(Ottawa) The Parliamentary Budget Officer says the Department of National Defense is planning unprecedented capital spending in the coming years, raising concerns about the future impact of inflation.
In a new report, Yves Giroux’s office assessed 20 years of planned capital spending under Canada’s 2017 defense policy, titled “Strong, Secure, Engage.”
The Parliamentary Budget Officer (PBO) found that planned capital spending was $50.8 billion higher than two years ago, mainly due to NORAD modernization and new military acquisitions.
Capital spending is expected to be at least $10 billion per year, peaking at $18 billion in the 2027-2028 fiscal year — an increase, in this case, of $1.7 billion from previous forecasts.
Delays in military acquisitions have meant the department has spent nearly $12 billion less than planned since 2017.
Mr. Giroux emphasizes that postponing these expenses to later years raises fears that inflation will reduce the government’s purchasing power.
“Increased spending in subsequent years is subject to greater discounting to account for inflation, as well as anticipated increases in the defense procurement inflation rate, as discussed by PBO in previous reports “, underlines the new report.
The PBO reveals that 62% of capital spending was shifted to the second half of the 20-year period instead of being spread equally over this period, as was the case in the last PBO report in 2022.
In June 2022, the Department of Defense announced plans for a major modernization of NORAD’s infrastructure and capabilities, which is expected to cost $38.6 billion over 20 years. A large part of this envelope should be spent after 2030.
The government has also announced several major acquisitions since 2022, including a project to purchase 88 F-35 fighter jets, for a bill of 19 billion, and a project of 10.4 billion for the purchase of surveillance planes P-8A.
Overall, the defense policy planned to spend 553 billion over 20 years, until 2037, of which 164 billion was reserved for acquisitions of capital goods. These acquisition expenses now amount to 214.8 billion, estimated Mr. Giroux.
The Department of Defense indicated in April 2022 that it was planning an update to its defense policy published in 2017. In a recent interview, Defense Minister Bill Blair said he would have liked this update. updated was completed “yesterday”, but he gave no new timetable for its publication.