Canada's Defence Spending Questioned at NATO Meeting

The Canadian Press 

The deputy minister of national defence has told a NATO meeting in Halifax that Canada is satisfied it is spending what it requires to meet its alliance and other military commitments.

Jody Thomas held fast to the government's stance on defence spending on Saturday, despite some pointed questioning about Canada's commitment following her presentation before NATO's defence and security committee, part of the NATO Parliamentary Assembly in Halifax.

U.S. Republican Rep. Michael Turner, the committee's acting chairman, asked whether Canada intends to table a plan for meeting the two per cent of GDP standard for defence spending that was agreed to by alliance members at a summit in Wales in 2014.

"Many of the nations that are here are either meeting their two per cent or have in place a plan to reach the two per cent," said Turner. "Canada is one of those countries who has not yet put forward a commitment to reach the two per cent although that is a commitment that Canada joined in making at Wales."

Thomas stuck to the Liberal government's line, saying Canada intends to increase its defence budget by 1.46 per cent by the end of 2024.

"Canada's defence budget is growing by 70 per cent as a result of Strong, Secure, Engaged (Canada's defence policy)," said Thomas. "We also on the ground are leading a significant number of operations, and we have never not participated in a NATO commitment or operation."

She also reiterated that Canada believes it contributes to the alliance in a "qualitative" way through an active participation in the alliance.

"The defence budget is a significant increase in funding for national defence and our prime minister is very satisfied with that contribution," Thomas said.
'It's not enough'

But Bob Stewart, a member of the United Kingdom delegation, reminded Thomas that Canada agreed to the commitment, adding that it's "crucial" it be honoured.

Stewart, a Conservative MP, then questioned Canada's current defence spending commitment.

"It's something like 1.12 per cent at the moment and honestly, it's not enough," said Stewart. "There are many nations that are not doing enough and I include my own nation ... we have all got to contribute more and help the United States that bears the burden."

Thomas shot back that Canada's funding includes its commitment to North American Air Defence (NORAD) and she stated that there are "inconsistencies" in the way the military budgets of member countries are assessed.

"The fact is that who counts what differs from country to country," she said.
Canadian contributions

Later in the day, Defence Minister Harjit Sajjan said budget numbers don't necessarily reflect a country's actual contributions to NATO.

"The NATO Parliamentary Association may not be fully briefed about what is actually discussed at NATO," he said in an interview with The Canadian Press.

"All of this is useless if you don't make contributions," he said, citing a list of Canadian contributions that include leading a battle group in Latvia, providing air policing over Romania, leading a NATO training mission in Iraq and building a new fleet of Canadian warships.

A report released by NATO ahead of last July's alliance summit in Brussels predicted Canada would spend 1.23 per cent of its GDP on defence this year — less than last year's level of 1.36 per cent. That leaves Canada ranked 18th out of the alliance's 29 members.

The decline is largely attributed to two one-time expenses last year:
a retroactive pay increase for service members that was included in the government's defence policy, and;
a $1.8-billion payment into the account that provides pensions for Forces members and their dependents.

In an interview with The Canadian Press, British Air Chief Marshal Stuart Peach, who is chairman of the NATO Military Committee, praised Canada for its "very strong support for the alliance."

Peach pointed to ongoing naval exercises and Canada's support for NATO's forward deployment in the Baltic states along with its support for the training mission in Iraq.

With regards to the two per cent target he remained diplomatic, saying that NATO officials have maintained there are three elements to the overall funding conversation.

"There is defence spending which is about the money, there's then a description and important modernization adaptation of NATO's capabilities of which Canada plays an important role," Peach said.

"And then there's the question of contributions and I've already set out how pleased we are with the range of Canada's contributions."

Public Outcry: The Way to Fix the Canadian Forces

By: Ian J. Keddie, Macleans

Opinion: Why the Canadian Armed Forces are trapped in a catch-22—and why pressure on our politicians is the only thing that can break it

Canada may not be known for its military might—perhaps rightly so. The country’s military budget has fallen among the lowest in NATO, when measured as a percentage of GDP, and procrastination on decisions for new equipment has led to years of delays. A Lester Pearson-era reputation for peacekeeping has subsumed, in the public’s mind, the CAF’s responsibility for national defence.

But despite the limited size of spending on defence, the Canadian Armed Forces have, in fact, maintained a complex and effective range of military capabilities around the world, providing specialist experience and capabilities that are the envy of almost every country. It contributes to a diverse range of military tasks and has maintained a long history of supporting NATO operations, taking part in 19 international military operations and 11 domestic operations in 2017. It has sustained a number of missions in Europe under Operation Reassurance since the Russian invasion of Crimea in 2014. Operation Reassurance has been a sustained effort, with elements of all three services maintaining a presence in Central and Eastern Europe. Canada also has 450 soldiers leading a NATO-enhanced Forward Presence battlegroup in Latvia. In addition to European commitments, the Royal Canadian Navy has deployed a submarine across the Pacific for the first time in 50 years.

Despite this tempo of operations, the Armed Forces are often out of sight and out of mind. Indeed, Canada’s relationship with its military could be generously described as aloof. Little attention is given to the topic of defence in the country’s media, and the Armed Forces often take a backseat to many other national issues. Considering the significant role of the Armed Forces in Canada’s founding myths, military tradition and experience is strangely absent from everyday life, and thanks in part to this feeling of indifference on the part of voters, Canada’s politicians have allowed spending to dwindle.

There are, however, still military issues that provoke attention nationally. Prime Minister Justin Trudeau’s tone-deaf response to a disabled veteran at a town hall meeting in Edmonton last week about why the government was fighting some veterans’ groups in court over injury compensation—because “they’re asking for more than we are able to give right now”—demonstrated a profound misjudgement of attitudes, and he has suffered a wave of criticism as a result.

Trudeau’s comment will only widen the divide between veterans and the government. But a gap between civilian and military culture is not isolated to the Liberal Party: it is the symptom of a broader disconnect in the national psyche.

COUNTERPOINT: We’ve given up on Canada’s military, so let’s abandon it altogether

Canada’s vast geography has a lot to do with that: the country is simply too big and major population centres too far away from the main centres of military activities. Of the world’s 20 largest economies, Canada easily has the smallest military per area of territory. Short of completely demilitarized states such as Iceland or Costa Rica, it is almost impossible to find a country with fewer personnel per square kilometre; as of 2016, Canada has just 0.0066 uniformed personnel to protect each square kilometre, while Australia is the only nation that comes close, with 0.0074 personnel per square kilometre. South Korea is (understandably) the most militarized of the top 20 economies, at 6.24 in uniform per square kilometre.

Of course, this may be an unfair metric for the second largest country on Earth. But an alternative metric, using military personnel per capita, still leaves Canada the fourth-lowest number, with 0.0018 per person. In this instance, Canada is only beaten by India, Brazil, and China, whose large armed forces are eclipsed by their giant populations. Such measurements tell us nothing about military effectiveness or capability, but they do give some indication of the presence of the military in everyday life.

Indeed, Canada’s military is far less visible, particularly to people living in larger urban centres, and Canadians are less likely to know someone who has, or is currently serving in the Armed Forces. Countries such as the U.K., Germany, and Australia have almost 30 per cent more personnel per capita and the proportion is greater still in places like Spain, France, or the United States. The recent attention on defence spending by NATO nations has certainly spurred a greater discussion on the topic and it is right that Canada should gradually take more responsibility for national defence and seek to improve the role it can play with allies and international partners. But it shouldn’t require a wounded former soldier arguing with the Prime Minister for military issues to make the front pages: there are Canadian personnel carrying out tasks around the world every day that largely go unreported.

