Canada Faces Tens of Billions in New Defence Spending Requirements Amid Evolving Global Threats

Strategic Insights -

Prime Minister Mark Carney has warned that the federal government may have to make "trade-offs" in other areas to meet Canada's new defence spending target, which could require tens of billions of dollars in new annual spending. This increased spending is necessary to meet the new and more aggressive target of the North Atlantic Treaty Organization (NATO) to crank up its military budget over the next decade, as well as to address evolving threats and global dangers. The new target, set at five per cent of gross domestic product by 2035, is a significant increase from the long-standing goal of two per cent of GDP.

Key Takeaways:

  • The new defence spending target of five per cent of GDP by 2035 will require Canada to devote tens of billions of dollars in new annual spending to the military and defence-related infrastructure.
  • The prime minister has warned that the new target may force the government to make "trade-offs" in other areas, including potential cuts to federal spending in areas such as healthcare or education.
  • The new target is broken into two parts, with 1.5 per cent of GDP for "defence- and security-related spending" and 3.5 per cent on "core defence requirements" like troops and equipment.
  • Hitting the 3.5 per cent target on direct defence spending will require the annual defence budget to grow by upwards of $40 billion over the next decade.
  • The government has already announced a $9-billion boost to defence spending for the 2025-26 fiscal year, bringing the total budget to $62.7 billion.
  • Gen. Jennie Carignan, Canada's top soldier, has warned that Canada is currently vulnerable in a world of changing threats and needs to bolster its military, especially in the Arctic.
  • NATO secretary general Mark Rutte has said that Russia is as little as three years away from having the capacity to successfully attack the alliance, while China is aggressively expanding its navy and nuclear arsenal.
  • The government will likely have to shift spending away from other areas and possibly seek ways to increase revenues to avoid bigger deficits and government debt.
  • The Liberal platform in this spring's federal election campaign promised to find $28 billion in unspecified "savings" to help pay for election promises.

Statistics:

  • The new defence spending target of five per cent of GDP by 2035 will require Canada to devote roughly $150 billion per year, equivalent to about one-third of all federal spending expected in 2025-26.
  • The government has already announced a $9-billion boost to defence spending for the 2025-26 fiscal year, bringing the total budget to $62.7 billion.
  • Hitting the 3.5 per cent target on direct defence spending will require the annual defence budget to grow by upwards of $40 billion over the next decade.
  • The new target is broken into two parts, with 1.5 per cent of GDP for "defence- and security-related spending" and 3.5 per cent on "core defence requirements" like troops and equipment.

Sources:

  • The Toronto Star
  • CNN
  • Parliament of Canada
  • Government of Canada
  • NATO
  • BBC News
  • Maclean's Magazine