David Perry is the president of the Canadian Global Affairs Institute and the host of the weekly podcast Defence Deconstructed.
“How are we going to increase our spending allocation to a minimum of 2 per cent when we’re already cutting back [on] funding the military?” So asked Conservative MP Cheryl Gallant at a recent hearing of the House of Commons Standing Committee on National Defence.
Ms. Gallant’s question references NATO’s defence investment pledge: that all allies, including Canada, will spend at least 2 per cent of their gross domestic product on defence annually. Current NATO data shows Canada is nowhere near that threshold, as we will spend at most 1.38 per cent of our GDP on defence this year. The government’s long-gestating Defence Policy Review, which might have helped boost the defence budget, is nowhere to be found.
Against that backdrop, the federal government announced in August that all departments will be required to collectively cut $15-billion from their budgets over the next five years, and $4.5-billion annually thereafter. Although Budget 2023 noted the Canadian Armed Forces would be exempt from the budget knife, the Department of National Defence’s overall exemption appears to be pretty narrow. Deputy Defence Minister Bill Matthews recently told the Standing Committee on National Defence that the department may be asked to cut spending by around $900-million annually over the course of four years, once cuts are fully implemented.
Cutting the defence budget will in and of itself send a troubling message to NATO about Canada’s credibility. Most members of the alliance are now bolstering their defence spending in the face of the most significant war in Europe since 1945, not wielding a budget knife. These cuts will likely further erode Canadian credibility by reducing our military’s operational readiness.
Recent commentary has suggested this exercise is equivalent to just a smidge of overall spending, juxtaposing a few billion dollars in reductions with the $500-billion the federal government spends annually overall. If the DND was left free to identify $900-million in savings from within its total current planned spending of over $26-billion, that logic might hold. But that is not what is being directed. Instead, the DND is being asked to reduce by 15 per cent the $5-billion it was planning to spend this year on consulting and other professional services, particularly management consulting. This means that the bulk of DND’s reductions, about $750-million a year, are supposed to come from spending on contracted services.
This is problematic for two reasons. First, the rationale for reducing consulting spending across the federal government is that these expenditures have continued to grow despite a nearly 40 per cent increase in the size of the civil service since 2015. With 100,000 more bureaucrats today than before Justin Trudeau became Prime Minister, the government can get by with fewer consultants, the logic holds. But Defence has not followed this trend. Yes, DND’s spending on services and consultants has increased, but the military is short 8,000 full-time troops, so that spending has in part been used to make up for a lack of in-house capacity.
Half of the total professional and special service spending by the DND is for engineering and architectural services, which represents a range of activities supporting efforts to build, buy and maintain buildings and equipment. While some maintenance is done by our troops, much of the work on our vehicles, aircraft and ships is performed by contractors. For years, Canada has actually been spending less on maintenance and in-service support than it should, so any cuts will reduce our ability to put ships to sea, planes in the sky or vehicles into the field. Given it is currently operating with 40-year-old fighter jets and 30-year-old warships, Canada’s military needs more money for maintenance, not less, if the government wants to keep meeting our NORAD and NATO commitments and deliver on our Indo-Pacific Strategy.
The details of how the DND actually spends money on services show that savings will be hard to come by without impacting the operational readiness of the forces. Defence does hire “management consultants,” but last year less than 2 per cent of its service spending ($72-million) was devoted to that category. The DND did, however, devote about $247-million to military health care, $140-million to training and education, and $107-million to protection services, the latter mostly for security guards. There may be efficiencies to find in these areas, but drastically reducing spending on health care and education for troops at a time when retention is a major problem seems unwise, as does leaving our bases unguarded.
However much the DND may want to avoid maintenance spending, if the department is not granted flexibility to apportion its reductions, it is tough to see how it can avoid doing so, given the composition of the defence budget and the way this round of budget reductions is being structured. Contrary to the public narrative, at Defence at least, these cuts will require hard decisions.