READ MORE: Why military funding in Canada is in such a sorry state

The other reason for the forces’ lack of visibility is the simple fact of our national peace. More so than perhaps any other advanced economy, Canada has benefited from the peace dividend that resulted from the end of the Cold War, and the implied protection that Canada’s close relationship to the U.S. provides has led to a complacent attitude towards national defence. The Trudeau administration has attempted to reverse Canada’s spending trend and aims to increase spending from around 1 per cent of GDP to 1.4 per cent by the middle of the next decade, but it’s a decision many saw as merely a response to a new era of uncertainty around U.S. policy.

Still, the Trudeau administration has touted engagement with partners and a wider global presence as an aim for the military and Canada’s government agencies, and the country’s various deployments demonstrate an ability to carry out that role. But if Canada wants to maintain such capabilities, then investment in personnel and equipment are vital for the future of the CAF. There was a great deal of praise for the navy’s new supply ship, the MV Asterix, entering service last month, but celebrations should be tempered by remembering that the MV Asterix was hastily procured as a stop-gap until brand new supply ships are delivered some time next decade. Successive governments have delayed decisions on the Joint Supply Ship (JSS) programme since 2004, and no construction is likely to start until 2019. Multiple attempts to choose a new jet has left the air force in need of its own stopgap secondhand F-18s from Australia, and a huge shortfall looms in the number of reserve personnel that the army aims to have by next year. Trudeau’s planned additional investment of $62 billion over the next 20 years is failing to make headwayin the first year of implementation, and there are many areas of the Defence Policy Review that lack specific goals or deadlines.

If Canada wants to invest more in national defence, Canadian attitudes towards delays or can-kicking of procurement decisions must change so that they are politically unacceptable. Such an opportunity presents itself this year when the government selects a winning bidder for the Canadian Surface Combatant (CSC) programme; the CSC, the largest procurement project ever carried out by Canada, represents the future shape of the RCN, and could be the first of many large investments into the future of the CAF under Trudeau. Other, smaller investment decisions in cyber warfare, drones, and satellite communications are capabilities that Canada lacks, and while many of these are outlined as requirements in the Defence Policy Review, they were given no specific plans. Training, recruitment, and retention have also been chronic problems for the CAF, but investment in areas such as these usually fails to grab the headlines in the same way that new jets or ships do.

The stakes are increasing. Two decades of delays and underinvestment will eventually erode Canada’s capabilities. Much of Canada’s military equipment is entering the latter stages of its lifespan, and it is crucial that the money for replacements is invested now rather than left until it is too late. There won’t always be stop-gap options in the future, and it is far more difficult to relearn capabilities than it is to retain them.

In Jack Granatstein’s 2004 book, Who Killed the Canadian Military?, the historian concludes that ultimately, public attitudes have allowed politicians—who should take “the major share of the credit” in the military’s fade—to ignore the CAF. The Canadian interpretation of the military’s role is distinctive on the world stage, as the country sees peacekeeping as the CAF’S primary function and ignored the requirement for national defence. It’s produced a catch-22: the military’s shrinking role throughout the second half of the 20th century often placed it out of citizens’ view, which has led to even less public interest and political appetite. As the Trudeau administration reconsiders the country’s foreign policy and the role the armed forces will play in that, the public needs to provide the momentum for sustained regeneration of the military—before it’s too late.

Ivison: CAF Budget hits Post-War Low

By: John Ivison, The Globe and Mail

Justin Trudeau will head to Sicily next month for a NATO meeting with Donald Trump and other allies. The defence department hopes to release its major policy review before then, but perhaps it would be just as well if the Prime Minister goes empty-handed.

The Americans want Canada to live up to its commitment to spend 2 per cent of GDP on defence, but new figures suggest this year the country will hit a post-war spending low of just 0.88 per cent. Last month’s federal budget said the defence policy review will put the Armed Forces on a “sustainable footing,” but there was no money in that budget — in fact, $933 million earmarked for capital spending was pulled out of the defence budget over a six-year period.

This is a bad omen for the prospects of a major cash infusion. In previous reviews, DND got the money first and then published a policy outlining how it would be used.

Multiple sources say that the military submitted its plan to the federal cabinet only to have it sent back to the department for some pruning.

One particular thorny issue is ballistic missile defence, the cost of which is almost impossible to gauge since the Americans won’t talk hard numbers until Canada agrees to sign on. Nobody in defence minister Harjit Sajjan’s office would talk about cabinet discussions but sources expect the review will fudge on the subject by simply asking the military to examine the issue more closely.


David Perry, a senior analyst at the Canadian Global Affairs Institute, said he doesn’t believe the defence policy review is likely to assuage American concerns that Canada is a free-rider when it comes to defence.

“I’m not hearing they are dealing with a ton of money,” he said.

Before the federal budget, Perry wrote a paper suggesting the budget would establish the fiscal framework for the defence policy review. Ahead of similar exercises in 2005 and 2008, spending increases were included in the budget.

“If the outcome of the Defence Policy Review is an expansionist defence policy, and the minister of National Defence has indicated it will be, its short-term success depends on getting the needed funding put into the fiscal framework in the 2017 budget,” he wrote.

That didn’t happen — in fact, the government withdrew $8.48 billion from the fiscal framework over the next 20 years, to help pay for other priorities.

Trudeau — and his predecessor Stephen Harper — have long argued that share of GDP devoted to defence is not a good measure of Canada’s commitment to NATO.

“While the argument has merit, it would likely carry more weight if the share of our GDP devoted to defence were not in decline,” said Perry.

At $18.7 billion, defence spending is also at a new low in terms of share of total program expenditures at 6.11 per cent.

The same Senate defence committee report that found Canada is approaching a post-war low point in spending concluded that the Canadian military is “chronically underfunded,” pointing out that the Forces need more than $2 billion in new money, just to maintain current operations.


Support in cabinet for a major increase in defence spending is clearly tepid

“As the world becomes a more complex place, especially with rogue regimes and non-state actors seeking and acquiring biological, nuclear and chemical weapons, and mobile missile launch capability, Canada should not rely on others to protect our national interests and defend our sovereignty,” the report said, as it recommended Canada sign up for BMD and double defence spending to 2 per cent of GDP over the next 11 years.

There are no signs that the defence policy review will reflect similar thinking.

Canada has committed to some 600 soldiers for a still-undefined peacekeeping mission in Africa; 450 troops are already in Latvia; a further 830 personnel are contributing to the fight against the Islamic State of Iraq and the Levant.

Gen. Jonathan Vance, Chief of the Defence Staff, said the Canadian Forces are fully capable of doing what has already been announced. But it would be a career-limiting move for a general to suggest otherwise.

Support in cabinet for a major increase in defence spending is clearly tepid, and closing the funding gap does not appear to be a priority for the Prime Minister.

Yet his most important foreign policy task is to have a close working relationship with the President of the United States.

If Trudeau turns up in Sicily with a defence plan that indicates Canada is not serious about paying its own way, he will be greeted by a turbulent President Trump, one in transition between Dr. Jekyll and Mr. Hyde.

Canadian Navy Weakened: Analyst

By: FRAM DINSHAW, The Chronical Herald 

A senior defence analyst has branded last week’s federal budget as “unhelpful” for Canada’s navy at a time when Vladimir Putin’s submarines increasingly lurk off Nova Scotia’s coast.

(HMCS) ST JOHN’S transits to the Black Sea on February 1, 2017 during Operation REASSURANCE. (LS Ogle Henry, Formation Imaging Services)

David Perry, a fellow at the Canadian Global Affairs Institute, said that this year’s budget essentially kicked $8.48 billion of funding down the road to 2035-36, meaning that Canada’s navy will not receive needed submarines to patrol its Atlantic shores.

“The Canadian government does not have funding at present to maintain a modern submarine capability,” Perry told the Chronicle Herald.

The Royal Canadian Navy is further hamstrung by its current lack of destroyers. All four of its Iroquois-class vessels are now decommissioned and construction of the new Canadian Surface Combatant vessels in Halifax’s Irving Shipyard will not begin until the mid-2020s.

