of it. Parts of the annually approved allocation of funds are fixed to cover ongoing costs such as salaries. In the main, the overall budget fluctuates significantly as capital procurement projects mature and costs are met. What appears over time to be a series of budgets is in fact a highly uncertain and iterative process that results in a predictable 50 per cent of annual spending on fixed costs for personnel and other non-discretionary items like safety. It also results in a boom-bust cycle of new capital, necessary upgrades and recapitalization or even fuel for the operational readiness of naval, air and land fleets. This management framework makes it extremely difficult for force planners to chart out defence procurement in capital and infrastructure for the longer term and to commit to invest in new and innovative capabilities. It is equally hard for industry to plan and invest in research and development and production capacity. Likewise, without sustained financial incentives it is difficult for research-intensive universities to pivot to help solve complex defence issues in the national interest.

Committing to an annual spend of two per cent of GDP would introduce a legitimate long-term defence budget and catalyze a vastly improved approach to defence planning and management. Central agency (Treasury Board, Finance, Privy Council Office) approvals and oversight of capital and infrastructure programs would necessarily remain, but certainty about the source of funds would eliminate a lot of the challenges that contribute to painfully slow defence procurement. The ability to plan and responsibly spend two per cent annually will be a challenge and demand that the departments now managing this space to significantly change their approach. The most important change will be within government and the bureaucracy where a mandated two-per-cent spend would be treated as a recurring non-discretionary investment rather than a series of discretionary choices that often result in other non-defence interests being funded at the expense of Canada’s national security.

While the DND has faced and continues to face real procurement challenges, the considerable complexities of buying for defence that include intricate supply chains, stringent regulations and fast-evolving technologies must be acknowledged. In the past, the DND has grappled with delays, cost overruns and inefficiencies in procurement processes. However, attributing these issues solely to a lack of funding oversimplifies the situation, and there have been some notable improvements in procurement in recent years. Initiatives such as the Defence Procurement Strategy and the Defence Acquisition Guide, plus the equipment investments recently announced, demonstrate a commitment to reform and greater efficiency.

Responsible procurement goes beyond simply having sufficient funds; it requires a commitment to best practices in leadership, governance, transparency and accountability. Certainly, the CAF has not always demonstrated careful stewardship and attention to detail when elaborating equipment statements of requirements, or cost plus program risk, and must do better. By bolstering these aspects of oversight alongside increased funding, the DND can ensure that resources are allocated judiciously and that procurement decisions are made in the best interests of national security and value to taxpayers.

With increased financial resources, the DND and the federal government could build on and accelerate existing initiatives to improve procurement processes. This would include investing in enhanced training for procurement personnel, improving management boards and other oversight mechanisms and modernizing outdated systems and procedures. Adequate funding would also enable the DND to leverage economies of scale, negotiate better contracts and foster innovation in the defence industry.

With a secure funding source and a mandated minimum two-per-cent GDP expenditure rate, procurement cycles will become faster and continuous. Reinvestment in infrastructure, military housing and training facilities will be possible and a continuous investment in personnel – and in their families’ well-being – can be planned and no longer put at risk. This is a huge change from the current model. The prime minister, implicated cabinet ministers, the clerk of the Privy Council, affected deputy ministers and senior military leaders must drive the necessary process and cultural changes in government. Risks and innovation need to be embraced as part of a much more agile and faster procurement cycle to enable the government to obtain best outcomes on defence spending and stop an otherwise inevitable decline in CAF capability and readiness.

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Envisioning a Canadian Military Funded at Two Per Cent of GDP

The currently forecasted spending peaks in 2027 at 1.59 per cent of GDP. The gap to two per cent from 2023–24 through to 2027 translates into a spending delta of $57 billion. Given the composition of defence spending over decades, with that larger budget one could reasonably expect a growth in personnel and associated costs consuming anywhere from one-quarter to one-half of that, equating to 25,000 to 40,000 Regular Force personnel besides the 71,000 called for under Strong, Secure, Engaged. Even at the high end, where recruitment is difficult, and keeping Reserve Force strength at the current 30,000 maximum, a CAF of 96,000-110,000 Regular Force is still less than during the late 1970s and early 1980s. Minister of National Defence Bill Blair’s recent assessment that the CAF is in a recruiting “death spiral” neatly illustrates the scale of the challenge and the mindset change required to reach higher personnel targets.

