By Jeff G. Gilmour
On 9 June 2025 Prime Minister Carney announced Canada will reach NATO’s defence spending benchmark of 2% of GDP this fiscal year and upping this year’s budget for DND by $9.3 B. This is intended to push defence-related expenditures to $62.7B for 2025/26.
The major problem is where does this money come from? As noted by one writer, “out of nearly half a trillion dollars in federal spending, just $90B is truly discretionary - available for cuts, trims or efficiencies.”[1] How will this new money for DND be allocated?
Britain’s recent strategic defence review (SDR) released on 2 June 2025 acknowledged that the war in the Ukraine has challenged NATO planners’ “warfighting readiness.”[2] The review does not set out a detailed order of battle but makes a number of big commitments. After decades of complacency, Britain now acknowledges that it must prepare for war. As noted in the 140 page report, it means building up its forces, equipment, ammunition and technologies for fighting abroad, as well as securing the home front. Canada is in a similar position as are many of NATO allies, facing the situation that both Russia and China are re-arming and the United States is considering withdrawing its forces from Europe.
How can the gap between ambitious plans for DND and money be closed? Will the Canadian government in its next budget have to raise taxes, borrow, or make substantive cuts to other federal departments? In addition, NATO defence ministers who met in Brussels on 4 June are believed to be close to agreeing on a new 3.5% spending target which could be announced in the Hague later in June.[3] How will the government respond to this new NATO initiative?
The following are some of the critical areas in which the new government will have to define priorities in improving the effectiveness of the CAF’s three services:
- Although PM Carney has stated he wants an improvement with the current military procurement system, it will take years to restructure and establish a more effective and efficient regime.
- DND is currently 14,000 personnel short for all three services and recruitment continues to be a significant problem. The RCAF is short of pilots and technicians for the introduction of the new F-35s. New recruits are waiting too long before being trained in their respective trades. How can the entire recruitment system be improved?
- In a recent DND report, the readiness levels of the Forces’ core maritime and land assets able to meet multiple or concurrent operations declined significantly. Maritime fell to 45.7% in 2023/24 from 51.2% in the previous year and Land fell to 49% from 56%.[4]
- Monies will have to be spent on bases, ports, infrastructure, roads, etc., many of which have been left to suffer from a lack of annual maintenance and repairs for years.
- The National Shipbuilding Strategy (NSS) launched in 2010 has been an enormous boondoggle. Every one of its projects is years behind schedule and billions of dollars over budget.[5] There are three shipyards in Canada building ships for both the RCN and the Coast Guard. One of the first programs announced under the NSS was the plan to build 15 River class warships at the Irving shipyard in Halifax. The initial estimated cost from the federal government was $60B in 2019. In 2022 the PBO stated the estimated cost was now $84B. In 2025 dollars, it is likely the costs will exceed $100B. On March 8, 2025 DND announced they have entered into a contract to build three of the ships with Irving for $22B.[6]
- The federal government is looking at buying 12 new off-the-shelf submarines. South Korea has proposed to Ottawa to build 12 KSS-III conventional submarines for $20-24B.[7]
- The war in Ukraine has exposed the surface fleet’s exposure to hypersonic and cruise missiles and drones. Many pundits are now saying that Canada should be relying on fast patrol boats to protect the coasts and a priority should be on acquiring submarines for NATO and the Arctic Ocean instead of the costly Irving contract.
- In early 2025, an RCAF “readiness document” reported 60% of its inventory was unserviceable.[8] Back in June 2023, the old Liberal government ordered 88 F-35s at a cost of $19B, the last of which were due to arrive in 2032. On 10 June 2025 the Auditor General of Canada reported the jets will actually cost $27.7B in addition to $5.5B for infrastructure upgrades and advanced weapons systems.[9] In addition, she addressed concerns that the infrastructure for the jets were three years behind schedule and there could be a lack of sufficiently trained pilots to fly the new aircraft. The same month the PM ordered 16 F-35’s at a cost of $7B to be delivered by 2027, and ordered a review as to whether to continue the contract with Lockheed Martin or purchase the fighter jets from Europe.