Their construction must wait until Irving completes the construction of six Arctic and Offshore Patrol Ships, vessels designed to secure Canada’s Arctic frontiers against Russian naval incursions.

Perry noted that Russian submarine activity in the North Atlantic is back up to levels not seen since the 1970s and 1980s, when the Cold War between NATO and the Soviet Union was at its height.

As in the Cold War, Russian submarines set sail from their bases on Russia’s Arctic coastline, track around the Norwegian coast and thread their way past Scotland, Iceland and Greenland into the North Atlantic. Once there, they can roam as far as Nova Scotia and America’s Eastern Seaboard.

The Russian submarine fleet is now less than one-fifth of its peak Cold War size,when it numbered 250 vessels, according to a 2016 report by The National Interest.

But Putin’s navy is significantly better-trained and more technologically advanced than immediately after the Cold War, when a lack of funding meant that aging submarines remained stuck in port through the 1990s.

The Russians have recently deployed new Borey-class nuclear-powered subs capable of launching ballistic missiles and have also upgraded their diesel-powered Kilo submarines, among other improvements.

Perry warned against western complacency, saying that Putin’s navy possessed “multiple and varied modern subs.”

A resurgent Russia challenges Canada on two fronts: submarine activity in the Atlantic and increased military activity on its Arctic borders where significant reserves of oil and gas may be located.

The Russian military can deploy submarines and icebreakers to probe Canada’s Arctic and also possesses long-range bombers and missiles, meaning that Canada and the U.S. must upgrade the North American Aerospace Command’s capabilities. This may mean installing missile defence systems on Canadian soil, but in 2005 Ottawa rejected an American invitation to join such a program.

Since then, Moscow has deployed long-range cruise missiles in Syria, launching them from the Caspian Sea over Iran and Iraq against rebels fighting against Bashar al-Assad’s government. Such missiles may also threaten Canadian Arctic security.

“(The Russians) can probe, they can sense, they can do a lot of things to improve their knowledge of our northern passages, so that is a potential threat that Canada should take some measures to counter,” said Brian Wentzell, director of Nova Scotia’s Royal United Services Institute.

A third land front is in Eastern Europe, where ethnic Russian militants are fighting in eastern Ukraine against that country’s pro-Western government and Putin’s troops continue to occupy the Crimean Peninsula along the Black Sea. Canada and its NATO allies have provided support and training to Ukraine’s military.

Wentzell warned that Putin’s intelligence operatives may use ethnic Russians in Lithuania, Latvia and Estonia to stir up a Ukraine-style conflict in the Baltic Republics.

“The concern that I have is that we’re not sending a strong enough message to Russia — or anyone else for that matter — that we’re prepared to stand up for what we believe in,” said Wentzell.

Adding to Canada’s military challenges is Ottawa’s ongoing Defence Policy Review, a nationwide public consultation that has not yet been completed.

Canadian Forces, Security get Short Shrift in Budget 2017

By: Amanda Connolly, iPolitics 

Anyone hoping that Budget 2017 would provide insight into how the government plans to exercise soft or hard power abroad is going to be disappointed – as are any who hoped for a ballpark estimate of the costs of ambitious new programs like enhanced pre-clearance or the national security committee of parliamentarians.

This year’s budget offers little – and in many cases, nothing – in the way of plans to support the Canadian Forces or domestic security agencies. It also offers no insight into how, or if, the government plans to address pressure from the Trump administration to meet the two-per-cent of GDP target set by NATO allies for defence spending.

Budget 2017 includes no new money for the Department of National Defence, although the department is scheduled to get a bit of pocket money in the form of $134 million that kicks in this year under the escalator increase put in place by the former Conservative government in Budget 2015.

Until the long-awaited Defence Policy Review is completed, officials said Wednesday, the government will not be releasing any information about planned costing measures for the military.

The terms for the panel of experts advising Defence Minister Harjit Sajjan on the Defence Policy Review were extended last month to run until April 28. Although the listing on the Privy Council Office website stated the terms were extended so the panel could help finalize the report, a spokesperson for the minister said shouldn’t be taken as a timeline for the report’s release.

“We know how important it is to play our role internationally … we also know how important defence is to our economy,” said Finance Minister Bill Morneau in a press conference Wednesday, noting the pending release of the Defence Policy Review. “That will show our level of ambition.”

Budget 2017 does clarify the ongoing cost of renewing Canada’s military training mission in Ukraine, which decreases from $32 million per year in 2015 and 2016 to $29 million over the next two years.

Officials say that decrease reflects the start-up costs of the mission and not a reduction in the work Canadian soldiers are doing on the ground in Ukraine, given that the mission mandate is unchanged.

The government also adjusted the total amount of money allocated for large-scale capital projects – funding that was punted forward by about 30 years in Budget 2016.

While that budget set a total of $84.3 billion for deferred spending on military procurements the department isn’t ready to complete, Budget 2017 puts that figure closer to $83 billion.

The only new spending more-or-less related to defence is $13 million over five years to implement the Arms Trade Treaty, which Canada is set to join this year.

On the security front, the budget news is equally thin.

Despite suggestions that the government could have the planned new national security committee of parliamentarians in place by the end of the year, the budget allocates no new money for the committee’s secretariat, or for the reported $500,000 needed for renovations to upgrade existing meeting facilities to house the committee.

The same goes for plans to enhance pre-clearance efforts on both sides of the border under C-23.

The Canadian Air Transport Security Authority, Transport Canada and the RCMP will get an operational top-up of $125 million; CATSA and Transport Canada will get roughly $600,000 each from that envelope to support existing security screening measures for airport staff.

The Canadian Security Intelligence Service will share $1.25 million with Public Safety Canada to keep screening foreign investors for potential threats to Canadian national security – but there is no new money for CSIS’s operating budget or oversight, or for its sister signals intelligence agency, the Communications Security Establishment.

However, the government is recognizing the unfailing creativity of those who would like to blow up public spaces by giving $8.7 million over five years to Natural Resources Canada to expand the list of regulated chemicals to include those that could be used to create homemade explosives.

That list has not yet been finalized, officials said.

Public Safety Canada will get $1.37 million this year for its Regional Resilience Assessment Program and the Virtual Risk Analysis Cell, which together work to conduct site assessments of critical infrastructure facilities and share that information with those who operate critical infrastructure.

Community organizations looking for help in setting up security equipment like cameras for their facilities will be able to access $5 million that will be rolled out over five years through Public Safety Canada’s Security Infrastructure Program.

The only area seeing substantial new money this year appears to be the asylum system, which will get $62.9 million over five years and $11.5 million each year after that to provide better legal aid to asylum seekers.

Budget 2017 also includes $29 million over five years, with $5.8 million each year after, to allow officials with Immigration, Refugees and Citizenship Canada to intervene in asylum hearings to verify the information being provided in the applicant’s claim.

Yazidi refugee resettlement efforts will also get $27.7 million over three years, although there is no indication of how the government may adjust the soon-to-be-reevaluated mission against ISIS in Iraq.

The $167 million over three years that was announced in Budget 2016 for that mission continues and does not appear to have been changed.

Bad News for Defence: Budget 2017

By: David Perry, CGAI Senior Analyst

On March 22, the Government of Canada published a federal budget with nothing but bad news for Canada’s Department of National Defence (DND). This budget, the second for Prime Minister Justin Trudeau has removed a massive amount of money - $8.48 billion - set aside to buy Capital equipment and build infrastructure over the next twenty years. This shift, the largest ever re-profiling of the money earmarked to buy new kit and buildings for the military, is bad news for three reasons. First, the budget indicates that either the defence procurement system the Liberals inherited has not improved over the last year, or that the Trudeau government is choosing to remove the funding. Second, while defence funding has been shifted before, never have defence dollars been removed more than six years into the future. This budget removes defence funding allocated out through 2035-36, taking away future procurement funding that was scarce to start with. Third, the budget signals that Canadians should expect their new defence policy to reflect a military with significantly less money than it had prior to March 22, 2017.