One could also expect the relative spend on operations and training, equipment and infrastructure to follow historical trends. The net result would be a larger military equipped with added capabilities to improve Canada’s ability to conduct multiple missions simultaneously including:

• A major boost in support of domestic operations;
• Defending the Arctic and better defending the country’s oceans;
• Preparing for new threats and incorporating emerging technology;
• Transforming the reserves into a more viable force; and
• Facing the increasing threats of conventional wars with modern equipment and weapons.

Over a fairly short time, the cumulative year-over-year impact of additional funding would make a force-changing difference.

While the CAF’s personnel growth is necessary now and into the foreseeable future, emerging technology in AI and robotics and other emerging transformative technologies may at some point allow for a smaller force than proposed. This prospective benefit will be offset by the fact that people will cost more in the future to recruit, train, employ and retain. A highly skilled individual possessing the physical and mental attributes necessary to prevail in combat alongside fellow humans and trusted autonomous systems will be very competitive in the employment market and the salaries, benefits and family support costs of CAF members will need to keep pace. Therefore, a smaller force does not necessarily mean that the historical circa 50-per-cent spend on personnel can be avoided.

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Multiple Missions Capability

The CAF is too small even at its authorized full strength – let alone its current strength, given a shortage of an estimated 16,000 people – to fully respond to what is asked of it now domestically and internationally. Requests for military assistance to support civil authorities helping Canadians facing the perils of fires, floods and weather-related natural disasters have multiplied and are expected to increase. Unconventional requests, such as support to long-term care facilities during a pandemic, place additional demand on at-home forces. NATO commitments to reassure allies, such as those in Eastern Europe – and deployments with allies to protect Canadian interests in the Indo-Pacific – continue to grow. Trouble spots in Africa and the Middle East will erupt and demand rapid military intervention or assistance from Canada in one form or another.

The CAF has no capability to defend on or below the Arctic Ocean and cannot sustain a large force in NATO operations in Europe (the deployment in Latvia is a static activity). One ship sailing three times a year in the vast Indo-Pacific region hardly counts as a consistent presence, with little left for any significant naval operations in the Middle East or off the coast of Africa, let alone capacity to come to the aid of Canadians needing support. At home, governments at all levels, the private sector, citizens and the CAF will face persistent cyberattacks. Our rich resource base and relatively safe way of life foster resentment and spur adversaries to interfere with and try to harm Canada, including the use of disinformation to amplify the impact of the decline of trust in government and its institutions.

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Reserve Force Reform

The Reserve Force model must change, or we risk losing it as a viable capability. The three services use different models to generate and use their reservists and a review of options to achieve 21^st century modernization and relevance is overdue. There would be significant military value, including more robust ability to support domestic operations, in a two-per-cent-of-GDP funded military. With 185 reserve units in 86 cities across the country, part-time military members live closer to where harm or disaster can strike in Canada, and where a need to support civil authority can emerge suddenly. The Canadian Army Reserve Force, long a poor cousin to the Regular Force, should be trained and equipped primarily to conduct and support domestic response operations, while still augmenting the Regular Force for routine overseas missions and mobilize and deploy as formed units in a large conflict. This requires a major equipment enhancement to ensure all 30,000 troops are more usefully employable in times of crisis.

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Defending the Arctic

Russia, China and others will challenge and continue to try to exploit the Canadian Arctic. Even with our U.S. partners in NORAD, this vast territory is relatively undefended. We are unable to exercise credible sovereign control of our Arctic territory and airspace with the air and missile defence capacity necessary to detect, deter or defeat an attack. Current planned acquisitions including the F-35, enhancements to the NORAD system of radars and new Arctic/Offshore Patrol ships will bring some – but not enough – meaningful new capability.

