Defence Minister David McGuinty told reporters he’s confident the budget will receive the votes it needs to pass.Adrian Wyld/The Canadian Press
Defence Minister David McGuinty says next week’s federal budget will pave the way for the government to fulfill its new NATO commitment to spend 5 per cent of GDP on defence.
“What we’ll be doing in the budget is laying track to meet the 5-per-cent target by 2035,” Mr. McGuinty told reporters on the eve of the Asia-Pacific Economic Cooperation (APEC) summit in South Korea.
He also said he’s confident the minority government will receive the votes it needs to pass the 2025 fiscal plan in the House of Commons – unlike Steven MacKinnon, the Government House Leader, who has said the Liberals do not have the votes yet.
“I have every confidence that we will pass the budget,” Mr. McGuinty said. “I think that we will earn the respect and the support in the House. It’s a question of negotiations, the question of making sure that we are reflecting priorities for different members of Parliament.”
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The steep increase in military spending – the biggest in more than 70 years – has handed Prime Minister Mark Carney’s government a fresh challenge: how to pay for it.
Canada has yet to allocate money in the fiscal framework to buy as many as 12 new submarines. The subs will cost as much as $2-billion each, and that does not include all the weapons systems and associated costs of operating the boats. Over their operating lives, they will cost more than $100-billion when maintenance, parts and upgrades are included.
At the June, 2025, NATO leaders’ summit, the Prime Minister pledged that Canada will spend as much as $150-billion annually on defence within a decade – equivalent to 5 per cent of the country’s gross domestic product.
By comparison, the federal budget for defence-related spending this fiscal year is about $63-billion, or 2 per cent of GDP.
National Defence Minister David McGuinty, South Korean Prime Minister Kim Min-seok, Prime Minister Mark Carney and Hahnwa Group Vice-Chairman Kim Dong Kwan speak at the Hanwha Ocean Shipyard in Geoje Island, South Korea, on Oct. 30. Hanwha is on the short list of two bidders competing to supply Canada with 12 submarines.Adrian Wyld/The Canadian Press
The pledge – part of a collective boost in military spending to safeguard against threats from Russia and other hostile actors – will force Ottawa to run bigger deficits, raise taxes or make major cuts to spending, fiscal experts have warned.
In a July report, the C.D. Howe Institute warned that election promises and massive defence spending increases will fuel huge annual deficits averaging more than $77-billion a year.
The first component sees Canada and other NATO countries boosting core military spending to 3.5 per cent of GDP by 2035, or within 10 years. That would mean adding about $48-billion to the defence budget on a permanent basis.
The second NATO commitment is to spend 1.5 per cent of GDP on security- and defence-related infrastructure that would have a dual civilian and military purpose, such as bridges, ports and roads, as well as cybersecurity and measures to protect energy pipelines.
That’s at least another $48-billion in annual spending, although Mr. Carney has said that Canada can easily meet this target by claiming infrastructure expenditures that would happen anyway.
Editor’s note: This article has been updated to correct an earlier photo caption that incorrectly identified Prime Minister Kim Min-seok as President Lee Jae Myung.