- One of the defence priority areas will likely be the Arctic. In June 2022, the government announced that Canada would spend $36.6B on the NORAD Modernization Plan which incorporates 19 areas of upgrades over two decades. On 18 March 2025 the federal government announced that it had hired the Australian and British firm BAE to produce an over-the-horizon radar system for $6B.[10]
For decades, although politicians have argued that defence and security measures should take place in the Arctic, little action has occurred. For example, a planned port for use by the RCN and Coast Guard in the old Nanasivik mine site announced in 2007 never happened. After significant budget cuts, the project has now been downgraded to a refuelling station that will operate for just one month a year.[11] The following steps should be taken to enhance defence and security capabilities in the three territories:
- Polaris patrol aircraft could be located in the Arctic, as well as 11 MQ-9B Reaper drones which were acquired from General Atomic in 2023 for $2.4B. We also have existing infrastructure in our northern territories that could be used to improve our defence capability. We already have runways for commercial airlines in Inuvik, Yellowknife and Iqaluit as well as Forward Operating Locations (FOL) in hangars in all of these locations, which could house fighter jet aircraft on a permanent basis.
- The Canadian Army could become the experts in Arctic warfare for NATO. It should increase its rotations in the north although it recently announced plans to deploy forces for up to 10 months a year in the north.[12] With the addition of the first Canadian Patrol Group, this should increase the presence of military personnel in Canada’s Arctic on a more consistent basis.
- On either end of the Northwest Passage, underwater surveillance stations with fibre optic cables (SOSUS) should be established by both the US and Canadian governments to monitor foreign submarine traffic, similar to the station located at CFS Shelburne, Nova Scotia, which was operational during the Cold War to monitor Russian submarine traffic exiting their Arctic bases. CFS Shelburne was decommissioned in 1995.
- The only deep water port in the Arctic is located at Churchill, Manitoba. Consideration should be given to building other such ports in the three territories.
- Improved communications, roads, and other infrastructure should be constructed throughout the three territories, including the establishment of small nuclear reactors (SMRs) at strategic locations.
- Search and Rescue Co-ordination Centres (SAR) could be established in either Inuvik or Iqaluit, instead of relying on aircraft being deployed out of Trenton (Ontario), Halifax, Edmonton or Comox (BC).
Conclusion
One of the practices of the federal government over the years has been to announce specific defence or security programs but spread the costs and implementation of the acquisition of the equipment or projects decades down the road so that the actual outcomes became unreasonable. For example, look at the extended timelines for the final purchase of the F-35 aircraft or the destroyers being built at the Irving shipyard. Such action affects the future operational effectiveness of both the RCN and the RCAF.
Based on the scale of rearmament of both China and Russia, time is not on our side to arm our CAF and to ensure our Arctic defence and security is enhanced and improved sooner rather than later. As the British defence review notes, we also must be prepared to fight a war and can no longer be reliant on the US to carry our defence burden. The problem for the Prime Minister will be to close the gap between ambitious plans for DND and the finances available to fulfil such plans in the future.
[1] Globe and Mail, T. Hirsch, “Great new military spending, Canada. Where’s the money going to come from?”, June 9, 2025.
[2] The Economist, “Tomorrow’s armed forces, maybe”, June 7, 2025, p. 49.
[3] Ibid; footnote 2, p.50.
[4] S. Chase, “Canada falls short on NORAD obligations, military readiness, report says”. Globe and Mail, December 19, 2024.
[5] Globe and Mail, E. Reguly, “Canada can learn a lot from Italy’s far superior military procurement system”, June 7, 2025.
[6] Canadian Defence Review, March 8, 2025.
[7] CBC News, M. Brewster, “South Korea wants to be Canada’s new military supplier”, May 6, 2025.