The Arctic will become increasingly attractive to economic competition and face challenges from incursions into our economic zone. We risk losing control of our Arctic sovereignty if we can’t properly defend our ocean, its shores and seabed and the air approaches over the Pole to the rest of Canada and North America. We will need consistent surveillance and immediate armed response when our sovereignty claims are challenged. Consistent fighter aircraft presence and missile defences are essential to defeat air threats that are present and growing. The polar route through the Arctic is the best and likeliest approach for Russia or China to attack Canada or the U.S. with aircraft and missiles. Our Arctic waters are virtually unpatrolled most of the year and we can’t patrol under the ice with submarines or uncrewed underwater vehicles. A CAF funded at two per cent would make the following more feasible:

• A permanent basing of air and missile defences, ice-capable submarines and/or remote sensors;
• Deep-water ports in the Eastern, Central and Western Arctic; and
• A high-readiness rapid response force able to be projected anywhere, anytime within our Arctic territory.

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A Three-Ocean Navy

Whether for deterrence and defence or for search and rescue and monitoring, our vast ocean space is relatively devoid of naval presence on, above or below the water. As adversary naval, air and space-based capabilities rapidly develop, Canada risks being incapable of enforcing sovereign control of our waters. Our most critical capability gap is submarines; the second most critical is caused by the accumulated compromises due to the increased costs to build our new major warships. These ships would replace the aging Halifax-class frigates and the Iroquois-class destroyers, the last of which was decommissioned in 2017.

Cost, schedule and governance pressures have impacted the preferred capability of the Canadian Surface Combatant (CSC), a vital project. The CAF/RCN must have sufficient numbers of globally deployable warships capable of decisive action in our maritime approaches and alongside allies, including full-spectrum coalition warfare. Canada requires greater long-range maritime strike capability, an outstanding anti-submarine warfare capability and more ships, given our three-ocean persistent surveillance and response needs. The CSC procurement must move forward as quickly as possible and a new program of frigates must be conceived, alongside an added focus on uncrewed air, surface and sub-surface vehicles.

Potential adversaries are rapidly developing submarine capability. Due to their stealth, submarines are the priority capability of all serious navies. The CAF has established a submarine project office to begin replacing the four Victoria-class submarines in our inventory with a proposal for up to 12 yet-to-be-determined type of submarines. Given that a portion of the fleet will be in refit for maintenance and others used for training, the fleet’s operational output could be as low as one-third of the total complement. A two-per-cent funding level will offer the opportunity to ensure our submarine fleet can meet our multi-mission requirements while possessing the critical characteristics of range, strike, endurance, stealth, speed and under-ice capabilities to meet Canada’s needs at home and anywhere in the world. Given Canada’s rich history and experience in the nuclear power generation field, and the emerging debate on the utility of nuclear energy (and stored waste) for green transition purposes, nuclear-powered submarines should be in the discussion for at least a portion of the fleet.

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Emerging Technology and the Unforeseen

A too small and inadequately funded CAF will certainly miss the opportunity to study and develop emerging technology and the new capabilities derived from it. The CAF has been too slow to adopt unmanned aerial vehicles (UAVs) and small drones, not to mention uncrewed systems on land, water and sub-sea, and is hard-pressed to keep pace with new and demanding cyber- and space capabilities. The CAF remains largely analog with many of its systems unable to talk with each other and it is losing interoperability with allies. The force’s digitization is essential for both management and operational purposes. A two-per-cent force will provide some needed relief and allow strategic investment in emerging capabilities.

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Large Conflict is Back

The return of great-power rivalry and conflict, including through proxies (such as Hezbollah, Hamas and Houthis, all supported by Iran), points to the return of large technology-enabled conventional conflicts to settle disputes and support political ambitions. The potential for large-scale warfare implicating Canada in Eastern Europe is increasing, as it is in the Middle East and the Indo-Pacific. The prospect of larger conflicts places a premium on highly capable all-domain joint forces networked together by robust command, control, intelligence, surveillance and reconnaissance assets that can operate successfully as part of a coalition or NATO force.

