Spending

Spending Reductions and Lapsed Funding

Key Facts

Details

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:

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.
• Funding available for travel will be closely related to defence policy priorities and Government-directed activities.
• Travel reductions will not affect deployments of CAF personnel.
• The Department is focusing on discretionary travel – for example, travel related to governance and planning that can be done in another format.

Savings measure 2: Professional Services

• Reduce spending on professional services by $200.0M in 2024-25, and ongoing.
• DND/CAF 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.
• 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.
• Priority setting exercises are being undertaken throughout the department to determine reductions in this area.

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 on initiatives yet to be started and earmarked in the fiscal framework by $197.1M in 2024-25, $185.8M in 2025-26, $79.9M in 2026-27, and ongoing.
• The Fiscal Framework is the financial structure within the Government’s budget agreed upon by Cabinet. Funding is transferred to a department from the Fiscal Framework through approved Treasury Board submissions for initiatives approved by Cabinet.
• 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.
• The Department is working to identify spending reductions to meet the full ongoing savings target beyond fiscal year 2024-25. A deeper review of targeted programs and activities to identify ongoing reductions is underway.
• 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.
• This flexibility facilitates the delivery of major projects which require multi-year funding.
• Despite sound long-term planning, most defence procurement projects do not advance exactly as planned—some progress faster, others slower, for a variety of operational, logistical, and program reasons.
• 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).

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