By Jeff G. Gilmour
The purpose here is to show the projected costs of capital equipment for DND over a 20- to 25-year lifespan based on the existing proposed budget for that department. Many of the required items noted in the 2023 National Defence Policy “North, Strong and Free” have no budget costs attached to them. The ones that have, I’ve flagged.
Ottawa announced recently that the operating budget for DND will amount to $73B over a 20-year cycle and of that, $8.1B will roll out in the next five years. Even so, Canada will only be spending 1.76 percent of GDP by 2029-30.
The current procurement system for the military is in a state of flux. This has led to the delay of equipment renewal needed for the three services, resulting in problems of force readiness and operational concerns due to a lack of critical equipment upgrades.
Even with extended timelines, on the basis of DND’s budget noted above, the question remains: how financially realistic is it to acquire all the proposed military equipment referred to in either the National Defence Policy or the 2010 National Shipbuilding Strategy (NSS).
Under the 2010 NSS, 66 ships were proposed to be built for both the RCN and the Canadian Coast Guard. Even not including one major project where the costs were not known, the projected costs equaled $136.3B. One of these important projects was the construction of 15 Canadian Surface Combatants (CSC) ships at the Irving Shipbuilding yard in Halifax. Defence Minister BiIl Blair recently announced the new ships will be known as River-class destroyers with the first ship operational in the 2030s with a 25-year construction phase and the last ship to be completed in the 2050s. The Parliamentary Budget Officer (PBO) projected the cost of this project as $84B. On the basis of delays in the project and the 25-year duration of the project, it is likely the costs will be closer to $100B.
What other projects and costs are there?
1. The government purchased 88 F-35A aircraft from Lockheed Martin in 2023 for an estimated cost of $19B.
2. The 2022 federal budget noted that upgrading the North American Aerospace Defence Command (NORAD) is estimated to cost $11B.
3. Replacement of 9 Airbus aircraft for the RCAF at a cost of $3.6B.
4. Purchase of 16 Poseidon P-8A aircraft for the RCAF at a cost of $10.4B
5. Purchase of 11 drones for the RCAF in 2023 which cost $2.49B
In addition, there is equipment that has been proposed but is yet to be purchased.
1. Replacement of the 4 Victoria Class submarines?
2. Purchase of new light armoured vehicles and tanks?
3. Purchase of ground-banded air defence system?
4. Purchase of early warning aircraft and tactical helicopters?
5. Purchase and installation of marine sensors and detection systems?
6. Satellite ground stations, over the horizon radar and port facilities in the Arctic?
The total bill for this proposed DND equipment comes to $182.4B based on existing costs. This does not include the equipment list in the above paragraph. It is difficult to imagine, based on DND’s existing budget, how it will be financially possible for the department to complete current or proposed equipment contracts, even with timelines extended out to 25 years. Canadian governments have for decades, left the replacement of vital equipment for all three services too late, while at the same time not substantially increasing the budget of the department. Canada is now faced with increased urgency to meet its national and international defence commitments. An open and honest assessment of budget and equipment priorities is essential. Cost-effectiveness must be a primary consideration. That may include a deviation from traditional procurement methods, including domestic and regional development considerations and a willingness to look off-shore for purchases.
18 thoughts on “Canadian Military Budget Projections for Military Equipment”
Hello,
I am struck that most of the items listed above are essentially a purchase list to the United States. Most of NATO appears to be a mechanism to force members to purchase US-made equipment.
This goes along with the US’ assessment of its own security apparatus being based on the sole metric of expenditure. More $ spend = more security. Sheer lunacy!
The 2% target is another incomprehensible metric devoid of logic. Please explain it to me.
Canada’s immediate defense requires what? good command over littoral areas (two/three oceans make pretty decent defenses against physical invasion) with decent navy, good long-range sensors, good stand-off weapons coverage (missile defense, and anti-shipping missiles), decent air force integrated with land-based defense?
OK, how much equipment and personnel is needed to do that over the given area, over a period of time, and how much does it cost per year? How much must be produced internally, or “looked off-shore”? This is basic planning.