This requirement is equally pertinent to each of the services although current shortfalls can perhaps be more easily understood through the state of our land forces. The Canadian Army is lamentably small and has insufficient artillery, tanks, engineers, anti-tank weapons and virtually no air defence. Its inventory has no armed UAVs and it uses outdated analog command-and-control systems. It is not well supported with field-deployed logistics and has insufficient medical capacity to endure even moderate combat operations. It cannot operate in a contested chemical, biological, radiation or nuclear environment and has insufficient ammunition to train and fight in conflicts. Decades of underfunding of personal equipment and combat uniform programs put our soldiers at greater risk on deployment. Over time, a two-per-cent force would permit a significant investment to reverse the army’s obsolescence and address the lack of big war-fighting capability in all three services.

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Positive Impact on Industry and Academia

A two-per-cent funding environment would provide the CAF with certainty regarding when and how to engage with industry to upgrade, consider or develop new capabilities. It is nearly impossible for the CAF to partner well with industry to do this when both parties have little confidence in funding sources or are absent a mandate to pursue innovative solutions. The importance of this was acknowledged in November 2023 following meetings with defence industry executives and Minister of National Defence Bill Blair, who directed that the long-delayed defence policy update be recrafted to give industry more clarity about long-term spending plans. Partnering with industry is essential for the study and development of emerging technology and, increasingly, for through-life service and maintenance plus upgrading of existing capabilities. Such partnerships would generate the kind of relationships and trust that would, in effect, create a sovereign Canadian arsenal, thereby supplying Canada’s own needs and offering better prospects for export. It would provide much-needed innovation and intellectual property which the country’s economy desperately needs. From munitions production to digitized battlespace management systems and major assemblies, a stronger, mutually beneficial partnership between the DND and industry is necessary and feasible with assured funding.

Similar positive outcomes can be had for academia, which plays three critical roles relevant to force generation and needs increased investment by Defence. First, academics conduct critical research that leads to dual-use (defence and other civilian applications) prototypes and even new sovereign manufacturing capabilities. Researchers, including in the Group of Canadian Research Universities (known as the U15), do this in partnership with industry players and with the DND’s organic research organization, Defence Research and Development Canada (DRDC). Second, universities and colleges educate and skill the future force. They need to be regarded as instruments of national power in the defence and security arena. Third, academics can be powerful advocates for social licence in the defence space. Despite their own challenges grappling with social change, Canada’s universities remain centres of innovation and thought leadership.

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Conclusion: A Better Canadian Armed Forces and a More Secure Canada

Canada faces increasingly complex threats from a variety of state and non-state actors, as well as climate change. That impacts our safety, security and economic well-being. Our military capacity to predict, plan for and meet these challenges and decisively respond is not quite in free-fall, but is certainly in rapid decline. On the international front, Canada’s diminished capacity to meaningfully engage in world affairs in support of our national interests means our reputation continues to wane.

An annual two-per-cent-of-GDP defence spend, as agreed by successive governments, would be a significant forcing function for multiple federal departments to do more to obtain much better outcomes for the money spent. This will require a change in culture and thinking by our political leaders and in government if Canada is to meet the range of threats and potential dangers at our doorstep. A non-discretionary minimum two-per-cent spend would provide certainty in defence budgeting, help secure Canada’s borders including the Arctic, strengthen our military alliances and improve our credibility with the U.S. and other NATO members and partners. It would rebuild the armed forces, including driving recruiting and helping retention. Such a policy would also have a positive cascading effect on Global Affairs and all other departments and agencies working in the intelligence, policing and national security space.

Such funding will not solve every problem, but it will make the CAF more consistently dependable, relevant, modern and capable. Ultimately, a minimum two-per-cent spend would provide Defence and indeed the whole of government with the ability to invest in bringing the DND/CAF, defence industry and universities to work more closely together. This would be enabled by an integrated, trust-based and shared culture embracing risk to accelerate the generation of needed competitive advantage capabilities for Canada’s sailors, soldiers and aviators, as well as cyber- and space operators. It would set conditions for Canada to once again credibly meet its Alliance obligations and contribute directly to Canadian security and prosperity, as well as to a safer and more prosperous global commons. It would show that Canada values its partnership with the United States, respects its outsized contribution and seeks to bolster its resolve to stay engaged with allies, while avoiding any potential blowback from a resentful American body politic. Without more serious attention to how our national defence and security institutions are organized and funded and how monies are spent, lamentably, the CAF will be forced to continue to do its best to manage a debilitating decline years in the making.

