Canada's defence budget heads back to the future
by Terry Milewski (feat. David Perry)
March 27, 2016
"Meet the new boss. Same as the old boss," sang The Who in their 1971 classic, Won't Get Fooled Again.
Sadly, though, for geezers who recall that brave song from 45 years ago, The Who were wrong. We always get fooled again.
So meet the new defence budget. Same as the old defence budget.
In opposition, the Liberals were severely critical of the Conservatives' much-ballyhooed strategy to re-equip the Canadian military — just as the Conservatives condemned the preceding "decade of darkness" under the Liberals.
But neither government ever produced the ships and planes that both said were needed.
Now, the cycle is repeating like the chorus of the old song. Goodbye to the Conservatives' regular chest-thumping announcements that a new day was dawning for a threadbare military — and hello to the Liberals as their finance minister, Bill Morneau, does exactly what the late Jim Flaherty did for the Tories when he had the job.
Like Flaherty in 2012 and again in 2014, Morneau has now punted the budget for defence procurement down the road.
Fear not! We're still planning to buy lots of ships and fighter planes. You just won't find the billions to pay for them in the budget.
No point in having it if you can't spend it
Dave Perry, senior analyst at the Canadian Global Affairs Institute, calls this a "recurring theme" in Canada's defence budgeting, which he calls "depressing." But Perry does not blame either of the two ministers. Rather, he blames a dysfunctional procurement system, which, he says, "simply cannot deliver on schedule."
"In essence, no matter how badly needed, the government just isn't able to get this money out the door on schedule," Perry complains. And the official budget documents confirm it, saying that the earmarked funds "cannot be spent due to unforeseen delays in planned projects."
Unforeseen? That's a stretch. Many defence analysts, including Perry, saw these delays coming long ago. And the budget games are hardly new.
In his time, Flaherty explained the procedure very simply.
"We're not reducing spending on the armed forces," Flaherty told reporters of his February, 2014 budget. Even so, he added memorably, "There is no point in having money there to spend if they can't spend it, which they can't."
See? It was easy. The government had not decided what jet fighters to buy and it hadn't built any ships. So no procurement was actually happening and — poof! — the vast piles of cash required were deftly shifted off the right-hand side of the page and beyond the five-year budget horizon.
Thus exiled from the spending column, the missing money became invisible — as weightless as it was immense, leaving no stain upon the cheery numbers that remained.
Don't try this at home
The time-shifting process worked well for Flaherty, whose balance sheet was thereby spared the inconvenient facts of the future. Now the new boss, Morneau, is doing the same, although his explanation is not quite so pithy.
"In order to make sure that we have the funds available at the time when they need those funds," the finance minister told reporters about the defence numbers, "we've re-profiled some money in the fiscal framework, which is currently in the 2015-16 to 2021 period. And we've re-profiled it to future years so that when we need the money, the money will be in the fiscal framework."
"Re-profiled" is a word only a finance official could love. Here, it really means the money is parked in the beyond. But however numinous, the amount is still impressive. In his two tries, Flaherty moved a total of $6.7 billion in procurement funds off the page in this way. Morneau has now added another $3.7 billion.
So the Liberals are all for spending and job creation and investments — but the federal government has now reached well over $10 billion in defence money that is theoretically earmarked but not even close to being spent. Call it stimulus, call it infrastructure — but it's not being spent. And that's because, as Flaherty said, there's no point in having money there if we can't spend it, and we can't.
Won't get fooled again?
So where has that cash gone? Those determined to find it must take a microscope and dive deeply into page 204 of the new budget. There, the future is squeezed onto one page in tiny font, extending to the year 2045. A graph shows procurement spending rocketing upwards under the old plan, but rising much more gently under Morneau's plan.
Oddly enough, that new plan doesn't match the old level of projected spending on procurement until after the next election. Purely a coincidence, no doubt.
Notice, too, the footnote, in even smaller font. "The annual profile of this funding," it warns, "may be subject to change depending on project schedules."
Still, it must be admitted that the repeated delays in funding do match the repeated delays in buying ships and planes. The minister for procurement, Judy Foote, is reviewing the creaky system and the minister of defence, Harjit Sajjan, is reviewing defence strategy in general. And for now, there seems to be no danger of a new ship suddenly hitting the water and demanding to be paid for.
But the navy, the coast guard, the Defence Department, the shipbuilding industry and anxious experts like Dave Perry are all hoping that Canada's sclerotic purchasing system can be shocked into life.
Otherwise, forget The Who. We just might get fooled again.
"If this situation doesn't change," says Perry, "the 2018 budget will be telling the exact same story of a defence procurement system unable to deliver what Canada needs."