The Department of National Defence is heading into another round of internal belt-tightening even as tens of billions of new dollars arrive, CBC News reported Tuesday. The federal Treasury Board Secretariat is examining defence operational spending with the aim of reducing it by 10 per cent, two confidential sources told CBC.
The cause is two budgets working against each other. The operations and maintenance reductions the Trudeau government announced in 2023, and enacted in the 2024 budget, are still in force. That was $810 million in the year they began and $908 million every year after. A federal official told CBC the schedule is unchanged and the directive has not been rescinded.
The money that has arrived is pointed somewhere else. DND has been told to put its increase into priority areas, principally the new combat equipment it has been short of for years.
John Fragos, press secretary to Finance Minister François-Philippe Champagne, said the government intends to protect the department as much as it can. "We have however asked DND, as with every other department, to reorient its spending such that it prioritizes capital expenditures," he said in a written statement, "and spends less on operating expenditures." The plan, he said, is to balance operating expenses by 2027-28.
That distinction is not an accounting detail. Capital buys the equipment. Operations and maintenance is what keeps it working. The latest federal budget puts the military's overall operational readiness at 61.3 per cent. Readiness has suffered for years from a shortage of exactly the funding now under review.
Three weeks ago the vice-chief of the defence staff told the military that internal savings would have to be found. Its growth plans would have to be tempered as well, a third source with knowledge of the presentation told CBC.
Dave Perry, president of the Canadian Global Affairs Institute, said the scale of the announcements has built expectations the budget cannot meet. "I think it's created this impression that there's gazillions of dollars that could be allocated to any number of new initiatives in the near-term window," he said. "And I think that's not really the case." There is not nearly as much available, investable and disposable cash as people have been led to believe, he said.
The Parliamentary Budget Office expects defence spending to rise from roughly $75 billion a year now to $95.6 billion by 2030. Direct spending on the military would pass $163 billion by 2035. Much of the near-term increase is already committed, including to the pay rise given to members of the Forces.
One place savings might come from is already in the water. Only one of the navy's four Victoria-class submarines is operational, and the deep maintenance and modernisation plans for the class run to 2038. With a replacement programme now started, people inside the department cite those boats as an obvious candidate, CBC reported.
Nothing has been decided. What is under review is the line that pays for training, maintenance and the hours a fleet actually spends at sea.