Defence budget 2015: promise of long-term funding, but short-term deficits remain

by David Perry

The Hill Times
May 25, 2015

After five years of slashing the defence budget, the Harper Government is promising, if reelected, to restore the funding it removed from the military’s coffers.  

This plan faces two problems. Even if DND sees every penny of this increase, it still has to deal with a massive hole in its finances for years to come. The 2008 Canada First Defence Strategy (CFDS) pledged 20 years of long term predictable funding. That promise evaporated in short order.

As the federal government undertook deficit reduction after 2010, DND shouldered much of that deficit-fighting burden, leaving DND almost $4-billion short of what it would have had this year alone under CFDS. In total, approximately $45-billion in funding was removed from defence through 2026.

In the 2015 budget, the government is promising to give DND a roughly $12-billion increase over that same timeframe. In truth this will only restore about one quarter of the money that was cut from defence during deficit reduction.

The government’s pledges stretches into the distant future with the full $12-billion promised requiring over a decade to accrue—at least three election cycles from now. Real world events make it extremely difficult for any government to stick to long-term defence budget promises. Besides, the people making these promises now will likely not even remain in political life by then.

If this revised funding plan survives, it will give DND meaningful year-over-year real increases, providing the long-term fiscal stability that defence planners always seek. It will also close the gap between the current defence funding line and the original CFDS plan sometime towards the end of the next decade. On both of those fronts, this budget could be good news for the military.

In the meantime, the military remains billions short of the funding the CFDS promised. The bureaucracy has been working on a renewed defence strategy for years but a finished product has not yet been approved. With no new plan, the relief promised in Budget 2015 won’t take effect for two years and it will only accrue slowly, leaving the military short on cash for another decade.

The annual, automatic funding increase for DND, known as the “escalator” will see its budget rise every year by three per cent. This is actually the second time the Harper government has increased DND’s escalating budget increase, but their record the first time suggests that similar long-term pledge should be treated with some healthy skepticism.  

The 2008 Canada First Defence Strategy saw the escalator rise from 1.5 to two per cent in 2011. To its credit, the government stuck to this commitment in the face of the economic downturn. Bizarrely, however, this didn’t prevent the government from simultaneously chopping billions in funding as the government cut federal spending.  

Paradoxically, the defence budget was being cut at the same time that it was being raised by two per cent a year. So the record shows that long-term promises of defence budget increases go out the window the moment a government runs into financial difficulty. The last pledge of long-term, predictable defence funding was supposed to span twenty years and lasted only three. There is no reason to think this new commitment will be any easier to keep.

Even after the 2015 budget, whoever forms the next government faces a defence plan that is unaffordable. A new defence strategy is needed to provide either an infusion of funds or indicate what aspects of the 2008 CFDS should be scrapped so that defence can square the desired ends with its fiscal means. Either option could put the military on a sound fiscal footing which the annual funding increase outlined in the 2015 budget could make sustainable over the long term.  

David Perry is the senior analyst of the Canadian Defence & Foreign Affairs Institute. Perry’s latest paper, ‘Defence Budget 2015: A Long-Term Funding Increase… Maybe’ is available online at www.cdfai.org.