Expanding spending to meet Canada’s international security obligations will require a major shift in political priorities.
New projections released by the Parliamentary Budget Officer’s Office reveal a huge spending gap that Canada needs to overcome to meet its military commitments to NATO allies.
The PBO estimates that the federal government would need to double its current military spending based on the NATO mandate of 2% of GDP.
After facing months of pressure from allies, the prime minister announced at the NATO summit in July that Canada would meet the goal by 2032.
The federal government plans to spend $41 billion on the military in fiscal year 2024, according to Department of Defense statistics.
Defense spending accounts for approximately 7% of the total federal budget.
The PBO estimates that to meet NATO’s goals, spending on infrastructure, equipment and personnel will need to increase to at least $81.9 billion annually over the next eight years by 2032.
Military spending can strain budgets
Parliamentary Budget Secretary Yves Giroux said the large increase in defense spending will make it difficult for the Trudeau government to stick to its fiscal goal of keeping the budget deficit at 1% of GDP.
“It’s possible, but it’s a matter of choice. If Canada says meeting NATO goals is a priority, that might mean cutting spending in other areas or raising taxes.”
Giroux says even if funding were allocated, it was uncertain whether the military would have the capacity to absorb the surge in investment.
“Then the question arises: Can the military spend that much money effectively?” Giroux said in an interview with CTV National News.
“Do we have enough military personnel? Will the Canadian Armed Forces be able to recruit that many personnel? Can we, as a country, get the right equipment in that time frame to spend that money? The need is clear. exists, but it’s a matter of capacity,” Giroux said.
Disagreements over data
Defense Minister Bill Blair has said the difference may not be as large as the PBO expects. The PBO uses federal Treasury-based figures, while NATO uses a subset of data collected from the Organization for Economic Co-operation and Development to calculate targets for member states. (OECD)
“Two per cent is the NATO spending standard…The PBO in his calculations shows frankly that the Canadian economy is much more optimistic,” Blair told reporters on Parliament Hill. .
“We have made it clear that Canada is committed to achieving the 2 per cent mandated by NATO.”
Prime Minister Blair said he would carefully consider the PBO calculations, but made it clear that the investment targets Canada must meet are those set by the North Atlantic Treaty Organization.
However, while the People’s Bank provided a figure, Prime Minister Tony Blair’s office did not provide a figure for the expenditure.
This spring, the government announced a new defense policy. Our North Strong and Free (ONSAF) provides a detailed spending plan, but only for the next six years. ONSAF predicts military spending will reach $57.8 billion, equivalent to 1.76% of GDP, by 2029-30.
The policy document does not outline a plan to achieve the 2% target. Since then, Canada has announced its intention to replace its aging submarine fleet, but has not disclosed how much or when it will be procured.
NATO leaders initially agreed to a 2% defense spending commitment in 2014. At the time, under the leadership of Conservative Prime Minister Stephen Harper, Canada’s defense spending was 1%.
Ten years later, at NATO’s 75th anniversary summit in July, Prime Minister Trudeau set Canada’s 2032 timeline. The date was set after months of pressure from NATO allies. Canada was also called on by several US Congressional leaders, including the Speaker of the House of Commons, on the sidelines of the summit in Washington, DC. Republican House Speaker Mike Johnson accused Canada of “riding on America’s tail.”
“They have the safety and security of being at our borders and not having to worry about that. I think that’s a disgrace,” Johnson said, criticizing Canada for not doing its part.
Canada ranks 27th in NATO defense spending
As of this year, Canada is one of nine out of 32 countries to have yet to reach that goal.
“We’re falling behind,” says David Perry, director of the Canadian Institute for Global Affairs. He noted that NATO member states in Europe have universal health care and strong social programs, and some are still able to meet their security obligations.
“Canada whines that it’s difficult for us and costs a lot of money, but I don’t think we’ll get much sympathy from our allies who are making the difficult decisions to make both happen. . . . to provide social programs to the public and to keep them safe,” Perry said.
The defense analyst also worries that Canada’s eight-year timeline for meeting its NATO commitments will hinder trade negotiations with its largest ally.
Democratic Vice President Kamala Harris and Republican former President Donald Trump have said they will renegotiate the Canada-U.S.-Mexico free trade agreement when it begins review in 2026.
Perry said Canadians don’t realize how “degraded” their military has become. He said despite record investments by the Trudeau government, the military has not been able to utilize much of that funding.
Perry points out that there are not enough people to meet the 1.76% target set by ONSAF, never mind the 2% target.
The force faces a shortage of 15,500 soldiers, according to figures provided by National Defense.
Perry said spending 2% of gross domestic product on the military would require a fundamental political shift.
“It’s not a matter of spending a little more money here and there. It’s a fundamentally different military. It’s going to have a bigger navy, it’s going to have a bigger international presence, it’s going to maintain a higher level of readiness.” said Perry.
“We’re going to need to think differently about how important an institution the military is, because it’s not being prioritized to the level it needs to be to spend 2% of GDP.”
