Even if Canada reaches its defence spending targets by the end of the decade, it would still be "$6 billion to $7 billion" short of NATO's two per cent of GDP benchmark for member nations, says Defence Minister Bill Blair.

The federal government's new national defence strategy, released Monday, pledged an increase in military spending of $8.1 billion over the next five years — which would move the needle on the country's investment in defence from 1.33 per cent of the gross domestic product to 1.76 per cent.

Appearing before the Senate committee on national security and defence late Monday, Blair described the new policy as a plan to put "in place the conditions to achieve the two per cent"— an alliance target originally agreed to by the former Conservative government in 2014 and reaffirmed by the Liberals last year.

Both Blair and Prime Minister Justin Trudeau have hinted there are more defence investments to come. The minister told senators those plans could "easily move us into that two per cent threshold."

NATO allies have been demanding that member countries come up with concrete plans to reach the goal.

Blair told senators he asked his department how far the additional funds would leave the defence budget from reaching NATO's target and was told to expect an annual gap of $6 billion to $7 billion. Much, he said, will depend upon the performance of the Canadian economy into the early 2030s.

The investment numbers are not the only major hurdle the new policy has to get past.

The Trudeau government has promised a renewed focus on addressing the shortfall in military personnel, which Blair has estimated at 16,500 members, both regular and reserve force.

The new strategy doesn't foresee the military returning to its authorized strength of 71,500 full-time members, 30,000 reservists and 5,200 Rangers until 2032.

But to meet the growing demands of overseas operations and domestic emergency response, the country's top military commander has suggested the Armed Forces should add at least 14,000 members to its full-strength complement.

"We decided that we will deal with the 16,500 deficit first," Blair told senators.

"When we close that gap — frankly, I think we can demonstrate that to onboard additional people — then I'm quite confident I can go back to the government and say, 'We've solved this problem now. We're on track. We can have the people we need.' And we'll ask for more money to onboard additional people."

Eyre 'cautiously optimistic' on recruitment

Chief of the Defence Staff Gen. Wayne Eyre said the latest numbers suggest that the military's regular force may have turned the corner and is expected to have grown by 214 members as of the end of February.

"Likewise, the reserve force has grown by several hundred as well," Eyre told the Senate hearing. "We are entering this fiscal year with more recruits in the processing pipeline than we have for the last three. February had the greatest number of monthly applicants in the last five years."

Chief of the Defence Staff Gen. Wayne Eyre arrives to appear as a witness at the Standing Committee on National Defence in Ottawa on Tuesday, March 7, 2023. (Justin Tang/CP)

Eyre said he's "cautiously optimistic."

The defence policy proposes a series of measures to fix the glacial pace of recruiting, including the introduction of a probationary period which would allow the military to enrol new members faster.

The federal government opened the door several months ago to allowing permanent residents to apply to join the Armed Forces. More than 21,000 applied but less than 100 had been accepted by early this year.

One of the major concerns for the Department of National Defence is that many foreign-born applicants must pass enhanced security screening.

"This is not a military problem. This is a Government of Canada problem," Eyre said.

Eyre told the committee a new information-sharing agreement between the immigration and defence departments should accelerate the process of obtaining security clearances. The defence department also signed a contract last week for new security software because the old program was "falling apart," he said.

In a recent speech, Blair openly stated that the recruiting crisis was putting the military into a "death spiral."

Defence expert Dave Perry, president of the Canadian Global Affairs Institute, said warnings about recruitment have been echoing loudly since the pandemic and the issue was considered a major priority in the last defence policy seven years ago.

He said he sees no sign of a sense of urgency, given that the policy doesn't predict a resolution to the recruitment crisis until 2032.

"They're not anticipating they will be back to their authorized strength, the numbers they're supposed to be at today, for another eight years," said Perry, whose organization has hosted conferences that are occasionally sponsored by defence contractors.

"I think it's a patently, ridiculously slow time frame."

He said the defence department needs to "fundamentally start doing things differently to get back" to where it needs to be.

Just over a month into the new fiscal year and two weeks after the federal budget, the Department of National Defence is struggling to reconcile the Liberal government's approach to military funding — giving with one hand while taking with the other.