[8] CBC News, M. Brewster, “Only 40% of our air force inventory ready for action as Canada rethinks its F-35 contract”, 19 March 2025.
[9] Globe and Mail, S. Chase, “US made F-35 fighter jets will cost Canada nearly 50% more than disclosed, AG finds”, June 10, 2025.
[10] Ottawa Citizen, D. Pugliese, “D-TA Systems says the government should use made-in-Canada equipment for the Arctic radar system”, March 20, 2025.
[11] Globe and Mail, S. Chase, “The bill comes due for Arctic sovereignty”, June 6, 2025.
[12] Ibid; see footnote 11.
Image: On 15 Jul 2022, HMCS Halifax and HMCS Montréal returned to their homeport of Halifax, N.S. after successfully completing their deployments on Operation REASSURANCE, in support of NATO assurance and deterrence measures in European waters. Credit: Royal Canadian Navy
One thought on “The Challenge between New Canadian Defence Priorities and Finances”
While it’s true that delays have marked some past federal defence acquisitions, characterizing this as an endemic and intractable practice overlooks significant recent efforts to modernize procurement and align resources with operational requirements. The delays observed in the F‑35 and River Class Destroyer (RCD) files were not products of calculated inaction, but of complex and necessary due diligence — reconciling evolving threat profiles, securing industrial benefits, and ensuring long‑term technological relevance. In fact, Canada has taken concrete steps to break this cycle, making significant commitments to the F‑35 program and mobilizing the RCD build in Halifax, making it one of the largest naval shipbuilding efforts in Canadian history.
More broadly, the assertion that “time is not on our side” is precisely why the federal government has been prioritizing new procurement and fast‑tracking critical equipment. The establishment of defence policy Strong, Secure, Engaged and its subsequent refresh reflects an active shift towards long‑term force structure planning. In a global security environment reshaped by Russian aggression and Chinese military expansion, Canada is responding by accelerating equipment deliveries, deepening alliances (NATO, NORAD), and exploring new procurement authorities that streamline the process.
Moreover, invoking the British review as a call for urgency confirms the trend within NATO — Canada is aligning itself with its allies’ approach, making hard decisions about resources, and setting realistic timelines for projects that balance the demands of quality, quantity and cost. The Prime Minister and the Government of Canada are acutely aware of the gap between aspirations and available resources and have demonstrated a willingness to adjust policies and budgets accordingly.
Importantly, despite the rhetoric and occasional tensions within NATO, the United States remains an irreplaceable ally across many areas — from North American aerospace defence and NORAD, to cybersecurity, intelligence‑sharing (Five Eyes), and global maritime security. The notion that Canada can pivot exclusively towards a European‑centric security model neglects the reality that the US will remain a cornerstone of our defence posture for the foreseeable future.
In this context, the recently signed $1.25‑trillion ReArm Europe program adds another layer of complexity. Its sheer scale and its potential to shift industrial focus could complicate Canada’s procurement priorities, impose overlapping or competing standards, draw resources away from longstanding North American supply chains, and dilute the benefits of established alliances. Canada must scrutinize this initiative closely to ensure it strengthens, rather than undermines, existing NATO and bilateral commitments, and doesn’t entangle the CAF in competing requirements or duplicative efforts.
In short, Canada is not bound by its past delays. Today’s defence procurement reflects a maturing approach — one that aims to meet the threat environment with accountability, precision and a long‑term strategic lens, making both the RCN and RCAF more capable, relevant and resilient in the decades to come.
And to those suggesting it should have been done differently, one must ask: What concrete measures would you have taken to expedite the F‑35 or RCD procurement while preserving value for taxpayers, sustaining the domestic industrial base, and ensuring the CAF received platforms that truly meet its mission? It is easy to criticize delays in hindsight — the harder, and more necessary, conversation is about making balanced decisions that align urgency, quality and fiscal responsibility for the long term.