Budget 2017 And Defence – Disappearing Capital Funds

The only statement of major significance for DND in Budget 2017 relates to a major shift in procurement funds. This is the fourth such shift of procurement money announced since 2012, but the first to announce a reallocation spanning more than six years (these shifts are outlined in Table 1 below). As the budget states:

The reallocation of $8.48 billion of funding from the 2015 – 16 to 2035 – 36 period to future years is required to accommodate two key capital projects: the procurement of fixed-wing search and rescue aircraft, and the modernization of light armoured vehicles that were originally scheduled to receive only partial upgrades. While there is sufficient funding available for these projects, the expected profile of large-scale capital funding does not align with the timing of expenditures associated with these projects.1

Aside from the two projects identified in the budget plan itself, finance officials in the budget lock-up were unable to identify any other projects implicated in the shift of funds. This leaves the move largely unexplained. The contract for the Fixed-Wing Search and Rescue Aircraft was signed late last fall and the one for the most recent tranche of Light Armoured Vehicle Upgrades announced in February 2017. The contract for the former is worth $2.4 billion in the acquisition stage, while the one for the latter only $440 million. Even if both projects were cancelled completely or delayed in their entirety beyond 2036 (and there is no indication that they were cancelled or delayed at all) they could account for at most $2.84 billion of the funding that is being shifted. This leaves another $5.6 billion worth of shifted funds totally unaccounted for, and the overall move effectively un-explained.

Procurement Problems or Reductions by Choice?

The Trudeau government inherited a procurement system chronically unable to spend all of the funding allocated for DND to buy new equipment and build infrastructure. In his first budget in 2016, Finance Minister Bill Morneau reprofiled $3.7 billion in Capital funds, citing an inability to spend the money. Having been in office for only five months at the time of the 2016 Budget, the Liberals cannot not be faulted for having shifted money that the previous government was unable to spend.

Twelve months later, however, responsibility for the shift of Capital funding outlined in the 2017 Budget, more than twice as large as any that preceded it, falls squarely on the Liberal government. Either $8.48 billion worth of procurement delays have developed since March 2016, or the money was reprofiled for other reasons.

Table 1: Budgetary Reprofiling of DND Capital Funds ($B)
	11/12	12/13	13/14	14/15	15/16	16/17	17/18	18/19	19/20	20/21	21/22	Total
Budget 2012*	-0.400	-0.500	-1.300	-0.700	-0.300	-0.100						-3.540
Budget 2014**			-0.592	-0.575	-0.900	-1.075						-3.142
Budget 2016***					-0.205	-0.090	-1.319	-0.911	-0.684	-0.507		-3.716
Budget 2017****						-0.197	-0.017	-0.102	-0.014	-0.091	-0.512	-8.480
Total	-0.400	-0.500	-1.892	-1.275	-1.405	-1.462	-1.336	-1.013	-0.698	-0.598	-0.512	-18.878
*A total impact of $3.54 billion was announced in Budget 2012, Table 6.3, p. 236. The annual reductions depicted are those shown in Budget 2012, Table 6.3, p. 236, and do not sum to $3.54 billion
** Budget 2014 Table 4.1.1, p. 260.
***Budget 2016 Table 6.1, p. 204 and Information provided by Government of Canada Officials
**** Budget 2017 Table 3.2, p. 204 and p. 186. Only $933 million was accounted for in the budget document - leaving the total depicted well short of the $8.48 billion that was indicated to have been shifted.

A Long-Term Capital Crunch

All three of the previous shifts of budgeted procurement funds have occurred citing procurement problems and an inability to actually spend the money available. This budget defers funding over the next two decades. This is especially surprising because prior to Budget 2017, DND was facing an acute shortage of funds needed to buy new equipment and rebuild infrastructure in the future. Public documents indicated that before the changes made in Budget 2017, DND needed roughly another $2 billion a year annually, on average, in additional Capital money to acquire all of its planned projects and that was before the Liberals announced plans to buy not one, but two fleets of fighter jets. Budget 2017 indicates that after 2021-22, DND will have $7.5 billion less funding through 2035-36 to buy new kit and build new buildings, just when it needed the money the most.

A Less Ambitious Defence Policy

The 2017 federal budget is particularly important for DND because it sets the fiscal framework for the Liberal’s new defence policy. This budget is a crucial indicator of the type of defence policy the Trudeau government will publish because, in Canada, defence policy has historically followed defence dollars, not the other way around.

In an interview during the budget lock-up, Finance Minister Bill Morneau indicated that the Defence Policy Review will indicate the Liberal government’s level of ambition for Canadian defence policy. Budget 2017, by removing funding over the next two decades, suggests quite strongly that the forthcoming defence policy will lower Canada’s level of defence ambition.

Drozdova: Thoughts on Future Conflict and its impact on DND/​CAF

By: OKSANA DROZDOVA, CDA Institute 

The following is a summary of the CDA Institute Roundtable “Defence Policy Review Considerations: Thoughts on Future Conflict and its impact on DND/​CAF” held on 25 May 2016. These roundtable discussions are held under the Chatham House Rule. This summary reflects Analyst Oksana Drozdova’s perception of the discussion. The CDAInstitute thanks our Strategic Partners Lockheed Martin Canada and General Dynamics for their generous sponsorship of the 2016/​17 Roundtable Discussion Series.

The electoral platform of the current Liberal government was filled with promises, one of which was the pledge to exercise informed decision-​making. This particular pledge has recently been put to test with the launch of the Defence Policy Review (DPR). With a few roundtables already concluded, the first being held in Vancouver and subsequent ones already held in Toronto, Yellowknife, and Edmonton, informed observers of Canadian defence policy are still keen to share their ideas on the future of Canada’s defence policy.

A recent roundtable organized by the CDA Institute, titled Defence Policy Review Considerations: Thoughts on Future Conflict and its impact on DND/​CAF, provided a venue in which contributors shared their ideas as to which key aspects of the country’s defence policy should be addressed in the DPR.

With the Liberal government proclaiming “Canada is back,” it is still unclear how exactly the “comeback” is going to happen. On one hand, the Liberals want to bring Canada back as a champion of peacekeeping. On the other, security of sovereign territory and national interests, as well as commitments to the NATO allies require more resources. The theme that should figure most prominently in the crafting the DPR, at least in this early stage, is prioritization. Will we, as a nation, be able to sustain all these roles, and if not, which should be privileged above the others?

Indeed, the financial realities of budgetary considerations (fiscal constraints) will most likely, in one way or another, guide the pen of those creating the final draft of the renewed defence strategy. And when the time comes for making the decision, the question will inevitably arise: Which strategy, broad overhaul or strategic investment, is right for us?

Numerous arguments are in favour of both approaches. Indeed, the image of multi-​purpose combat capabilities has its appeal. A flexible, combat ready army is capable of standing on its own as well as contributing to allied efforts in a meaningful way. Moreover, access to a wide range of capabilities will allow Canada to strengthen its defence posture abroad and ensure its national security at home. Moreover, while ties with the US are strong, Canada cannot forever piggy back on the support of our better equipped ally. As such, the general opinion maintains that a truly secure Canada should be able to at least defend its own territory and interests without relying entirely on the assistance of its neighbour.

However, as was raised in these discussion, in our current economic state, broad based capabilities are not something Canada can afford. And, as tough choices will need to be made, concentrating on areas of expertise in which Canada excels will yield the most benefit. In prioritizing a particular defence niche, we should not conceive of it as a means to repel a specific threat; threats constantly change. On the contrary, we should develop specialized capabilities that would be flexible and widely applicable.

