Prime Minister Justin Trudeau arrives with Defence Minister Harjit Singh Sajjan, centre, at the NATO summit in Warsaw last summer. In something of a surprise, the 2017 federal budget kicks a further $8.5 billion in defence procurement spending many years down the road. Markus Schreiber/Associated Press
The Liberal government is stripping $8.4 billion out of the equipment budget at National Defence over the near term — and then promising to put it back and spend it sometime over the next 20 years.
The extraordinary measure is contained in Finance Minister Bill Morneau's budget, tabled Wednesday in the House of Commons.
The Liberal government at the same time announced an additional $624 million in spending over several years on veterans programs, much of it aimed at helping smooth the transition for ex-soldiers from uniform to civilian life.
But it is the so-called re-profiling of capital expenditures at the Defence Department that may have the biggest political and policy impact on the Liberal government.
It comes at a time when the Trump administration is leaning on allies, including Canada, to put more into their militaries and meet the NATO spending benchmark of two per cent of gross domestic product.
Morneau was measured in his comments.
"We are going through, as you know, a defence policy review, the results of which will be out in the not-too-distant future," he said at a news conference prior to the release of the budget. "And that will show our level of ambition ... in making sure that we play our part internationally."
Federal budget documents are not clear about the reason for the massive reallocation of funds. In fact, there was outright confusion about references to the need to reallocate cash in the future for things like new fixed-wing search-and-rescue planes and upgrades to the army's fleet of LAV III armoured fighting vehicles.
Those programs are already underway and were recently announced by the Liberals.
"That explanation makes no sense," Dave Perry, an analyst with the Canadian Global Affairs Institute, told CBC News. "That whole description is incoherent, so I cannot make heads nor tails of what they are saying."
Last year's federal budget saw a similar — much smaller — postponement of defence equipment purchases. Federal finance officials who briefed the media said this year's reallocation was on top of the $3.7 billion measure taken last year — an assertion officials in Defence Minister Harjit Sajjan's office had to correct late Wednesday.
At the end of the day, it was still not clear what projects in the already moribund defence procurement system were being postponed and under what circumstances.
'This budget is actually taking money away from the military and pretending to give it back several decades in the future.' - Dave Perry, Canadian Global Affairs Institute
Perry's assessment was blistering: "I'm stunned this budget is actually taking money away from the military and pretending to give it back several decades in the future."
The budget does contain a modest increase of funding for defence — $184 million — on the operations side. But that is cash the previous Conservative set aside and the Liberals promised not to touch in the last election campaign.
Perry said the budget, as written, will almost certainly drive Canada's defence spending below one per cent of GDP.
And that is something former Conservative cabinet minister James Moore said will almost certainly incur the wrath of the new administration in Washington.
"Defence policy is just not a priority for this government at all," said Moore. "The Americans are watching this. The Americans notice this. Secretary Mattis, President Trump will be well briefed on all of the partners with the United States in NATO."
The Liberals have taken pains to build a positive relationship with key players around Trump, and Moore said he believes the political signal sent by this budget on defence will have repercussions in other areas.
"It'll have consequences on the bilateral relationship with the United States in the future, whether it's on trade; whether it's on a border tax," he said. "Prior to any future meeting between President Trump and Prime Minister Trudeau, President Trump will be reminded Canada is not pulling its weight or doing its fair share when it comes to national defence."
Separately, the government was keen to highlight the improvements it plans to make in terms of support for veterans.
There is more money for education and retraining of ex-soldiers, better career transition services and support for caregivers who look after injured and ill veterans, among other things.
The government was obliged by its accounting rules to book most of the program spending in the current budget year, which is about to end next week.
Finance Department officials say the new services and benefits will roll out in the 2018-19 budget because it'll take a year for Veterans Affairs to get the systems in place.
The budget also contains a promise to give veterans the option of accepting a lifetime pension for wounds sustained in the line of duty. But there was no price tag attached, just a pledge to reveal more details later in the year.