Is the list presented by Jeff Gilmour insufficient? If it is sufficient and the federal government thinks it can acquire it for 1.76% of GDP, then what’s the problem? Our GDP includes all debt obligations, meaning its calculation includes all claim on future wealth through the magic of compound interest. Easily 20-30% of our GDP is just an endless compounded debt calculated recursively on itself. Filter that out and the 1.75% quickly becomes a full 2%-2.5%, if you so insist on this threshold.
If it is insufficient, then what would a sufficient list look like over a 1/5/10-year period of semi-hot/cold engagement, to achieve what diplomatic outcomes and what political objectives?
Canada’s oversees commitments to NATO allies requires what?
Contribution of how many vessels to the direct defense of which allies, for how long?
Contribution of how much materiel and personnel, for what objectives?
How much would that cost per year?
These should be basic calculations with set limits, not the open-ended mess it is now. If NATO is a defensive organization, then it has clear boundaries. Defend this territory or this state apparatus against a known adversary with X capabilities, for period of time T, until the adversary can be compelled to a diplomatic and political solution to shared grievances.
I am a civilian and the internet points to reams of literature and math to calculate all these things. Salvo models, attrition models, all pretty straightforward calculus with some probability functions, made even easier by all the fancy AI business.
Total $ = X defense expenditure to sustain engagement A with attrition rate B over time period T.
This is a simple calculation – if CAF need assistance, any competent economist can help.
As a citizen, I feel like I am being taken for a ride. Why must my government spend an arbitrary 2% of a GDP overinflated by a fraudulent financial sector, to purchase overpriced equipment that does not appear to work that well (LCS, F-35, Abrams, Leopard, Patriot…)?
Regards
As a citizen of this country you and your government are riding on coat tails hoping that the US and NATO will come to our defence while we continue to operate old out-of-date equipment. Should be ashamed. Look what’s happening around you.
Interesting comments. Like you said you are a civilian and who doesn’t seem to know how NATO comes to these GDP numbers and as a NATO member we agree upon them as a minimum. If anything we should be going to 5% GDP to rebuild our neglected military.
Hello Ted. You sometimes surprise me! 5% of GDP is certainly a lofty goal! I was thinking more like 2.5 to 3% of GDP tops, however, if you believe Canada can withstand the strain at 5%, who am I to argue. In order for your 5% to become a reality for the military however, we would have to substantially increase defence spending, passed $60B CAD annually in order to meet that goal by 2032. Taxes may also have to be raised more that they already have been, but from where and whom? Let’s not also forget that other programs may also have to be adjusted as well.
Quite right, Ted, that’s why I am asking.
The 2014 Wales declaration https://www.nato.int/cps/en/natohq/official_texts_112964.htm notes “agreed guidelines for deployability and sustainability and other agreed output metrics”. That’s my point. If we agreed to whatever deployability and sustainability requirements — X tanks, ships planes, brigades, machine shops, industrial output, whatever — for whatever amount of time, then price those, and sell that number to Canadians. Don’t just wave the GDP % like it’s magic and means something.
Concerned Citizen, we are in agreement about replacing equipment and capabilities. But convince me of what we need and why. We are asked to commit to purchasing, in an open-ended fashion, very expensive equipment that is subject to constant price inflation and that doesn’t appear to function that well. If it comes out to 2% or 5% or whatever, fine, but itemize these things and convince me through competence that we need them.
Ted and others who understand NATO’s magic, do you know how the 2% or 5% is calculated? Can you show the high-level math?
My concern is that we are asked to throw money at it blindly. As a citizen, I should see a return on this money. After the warships, show me the civilian applications. Show me the new factories and machine shops. Show me the lines of workers, lunchbox in hand, heading to work. Show me the well-paid families that can afford housing, heating, food, education and kids. All I see now is defense contractors telling us they need more money to hire labour from oversees and to buy off-shore.
That does not look right, hence my rant.