Furthermore, at their essence, broad-​based capabilities are chiefly designed to repel aggression from a state. This concept of warfare is largely outdated as the potential of a true ‘state on state conflict’ is highly unlikely. Indeed, cyber-​attacks, hybrid warfare, non-​state actors, and the consequences of climate change (most notably mass migrations) are the most prominent future sources of instability. Conversely, our current defence structure, which is predicated on the broad-​based capabilities model, is designed to repel an open state aggression and has been adapted to deal with fragile states and non-​state actors. Yet, other than Russia’s sabre-​rattling, there is no significant state threat that would force Canada to engage in ‘state-​on-​state’ warfare. With low chances of a direct state assault, certain areas of broad-​based capabilities, which also happen to weigh the most heavily on the defence budget, become under-​utilized.

With dozens of ongoing conflicts around the world, Canada has any number of choices when it comes to committing its military resources. Identifying the most pressing areas in which Canadian military involvement can make the greatest impact is of the essence. For instance, while Canada can renew its longstanding commitment to UN peacekeeping as promised, it seems unlikely it can at this time return to peacekeeping on the scale that it practiced in Cyprus and Bosnia. Instead, it should strive to offer targeted technical expertise and state-​building knowledge to missions worldwide. Canada’s efforts in Afghanistan provide a good example of how persistence and targeted military intervention can help maintain a fragile and much needed balance in an unstable region.

Western democracies are gradually learning and accepting that intervention has to be comprehensive in scope and long-​term in duration. With the pattern of global instability and threats constantly changing, it will be increasingly difficult to address threats earlier – the difficulty of understanding and responding to them will remain proportionate to their complexity. Instead, Western democracies need to build and promote internal capacities and societal resilience of fragile states. And since peacekeeping, or peacebuilding – as some experts prefer to call it, stating that it is not merely a question of semantics – is what many Canadians view to be a staple of our national identity, Canada’s commitment to those operations will have to be significantly furthered and augmented.

With future military threats becoming increasingly volatile and uncertain, our military strategy will require interaction with an ill-​defined combination of state and non-​state actors who are both declared and undeclared. Multilateral engagement and allied cooperation will thus become the most effective framework to address these complex issues. The reality is as true for the idea of pursuing independent foreign policy as it is for vigorous and interventionist multilateralism, in which the international community has certainly missed the tone and substance of Canada’s well-​honed role. And if we are indeed serious about “being back,” innovatively excelling in our strengths while cooperating with our allies in a meaningful way will allow for fruitful investment with tangible results the Canadian public can see and take pride in.
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Oksana Drozdova is an Analyst with the CDAInstitute currently working towards a Master’s degree at UOttawa’s Graduate School of Public and International Affairs (GSPIA). Her research interests focus on International security, Eastern European studies and issues of statehood in political theory. (Image courtesy of Bruce Campion-​Smith/​Toronto Star.)

Canada ranks 23 out of 28 NATO countries on defence spending

By: Murray Brewster, CBC News 

The Trudeau government won praise Monday along with some European allies who have chosen to put more into their militaries, despite only promising to increase defence spending by a whisker in the current budget year.

New figures released by NATO ahead of this weekend's leaders' summit show Canada inhabits the lower third of NATO membership in terms of defence spending, with the government planning to spend an additional .01 per cent of the country's gross domestic product on defence.

The increase, which is only anticipated because the 2016 budget year is just getting underway, will see Canada's defence spending rise to .99 per cent of GDP from .98 per cent.

To put that in perspective, the North Atlantic military alliance has established two per cent of GDP as its annual investment benchmark. Canada is ranked 23rd out of 28 member countries, wedged between Hungary and Slovenia.

It has been a source of frustration for the Americans, something that manifested itself last week in U.S. President Barack Obama's speech to Parliament, where he pointedly called on the Trudeau government to meet the NATO measure because "the world needs more Canada."

The irritation was also felt in Brussels, where NATO Secretary General Jens Stoltenberg has struggled to convince hesitant allies to pry loose cash in the face of a resurgent Russia.

"Last year, after a long period of decline, we saw a small increase in overall defence spending by NATO's European Allies and Canada," the secretary general said Monday.
'A very long way to go'

Stoltenberg, who has regularly but diplomatically rebuked nations for failing to meet the two per cent standard, chose to focus his praise on what's known as "real" defence spending — the total dollars each ministry pours into its budget without accounting for the corrosive effect of inflation.

He said NATO is pleased to see an expected increase of three per cent in defence spending by European Allies and Canada in 2016. That amounts to about $8 billion US, and 22 of the allies are planning bigger budgets.

"So, we are both spending more and we are spending better," he said. "But we have a very long way to go and we must keep up the momentum."

According to NATO figures, Canada will set aside $20.3 billion for defence in 2016, an increase from $19.4 billion last year.

Stoltenberg's praise raised a few eyebrows among defence experts, who point out it comes just a few days after the Liberal government committed to send troops and headquarters formation to a NATO high-readiness brigade, which is slated to deploy to eastern Europe.

Troops from the U.S. Army's 173rd Infantry Brigade Combat Team parachute from a Boeing C-17 Globemaster III during a NATO-led exercise held together with Canada's 3rd Battalion and Princess Patricia's Light Infantry, and Poland's 6th Airborne Brigade in southern Poland in May 2014. (Kacper Pempel/Reuters)

"If we were not going to take a leadership position on one of NATO's key priorities, I imagine that we would be having a very different conversation right now," said Dave Perry, an analyst with the Canadian Global Affairs Institute. "We have been getting a free pass on our actual budget commitments because we are heavy lifters when it comes to operations."

Perry noted the country's No. 23 ranking at NATO and said there's little in the Liberal government's plans or public statements that will change that.
Risk of a 'hollow force'

During the 2015 election campaign, Justin Trudeau promised not to cut defence expenditures and to live up to Conservative pledges of an additional two per cent annual increase, starting in 2017.

The government is in the midst of a strategic defence review, which could be completed in time for the next budget, but Perry said the Liberals seem to have other priorities.

"Our allies will remain disappointed with the actual amount of money we put on the table, and I suspect we can fob off the criticism by showing up for operations," he said.

But Perry warned that strategy runs the risk of further wearing down equipment and personnel, creating a "hollow force."

A spokeswoman for National Defence responded that government agreed at the 2014 NATO summit in Wales that bigger budgets were in order, but that committing to a "fixed target" was not something Canada was prepared to do.

Dominique Tessier said the NATO two per cent benchmark is "a statement of aspirations" and the prodding by allies was meant "to reverse the trend of falling spending on defence among allies and to optimize the use of available funds."

Defence Review Could Lead to Reduced Canadian Army

By: Richard Cohen, iPolitics 

The federal government, as part of its ongoing Defence Policy Review (DPR), recently announced public consultation on the future of Canada’s armed forces. So what does Defence Minister Harjit Sajjan have in mind — a political exercise, or something more in-depth?

For all its faults, the Conservatives’ 2008 Canada First Defence Strategy (CFDS) was developed inside a clear fiscal framework … which was later discarded. In contrast, the DPR is wide open and (allegedly) not constrained by financial considerations. But as everyone knows, the size and shape of the Armed Forces will be determined by what the government decides to spend on defence. Money drives defence policy.

Given the big budget deficit, it’s hard to imagine the Liberals significantly boosting defence spending. Their aim is a ‘leaner and more agile’ military — almost certainly a code word for ‘smaller.’ And as any seasoned politician or bureaucrat knows, the $4 billion in equipment spending that was deferred for five years in the March budget is unlikely to return to Defence. Even if it does, by that time ‘defence inflation’ will have gobbled up a good part of its value.

Ideally, the government would announce that, unlike its predecessors, it will begin to work toward the agreed NATO goal of spending 2 per cent of GDP on defence. Canada, as one of the lowest-ranking military spenders in NATO, hovers around 1 per cent. But barring a major international crisis, or an unexpected change of heart, such an increase in defence spending isn’t likely to happen.

