Friday, January 23, 2009

"Waiting for Defence Budget 2009: First of the Canada First Defence Strategy Budgets?"

Excerpts from a "Commentary" by Brian MacDonald, Senior Defence Analyst, Conference of Defence Associations:
The Canada First Defence Strategy Budget

2008 also saw the tabling of the Canada First Defence Strategy (CFDS). An unusual aspect of the CFDS was the inclusion of a long-range funding formula which had three key elements. First, was a promise of 2.7% “Nominal” growth, which includes an expected inflation factor of 2.1%, and therefore 0.6% “Real” growth in the defence budget.

Second, was a promise that future expeditionary, or “major, operations would be provided with supplementary funding to cover the incremental costs [emphasis added] of those operations...

...the defence budget over the Martin/Harper administrations...[has evolved] from a Main Estimates 2005/6 figure of $13.4 billions to a Main Estimates 2008/9 figure of $18.3 billions, an increase of 36.3% or 11.1% annually.

Additional funds which were added as “adjustments” increased the real size of the defence budgets even more during the period, but these sums do not become part of the “baseline” defence budget reflected in the evolving “Total Main Estimates figure.

Defence Budget 2009/10

Defence Budget 2009/10 is the first of the annual CFDS budgets.

The increase in the Main Estimates from $18.3 billion in FY 2008/9 to $18.8 billion in FY 2009/10 represents an increase of $500 million or 2.7%, which is consistent with the CFDS “Nominal growth” figure.

Planned Adjustments already included in previous Reports on Plans and Priorities amount to about $600 million. Total Actual Adjustments have run about $1.1-1.3 billion over the previous years. Given that our actual strength figure in Afghanistan has risen over the past year it is likely that this figure will be increased.

Consequently, since governments like to appear to be consistent with their previous statements we can probably expect a Total Main Estimates figure of $18.8 billion, plus Planned Adjustments of $600 million and Further Adjustments of between $600 million and $1.2 billion for a Total Planned Spending figure of $20.0 to $20.6 billion for FY2009/10.

And we can probably expect to see that figure adjusted upward in the Supplementary Estimates (A) and Supplementary Estimates (B) in 2009.

Impact of the Financial Crisis

Many defence watchers have expressed fears that the measures taken to deal with the financial crisis would result in reductions to the defence budget . This fear is probably unwarranted since the bulk of the defence budget is spent in Canada and a withdrawal of that spending would reduce economic activity.

The Chairman of the Conference of Defence Associations has delivered a statement to the Finance Minister recommending that funds allocated to the solution of the financial crisis be made available in part to the rehabilitation and new construction of DND infrastructure, as well as to the restart of the Joint Support Ship project, projects that could have a major short term economic multiplier effect coupled with crucial long term strategic benefits to Canadian defence...
While I doubt the defence budget will actually be reduced, I do see likely big problems with funding major equipment purchases (see this post), and CF personnel expansion, over the next few years. And any reduction in the (very small) planned spending increases will have a severely negative effect on the CF's capabilities.

And, from the Ruxted Group: "The Defence Budget"


Blogger Mabus said...

Oh, I had no idea the Ruxted Group was back.

Anyway, it seems like a bad idea to restart the JSS as a form of economic stimulus. It would make more sense to separate AOR and sealift, and just sign a contract to build Canberra class or Mistral class ship while we design an AOR replacement. At least that way we could start building immediately rather than spend a few years trying to design a class of ship that's never been built before.

(As a side note, the Canberra class does sort-of meet the profile of the hybrid carrier Harper talked about in the 2006 election)

3:18 p.m., January 24, 2009  

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