Gen. Wayne Eyre, the country's top military commander, told the rank-and-file in a remote town hall event last week that he doesn't have answers to crucial questions about how internal budget cuts and funding reallocation square with promises of additional money in the recently released defence policy.

"We're being asked to suck and blow at the same time," Eyre, the chief of the defence staff, told about 1,300 members of the Armed Forces who tuned in for the presentation. A video copy of his presentation was obtained by CBC News.

"We got some budget cuts last year," he added, referring to the wave of spending reductions announced by Treasury Board President Anita Anand last fall. "We're getting new funding this year. Reconciling the two of those is a bit of a challenge. The finance staff is working on that right now."

Gen. Eyre says he doesn’t have ‘complete clarity’ on impacts of federal budget

Duration 1:35

Eyre, who is expected to retire this year, told the audience that he's hoping to get a better idea of how the internal cuts announced in late 2023 will affect operations and maintenance.

"We have more funding in the future, as you know," Eyre said in a response to a question from the audience. "This year on the operations and maintenance side, we are facing some challenges. And you talk about confusion — I don't have complete clarity yet either, as the finance staff continue to analyze the impacts of this year's federal budget."

Eyre also hinted the federal government is weighing calls to eliminate some military capabilities that the different services — army, navy, air force — have said they can do without. He said he's asked the commanders of the various branches to come up with "tangible examples of those capabilities that we should put on the chopping block" and has received a few recommendations.

'Tangible' cuts coming, says Eyre

"You will probably see some — I'm not going to get ahead of some ministerial decisions here — but we are going to have to cut a few tangible ones based on advice that's come up from the services," he said.

The internal cuts and budget juggling come as the military faces a readiness crisis. Critics warn that it would have a hard time responding to calls for help from NATO in the event that international tensions escalate.

The new defence policy promises to invest an additional $8.1 billion in the military in the near-term and over $73 billion over the next two decades — but much of that funding is earmarked for future years. The Opposition Conservatives call the policy "aspirational."

     A U.S. F-35 fighter jet flies over the Eifel Mountains near Spangdahlem, Germany on Wednesday,   Feb. 23, 2022. (Harald Tittel/The Associated Press)

The federal budget anticipates a slight increase in overall defence spending this year and projects a 30 per cent increase in the next fiscal year — when the government is expected to start paying for big-ticket items of replacement equipment, including the new F-35 fighters.

Appearing before the House of Commons defence committee last fall, Defence Minister Bill Blair attempted to assure MPs that the planned internal cuts will be surgical.

'The instructions we've received from Treasury Board, and that I passed on to both the [chief of the defence staff] and the deputy minister, are that we are looking at ways in which we can eliminate unnecessary costs, but none of those reductions are to impact the capability of the Canadian Armed Forces or the supports that we provide to the men and women of the Canadian Armed Forces," Blair testified on Nov. 23, 2023.

On Wednesday, while promoting the federal budget and the defence policy before a think-tank audience in Ottawa, Blair said pressing the federal cabinet for higher defence spending overall has been an uphill battle.

Finance Minister Chrystia Freeland, left, and Defence Minister Bill Blair talk to the media during a joint exercise in which Polish and Canadian troops provide training to soldiers from Ukraine near Jezewo, central Poland, on Sunday, Feb. 25, 2024. (Czarek Sokolowski/AP Photo)

"I had to sort of keep on pushing my issue forward, about the importance and the need to invest in defence," Blair told the audience at Canadian Global Affairs Institute symposium.

He added that he's struggled to make the case for Canada spending 2 per cent of its gross domestic product on defence — a spending benchmark agreed to by all NATO members.

"Trying to go to cabinet, or even to Canadians, and tell them that we had to do this because we had to meet this magical threshold at two per cent for the NATO commitment — don't get me wrong, it's important," he said. "But it was really hard to convince people that that was a worthy goal, that it was some noble standard that we had to meet, because nobody knows what that means."

The defence policy projects the current plan would move the needle on the country's investment in defence from 1.33 per cent of GDP to 1.76 per cent. Blair is on the record saying that in order to meet NATO's two per cent target, Ottawa would need to invest an additional $6 billion to $7 billion annually on top of what's already been promised.

