Vanguard Magazine

www.vanguardcanada.com APRIL/MAY 2022 47 DECIPHERING DEFENCE SPENDING THE LAST WORD BY DAVID PERRY BUDGET 2022: E xpectations for an increase in defence spending ahead of Budget 2022 were higher than any other budget in recent memory. Russia's invasion of Ukraine on February 24 created an intense interest in defence and security issues in the span of a few weeks than Canada had experienced in years. The invasion also cre- ated significant changes in the global se- curity landscape, most notably Germany's commitment to reach the NATO target of spending two percent of GDP to defence and spend an extra (Euro symbol)100 billion. Comments from Prime Minister Trudeau on March 7th, left the impression that the invasion had made his government "open to raising Canada's military spend- ing." Finally, the speculation was ratcheted up even further when the Minister of Na- tional Defence stated in an interview that "I personally am bringing forward aggres- sive options which would see, potentially, exceeding the two percent level, hitting the two percent level, and then below the two percent level." It was unusual language for a Cabinet minister ahead of a budget, but comments that fit with the tenor of discus- sion from many NATO countries. What Budget 2022 delivered for defence is a modest increase to defence spending, a promise to review Canada's defence policy, and the Trudeau government's first ex- penditure reduction exercise. For Defence, Budget 2022 provides an increase of $8 billion (on an accrual basis) over 5 years to "strengthen Canada's contributions to our core alliances, bolster the capabilities of the Canadian Armed Forces; continue to support culture change and a safe and healthy working environment in the Cana- dian Armed Forces and reinforce Canada's cyber security." According to data provided by Finance officials, elaborating on the bud- get's Chart 5.1 which outlined forecasted funding for DND through 2026/2027 on a cash basis, the additional funding provid- ed in Budget 2022 would result in an an- nual increase in spending of three percent in 2022/2023 rising to eight percent by 2026/2027. Given consumer inflation run- ning was already running at a multi decade high and Russia's Invasion of Ukraine has created a further commodity price shock, it is unclear how significant an annual in- crease the spending will produce once de- fence specific inflation is factored in. Of note, the chart makes clear that measures taken since the publication of Strong, Se- cure, Engaged, but prior to Budget 2022 (the 2020 Fall Economic statement and Budget 2021, presumably) had actually added more defence funding than Bud- get 2022, without fanfare. According to a senior government official in the budget lock-up, if the anticipated defence spend- ing occurs as forecast and the budget's other assumptions hold, by the end of the Budget's fiscal period, defence spending would reach approximately one and half percent of GDP. Interestingly, the Budget itself makes no mention whatsoever of de- fence spending as a share of GDP. A full itemization of that $8 billion is provided in Table 1. The main areas of spending are: 'Reinforcing our Defence Priorities;' 'Supporting Culture Change in the Canadian Armed Forces;' 'Enhanc- ing Canada's Cyber Security;' 'Supporting Ukraine;' and the 'Renewal of Operation Artemis.' Working through that list in re- verse order, the extension of Operation Artemis, a counter terrorism and maritime security mission in the Middle East was renewed in August 2021 and will cost of $120 million over three years. The defence portion of the support for Ukraine con- tains two major initiatives. The first is an extension of Operation Unifier, ($338 mil- lion from 2022/2023 – 202024/2025) Canada's military support mission for Ukraine, which has evolved from a focus on training Ukrainian forces, to a broader set of activities supporting Ukraine's fight. The second component of the support to Ukraine is $500 million in 2022/2023 to provide additional military aid to Ukraine. As explained in the budget lock-up by De- partment of Finance officials, this money would flow through DND, but be used to actually obtain additional military supplies and provide it to Ukrainian forces. On the cyber front, several initiatives were announced, totalling $875.2 million from 2022/2023 – 2026/20227 to en- hance Canada's cyber defences, and $17.7 million over the same time period to es- tablish a cyber research chair program. The enhancements to cyber defences in- clude the ability of the Communications Security Establishment (CSE) to launch cyber operations to prevent and defend against cyber attacks ($263.9 million); improvements to CSE's ability to prevent and respond to cyber-attacks on critical infrastructure ($180.3 million); fund- ing for CSE to make critical government systems more resilient ($252.3 million); and an expansion of cyber security pro- tections for small departments, agencies and Crown corporations ($178.7 mil- lion). Supports to Culture Change in the Canadian Armed Forces include $144.3 million over five years to expand health services and physical fitness to be 'more responsive to women and gender-diverse military personnel,' and $100.5 million over six years for a range of initiatives in- cluding strengthening leadership in the Canadian Armed Force's; modernizing the military justice system, and engage- ment and consultation on culture change. Finally, the most significant funding line in the Budget for Defence was $6.1B over five years, starting in 2022/2023, for "de- fence priorities, including our continental defence, commitments to our allies and for investments in equipment and technology to immediately increase the capabilities of the Canadian Armed Forces." Curiously, the Budget itself said little more than that and the officials in the budget lockup had no additional information to provide about the initiative. A Senior Government Official did offer, however, that it was an indication that Canada was 'prepared to step up with NORAD and NATO' 'without putting all of our contributions on the table.' With a shiny new NATO headquarters in Brussels to pay for, and post February 24 strategic circumstance to address, further support to NATO is not unexpected. Similarly, con- versation with the American government

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