National defence cuts could tally $2.5B

An independent analysis has concluded the waves of federal budget cuts washing over National Defence will run deeper and likely be more painful than advertised by the Harper government.

While it won't exactly be a return to the "decade of darkness" the Conservatives attribute to the Liberal years, the reductions will be significant and are expected to cut into the military's "readiness" or ability to respond quickly to a crisis.

The days of soldiers rationing their training ammunition, fuel and money used to make equipment operationally ready may be about to return, the report warned.

The research paper, written for the Centre for Security and Defence Studies at Carleton University, estimates the cumulative effect of the Harper government's strategic review and the overlapping deficit reduction action plan will carve up to $2.5 billion out of the nearly $21 billion National Defence budget by 2014-15.

The 27-page report, penned by defence expert Dave Perry, is believed to be the first comprehensive snapshot on the post-war military of the impact of the federal government's dual-tracked deficit reduction plan and spending freezes.

"With the economy once again the government's top priority, the Canadian Forces will need to adjust to a new fiscal climate, one which will reduce its budget by at least 11 per cent over the next three years," said the research report, a copy of which was obtained by The Canadian Press.

"At the same time, the military's ability to make budgetary adjustments has been tightly constrained by the decision to retain its front-line military capabilities. As a result, the Operations and Maintenance budget will bear the brunt of these budget cuts."

Expeditionary role may be reduced

The Harper government has repeatedly said it wants Canada playing a leading role internationally alongside allies, but the report warns, the way the cuts are shaking out, the military will be strained almost as badly as in the 1990s.

"As a result, it will be very difficult for the military to play the same expeditionary role that it has in recent years," said the report. "While the pursuit of influence may not be over, with less funding available for operational readiness, the prospects of making influential military contributions abroad will be greatly reduced."

The government's mantra of being defenders of the military will be sorely tested over the next few years.

"They're cutting it quite hard, but no harder than any other government would in the same position," said Perry, who is also a researcher for the Conference of Defence Associations. "DND is a huge chunk of discretionary spending and if you want to cutback on overall federal outlays, no matter how much you like to support the military, you've got to cut defence."

But a spokesman for Defence Minister Peter MacKay says the government has increased spending on the military by $1 billion per year since coming to office, including a guarantee of annual operating increases.

"Following the combat mission in Afghanistan, and in conjunction with all government departments, the Department of National Defence and the Canadian Forces need to ensure taxpayers are getting value for their tax dollars and that, in turn, makes the Canadian Forces more efficient and, ultimately, more effective," said Jay Paxton.

Little room to manoeuvre

But Perry argues that unlike past budget cutting exercises, defence has less room to manoeuvre because of a change in accounting policy and the reluctance to give up specific capabilities, such as submarines or transports.

When they've wanted to reduce money to the military past governments have simply cancelled equipment purchases outright. But the system of accrual accounting, where purchases are amortized over their lifetime, means such cuts will not produce large, immediate savings.

The Harper government's strategic review mandates a direct defence budget cut of $1 billion by 2014-15, but at the same time it overlaps with a planned 7.4 per cent, or $1.12 billion, reduction under the Deficit Reduction Action Plan.

In 2008, the Conservatives made political hay out of the promise to give the military stable and predictable funding, with planned operating budget increases over 20 years.

Perry says the $344 million extra the department gets as a result of the Canada First Defence Strategy is being more than chewed up by increased costs associated with the government's 2010 freeze on departmental spending, which came at the same time as negotiated wage hikes.

"Thus, the wage measure has effectively negated any increase DND would have otherwise received under the CFDS spending plan," he wrote.

The only place left to cut would be in what's known as national procurement funding, which is money used to make equipment operationally ready.

"Accounting for roughly 40 per cent of readiness spending, National Procurement encompasses the acquisition of spare parts, contracts for maintenance, repair and overhaul, technical support, and the ammunition used in training," said the report.

It suggests the recent merging of commands will not save the government very much and a suggestion in the Leslie report to axe outside contractors will hurt the air force, which relies extensively on them to keep aircraft maintained.