"So it's really for me, I couldn't go and make a defence policy argument to reach that spreadsheet target of two per cent," Blair said Wednesday.

Eyre said the debate over NATO metrics doesn't concern him.

"I don't care about percentage of GDP in terms of spending," Eyre told the town hall. "For me, that's an input metric. What I care about is, what does the armed forces and the [defence] department produce as an output metric, which is capabilities and readiness?"

Eyre also critiqued the new defence plan in blunt terms.

"This policy was not as fast as we wanted it to be, and it did not give us everything that we needed, but I will tell you, it's more than I expected — much more than I expected — going into it," Eyre said.

"Would we have wished for a more rapid implementation? Well, yes. But we've got our marching orders and it's time to move out and within our own realm, within our own arcs of influence, implement as quickly as possible."

The federal budget does earmark significant funds, starting this year, for maintaining older fleets, including the navy's three-decade-old frigates.

The HMCS Fredericton, guided by tugs, returns to Halifax on Tuesday, July 28, 2020 after completing a six-month deployment in the Mediterranean Sea. (Andrew Vaughan/The Canadian Press)

It sets aside $1.9 billion to keep the frigate fleet afloat over the next five years and to extend the lease on the navy's privately contracted supply ship.

But the defence department is still expected to find $810 million in savings in the current budget year, as part of the Liberal government's overall austerity drive. The federal budget estimates say that, going forward, DND is expected to find $851 million in savings in the 2025-26 budget year and $907 million thereafter.

That's money the department had been expecting but will now have to do without.

The last time the defence department went through a major budget-cutting exercise was more than a decade ago, under the former Conservative government.

One of the areas hit hardest back then was the internal budget category known as national procurement funding — the cash that covers equipment maintenance, repair and overhaul, and in-service support.

The cuts between 2012 and 2014 led the army to park a large number of its vehicles, the air force to reduce flying hours by a quarter and the navy to tie up some of its warships.

Anecdotally, some in the army trace the current shortage of spare parts — which today is severely limiting the use of Leopard 2 tanks — back to the budget restraint of a decade ago.

Responding to the current round of budget cuts, the defence department acknowledged in a recent media statement that the national procurement pot of money will be affected this year, but insisted there will be money for military priorities.

"Due to the importance of National Procurement funding for the sustainment of CAF fleets and their materiel readiness, the Department is not intending to reallocate any significant amount of National Procurement funding," said the statement.

Operations and maintenance may go under the knife

The department was asked to explain what it means by "significant." It did not. "Decisions on savings are ongoing," DND said in a statement issued to CBC News. "Government of Canada priorities for defence will continue to guide our work across the organization."

When the Conservatives were cutting the defence budget, the separate pot of money for operations and maintenance (O&M) took a heavy hit.

Since November, anecdotal reports out of the defence department have suggested that operations and maintenance funding for reserve units was being slashed, in some cases by as much as 30 per cent. 

The department told CBC News that individual units will have to decide how cuts to travel and professional services will affect their operations budgets.

"It is too soon to say how this could affect reserve units' O&M funding," the statement said.

The new federal budget sets aside $2.72 billion in loans and donations for Ukraine in the current fiscal year, most of which is aimed at helping President Volodymyr Zelenskyy's government keep the embattled country's finances afloat.

And a lot of that money is already out the door.

The Canadian government delivered $2 billion in loan assistance for Ukraine to the International Monetary Fund in late March.

The 2024 federal budget also sets aside $320 million this year for "the provision of lethal and non-lethal military aid" to Ukraine — part of the bilateral security assistance package signed by Zelenskyy and Prime Minister Justin Trudeau in Kyiv in February.

"This multi-year commitment will provide predictability to Ukraine as well as to Canada's defence industry," the budget document says.

Overall, the federal government is earmarking $1.6 billion for military aid to Ukraine over the next five years. That's a drop in the bucket compared with Ukraine's biggest backer, the United States, which is still struggling to pass a $60 billion aid package.

Finance Minister Chrystia Freeland recently said Washington appears "unable to step up" on aid to the eastern European country, which has been holding back a full-scale Russian invasion for over two years.