Regards
Hello Curious Civilian. Some Canadians must stop sticking their heads in the sand (or any other parts of their body) and come to the conclusion that the world is indeed a very different place (and much scarier) as most other countries now realize (NATO or otherwise). NATO countries see the writing on the wall much clearer than Canada does right now, and are doing the right things to help “turn the nuclear clock back”. The world is much closer now to a doomsday scenario than we have ever been and we had better get with the program now before it’s too late (it may already be too late for Canada)! Our thinking on Canada’s defence must change like yesterday or we will be living in a dictator’s world like Russia, China, Iran or North Korea! Remember 2% of GDP for Canada’s defence is just the starting point. Yes, it will hurt for a while but Canada is a very rich country and I’m afraid we now have no other choice! So let’s get on with it as most intelligent Canadians now realize and stop wasting valuable time! The world will not wait for us to catch up. For a founding member of NATO to be floundering about like this is not what most Canadians or the rest of the world hoped for the survival of this country or the rest of the world. There … enough said!!
The news now, just maybe we might hit 2% in 8 years. What a joke. The government has no clue or details on what just numbers out of a hat. An arrogant embarrassing government we have. Goes to NATO to talk about climate change as if any other government was even listening to him.
Are you saying that climate change is not an existential threat?
Money only counts towards 2% when actually spent. Thus, we cannot count expenditures for SSKs or anything else until we have received deliverables. Unless of course we simply give money away now to reach the artifical 2%.
Ubique,
Les
Yeah, let’s talk about climate change at a defense meeting!! Meanwhile ordinary people are dying for nothing in a war.
Good morning Concerned,
Climate change is already radically affecting defence requirements. Its impacts will only get more severe and more relevant to Canadian (and NATO) defence planning. Thus, it should definitely be discussed by those who are serious about thinking longer term.
Who is dying for nothing?
Ubique,
Les
Les – I’m curious about your comment “Money only counts towards 2% when actually spent.” I recognize that this seems to be the case in Canada – money set aside for purchases is returned to the treasury if the purchase is not delivered within the fiscal year. However, when I read reports from the US, Congress is said to have “procured” a submarine (for example) in 2024 even if the submarine will not be delivered until 2030. This raises two questions:
1. Does a “procurement” by our allies imply that the money has been irrevocably set aside? Or are these what we would call planned purchases?
2. Is Canada, because of our accounting system, being held to an unfair higher standard than allied nations in calculating the 2% standard? It seems that decisions other nations make today may be credited immediately; decisions we make are not credited to us until we receive the goods. If so, it is no wonder the Europeans have been able to ramp up spending much faster than we have – the additional capabilities don’t exist yet.
Furthermore, economic growth means that a cost which would have amounted to 2% if fully accounted at the time of ordering, will be less than 2% when the goods are received.
Good morning Michael,
My understanding is that NATO only counts money towards the 2% when it is actually spent. This prevents countries from making extravagant claims, getting credit for the 2%, and then never spending the funds.
Thus, we cannot make claims towards the 2% until projects (destroyers, CF-35, submarines, etc) are mature enough to start spending funds. Our % will rise dramatically when these come on line.
I do not know if our accounting processes make things needlessly harder for us.
You are correct that meeting the 2% is also affected by what happens with the GDP.
Ubique,
Les
Already blew the budget with proposed 12 SSK.
Hello,
A % allocation of GDP to defense can be rationalized when it can scale directly with a country’s economic strength, as a proxy for its ability to pay for defense. A strong & healthy country should be able to spend X% more for its defense and for its contribution to alliances, as its economic strength grows by X%.
However, Western measures of GDP are no longer correctly representing either the country’s real economic/productive strength, or its ability to pay for its defense. Western GDP (and this applies to Canada as well as US) is now bloated with financial garbage and compound debt, and is no longer linearly related to its real productive ability. Our economic strength is less than it was 30 years ago, and our ability to pay is less than it was 30 years ago, because we are now bogged down with endless debt burden (all measured as GDP).
This is somewhat less apparent for nations that still have strong industrial production and can still physically produce the means to defend themselves. Review industrial output numbers and you will find very few nations in NATO in this category. Estonia is not a good example, no matter how many IT people it has inventing digital lending products.
