A shot in the arm or the foot?
Kingston Whig-Standard, Sharon Lindores
Defence Minister Art Eggleton‘s call for a review of defence strategy has experts predicting everything from a major downsizing of the Armed Forces to a beefing up of resources that will give Canada‘s military greater international credibility.
The government plans to start work on the white paper in the new year, but it could be months before Canadians learn if it‘s a harbinger of drastic change.
Queen‘s University Prof. Douglas Bland says the public should demand a say in the matter before it‘s too late.
"If the review is held within the closed hallways of the National Defence Headquarters, that won‘t happen," said Bland, chairman of defence management studies at the school of policy studies.
Following a budget that did little for a cash-starved military, Bland says the white paper announcement signals the military‘s future is at risk.
"Every time Ottawa jiggles the money bags or takes money out of the Defence budget, all of the capabilities are up for question," Bland said. "I don‘t think anything will not be on the table." CFB Kingston included.
"The question of which bases remain open is back up in the air, and the numbers of people and the equipment. In my mind the status of Trenton, Petawawa and perhaps Kingston are going to be reviewed.
"These are the kind of questions the minister implies have to be faced."
Eggleton said Monday that changes have to be made.
"Certainly we‘re going to have to make structural adjustments to live within our means," Eggleton said.
"[A policy review] will help to determine how we should cut the cloth according to the resources that we have."
Paul Martin‘s Dec. 10 federal budget gave the military an extra $300 million for capital spending, far less than the $1 billion per year for five years that critics have been seeking.
‘VERY BAD NEWS‘
"This is very bad news," Bland said. "What it means to Canadians is that Canada is going to be much less involved in international affairs than it has been since 1939, because the suggestion is we‘re going to have to build an armed force only based on what the finance minister is willing to provide for national defence and not on what‘s needed for national defence.
"The finance minister made it explicit - we‘re not going to play in big games any longer overseas."
Bland said the announcement comes at a critical time when U.S. Defence Secretary Donald Rumsfeld is in Brussels meeting with NATO members suggesting they spend a great deal more. "And we are making the suggestion that‘s not even possible."
Hal Klepak, a professor of military history at Royal Military College, disagrees.
"It would be an extraordinary message to send to the U.S. at this time - that we are reducing our effort," Klepak said. "I think Washington would simply be flabbergasted and I think the prime minister is very aware of it, so I don‘t think the announcement means forced reductions.
"You might restructure somewhat, but I can‘t see a reduction in strength. There‘s not much meat on the bone."
The demands keep rising while the number of soldiers and the amount of equipment and weaponry is falling, Klepak said.
"We‘re a bit stuck. In the ‘60s we had over 120,000 people in the Armed Forces and much less to do. Now, we have fewer than 60,000 and much more to do, so obviously there‘s a problem."
Klepak argues that Canada should put more resources into the military, foreign policy and aid policy if the country wants to be part of international-order discussions in the future.
The white paper might be a way to usher in those changes, he said.
Joel Sokolsky a political science professor at RMC, said that‘s unlikely.
"People who assume a new white paper will lead to more defence spending better think again," Sokolsky said.
He doesn‘t believe a public debate would help, saying people would rather see sky marshals on every plane than more troops in Afghanistan.
He doesn‘t think Canadians can buy influence right now.
‘FOLLOWERS AND ALLIES‘
"My view is that the U.S. is looking for followers and allies, not full partners," Sokolsky said. "If we doubled our spending it wouldn‘t make one iota of difference to the U.S. in terms of influencing its policy.
"I think the government has to create a priority list for equipment and look at recruitment and take a hard look at our existing overseas deployment," he said, adding he doesn‘t think a new white paper is necessary or will make a difference.
Don Macnamara, a retired air force brigadier-general who spent 37 years in the military, thinks a new policy is long overdue.
Five reports within the past year alone have called for a review. The most recent was Sheila Fraser‘s auditor general report, which said the military has a shortage of funds, skilled technicians and modern equipment.
"To me, it‘s clear something substantial will have to take place," said Macnamara, a Queen‘s business professor.
"Last week, when there was very little money announced in the budget, it was clear that the Canadian Forces could not continue.
"It all comes down to money. It‘s a five-letter word, not a four-letter word.
"It‘s clear the money the Forces now gets is not sufficient for them to do what policy expects in terms of equipment, training and manpower."
Macnamara said the government should develop a comprehensive defence arrangement with the U.S., be capable of upholding its international commitments in a sustainable manner, and be able to prevent global events from escalating into military or humanitarian responses.
The government owes it to the young people who are willing to fight and die for the country, he said.
Still, he‘s not optimistic it will be forthcoming, particularly when Finance Minister Martin says health care and education are the country‘s top priorities.
"The underfunding of the Canadian Forces has been continuous almost for the last 10 years," said Macnamara, who retired from the Forces in 1988.
"Yes, there has been drama associated with the war on terrorism, but this doesn‘t seem to have affected the resources provided to the military, therefore there must be a new policy reflecting expectations and resources."
