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Cost of Tory military plans grows, while defence budget keeps getting cut

HMCS Windsor, one of Canada's four Victoria-class submarines, is returned to the waters of Halifax harbour after a five-year refit on April 11, 2012.

ANDREW VAUGHAN/THE CANADIAN PRESS

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It's an eye-popping figure: $105-billion for new warships. It's a sobering estimate of what it costs to buy a navy. Too bad there's no sober assessment of what Canada's defence will do without.

There is an inescapable squeeze: the cost of all the military equipment the Conservatives pledged is edging higher, but the military budget is shrinking.

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The new $105-billion estimate of lifetime costs for building warships – released by the government as it awaits an Auditor-General's report on its shipbuilding plans – shows why current decisions have to fit into a long-term plan that adds up.

Prime Minister Stephen Harper built a big part of his political persona on pumping money into the military, as the Conservatives blamed previous Liberal governments for putting the Canadian Forces through what general Rick Hillier called a decade of darkness. Now it seems like Mr. Harper doesn't want to admit the money he pledged isn't there by revamping the plans.

When his government set out its plans for military-equipment purchases, in a 20-year defence strategy issued in 2008, it was planning bigger defence budgets. This year's defence budget was supposed to be $21.7-billion, but now, in reality, it's $3-billion less. It's projected to stay relatively flat. The gap between the plan and reality is getting bigger every year.

Add the $105-billion lifetime cost for ships to the $45-billion estimated by accounting firm KPMG for F-35 fighter jets – even if the decision on buying them is on hold for now – and it starts to look like real money. In broad terms, that would take up a quarter of the defence budget, year after year, unless the budget is increased. And there's more on the shopping list.

The $105-billion projection for warships doesn't come from a spiralling price tag – if there are cost increases or overruns, they will be added later. But it's supposed to be all-inclusive, and long-term: it includes the purchase price, but also 30 years of maintenance costs and the salaries of people who will operate them.

It provides a great big number, with everything, in theory, thrown in. In this case, it's a useful illustration: it amounts, with a just a small portion missing, to what it costs to buy and operate a navy over 30 years. The $105-billion breaks down (roughly, because of the accounting details) to about $3.5-billion a year in constant dollars – but it's there year after year, for decades.

It includes the ships that are the backbone of the navy – the so-called "surface combatants" that will replace the current frigates and destroyers. Building "up to" 15 of them will cost $26.2-billion, and with maintenance and operations, the total cost is estimated at $90-billion over 30 years. The $105-billion total also includes the cost of replacing two supply ships and adding "up to" eight new Arctic patrol vessels. Barring the costs of operating and (possibly) replacing Canada's four submarines and its 12 small coastal vessels, it's pretty much the fleet.

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There isn't much to cut, unless you do without a navy. Some in the military would do without the Arctic patrol vessels, about 8 per cent of the cost estimate, but the government insists. The biggest element – about 85 per cent – is the crucial frigates. The $26.2-billion purchase price is already very tight, said David Perry, a defence analyst with the CDA Institute, so the government will have to either shrink the small fleet or skimp on their capabilities.

Big price tags for a navy and fighters mean a big figure has to be squeezed into the defence budget every year. Half the defence budget, more than $9-billion, goes to salaries, and only a small fraction is for the navy or fighter squadrons. The overwhelming portion is in the army and bureaucracy. Billions more are spent on bases and training – though the Defence Department is already reducing the latter. It is cutting billions, and stretching the life of equipment, but its capital spending is supposed to go up.

There's still the other things Mr. Harper pledged to buy: search-and-rescue planes, maritime patrol planes and close-combat armoured vehicles. And as the estimate for warships illustrates, decisions made now will be paid for year after year, long after Mr. Harper is gone.

So far, it won't all fit. Former lieutenant-general Andrew Leslie, when he was still in the army, called for restructuring the military, cutting overhead to pay for its cutting edge. The government still argues cost-cutting will make it fit. But something big has got to give, and as yet, the Conservative government hasn't explained what it is. The military isn't back to the decade of darkness, not yet, but its budget is in the shadows. Time for a new plan.

Campbell Clark is a columnist in The Globe's Ottawa bureau.

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