Defence Spending

Spending Reductions and Lapsed Funding

As one of the largest federal departments, National Defence is committed to working more efficiently, and ensuring that our dollars are concentrated on achieving our top priorities.
That is why National Defence reduced spending on professional services and travel by $211 million during the last fiscal year.
In parallel with these targeted spending reductions, we continue to invest in military capabilities to ensure Canada can continue to contribute meaningfully to global peace and stability.
This includes funding for major capital projects such as the River-Class Destroyer and the Canadian Multi-Mission Aircraft.
In addition, during the latest NATO Summit in Washington, I announced that Canada expects to spend 2% of its gross domestic product on defence by 2032.
While we continue to maintain our fiscal responsibility toward Canadians, we remain steadfast in our efforts to defend their safety and security, at home and abroad.

If pressed on lapsed funding:

National Defence manages a large budget with major equipment and construction initiatives that need funding over many years.
As such, Defence uses a flexible funding model to ensure that projects get the money they need when they need it.
This means that money can be re-allocated to support priority projects and initiatives within a given year or moved forward to support needs in future years.
For example, last fiscal year, we reprofiled $1.1 billion to future years for several capital equipment and infrastructure projects.
We will continue to direct committed funding when needed, to support our people, deliver on operations, and undertake major equipment and construction initiatives.

Budget 2023 announced a goal of saving $7.1 billion over five years through a 15% cut to discretionary spending on consulting, professional services, and travel over five years.
The Budget also announced a planned phase-in of a 3% spending cut by departments and agencies by 2026-27, with a goal of saving $7 billion over four years.
Of the $1.57 billion in lapsed funding in 2022-2023, $1.45 billion or 92% of the amount is available for defence spending future years. This includes:
- $1.1 billion for adjustments to spending on capital equipment and infrastructure projects;
- $240.3M in Carry Forward (operating expenditures);
- $107.3M for the Heyder-Beattie Final Settlement Agreement; and
- $16.2M in proceeds from the disposal of surplus Crown assets.

Spending Reductions

Efforts are underway to reduce National Defence's spending to meet targeted reductions of approximately $900M per year. Reductions will be phased in over three years and are not expected to result in job losses outside of normal attrition, or reallocation, ensuring that National Defence's work is focused on high-priority initiatives.
Additional spending reduction targets are planned for 2024-25 and ongoing, as outlined in the Departmental Plan:

2024–25	2025–26	2026–27 and after
$810.4M	$851.4M	$907.5M

Savings measure 1: Travel

Reduce spending on travel by $58.6M in 2024-25, and ongoing.
The Department is focusing on discretionary travel – for example, travel related to governance and planning that can be done in another format.
Travel reductions will not affect deployments of Canadian Armed Forces (CAF) personnel.

Savings measure 2: Professional Services

Reduce spending on professional services by $200M in 2024-25, and ongoing.
Our focus on reducing spending in this area is on those services that can be reduced or eliminated while minimizing the impact on CAF readiness and operations.
National Defence spends about $5 billion annually on contracted services. About half of that amount is in direct support of equipment and fleet maintenance and sustainment, such as engineering services.

Savings measure 3: General Operating Funds

Reduce general operating expenses by $354.8M in 2024-25, $264.3M in 2025-26, and ongoing.
The Department has completed the initial phase of this exercise, which has identified several areas for savings and potential long-term efficiencies across the organization. This includes activities that have historically lapsed funding.

Savings Measure 4: Fiscal Framework^{Footnote 1}

Reduce spending to initiatives yet to be started and not yet funded in the fiscal framework by $197.1M in 2024-25, $185.8M in 2025-26, $79.9M in 2026-27, and ongoing.
Reductions will be applied to programs where a Treasury Board Submission has yet to be approved and where there is an opportunity to harvest some savings by revising the schedule.

Savings Measure 5: Additional Targeted Spending Reductions

The previously described measures do not fully meet targeted saving reductions. Further work is therefore currently underway to identify $142.7M in 2025-26 and $304.8M in 2026-27 (ongoing) to fulfill Department of National Defence targets.
We will continue to ensure that the spending in our budget is directed toward top government and defence priorities, which include increasing military capabilities and supporting our people and their families.

Lapsed Funding

National Defence introduced a flexible funding model in 2017 to re-allocate lapsed funds to support emerging priorities or future needs.
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 requesting 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); and
- Monitoring forecasted exchange rates to better forecast their impact on funding estimates (to mitigate grants and contributions lapse).