Canada First Defence Strategy

A new long-term funding framework

The investments required to implement the Canada First Defence Strategy are supported by increased, long-term funding. This commitment will reverse the damage done by major cuts to the defence budget in the 1990s. Indeed, after defence spending peaked in the waning years of the Cold War, funding for defence declined in real terms by roughly 30 percent as the government of the day dealt with the federal deficit.

While a series of episodic increases between 1999 and 2005 helped the budget to grow in real terms, they were not predictable and did not sufficiently address the rust-out of key equipment platforms, strain on personnel and other challenges arising from a high operational tempo.

Note: Figures for years up to and including 2007-08 reflect final adjustments for items such as funding for incremental costs of deployed operations. Although the Government has committed to continue providing this funding, future adjustments in this context are not reflected in the graph. These adjustments will not affect the baseline for the long term planning figures. Consistent with established practice under the Expenditure Management System, the forecast annual planning figures presented here will be re-confirmed annually through the Estimates and Budget processes.

* Note: In the top display, the years 2006-07 and 2007-08 are segregated to note that they represent the program "re-set" years upon which the CFDS is subsequently based. Figures for years up to and including 2007-08 reflect final adjustments for items such as funding for incremental costs of deployed operations. Although the Government has committed to continue providing this funding, future adjustments in this context are not reflected in the graph. These adjustments will not affect the baseline for the long term planning figures.

Note 1: This figure reflects only the capital component of this equipment over the 20-year period. The previously announced total of $30B includes the capital and in-service support costs over the full life of the equipment.

Note 2: This figure represents the capital costs of the new Major Fleet Replacements during the 20-year period reflected in the chart. The total capital costs of these platforms amortized over their useful life, which extend beyond this 20-year period, amount to $45-50B.

To address the problem, the Government increased defence funding through Budget 2006 by $5.3 billion over five years, including a baseline increase of $1.8 billion starting in 2010-11. In doing so, it established a firm foundation for the future and raised the baseline on which future efforts to rebuild the Canadian Forces will be anchored.

Moving forward from this strong footing, the Government, in Budget 2008, augmented the automatic annual rise in Defence funding from 1.5 percent to 2 percent starting in fiscal year 2011-12. Over the next 20 years, this increase is expected to expand the Defence budget from approximately $18 billion in 2008-09, to over $30 billion by 2027-28, as shown in Charts 1 and 2. This figure reflects the new investments made by the Government as outlined in this document. Overall, the Government will spend close to $490 billion on defence over the next 20 years (see Charts 3 and 3a for further details).

With this funding framework, National Defence will be able for the first time to plan for the future on the basis of stable and predictable funding, which will allow it to strategically allocate resources and build the capabilities necessary to meet the country's defence needs. Furthermore, in addition to this new formula, the Government is committed to separately fund incremental costs for major operations.

This commitment to long-term funding and to the detailed procurement strategy it supports will also provide major new opportunities for Canadian industry and produce significant economic benefits for Canadians. It will provide good jobs and new opportunities for tens of thousands of Canadians who work in defence industries and communities with military bases. It will also allow Canadian companies to align their long-term manufacturing, support, and research and development programs to better meet procurement requirements. This comprehensive plan will be implemented in concert with a new long-term procurement strategy designed to benefit Canadian industry while building commercial capacity in relevant knowledge and technology industries.