So the DPR will have to be developed within realistic financial limits. This means focusing only on military capabilities that are absolutely essential to our national interests — while relegating the rest to the ‘nice to have but can’t afford’ category.

So where to start? Nearly everyone agrees on the three basic roles of Canada’s Armed Forces: defence of Canada, defence of North America with the U.S. and contributing to international operations.

Reducing the Army’s strength — which is more than double that of the other two services — would free up funds for higher-priority capabilities.

The first two roles are not optional; the third may have to be. The only way Canada can continue to contribute to international operations is if the capabilities it funds for its primary and secondary military roles — defence of Canada and of the continent — can be adapted to overseas conflicts.

Let’s break down those three roles according to what they require. Defending Canadian territory starts with a robust surveillance capability for all three coasts and for our vast land area, including the Arctic. For this we need satellites, land-based sensors and radars, underwater devices and unmanned air and underwater vehicles — backed up by the Canadian Rangers, who spread very thinly across the North. We need ice-capable ships, transport aircraft, heavy-lift helicopters and quick-response army units to react to incursions or incidents. An effective anti-submarine capability and submarines capable of travelling under ice complete the picture. Tasks like air search-and-rescue and routine domestic disaster response could be transferred to non-military organizations.

Continental defence overlaps with national defence. The focal point for continental defence is NORAD, and it requires advanced interceptor aircraft, an integrated Canada-U.S. ballistic missile defence system, joint maritime surveillance and a new and more effective North Warning System across the Arctic.

State-of-the-art jets, ships, submarines and UAVs are essential for both these roles and also could make a useful contribution to international combat operations. But they are expensive to buy, operate and maintain.

So what do we have to give up?

The Army relies on people. People are expensive and account for half of our defence budget. Reducing the Army’s strength — which is more than double that of the other two services — would free up funds for higher-priority capabilities. The government and Canadians would have to accept that our ground forces cannot play a significant role in allied combat operations.

Our mechanized forces, based around a small number of (expensive to maintain) Leopard 2 tanks, cannot contribute much to major combat operations. Canada’s Light Armoured Vehicles (LAVs) and the new military trucks would be useful in small-scale overseas operations, including support for the UN — but in smaller numbers. So tanks and other combat vehicles, and the ground units that operate them, probably will have to be reduced or eliminated.

The DRP must ensure that, at minimum, we have world-class defence capabilities on the home front. Some ships and aircraft can be ‘double-hatted’ for international operations. But limiting our ambitions to contribute to major land battles overseas makes sense — and would release money needed to effectively defend Canada closer to home.

CDA Institute Analysis – “Trudeau’s Promises: From Coalition Operations to Peacekeeping and Beyond”

In this new CDA Institute Analysis, Stéfanie von Hlatky looks at the key considerations that should help guide the deployment of the Canadian Armed Forces (CAF). The following is an excerpt of the Analysis.

Academic and policy discussions on Canada’s future role in multinational military interventions inevitably refer back to the long war in Afghanistan. Canada’s involvement, as part of Operation Enduring Freedom (OEF) and the International Security Assistance Force (ISAF) evolved significantly over the years. Canada’s reputation as an alliance partner also improved noticeably in the process. As of 2006, the Canadian Armed Forces (CAF) were known for operating with few caveats and were at the forefront of developing a viable whole-​of-​government approach as part of their design of the Provincial Reconstruction Team (PRT) in Kandahar, despite obvious shortcomings.

Although the success metrics of the war in Afghanistan are hard to establish and the overall outcome of the intervention is inconclusive at best, the experience tells us a lot about Canada’s standing in alliance politics and what the CAF can be expected to do in the future as part of those coalitions, given the skills and expertise acquired during this war-​intensive period. Indeed, the CAF acquired diverse skills as the intervention called for both community engagement and warfighting, with a lot of necessary adaptations along the way.

Beyond the lessons learned from the previous war, Canada’s military role abroad should be guided by clear foreign and defence policy guidelines. The last defence policy statement dates back to 2008. With the economic recession hitting the country at about the same time, many of the plans outlined in the Canada First Defence Strategy had to be shelved. Now that there is a Liberal government in power, under the leadership of Prime Minister Justin Trudeau, the Department of National Defence (DND) has been tasked with conducting a defence review. The review process includes public consultations across Canada, through the organization of events, roundtables, and discussions on social media. The result of this process will be unveiled in January 2017 and will provide greater clarity on Canada’s role in operations, force levels, readiness, and personnel issues.

This paper examines the conditions under which Canada should consider deploying the CAF and considers some of the motives that play into the decision-​making process. It does so by taking into account past and current CAF operations, as well as the defence priorities that have already been announced by the government. I argue that, moving forward, the Canadian government ought to think much more about the type of mission that is well suited for the CAF, where Canadian soldiers are most needed, as well as which allies and partners are best to work with.

Alliance Politics

One of the assumptions of this paper is that maintaining a reputation for reliability within an alliance setting is one of the main currencies of influence for a medium-​sized country like Canada. Therefore, decisions on the use of force are assessed in reference to Canada’s most important allies. That being said, it is worth asking whether Canada paid too high of a price to boost its reputation over the course of the Afghan War. In Afghanistan, but also more recently in Iraq as a member of the global coalition against the Islamic State, Canada strived to make military contributions that place it in the top tier of participating countries. As mentioned before, Canada is also seen as an alliance partner capable of deploying its armed forces with few restrictions on what they can do on the battlefield, meaning a higher tolerance for risky missions, which plays into allies’ qualitative assessments of burden-​sharing. The nightmare of coordinating national caveats was felt by ISAF commanders as they had to consider the various contributions made by each ally and partner, factoring in each nation’s rules of engagement and restrictions on their mobility in order to translate pledges into effective multinational military cooperation.

Given what Canada has invested in previous military interventions, the government would do well to invest in mechanisms that preserve allies’ coordination capacity and interoperability, either as part of NATO or US-​led coalitions. For NATO, the Secretary-​General has insisted on the utility of the Connected Forces Initiative (CFI) as the means through which NATO allies and partners can retain their capacity to work closely together, as refined through ISAF and Operation Unified Protector in Libya. The message was reinforced during the 2014 Wales Summit:

We continue to build on the experience gained in recent operations and improve our interoperability through the Connected Forces Initiative (CFI). Today we have endorsed a substantial CFI Package consisting of six key deliverables, including the high-​visibility exercise Trident Juncture 2015, with 25,000 personnel to be hosted by Spain, Portugal, and Italy; a broader and more demanding exercise programme from 2016 onwards; and a deployable Special Operations Component Command headquarters.

Through CFI or military exercises led by the Alliance or individual nations, Canada has a stake in continuously sharpening its capacity to operate with other Western armed forces.

Why Participate in Military Operations?

The government of Canada, currently engaging in a comprehensive defence policy review, will examine how alliance ties can enhance the country’s foreign and defence policy goals, but the scope of the exercise is much broader. The review, which was launched by Defence Minister Harjit Sajjan in April 2016, is articulated around three issues: identifying the most pressing security challenges, defining the role of the CAF in meeting those challenges and finally, establishing the appropriate mix of capabilities needed by the CAF to accomplish their missions and tasks successfully. Therefore, as a point of departure, it is worth asking which security challenges or motives guide decisions on the use of force.

The primary motive for investing in the armed forces is national defence and, by extension, to contribute to regional and global security for the sake of international stability. In Canada, the absence of an existential security threat means the country’s military commitments are primarily assessed through alliance politics, especially the bilateral relationship with the United States. The US has a more expansive perception of threat than Canada, given its massive and global military footprint. Based on numerous treaty commitments and alliance ties, American armed forces have been deployed all over the world to defend US interests and partners, with the goal of ensuring international stability through the projection of its power. In Canada, decisions on the use of force are often taken as the result of US or NATO initiatives. Finally, the Canadian government may choose to use force for humanitarian purposes. The humanitarian logic of intervention can lead to operations ranging from disaster relief or peace support operations.