For those concerned about our NATO spending target, and concerned about world insecurity, and coat-tails and heads in sand, please be concerned by our lost productive capacity and capability first. Canada can no longer design, build and export major defensive platforms or systems, or advanced tools. And no, Canada is not sufficiently rich to just throw money at it and buy equipment. Our Ukraine proxy war has shown that this equipment (platforms and ammunition) burns very quickly in a hot confrontation and we have no replacement capability. This applies to the US and Western Europe as well.
2% is now going to 2.5%, 3%, 5%. Why not 10%?
What are we paying for, and what will we actually do with it?
A $1 billion Nimitz with its additional $1 billion escort could not stop the Houthis from interdicting Red Sea passage.
What will they do when China, Russia, Iran, etc…choose to interdict passage in their back yards?
I am not trolling, I am making the point that these defense discussions cannot be open-ended. They need to have boundaries, because the end-point of the open-ended approach is nuclear.
Regards
The arbitrary 2% is a NATO commitment to spend in our own defense, not just in NATO operations. It is a number based on calculations by experienced military personnel from multiple militaries as a minimum that would enable a country to build and maintain a strong national defense and deterrence to aggressors. This number will rise with growing threats. It is if anything a low number in Canada’s case as even at 2% it would not be enough to defend a country and coast lines of this size. But how does it matter to NATO? well the more each Country spends on defense, the longer it can hold off an attack until help arrives, also it takes some of the burden off of the alliance as a whole and allows them to maintain a better defense of their own territories while sending help to the attacked, just in case their own defense is necessary.
This metric did not take into account that countries like Canada would fail to meet that goal and allow their militaries to fall into disrepair where more money is needed to bring it back to a fully capable fighting force. Those arguing 2% shouldn’t matter fail to realize is actually a bargain, as the other metric could have been the ability to defend your own country, which in Canada’s case would be around 5% after years of catch up at around 10% of GDP. Also tying defense spending to GDP, as Canada has never truly done, has benefits. When economies are good and GDP is high you spend more on defense without affecting the % of other budgets and when the economy is in decline that dollar amount decreases with it also without changing the percentage of other expenditures. This would enable countries actually following the metric to not have to come up with invented cuts or increases to expenditures but should make the spending expandable and contractable in all areas of spending across the board based on monies the Government collected that fiscal year. This country doesn’t do that. They try to maintain our increased funding for vote-buying social programs while treating defence spending as a discretionary budget they can pull from to cover those costs and this must be stopped.
Where does the money come from for defense increases? We could start with reducing the federal employ that has increased by 140% since 2015 and return to 2015 numbers which accomplished the same services with less wait time we have now, send some of those qualified persons with training over to defense procurement. Using those billions yearly saved with an increase of 1% GST, you have your 2% for defense and more people that are desperately needed to handle the procurement file. To offset the cost of living by the 1% GST rise, the government should immediately cut out all Carbon Tax and enforce that prices on products, produce and gas/ hydro/ heat are reduced to the consumer in that same amount. Then they can focus on offering incentives to corporations to maintain the transition to a greener operation which would have a much bigger impact on the environment without the added inflation we have currently. And this could be done all while promoting Canadian natural gas to countries using more carbon intensive sources, also resulting in a bump to our GDP while lowering global emissions.
Hello Jeff. In addition to your projected equipment costs of $136.3B CAD, or possibly more (up to $140B CAD), I would put the procurement for the Victoria class replacement of up to $90B CAD for 8-12 AIP/LIB submarines; new light armoured vehicles & tanks of up to $4-5B CAD; Ground Based Air Defence Systems up to $2B CAD; Early Warning Aircraft-up to $5B CAD; new vertical Tactical Helicopters-up to $15B CAD; I would presume the Marine Sensors & Detection Systems would include both UAVs & UUVs and some sort of under-sea bottom detection systems-anywhere from $10-15B CAD. Satellite ground stations, over the horizon radar and port facilities in the Arctic could add up to $50B CAD as well. In total besides your projected equipment costs of up to $140B CAD, you should also add the total extra costs of up to$192B CAD +$140B CAD=$332B CAD. This also does not include the projected $84B CAD cost for the CSC River class Destroyers over the next 20-25 years. Possibly over $406B CAD for Canadian Defence over the next 25 years. Jaw-dropping cost indeed! But this is the price Canadians will have to pay for the neglect of our military over the past decades for the future protection of this country and all Canadians.
