Defence Funding

“Lapsed” Funding

Strong, Secure, Engaged fundamentally changed the way National Defence manages its budget.
We request only the resources we need to manage our budget each year.
- These transactions are reviewed by Parliamentarians through the estimates process.
- Capital resources that we do not request, are available to the department in future years.
- This is a critical tool that allows us to manage resources effectively when delivering procurements over multiple years.
Funding for deployed operations is typically only requested at the last Supplementary Estimates exercise.
This ensures our requirements are as accurate as possible before requesting additional funding.
Regarding Capital funding, we have the flexibility to re-allocate between existing projects or move funds forward to support needs in future years.
- This allows us to respond to project developments like extra time to review options or mitigate delays from industry.
- Finally, we “carry forward” as many unused operating funds as possible as a planned lapse.
- For instance, in 2018-19, Defence was unable to spend $473.4 million.
- I am pleased to report that $390.9 million will be available in future years and the remainder was used to pay for Government wide initiatives resulting in no residual lapse.

National Defence public account lapse (difference between funding requested and expeditures):
- $473.4 M was lapsed in 2018-2019, of which $390.9 M was available for future years.
- $677 M was lapsed in 2017-2018, of which $652.9 M was available for future years.
This flexible funding model allows National Defence to manage changes in project developments such as:
- lower contract amounts;
- changes in required capabilities to meet new threats;
- additional time needed to analyse options; and
- delays in the delivery of goods and/or services by industry;

Despite sound long-term planning, most defence procurement projects do not advance exactly as planned—some progress faster, others slower, for a variety of operational, logistical, and program reasons.
To mitigate lapses in funding authorized by Parliament, National Defence is taking the following actions:
- Improving its capital funding forecast to ensure that the department does not request more funding authorities from Parliament than required;
- Funding new projects from surplus in-year funding rather than request additional funding from Parliament;
- Requesting funding for additional military deployments later in the process to ensure only the required funding authorities are requested (to prevent operating lapse).
Funding not requested is not lost. National Defence has the ability to re-profile funds into future years for major projects, and then access those funds when needed.

Version 5; 2020-02-26 – Source: Committee of the Whole Note, 2019-12-07

Canada’s commitment to NATO is unwavering.
We continue to demonstrate our support for the Alliance and proudly to contribute forces and capabilities to several NATO missions and initiatives.
For example, we are leading the NATO mission in Iraq for a second year in a row and contributing to NATO assurance and deterrence measures in Central and Eastern Europe.
In December, the Prime Minister also announced that Canada is contributing to the NATO Readiness Initiative by providing Air, Land, and Maritime capabilities.
We will keep working with NATO Allies to enhance our collective security and promote peace and stability around the world.

If pressed on defence spending as share of GDP (NATO 2%):

In 2017, through Strong, Secure, Engaged, we committed to increasing defence spending by 70% over ten years.
We have taken important steps to procure the equipment needed to continue providing important capabilities the Alliance.
This includes future generation fighter jets and new Canadian Surface Combatants.

National Defence financial contribution to the common services of NATO:
- $140.3M 2019-20 (Main Estimates)
Canada’s defence spending for 2018-19 was 1.31% of GDP.
National Defence forecasts that total defence spending as a percentage of GDP will increase to 1.48% by 2024-25.

During the NATO Wales Summit in 2014, member nations established the guidance to move spending on defence towards 2% of their GDP.
Starting in 2015, Canada aligned its accounting of defence spending with criteria established by NATO. This resulted in the inclusion of new spending categories related to veterans and personnel program support, which were not previously accounted for.
Canada’s defence spending for 2019-20 was 1.31% of GDP and is forecasted to be ranked 20th out of 29 Allies. National Defence forecasts that total defence spending as a percentage of GDP will increase to 1.48% by 2024-25. Canada’s progress towards meeting spending goals does not yet include future expenditures on continental defence, including modernization of NORAD.
National Defence contributes to Canada’s share of NATO’s Military Budget, which is funded by all NATO members. The NATO Military Budget funds the operating and maintenance costs of the NATO military structure and activities, including deployed operations.

As part of the NATO training and capacity building mission in Iraq, Canadian Armed Forces members are deployed to Baghdad and the surrounding area. Canada contributes the command team, a force protection company, advisors and trainers, mission headquarters staff, and a helicopter detachment to the NATO training mission in Iraq.
On February 12, NATO Allies agreed in principle to expand NATO training activities. Throughout this process, Canada will be working closely with its NATO Allies, Iraqi authorities, and Coalition partners.
On June 26, 2019, Canada announced the extension of its command of the NATO training mission in Iraq until November 30, 2020. Following completion of its command, the Canadian Armed Forces will continue contributing military assets to the NATO training mission in Iraq.

Version 5; 2020-02-26 – Source: QP Note 2020-01-