Click here to read the rest of the CDA Institute Analysis.

Dr. Stéfanie von Hlatky is an assistant professor of political studies at Queen’s University and the Director of the Queen’s Centre for International and Defence Policy (CIDP). (Image courtesy of David Goldman/​Associated Press.)

Perry: Defence Budget (not as bad as you think)

BY DAVID PERRY
© 2016 FrontLine Defence (Vol 11, No 3)

Budget 2016 provided a mix of good news, pleasant surprises and disappointing news for Canada’s military. Despite the scant discussion of the Department of National Defence (DND), the budget actually contained several noteworthy defence related items. DND received some modest new money for infrastructure upgrades, incremental funding for its operations in Syria and Iraq, its planned (but unmentioned) 2% increase to its defence escalator, and the third major deferment of DND’s budgeted procurement money in three years.

The latter measure has attracted by far the most attention, and coloured overall perceptions about the impact for DND. But if the 2016 Budget provides a window into the current government’s thinking about defence, it reflects, on balance, a slightly positive signal. The government kept the big budgetary promise it made during the campaign (the good news), introduced a spending review smaller, thus far, than pledged (some uncertainty), provided some unexpected, albeit small, cash infusions (the pleasant surprises), and continued a trend of deferring procurement funds (the disappointing news), but actually demonstrated how difficult it would have been to actually use the money.

The Good News
Despite pre-budget speculation to the contrary, there was no outright cut to DND’s budget in 2016. While two weeks prior to Budget day it was reported that there would be a $400 million reduction to the DND ‘budget’, this reference was to the cash-based spending in the Estimates. The Report on Plans and Priorities for 2016/2017 showed that final, year-end spending for Fiscal Year 2015/2016 was just over $19 billion, whereas the spending requested in the 2016/2017 Main Estimates was $18.64 B.

While the requested funding for 2016/17 is less than for the previous year, this is largely the result of DND asking for less money for Capital equipment funding than the year before, rather than an actual budget cut.

The requirements for Capital funding vary from year to year, so reductions in the amount requested do not equate to an actual cut to this funding.

Notwithstanding the slight year after year budget reductions, DND actually saw an increase to its baseline Vote 1 (Personnel, Operations and Maintenance) operating budget – as planned.

National Defence has a unique funding arrangement, whereby an automatic annual increase to its budget (known as the defence escalator) is built into the fiscal framework. This funding arrangement means that the department automatically receives a budget increase every year, unless otherwise indicated. While Budget 2016 made no mention of this funding, Department of Finance officials in the budget lock-up confirmed that this escalator was in fact provided.

Under the terms of the Canada First Defence Strategy (CFDS) funding arrangements, DND’s escalator increases by 2% each year. That is, each year, the amount by which the National Defence budget increases is 2% larger than the increase of the year before. Of note, this does not mean that either the defence budget (on an accrual basis) or defence spending (on a modified cash basis) actually increases by 2% annually. In fact, the impact of the annual increase to the defence escalator is less than a 2% rise in either the defence budget or defence spending. Nonetheless, the escalator does provide the department with a predictable funding increase, so long as no other cuts or freezes are applied to the defence budget.

The Harper government’s 2015 budget included a pledge that the annual escalator will increase to 3% annually for 10 years (between 2017/2018 and 2026/2027). In its campaign platform, the Liberal Party of Canada pledged to “maintain current National Defence spending levels, including current planned increases.” The additional $361 million DND received for 2016/2017 is evidence that the new Liberal government has stuck to that campaign commitment thus far.

The total absence of any mention that this campaign promise had been kept, however, is curious. What this means about future defence budgetary intentions, and whether DND will see its escalator increase by 3% in 2017, remains to be seen – will this migrate from the “good news” category to “uncertain” or “disappointing”?

Some Uncertainty
The Budget did provide an indication that the government will conduct a spending review – another campaign promise. Whereas the Liberal Party campaign platform had pledged roughly $3 billion in spending efficiencies, the 2016 Budget announced government-wide “annual reductions of $221 million in professional services, travel and government advertising.” This was described as “a first step” in the spending review, with a pledge that other changes would be forthcoming to “better align government spending with priorities.” The Finance officials in the federal budget lock-up were unable to provide any assessment of the impact of the measures announced so far to DND, however, since National Defence accounts for a fifth of Direct Program spending, it is unlikely that defence spending will be spared. So far, however, the spending review is far less aggressive than what had been discussed in the platform.

The Pleasant Surprises
Two modest budget measures were unforecasted good news for defence. First, DND received an unexpected increment for addressing its infrastructure requirements. The $200.5 million over two years is a modest boost for a department with tens of thousands of buildings and works across dozens of bases nationwide. It is nonetheless a welcome infusion of money in an under-resourced sector of its budget. The funding, to be dispersed across upgrades to jetties, air fields, ranges, housing units, reserve armouries and northern operating infrastructure, represents investments DND will no longer have to fund within its own budget.

The budget also contained incremental funding for the mission in Syria and Iraq. For most of the past decade, the Canadian military has funded some or all of its incremental expeditionary mission costs out of its existing budget envelope. For example, during the mission in Afghanistan, DND had to absorb over $3 billion dollars in operational costs out of its existing budget. Redirecting funding in such a manner to offset unforeseen contingency operations makes it difficult to conduct sound long term budget planning. If this indicates a return to the previous practice of providing DND with incremental funding for the bulk of its operational costs, it will be a welcome change. In recent years, the $306 million provided in Budget 2016 would have been redirected from other planned DND budget items.

The Disappointing News
The aforementioned items were all positive news for DND’s Operations and Maintenance, Personnel and Infrastructure funds. In contrast, the outlook for its Capital Equipment purchases wasdisappointing, as some of the funding that had been set aside in the fiscal framework for procuring Capital equipment was removed.

A total of $3.7 billion in DND’s accrual space that had been set aside in the fiscal framework between 2015/16 and 2020/21 was removed and redistributed evenly between 2021/22 and 2044/45. The accrual space is a budgeting construct that had been introduced with the CFDS in 2008. It set aside a portion of DND’s budget to account for the annual amortization expenses associated with the purchases of major defence equipment.

The funding construct is somewhat analogous to a home mortgage in the sense that, for most Canadians, the purchase cost of your home does not count against your monthly budget, and instead only your mortgage payment does. To relate this back to the Capital Equipment funding dynamic, while the Bank (in this case Finance Canada) has to pay the seller in full for the cost of your house (or for DND, Irving or Seaspan for naval ships), you only pay the Bank your monthly mortgage payment (for DND, its annual amortization charges for the ships). While you might have the money set aside to pay your monthly mortgage payments, if your real estate agent can’t actually close a deal for you to buy a house, you don’t actually have to pay your mortgage (even though you could have, financially).

The 2016 budget made clear by publishing a table depicting both the previous and revised profile of the accrual space that this basic dynamic explains why DND could not use all the money set aside.

The CFDS created the accrual space construct for DND in 2008 on the premise the DND could immediately start recapitalizing all of its combat fleets. To make full use, right away, of all the accrual space set aside for this recapitalizaiton would have required several 10s of billions worth of purchases and delivery of major equipment, in just a few years. While some progress has been made, the full scope of planned reinvestment simply has not happened on schedule, because the procurement system cannot move the money fast enough.

As a result, the Department of Finance is moving the money into the future, not to prevent purchases, but because DND has been unable to buy equipment.

In doing so, the funding was redistributed evenly over the subsequent 25 years, increasing the annual budget allotment for Capital equipment. This will actually provide defence with a small degree of additional flexibility to account budgetarily for additional equipment purchases in future years.

The reaction to the defence portions of Budget 2016 has been largely pessimistic, particularly within the defence industry, due to the reprofiled Capital funding. The defence section placed by far the largest focus on that budget measure, understated the impact of the infrastructure and operational funding, and did not mention the escalator increase at all, so this reaction is understandable. This sentiment also likely reflects a widely held expectation that the Liberals would reduce defence spending. For those expecting that outcome, the Budget certainly lent itself to that interpretation.