The federal budget also commits to setting aside $216 million over five years, starting next year, for contributions to the European Bank for Reconstruction and Development (EBRD) rebuilding program.

Turning Russian assets into Ukrainian aid

The federal government is also committing to working with allies to find a legal mechanism to turn seized Russian assets over to Ukraine.

More than $280 billion US in Russian assets has been seized by allied nations since the full-scale invasion began in February 2022.

"Canada believes that now is the time to use these resources actively to support Ukraine in its existential fight," the budget document says.

"It is Canada's position that these assets can be redirected to benefit Ukraine, consistent with international law."

   An Antonov-124 cargo plane owned by Volga Dnepr is pictured on the tarmac at Pearson airport in Toronto on June 13, 2023. During a visit to Kyiv in June 2023, Prime Minister Justin Trudeau said Ottawa would use powers enabled by Parliament in 2022 budget legislation to seize the plane. (Evan Mitsui/CBC)

The federal government says it believes there is "a lawful basis to repurpose these assets." It points to the European Union's Windfall Profits mechanism as the sort of mechanism that could be used for Ukraine.

Earlier this year, the European Union began drafting a law to apply a windfall tax to the profits generated by frozen Russian central bank assets. It opted not to seize the immobilized money outright. The proceeds from the tax are to be sent to Ukraine.

"Canada is committed to work with allies to explore all possible legal mechanisms to make full use of the assets currently immobilized in our jurisdictions, including for the purpose of increasing support for Ukraine in the short term," the budget document says.

In a social media post late Wednesday, Zelenskyy thanked Canada for the contributions, both financial and military, and urged more action on the issue of seized assets.

"It is also critical that Canada consistently supports the use of frozen Russian assets to aid in Ukraine's recovery," Zelenskyy wrote on X, the platform formerly known as Twitter.

The first 16 of the air force's new F-35 fighters will be paid for out of the current federal budget, even though Canada isn't expected to take delivery of the warplanes until 2026.

Defence Minister Bill Blair pointed to the investment on Monday while defending the Liberal government's military spending plans before a House of Commons committee.

In testimony to Congress, a senior U.S. military official warned late last year that the delivery of stealth fighters ordered by Canada and other allies might be delayed because of ongoing technical problems with the aircraft.

Defence Minister Bill Blair told MPs there's money in the current budget for F-35 fighters, transport and surveillance aircraft. (Justin Tang/Canadian Press)

The F-35 program's executive officer, U.S. Air Force Lt. Gen. Michael Schmidt, told American lawmakers last December that the latest version of the fighter — known as Block 4 — was facing significant development challenges.

Because of testing and supply delays, the Pentagon's F-35 project office followed up on Schmidt's warning last month. It reported that the manufacturer, Lockheed Martin, will be able to deliver only 75 to 110 F-35s in 2024, instead of the 156 that had been expected.

Canada's defence department still cites 2026 as the arrival date for Canada's jets.

Blair testified Monday that the military's current capital budget also includes money for the new C-330 Husky transport and refueling aircraft, as well as the P-8A Poseidon maritime surveillance planes.

Following the minister's testimony before the committee, the country's deputy top military commander, Lt.-Gen. Frances Allen, was asked about the shortage of fighter pilots.

MPs asked Allen for specifics but she said she was unable to state how deep the shortfall might be.

"I would say there's currently less fighter pilots available than we ... would currently wish to be able to do both [NATO and NORAD] missions that we have today, and the training for the transition to the new F 35," she said.

In 2023, commander of the air force Lt.-Gen. Eric Kenny revealed in a interview with The Canadian Press that the branch overall was short nearly 2,000 full-time members and 500 reservists.

He warned at the time that unless things turned around, "there will be insufficient experienced pilots to effectively transition the force onto the F-35 whilst maintaining any meaningful combat capabilities in the remaining two CF-18 HEP II squadrons out to 2032."

Last fall, a study funded by the defence department — a copy of which was obtained by CBC News — said the country's fighter force was "in crisis."

The report by the Royal United Services Institute, a British think-tank, also warned that under the current circumstances, "there will be insufficient experienced pilots to effectively transition the force onto the F-35."