Janes Defence Review

April 12, 2014

Canada slashes defence spending

The Harper Government announced today that it is cutting projected defence outlays by $3.1 billion over the coming four years. According to one expert, the initiative, which was buried in documents that were released in conjunction with Finance Minister Jim Flaherty’s 2014 budget presentation, appears designed to raise as little notice as possible among industry suppliers, notionally one of the Conservative Party’s core constituencies.

The cuts, which are among the largest in dollar terms of all initiatives being implemented, were not even mentioned in the speech. “The government refers to the moves as a “shift in spending,” says Dave Walsh, a tax partner with Ernst & Young LLP’s Ottawa office. “But the reallocations are more in the nature of outright cuts. Long-term finance department projections show the years in which spending is being reduced. But spending tables stretching out to the end of the decade don’t indicate if or when those funds will be added back.”

Flaherty defended the move, alluding to challenges in the procurement process that have led to widespread program delays and cancellation. Widely touted initiatives ranging from plans to buy Lockheed Martin joint strike fighters, to shipbuilding and combat vehicle programs, have either stalled in recent years, been cancelled, or are moving forward at a snail’s pace. “If you have money laying around that you can’t spend, it makes sense to do something else with it until future years when it is needed,” said Flaherty.

According to David Perry, a senior analyst with Conference of Defence Associations Institute, the Harper Government’s latest budget fits a pattern. “For several years the defence department has not even been spending the money it gets,” said Perry. “Frankly our operational guys are starting to worry about how that will affect readiness.”

Peter@peterdiekmeyer.com

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