Prime Minister Mark Carney holds a press conference with Foreign Affairs Minister Anita Anand, left, and National Defence Minister David McGuinty, right, following the NATO Summit, where the government announced new defence spending, on June 25.Sean Kilpatrick/The Canadian Press
Election promises and massive defence spending increases promised by Prime Minister Mark Carney at a NATO summit last month will fuel huge annual federal budget deficits averaging more than $77-billion a year, a new report predicts.
A fiscal forecast released by the C.D. Howe Institute Thursday said the combined cost of Liberal Party election platform pledges, plus a June 25 commitment by Canada to boost military expenditures by as much as $90-billion each year, will drive Ottawa deeper into the red.
The outlook, from William Robson, former federal Finance Department official Don Drummond and Alexandre Laurin, said the federal government would face a cumulative deficit of $311-billion over four years, for an annual average of $77.7-billion.
If the savings promised in the Liberal election platform − from penalties, fines and spending cuts − are not realized, the cumulative deficit would be $342.7-billion for an annual average of $85.7-billion, it said.
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The C.D. Howe report calls for scaling back election platform commitments, finding much deeper savings within current operations, enacting a “modest increase” in the goods and services tax “and reconsidering how Ottawa transfers funds to the provinces and territories” to help lighten the fiscal load.
“The Liberal election platform along with the commitment to much higher defence spending amounts to a radical change in the nation’s finances with long-lasting adverse consequences,” Mr. Robson, CEO of the C.D. Howe institute, said in a statement.
Mr. Carney last week committed Canada to the biggest increase in military spending in more than 70 years, part of a North Atlantic Treaty Organization pledge designed to address the threat of Russian expansionism and to keep U.S. President Donald Trump from quitting the Western alliance.
The Prime Minister and the leaders of the 31 other member countries issued a joint statement late last month at The Hague saying they would raise defence-related spending to the equivalent of 5 per cent of their gross domestic product by 2035.
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NATO Secretary-General Mark Rutte said the commitment means “European allies and Canada will do more of the heavy lifting” and take “greater responsibility for our shared security.”
For Canada, this will require spending an additional $50-billion to $90-billion a year – more than doubling the existing defence budget to between $110-billion and $150-billion by 2035, depending on how much the economy grows. This year, Ottawa’s defence-related spending is due to top $62-billion.