The Future
It is impossible to know, at this point, what the future intentions are. This Liberal government inherited a situation where the procurement system remains unable to make full use of the funding available. Realistically, the new government could have done little to fix that situation in only five months in office. After all, the previous government was unable (or unwilling) to do so in the decade they were in power. Thus, the government may have been happy, or not, to remove this funding from the fiscal framework and punt it into the future. It does not seem as though they had much choice. Whether they choose to fix this situation to prevent it from happening again in 2018 will be the true test of whether they were happy to save the money in this budget, or actually would have preferred to spend it.

===
Dave Perry is the Senior Analyst of the Canadian Global Affairs Institute.

Sajjan: No CFB or CFS closures as part of Defence Review

By: David Pugliese, Defence Watch

The Defence Review is now underway but so far Defence Minister Harjit Sajjan has ruled out cuts to the two of the most costly areas of the defence budget – military personnel and major infrastructure.

In February, Sajjan stated categorically that the Liberal government would not be cutting any military personnel – in fact he was looking to expand the size of the Canadian Forces he noted. “We are not looking at reducing our personnel,” Sajjan said at the time. “The conversation I’m having right now is about where do we need to increase some of the personnel.”

Salaries and benefits for personnel make up around 50 per cent of the defence budget (that figure also includes public servants).

In addition, on Monday night Sajjan revealed to a Commons committee that the Liberal government has “absolutely no plans to shut down any bases.” Keeping aging infrastructure operating has been a costly affair over the years for the Department of National Defence and base closures, have under the Jean Chretien government, been used to save money. But not this time, according to the minister.

Location of Canadian Forces Bases or Stations (CFB/CFS) across Canada. Department of National Defence. 

Some analysts, however, have argued for closures. In a January opinion article, Doug Bland, past chairman of the defence management studies program at Queen’s University, argued that Prime Minister Trudeau should cut some bases and installations. Here is part of what he wrote in the Victoria Times Colonist: “The defence budget funds 38 large “bases” and smaller “installations,” located in every province except Prince Edward Island. Most were renovated at the beginning of the Cold War to accommodate a permanent military force of about 130,000 personnel, more than twice today’s personnel strength. Each base is expensively supported by numerous non-operational Canadian Forces units and headquarters and personnel needed to manage budgets, maintain public schools and hundreds of “married quarters” and provide other community services and utilities.

Some bases are critically important to the Canadian Forces’ operations and thus to Canada’s national defence; others are not. Keeping open bases with little or no military utility imposes a heavy, unnecessary tax on the defence budget. According to one informed source, the Liberal government could close 12 bases without impairing Canada’s national defence at all.”

Sajjan also indicated to MPs on Monday night that the government’s Defence Review was considering involvement in the U.S. ballistic missile defence system. No word on what the cost would be if that involvement proceeds.

At the same time, Sajjan has acknowledged there is a limit to the government funding for defence.

Conservatives to Question Sajjan and Defence Budget

By: Amanda Connolly, iPolitics 

Defence Minister Harjit Sajjan will face a grilling tonight on the main estimates for his department.

The Conservative opposition gave notice on May 2 that they would be calling Sajjan and Finance Minister Bill Morneau to committees of the whole to answer questions about their department’s fiscal plans.

Liberal House Leader Dominic Leblanc announced on Thursday that Sajjan’s appearance would happen today.

The opposition parties will get four hours to question Sajjan about his department’s fiscal priorities.

It’s not clear yet whether Interim Conservative Leader Rona Ambrose will be in the House for the questioning but defence critic James Bezan will be.

Bezan said in an email to iPolitics that the party is concerned about the government’s decision to punt funding for major procurements until 2022, in its last budget.

“The Conservative Party holds the Canadian Armed Forces in high regard and this is an opportunity to question the Minister on issues that affect our troops and national defence policy,” Bezan said.

“We have concerns over the Liberals’ decision to cut funding for major procurement projects in their first budget. DND was the only department to have its budget cut. We want to know how these cuts will impact our troops. The committee of the wholeon Monday will be an opportunity for our caucus to raise these concerns directly with the minister.”

The committee of the whole is expected to wrap up around midnight.

DND owes Federal Treasury $147M for Unauthorized Expenses

By: Murray Brewster The Canadian Press

OTTAWA — The Trudeau government has absolved Canadian Forces members of liability after National Defence was ordered to repay more than $147 million in unauthorized expenses incurred by members of the military over nearly a dozen years, The Canadian Press has learned.

The department acknowledged five years ago it had made a mistake when it allowed soldiers and civilian staff to claim some travel expenses and benefits that fell outside of federal guidelines.

The practice went on between April 1999 and January 2011, but was then halted following an independent analysis.

The Liberal government has ordered National Defence to reimburse the Treasury Board for unauthorized expenses incurred by members of the military for nearly a dozen years. File Photo

At the time, the military said the mistake involved "tens of millions of dollars" over five years and that it would try to get the federal Treasury Board to cover the expenses, which included the cost of sending family members of fallen Canadian soldiers to visit Kandahar during the war in Afghanistan.

Other expenses included reimbursing travel fees for troops deployed in different parts of Canada, bonuses for overseas postings and allowances for soldiers assigned away from families.

The deputy commander of the military, the now-retired vice admiral Bruce Donaldson, said in 2011 that he was hopeful Treasury Board — the department that manages federal spending — would retroactively approve many, if not all, of the payments in order avoid forcing members to pay back the money.

Treasury Board spokesman Jean-Luc Ferland said Tuesday that the decision to have DND repay these funds was made under the previous government in 2013 and payments immediately began to flow.

"What was left to do for this Government was to absolve of liability all CAF members who may have erroneously received benefits by no fault of their own, but rather because of a misinterpretation of rules at National Defense," he said in an email.

"Since discovering those errors, DND and the CAF have amended their rules to prevent this from happening again."

No one in the department, or the Liberal government, could explain why the amount wasn't simply written off the federal books.

Jordan Owens, a spokeswoman for Defence Minister Harjit Sajjan, said she wasn't able to comment on what went on before the Liberals took over. But she said the department felt the need to assume responsibility for the error.

"Our request to Treasury Board was that DND will pay back these debts, over the course of several years," she said.

"Partisan politics aside, I don't think anyone thinks (Canadian Armed Forces) members should be liable for money they believed they were receiving in good faith."

Dave Perry, an analyst with the Canadian Global Affairs Institute, was startled not only by the figure, but also the fact that the debt stretches back over 17 years.

"It's beyond bizarre that you be going back that far," Perry said.

"I don't understand what the point might be. It is money that was authorized by Parliament over the course of three governments and spent. And it seems to be a case of the left hand of government giving money to the right hand."

Part of it seems to be a regulatory, for-the-record exercise that formally absolves members of military from having to repay the cash themselves. Those who received the payments have been released from liability by the cabinet order, said National Defence spokeswoman Laura McIntyre-Grills.

What she did not reveal was how many years it will take the department to repay the debt.

Perry said he is concerned what — if anything — National Defence will have to forgo as a result of its decision to assume the liability.

"There are all kinds of good things that could have been planned with this money," he said. "Will this impact training? Will it impact national procurement funding?"

One of the reasons it has taken five years to sort out the issue is that after the error was discovered, defence officials ordered a more comprehensive assessment of the benefits system, said McIntyre-Gills.

"In 2011, the DND and the CAF discovered specific payment errors during a standard internal audit," she said.

"This initial discovery resulted in a more extensive review of other benefits and, thus, subsequent discoveries of unauthorized payments. In 2011, an independent external agency reviewed the circumstances of the unauthorized payments and found no evidence of wrongdoing, and that benefit payments had been made in good faith."