By Richard Martin, President, Alcera Consulting Inc.
Whatever we may think of NATO’s target of spending 2% of GDP, it’s the one we have and the one our government has agreed to. Canada’s commitment to raising defence spending to 2% of GDP is a cornerstone of its NATO obligations and a symbol of its commitment to collective security. While the 2024 policy update Our North, Strong and Free (ONSAF) currently sets the target for 2032, recent statements from Defence Minister Bill Blair and Deputy Prime Minister Chrystia Freeland (in the context of her campaign to succeed Trudeau as leader of the Liberal Party of Canada) suggest that an accelerated timeline—reaching 2% by 2027—may be under consideration.
This article examines the depth of the challenges, opportunities, and strategic implications of such an acceleration. As we’ll see, turning “ploughshares into swords” is not just a question of more money.
1. The Current Roadmap: ONSAF and Key Programmes
Our North, Strong and Free outlines an ambitious plan to incrementally increase defence spending over the next two decades. The update commits approximately C$8.1 billion over five years and a total of C$73 billion over 20 years in new investments. Under this plan, spending is expected to rise to about 1.76% of GDP by the 2029–30 fiscal year and ultimately reach 2% by 2032. This roadmap builds on the earlier 2017 Strong, Secure, Engaged policy that already set the stage for doubling defence budgets between 2016–17 and 2026–27.
Key procurement and investment programmes with firm commitments include:
- Air and NORAD Capabilities: The planned acquisition of 88 F-35 fifth generation fighters is aimed at modernizing the RCAF’s air combat capabilities. However, the global F-35 production schedule is highly congested, which means that any additional orders would face long lead times. Orders for up to 16 P-8A Poseidon aircraft were placed in time to fit into a heavy production schedule. To this must be added the C$20 billion or so committed in 2022 to upgrade our NORAD capabilities, including advanced satellite communications, over-the-horizon radar, and long-range detection systems. The procurement strategy includes 9 multi-role tanker transport aircraft and 11 MQ-9B Predator-class drones.
- Maritime Capabilities: In place since 2010, the National Shipbuilding Strategy has led to large investments in and orders for Canadian shipbuilders Irving, Davie, and Seaspan and a large array of suppliers and sub-contractors. These are intended to rejuvenate naval capabilities. Seaspan is currently building the two Joint Support Ships for the RCN and one of the two heavy polar class icebreakers for the Canadian Coast Guard (CCG)—the other will be built by Davie Shipbuilding. Irving is finalizing the delivery of all six of the Arctic and Offshore Patrol Ships for the RCN and has started building two more for the CCG. Finally, Irving is in the preliminary construction stages of the 15 River class destroyers as the RCN’s future Canadian Surface Combatant, which will eventually replace the Halifax class patrol frigates.
- Other Capabilities: Massive allocations are set aside for next-generation platforms—C$18.4 billion for new tactical helicopters, C$2.7 billion for Army long-range missiles, C$1.4 billion for advanced maritime sensors, C$2.8 billion for establishing a new cyber command, and modernization of army artillery and logistics vehicle systems.
- Sustainment and Modernization: Recognizing that new acquisitions are only part of the equation, the roadmap also dedicates C$9.9 billion to extend the life of existing naval vessels, C$9 billion to sustain current equipment, and C$9.5 billion to boost munitions capacity and stockpiles.
These detailed measures illustrate the breadth of the planned investments and serve as a baseline for understanding what accelerating the timeline would entail.
2. Challenges Under the 2032 Timeline
Even the current, gradual plan faces several significant challenges:
Procurement and Budget Absorption
The Department of National Defence (DND) has a well-documented history of not fully expending its allocated capital budget. Due to lengthy procurement processes, administrative delays, and insufficient absorptive capacity, between 10% and 15% of funds can lapse each year. This systemic bottleneck indicates that simply adding more money may not translate into faster project delivery unless procurement processes are reformed. Another factor that is often overlooked is the need for larger numbers of qualified and experienced civilian and military personnel with the requisite skills and expertise to formulate operational requirements, including training and logistics support, procurement specialists, and project managers.
Personnel Shortfalls and Operational Readiness
A persistent gap exists in the Canadian Armed Forces. Current estimates show a shortfall of approximately 16,000 personnel—roughly 15% below the required force levels. This shortfall hampers the integration of new platforms and undermines readiness; without sufficient trained operators, maintainers, and support staff, new equipment risks becoming an expensive “paper asset” rather than a fully operational capability.
Fiscal and Budgetary Constraints
The Parliamentary Budget Officer (PBO) has projected that achieving 2% by 2032 requires a near-doubling of defence spending—from roughly C$41 billion in 2024–25 to about C$82 billion by 2032–33. Accelerating this increase to 2027 would impose an even steeper and more immediate fiscal burden, potentially conflicting with government deficit targets and other fiscal anchors. The challenge is not merely technical—it is also political, as tougher budget choices may be required that could affect other priority areas like healthcare and infrastructure.
Industrial Capacity and Global Supply Chain
Canada’s defence procurement relies heavily on international suppliers, particularly for high-end systems like the F-35. These suppliers are already operating at near-full capacity, and global demand has led to significant production backlogs. An accelerated procurement schedule might exacerbate supply chain issues, resulting in longer delays or higher costs. Moreover, domestic industrial capacity is limited; while Canada has niche expertise in aerospace components and maintenance, it does not have the mass production capabilities for combat platforms other than light armoured vehicles and ships.
3. Opportunities for Accelerating the Timeline
Despite these obstacles, several opportunities could enable Canada to accelerate its path to 2% by 2027.
