The Conservative government's pledge for a stable funding program for the Canadian military will actually result in less money for the cash-strapped Forces because of inflation, a Senate committee report says.

The report by the Senate security and defence committee, which was slammed by Defence Minister Peter MacKay, criticizes the Tories' planned annual defence budget increase of 1.5 per cent until 2011 and two per cent until 2031.

"A two per cent increase is ludicrous as any government accountant must be well aware," says the report released Wednesday.

The committee says that it's almost inevitable that the military's inflation rate will be above two per cent in the foreseeable future, meaning there won't be any real spending increases.

"It is inconceivable that inflation on defence costs will come in under two per cent over the next decade. This means that the 'guaranteed increases' will almost surely be 'guaranteed decreases,' " the report says.

Defence spending went up by $1.3 billion in this year's federal budget and is now at slightly more than $18 billion annually.

But in terms of military spending as a percentage of GDP, Canada spends almost 1.2 per cent of its GDP on defence, while the average for most NATO countries is two per cent.

However, both the Senate committee and the Conference of Defence Associations have estimated that under this spending plan, the defence budget in 10 years could fall to as low as 0.89 per cent of GDP.

"A two per cent increase over and above inflation would at least be an honest gesture. But even that won't come close to meeting the NATO target," the report states.

The report, entitled Four Generals and an Admiral: The View from the Top, says it disagreed with the "rosy testimony" the committee heard from senior officers about the military's financial picture.

"The Canadian Forces' senior leadership gives the impression that it is happy with the level of funding that has been announced. Has their experience driven their expectations so low that they no longer want to face the consequences of pushing for robust, capable effective and expanded Canadian Forces that Canada's interests demand?"

In an interview with the Canadian Press, Liberal Senator Colin Kenny, the head of the committee, said that given the army will be fighting a ground war in southern Afghanistan until 2011, it would be inexcusable to let the current plan stand.

"That's what outrages me," he said.

"We have men and women in harm's way and the government is trying to do this on the cheap. If that's how they feel they shouldn't put our kids in harm's way. They should simply stay at home."

But the Tory government shot back at the report. MacKay called it "both disingenuous and inflammatory," saying it serves only to "highlight Senator Kenny's hypocrisy."

"After years of Liberal neglect of the Canadian Forces, Senator Kenny's only argument against the Conservative government is that it isn't cleaning up his party's mess fast enough," MacKay said in an e-mail statement.

MacKay said the government has committed over $50 billion in funding for major equipment purchases including tanks, tactical and strategic airlift, helicopters, trucks and ships along with a pay raise for personnel.

"Senator Kenny says that this government is not doing enough in rebuilding the [Canadian Forces]. This after his Liberal Party destroyed [Canadian Forces] morale and cut defence spending during what military officials deemed the 'decade of darkness.' "

With files from the Canadian Press