Parliament’s fiscal watchdog is raising concerns about nearly $15-billion of unexplained military spending buried in the 2022 federal budget – money in excess of what’s spelled out in the Department of National Defence’s spending plan released earlier this year.
Parliamentary Budget Officer Yves Giroux and the predecessors in his post have long been concerned about whether MPs and senators have sufficient details overall of budgets and spending estimates to be able to scrutinize and approve, or oppose, government expenditures.
But the unaccounted-for $15-billion is also raising questions about whether the government has quietly set aside billions of dollars more in defence spending than what it’s already acknowledged to Canadians.
Don Drummond, a former senior Department of Finance official, said this discrepancy amounts to a “black hole” that means MPs are in the dark about what the government is actually planning.
“It could be money associated with continuing to fund existing activities. Or it could be a gigantic slush fund. Both are possible.”
Mr. Giroux drew attention to the discrepancy in an April 22 report. In an interview, he said his agency has asked the Department of Defence for additional information on what the $15-billion is to be spent on.
He said National Defence’s 2022 departmental plan says it planned to spend a total of $77-billion between fiscal years 2022-23 and 2024-25.
But, Mr. Giroux noted, the defence numbers in the 2022 budget, unveiled April 7, are roughly $23-billion higher for the same three-year period.
The government’s budget plan talked about $8-billion of new defence spending over this period.
But, Mr. Giroux said, there is no explanation or details on how the remaining roughly $15-billion will be spent.
“While part of this spending (approximately $8-billion) pertains to new policy measures presented in the budget, there is no explanation for the balance (close to $15-billion),” he said in his report.
Asked to explain the discrepancy, Jessica Lamirande, a spokeswoman for the Department of National Defence, did not detail how the $15-billion would be spent. But she said the budget numbers include estimates of funding for buying military hardware or covering Canadian Armed Forces (CAF) operations that have not been approved yet internally or by the House of Commons and Senate.
“The numbers projected in Budget 2022 include forecasted capital funding, as well as CAF operations funding, for which Treasury Board and parliamentary approval has not yet been requested,” Ms. Lamirande said in a statement.
National Defence’s departmental plan, released before the budget, does not include all spending plans, she said.
“The numbers in the departmental plan represent approved capital funding at the time of the departmental plan and not the entire future forecast. As well, forecasted CAF operations costs are not included in the departmental plan as they are not yet approved.”
There could be bigger demands for defence spending coming soon.
Earlier this month in the budget, Deputy Prime Minister Chrystia Freeland announced the government would undertake a “swift defence policy review” to determine what additional military gear is needed “to equip Canada for a world that has become more dangerous.”
Mr. Drummond said it’s possible some of the $15-billion is money being set aside to pay for extra spending pending the outcome of this defence review. It could also reflect increased cost projections for existing hardware purchases owing to inflation, he said.
He said disclosures to date suffer from a lack of accountability and transparency. “It’s money that is being budgeted and we don’t know what it’s being budgeted for.”
It’s very likely that this $15-billion will not be spelled out for parliamentarians or Canadians for many months, he said. Supplementary estimates of government spending are normally released later in the fiscal year – some of them as late as the fall.
Former parliamentary budget officer Kevin Page said the public and Parliament deserve better.
“It is disappointing and bad public finance management that there is a large discrepancy between Budget 2022 and departmental spending planning numbers for National Defence,” he said in an e-mail.
The $8-billion in new spending announced on Budget Day amounted to a very modest increase – far less than what Defence Minister Anita Anand had hinted might be coming.
Ms. Anand had told CBC TV in mid-March she was bringing forward “aggressive options” for cabinet, some of which could push spending over 2 per cent of Canada’s annual economic output. Defence analysts have estimated this would cost Canada an extra $17-billion per year.
But the 2022 budget delivered only an extra $1-billion or $2-billion in each of the next four years – rising to more than $3-billion in the fifth year – falling far short of Canada’s NATO commitment to spend 2 per cent of annual economic output on defence.
Ms. Anand in February had pledged to soon bring forward a “robust package to modernize NORAD,” one expected to help replace the aging North Warning System, a joint U.S. and Canadian radar system that includes dozens of sites from Yukon to Labrador. It is currently incapable of addressing new threats such as hypersonic missiles from Russia and China. That funding has so far not materialized.
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