The bottom line: That scenario does not end well for national defence, nor for Canada.

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About the Authors

Paul Maddison is a graduate of the Royal Military College in St. Jean, Quebec and served in the Canadian Armed Forces for 38 years. He commanded at all levels, both at sea and ashore, and retired in 2013 from his appointment as Commander of the Royal Canadian Navy.

Paul returned to public service in 2015 and served as High Commissioner of Canada for Australia, with accreditation to seven Pacific Island countries. In 2019, Paul was appointed inaugural Director of the University of New South Wales Defence Research Institute in Sydney and Canberra. There he built deeper relationships and increased collaboration with federal,  state, industry, university and international partners, all with the aim of strengthening UNSW’s  position as Australia’s leading defence university, and to playing a defining role in accelerating  the delivery of capability for the Australian Defence Force. Paul is now the Director of Compass Leaf Consulting through which he provides advisory services across the defence innovation ecosystem.

Major-General (Ret.) David Fraser is the President of Aegis Six Corporation.  David Fraser is a 30-year veteran having served in various command and staff positions in the PPCLI from platoon to Division.  Most notable, he commanded the NATO coalition in southern Afghanistan in 2006. He is the recipient of the Vimy award for contributions to leadership and international affairs and the Atlantic Council Award for international leadership. Since leaving the Forces he has worked in the private sector and now with BMO. He is CTV’s Military Analyst.

He was a panel member on the Jenkins’ Defence Procurement Panel. Today, he sits on a number of boards including Open Text.  David is the CTV Military Analyst along with being a national bestselling co-author of Operation Medusa, The Furious Battle that Saved Afghanistan from the Taliban and The Anticipant Organization.

John Scott Cowan studied physics, then physiology at Toronto. A post-doc at Laval University preceded 24 years at the University of Ottawa as professor, chair of physiology, and then VP. He was then VP at Queen’s University before becoming principal of the Royal Military College of Canada (1999-2008). He has also worked extensively in labour relations, largely in the university sector, and has been called in to resolve problems and crises in 21 universities. He has flown some 60 aircraft types. In addition to his published research, he has written on a broad range of topics related to society, public policy, politics, world affairs and defence. He was president of the CDA Institute 2008-2012, and chair of the Defence Science Advisory Board of Canada 2010-2013.

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Canadian Global Affairs Institute

The Canadian Global Affairs Institute focuses on the entire range of Canada’s international relations in all its forms including trade investment and international capacity building. Successor to the Canadian Defence and Foreign Affairs Institute (CDFAI, which was established in 2001), the Institute works to inform Canadians about the importance of having a respected and influential voice in those parts of the globe where Canada has significant interests due to trade and investment, origins of Canada’s population, geographic security (and especially security of North America in conjunction with the United States), social development, or the peace and freedom of allied nations. The Institute aims to demonstrate to Canadians the importance of comprehensive foreign, defence and trade policies which both express our values and represent our interests.

The Institute was created to bridge the gap between what Canadians need to know about Canadian international activities and what they do know. Historically Canadians have tended to look abroad out of a search for markets because Canada depends heavily on foreign trade. In the modern post-Cold War world, however, global security and stability have become the bedrocks of global commerce and the free movement of people, goods and ideas across international boundaries. Canada has striven to open the world since the 1930s and was a driving factor behind the adoption of the main structures which underpin globalization such as the International Monetary Fund, the World Bank, the World Trade Organization and emerging free trade networks connecting dozens of international economies. The Canadian Global Affairs Institute recognizes Canada’s contribution to a globalized world and aims to inform Canadians about Canada’s role in that process and the connection between globalization and security.

In all its activities the Institute is a charitable, non-partisan, non-advocacy organization that provides a platform for a variety of viewpoints. It is supported financially by the contributions of individuals, foundations, and corporations. Conclusions or opinions expressed in Institute publications and programs are those of the author(s) and do not necessarily reflect the views of Institute staff, fellows, directors, advisors or any individuals or organizations that provide financial support to, or collaborate with, the Institute.

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