Fast-Track Procurement Mechanisms
Expanding the use of Urgent Operational Requirements (UORs) is a promising strategy. UORs allow the government to bypass some standard competitive bidding processes for critical acquisitions, effectively “fast-tracking” the procurement cycle. This method has been used successfully in past crises—such as interim supply ship purchases in 2015 and urgent equipment orders for Eastern Europe in 2023—and could be applied to key platforms like the submarine replacements or advanced air defence systems. By contracting directly with experienced suppliers, Canada could significantly cut down lead times.
Front-Loading Sustainment and “Shovel-Ready” Projects
While major platforms often have long lead times, many sustainment projects can be accelerated. Increasing funding for maintenance and life-extension projects of existing fleets can yield quicker operational improvements. Similarly, scaling up production of munitions, spare parts, and essential consumables can provide near-term capability boosts. Investments in training and infrastructure upgrades—such as expanding domestic Maintenance, Repair, and Overhaul (MRO) facilities—can also be advanced to ensure that new equipment is quickly and effectively integrated.
Accelerating Personnel Expansion
A critical component of any accelerated timeline is addressing the personnel shortfall in the CAF. Aggressive recruitment campaigns, retention incentives, and expanded training programs are essential to fill the 16,000-person gap. The faster new recruits are trained and integrated, the more likely it is that new equipment will be operational sooner rather than languishing due to lack of support.
4. Industrial and Economic Feasibility
Capacity and Workforce Considerations
Even with aggressive measures, the capacity of the defence industry to absorb a rapid spending surge is uncertain. Global suppliers for high-demand systems may not be able to increase output significantly in the short term. Domestically, Canada’s limited production capacity and ongoing skilled labour shortages mean that any rapid scale-up risks higher costs or delays.
Economic Trade-Offs and Cost Inflation
From an economic perspective, accelerating defence spending involves significant trade-offs. Higher spending in the near term may necessitate reallocation from other areas, increased borrowing, or higher taxes—all of which could have broader economic impacts. Furthermore, increased competition for scarce resources in a global market may drive up prices, resulting in cost inflation that further strains budgets.
Fiscal and Macroeconomic Risks
Accelerating to 2% by 2027 might require an additional annual outlay of C$15–20 billion. This surge could substantially increase short-term deficits and debt levels, challenging the government’s fiscal targets. While defence spending can stimulate economic activity and job creation, its broader effects will only be realized if spending is efficiently managed. Rapid spending increases also carry the risk of temporary overcapacity, leading to inefficiencies and wasted resources.
5. Strategic and Geopolitical Implications
Enhancing NATO Credibility
Accelerating to 2% by 2027 would send a strong signal to NATO allies that Canada is committed to collective defence. This early achievement could help dispel longstanding criticisms of Canada as a laggard in defence spending, thereby enhancing its influence in alliance decision-making and burden-sharing negotiations.
Diplomatic and Operational Benefits
An accelerated ramp-up may ease tensions with key allies—especially the United States, which has criticized Canada’s pace in the past. Improved credibility could lead to better alignment on joint procurement projects and collaborative defence initiatives. Operationally, if new equipment and sustainment measures are delivered sooner, the CAF could begin to realize enhanced capabilities earlier, bolstering deterrence in critical areas such as Arctic surveillance and European deployments.
6. Alternative Phased Approaches
Given the significant challenges of a full acceleration, a phased approach might be more realistic:
- Interim Targets: Instead of an abrupt jump to 2% by 2027, Canada could aim for an interim target of 1.75% by 2027 and then reach 2% by 2030. This gradual increase would allow more time to adjust procurement processes, expand industrial capacity, and address personnel shortages.
- Staggered Procurement: Front-load “shovel-ready” projects like sustainment upgrades and munitions production while allowing major, longer-lead projects to proceed at their natural pace.
- Fiscal Smoothing: A phased approach spreads the additional spending over several years, reducing immediate deficit pressures and providing time to manage economic and industrial risks.
This compromise approach not only mitigates short-term risks but also signals a serious commitment to NATO while maintaining fiscal and operational flexibility.
7. The GDP Factor: Leveraging a Smaller Denominator
An often-overlooked advantage of an accelerated timeline is that reaching 2% earlier means the target applies to a smaller GDP. For example, if Canada’s GDP is C$3.0 trillion towards the later 2020s, then 2% represents about C$60 billion, considerably less than the C$82 billion needed if the target is delayed until 2032. This “smaller denominator” can ease the fiscal burden and reduce the overall increase required.
8. Conclusion
Accelerating Canada’s defence spending to 2% of GDP by 2027 is an achievable but extremely demanding goal. It requires comprehensive reforms in procurement processes, rapid industrial and personnel expansion, and a willingness to accept short-term fiscal risks. While the potential advantages—such as enhanced NATO credibility, improved operational readiness, and a lower absolute spending requirement—are compelling, the risks of implementation delays, cost overruns, and capacity constraints remain significant.
A phased acceleration, targeting approximately 1.75% by 2027 and 2% by 2030, may offer a more balanced approach that eases fiscal pressure while still delivering earlier capability gains. Ultimately, the feasibility of accelerating the target hinges on the government’s political will and its ability to implement robust reforms that ensure additional spending translates into real, sustainable military capability.
About the Author
Richard Martin is the founder and president of Alcera Consulting Inc., a strategic advisory firm specializing in exploiting change (www.exploitingchange.com). Richard’s mission is to empower top-level leaders to exercise strategic foresight, navigate uncertainty, drive transformative change, and build individual and organizational resilience, ensuring market dominance and excellence in public governance. He is the author of Brilliant Manoeuvres: How to Use Military Wisdom to Win Business Battles. He is also the developer of Worldview Warfare and Strategic Epistemology, a groundbreaking methodology that focuses on understanding beliefs, values, and strategy in a world of conflict, competition, and cooperation.
© 2025 Richard Martin
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