Hi Curious Civilian, I somewhat agree with your sentiment regarding how military spending should benefit the average Canadian. While I do believe in Canada having an updated, capable and versatile military force that can serve in NATO missions abroad (helping to secure, protect and supply other states’ sovereignty from threats is certainly a worthy cause – and one that is becoming increasingly necessary in today’s political environments), we also have to address needs at home.
If you look at the US, both their National Guard and Coast Guard services fall under ‘military’ services. Canada does not have a similar type National Guard and our Coast Guard is a non-military organization. I would like to see this changed. A Canadian National Guard could certainly include disaster relief services (dedicated forest fire fighters, flood relief workers, mechanical engineering specialist, etc.) which would allow for government spending on more ‘water bomber’ aircraft and other heavy machinery such as bulldozers and supply trucks (and with climate change, such services are going to be needed more and more in the future). I know the military already helps in dire circumstances, but this is not directly part of their mandate. A National Guard could be a standing service that does not operate directly in open warfare, but can be deployed around the world in emergency relief and support operations under the auspices of the military.
If the Coast Guard was brought under the military, then littoral protection (read armed patrol ships) could fall under its mandate and it could be equipped with similar armed vessels as the navy (take the Harry DeWolf AOPS – the navy’s version has ‘guns,’ the Coast Guard’s do not). This could also apply to any future small frigates the RCN/Coast Guard procures. Somewhat combining these services would certainly help both Canada at home and increase our military footprint, not to mention make procurement more streamlined. It also allows the Coast Guard to be meaningfully engaged in the event war does come to our shores. It also frees up the RCN to send ships to more global areas where needed.
By having these two services fall under the Canadian ‘military,’ not only would we more easily reach (and potentially surpass) the mythical 2% spending threshold, ‘average’ Canadians could see immediate benefits to any spending made to equip and maintain such services. But as to others’ points made here, the Canadian Government has let our military forces and equipment become woefully outdated to such an extent we need to play catch up at an inflated cost due to not maintaining a continued procurement program over time.
Just a thought, but hopefully one that under consideration could make ‘dollars and sense.’
Hello GD. Your concept of a Canadian National Guard and the CCG ‘melting’ into the CAF is an interesting concept and has merit, on the surface, and has given me pause, but there are several questions that must be answered as to whether this is the right concept for Canada in the end. Do we really want to ‘Americanize’ our CCG? First, if we had a Canadian National Guard, would they (Reserve Force) be taken away from the regular military as part of the new effort to help protect Canada in crises like national disasters or internal conflicts? The regular military would then be without one of its most valued assets in case of international crises? The regular force would certainly have to ramp-up recruitment to help replace those Reserves that would then remain at home and not be available for NATO operations abroad.
Second, to have the Canadian Coast Guard armed to the teeth, I believe would not go over too well with the CCG or Canadians at large. For example arming the CCGs icebreakers with both major weapons like Bofors guns and/or Mk 41 VLS systems would not be great for the RCN but to keep them at home (read Naval Weapons Techs-NWTs) from the RCN to fight adversaries on the home front, but what would you do about replacements for the RCN help fight-the-good-fight around the world? The CCG as an organization, and most Canadians, would not appreciate that concept.
Third, would the Harry DeWolf class (AOPS) then be utilized at home to augment the Canadian National Guard and not be available to the RCN for other international missions? Fourth, to have this concept just to artificially augment Canadas need to go to 2% of GDP on-the-cheap so-to-speak, may make ‘dollars and sense’ as you say, but is it the way to go? NATO may probably frown on that tactic. In order for this concept to be feasible, the first thing that must happen is to increase the CAF military personnel strength up to the number of people we have already lost (16,500 personnel) and then add more to be able to fill the extra requirements of this new Canadian National Guard. You also have not answered the most important question. Will the Canadian people accept this vision for the CAF? People may buy in, however there is a big BUT in your plan….but, maybe not.