Government Operations Committee on June 21st, 2022

[Yves Giroux]

That's an interesting question.

We did a report in March, I think, or maybe later than that, on capital spending under the “Strong, Secure, Engaged” defence policy. We looked at the planned spending, especially on the capital side, in 2017-18 compared to the most recent actual expenditures.

We find that the pace at which the Department of National Defence has spent was lower than initially planned, which has resulted in a re-profiling of these expenditures of about $10 billion—if I am not mistaken—over the first four years of the defence policy. The Department of National Defence was behind schedule in these expenditures, which resulted in a re-profiling of these expenditures to later in the period.

That's probably as a result of challenges resulting from the procurement process and delays that the Department of National Defence encountered in procuring these major acquisition programs or launching these major acquisition programs. One can only speculate that, with additional or new equipment being purchased, as you referred to, the fighter jets and the surface combatants, notably, there could be further delays, but it's hard to predict at this time whether there will be additional delays in spending these amounts.

We have taken the Department of National Defence's spending profile going forward at face value. We did not adjust further what the Department of National Defence submitted to us for the purpose of this report.

[Anthony Housefather, Liberal, Mount Royal, QC]

Understood.

I will now turn to military expenditures. How can we more easily increase the percentage of these expenditures?

According to NATO figures, Canada's military expenditures were 1.01% of GDP in 2014. In 2021, they were 1.36% of GDP.

According to your forecast, Canada's total military expenditures should reach $51 billion in 2026-2027, rising to 1.59% of GDP. In order to reach 2% of GDP as quickly as possible, which expenditures would be the easiest to increase? Would it be materiel expenditures?

In your opinion, how could we reach 2% as quickly as possible and of course in a sound way?

[Yves Giroux]

National Defence and supply professionals would be better placed to answer your question better than I am. We have to consider both how quickly we can acquire materiel and recruit staff, as well as the effectiveness of measures and the operational needs of the armed forces, including those of Veterans Affairs and of the Canadian Coast Guard. All of these factors have to be considered in order to reach the target of 2% of GDP.

[Anthony Housefather, Liberal, Mount Royal, QC]

So you do not have any advice at all for us.

[Yves Giroux]

Unfortunately, I am not in the best position to advise you on the exact nature of national defence expenditures.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Housefather.

We will now go to Ms. Vignola for six minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Mr. Giroux and Mr. Penny, thank you for being here once again.

On page 5 of your report, in the first paragraph of subsection 1.1, you say: “NATO itself identifies that its own measurements can materially diverge from those reported by national governments”. You also state that NATO relies on public data published by Statistics Canada to determine Canada's level of involvement.

My next question is as follows. How does the Canadian government calculate its own defence expenditures in relation to the target to be reached as part of its role in NATO?

NATO uses Statistics Canada data. What data does the Canadian government use?

[Christopher Penney]

It uses Statistics Canada data.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

It uses the same data.

[Christopher Penney]

Yes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

So the figures should ultimately be the same.

[Christopher Penney]

Yes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

My next question might seem simplistic to you.

When a Canadian Coast Guard or Royal Canadian Navy ship is docked, are the the refit or repair costs for the ship also included when calculating defence expenditures?

[Christopher Penney]

Yes, absolutely.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

So it is not just construction costs. The costs for the entire lifespan of ships are considered.

[Christopher Penney]

Operating costs are included.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

You said before that the calculation method changed in 2017. I understand that veterans' pensions are the big change in the calculation. This morning, you published a note on survivors' pensions. Is that also included in your calculation, or has that been excluded from your calculation since 2017?

[Yves Giroux]

That is also included in the calculation of defence expenditures according to NATO's definition.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Okay.

Even with these amounts, it is still not enough. It does not do much to increase the percentage...

[Yves Giroux]

No, because we are talking about 2% of GDP, which is between $2,000 billion and $2,500 billion. It is easy to increase it by several tens of billions of dollars. Our report indicates that we are about $18 billion short of 2% of GDP this year. So even adding a few hundred million dollars in veterans' benefits, there is still a large shortfall in order to reach the 2% target.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

In the past, it has happened that National Defence was not able to spend the amounts allocated to it. In your opinion, why is the department unable to spend those amounts, knowing that in some cases members of the military do not receive their equipment in time for their training? This is not a political question.

[Yves Giroux]

That is hard to answer definitively without an in‑depth audit. The Auditor General might be able to answer that question more specifically.

On the other hand, I can say that National Defence does its own expenditure profile, with cabinet approval of course. One might expect that the person doing the planning would have a very good idea of what will actually be spent. If there is a significant gap between actual and planned expenditures right from the first years of the plans, one wonders whether the planning was done with due diligence, especially if there was no extraordinary event that disrupted planning, such as the COVID‑19 pandemic.

There might be room to improve the planning, but as I said officials with National Defence and the Auditor General could probably provide a more specific and detailed answer.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

We sometimes receive petitions by email calling on Canada to stop selling certain countries arms and armoured equipment, among other things. We see them in the newspapers as well. I understand that the government does not manufacture equipment itself, but are there companies, without naming them, that specialize in manufacturing arms and armoured equipment? Are the activities of those companies included under defence expenditures, or are they part of GDP?

[Yves Giroux]

The purchase of weapons by other countries and the sale of Canadian weapons to other countries are not included in Canadian defence expenditures. As you said, they contribute to the GDP and, if they are NATO countries, they help those countries reach the 2% of GDP target recommended by NATO. If the countries are not NATO members and they have other obligations, those transactions might be included in their defence expenditures. So they are not included in Canada's defence expenditures.