Federal Budget 2017

KEN POLE  –  Mar 22, 2017

22 Mar 2017

Despite pressure from the United States and NATO to effectively double Canada’s military spending, the federal government is ready to hold back some 10 percent of the Department of National Defence’s funding.

The 30-year total available to DND has been set at $83 billion for some time but the government said March 22 in its latest budget that reserving $8.4 billion beyond the 2035-2036 fiscal year is necessary to ensure funding for two capital projects.

These are the planned acquisition of new fixed-wing search and rescue (FWSAR) aircraft and the modernization of light armoured vehicles which originally were scheduled for only partial upgrades.

The option of holding back DND funds was not mentioned by Finance Minister Bill Morneau in his speech to Parliament, but details were set out in his department’s 278-page main budget document.

“While there is sufficient funding available for these projects, the expected profile of large-scale capital funding does not align with the timing of expenditures associated with these projects,” it said.

Morneau essentially demurred when asked during a news conference how the prospect of holding back funds squared with the push by Canada’s allies for more spending. Other than “we know how important our role is”, all he would say, is that the year-old Defence Policy Review would confirm that position.

The budget document said that “a key objective” is to support DND’s long-term planning with stable and predictable budgets. “A comprehensive overview […] will be provided when the policy is released in the coming months.”

In the meantime, the government reiterated its commitment “to ensuring the Canadian Armed Forces has the tools it needs to defend Canada and North America, and to contribute with our allies to a wide spectrum of operations globally.”

These included the FWSAR replacement project, which saw a contract awarded to Airbus late last year only to see the competing Leonardo conglomerate ask Federal Court for a judicial review on grounds that the other aircraft is unsuited for the Royal Canadian Air Force SAR mission

The budget document also highlighted the government’s controversial decision, which is still in negotiations with Boeing, to acquire 18 FA/18 Super Hornets to address what Defence Minister Harjit Sajjan has called a “capability gap” in the RCAF until a replacement for the current legacy fleet of CF-18 Hornets is selected.

“There is also tangible progress in the recapitalization of the naval fleet through the National Shipbuilding Strategy,” the budget document adds.

“A competitive process was launched and Irving Shipbuilding International was chosen to build the next generation of combat ships for the Royal Canadian Navy. Construction is already underway on two Harry DeWolf Class Arctic/Offshore Patrol Vessels and a competition has been launched to choose the design for the Canadian Surface Combatant.”

The only other defence-related element of the budget was the government’s decision to consolidate its Strategic Aerospace and Defence Initiative (SADI) and similar programs into a new Innovation Canada platform it says will pay out $1.26 billion over the next five years.

Again, Morneau did not specifically mention the change in his speech, leaving it to the budget document, which did not include specifics. A government official in the budget media lockup acknowledged to FrontLine that since there was “no carve-out” of individual programs, there was no guarantee of increased or even sustained growth of funding for SADI, which was established a decade ago.

Overall, however, the government says consolidation of “dozens” of innovation-support programs should facilitate access to funding by “reducing legwork and paperwork, providing more timely and relevant access to services, and ultimately putting more money in the hands of Canadian innovators.”

There were some financial specifics in the budget document, including an additional $950 million over the next five years to accelerate development of  “a small number” of technology “super-clusters” it says will attract “anchor” companies from around the world. “Successful clusters like the ones in Silicon Valley, Berlin, Tel Aviv and the Toronto-Waterloo corridor contribute significantly to both regional and national economies.” Access would be on “a competitive basis in support of a small number of business-led innovation superclusters” which would include advanced manufacturing, which could include aerospace.

– Ken Pole