PAPER CHASE
Â¥ The last white paper on national defence was done 1994
Â¥ It outlined a cut in personnel from 87,600 in 1990 to 60,000 by 1999 and a variety of commitments
Â¥ Most critics agree Canada hasn‘t met the policy guidelines outlined in the paper
Â¥ The groups that have called for a new policy within the past year include: the Royal Canadian Military Institute; the Conference of Defence Associations Institute; the Council for Canadian Security in the 21st Century, through the Centre for Military and Strategic Studies at the University of Calgary, the Standing Committee on National Defence and Veterans Affairs; and the Auditor General
++++++++++++++++++++++
AN ANALYSIS OF FEDERAL BUDGET 2001
December 16, 2001
General Impression
From the point of view of the Department of National Defence (DND) and the Canadian Forces (CF), Federal Budget 2001 is highly unsatisfactory. Although it professes to address the post-September 11 environment, it largely ignores the urgent requirements of an essential component of national security; namely, the armed forces. There are two main concerns:
C Additional funding assigned to general military capabilities, and to operational readiness comprises only $510 million over two years, whereas annual shortfalls in the DND budget computed by the Auditor-General and others far exceed that sum ;
C The manner in which funding for defence is presented lacks clarity and could be misleading for those interested in defence issues, but not well informed on budget procedures.
Budget Data
In raw terms the budget allocates $1.2 billion to DND and its agencies over the five year period starting in Fiscal Year (FY) 2001/2002 to 2006/2007. Full details are available on the Department of Finance website:
www.fin.gc.ca
Over a five year (plus this year) horizon (FY 01/02 to 06/07) , amounts from the above total are assigned as follows:
C Expanded anti-terrorist capacity $119 million
C Nuclear, Biological, Chemical threats 513 million
C Contingency 100 million
The balance is assigned over a two year (including this year) horizon as follows:
C Supporting Canada’s military $510 million
Total $ 1.2 billion
Note that the budget document, Budget Plan 2001, also includes $396 million for Emergency Preparedness" (p.92). In fact, this amount will be assigned to and dispersed by other departments and agencies, and is not included in this analysis. Much the same applies to the $513 million for NBC threats, although some of it will remain in DND (see below re "changes in budget format").
Comment
The additional funding is useful, but only $510 million is available for application to conventional military capabilities and the commitments assigned by the 1994 White Paper on defence.
Moreover, the $510 million is specifically assigned as follows, and therefore not available to address the long list of shortfalls in operational readiness of the CF:
C Operation APOLLO (anti-terror coalition operations) $210 million
C Capital purchases 300 million
The funds for Operation APOLLO have already been spent, and will not contribute to stopping the decline of operational readiness in the Canadian Forces as a whole.
The $300 million for capital purchases will be applied mainly to payments for projects already underway; for example, the ‘lease to purchase’ payments for the new fleet of VICTORIA class submarines. Nevertheless, it will relieve some pressure in future years in the DND Capital Program.
The "expanded anti-terrorist capacity"noted above refers to raising the strength of Joint Task Force 2 (JTF), as well as providing it with appropriate equipment. Funding this new and specific task will not alleviate the general malaise of the CF and, in terms of the additional manpower requirement, will impose further strains on an organization already pushed to the breaking point.
Defining the Problem
Recently, a number of agencies have issued reports and studies in which they analyse the problems arising from the failure of the government to provide the funds necessary for DND and the CF to implement the policy set out in the 1994 White Paper on Defence. They are as follows:
C The Royal Canadian Military Institute (RCMI);
C The Federation of Military and United Services Institutes of Canada (FMUSIC);
C The Conference of Defence Associations (CDA);
C The Council for Canadian Security in the 21st Century ( CCS 21);
C The House of Commons Standing Committee on National Defence and Veterans’ Affairs;
C The House of Commons Standing Committee on Finance.
All of the these reports and studies list serious problems within the CF arising inter alia from a lack of trained manpower, insufficient training, ‘rusting-out’equipment, and inadequate logistics support.
On December 7, 2001, the Auditor-General of Canada issued her annual report. It verified and supported the findings of the other reports listed above. In particular, it noted that there was an ongoing deficit in the DND Operations and Maintenance (O & M) account of $1.3 billion per annum. This means that over a two-year period DND would need $2.6 billion merely to clear this deficit. As shown above, the 2001 federal budget provides only $510 million over two years -- and that amount is already spoken for in other areas!
In previous reports the Auditor-General has also identified an additional $6 to $10 billion over the next decade which would be needed for major equipment replacement.
To date, DND has managed to survive by re-prioritizing and re-allocating resources -- the so-called ‘rob Peter to pay Paul’ approach. Considering the failure of the 2001 budget to provide significant new funds, this option is no longer viable. It is therefore likely that a defence policy update, scheduled for release early in 2002, will direct further downsizing of the CF, with associated elimination or reduction of combat capabilities.
Lack of Clarity
Budget Plan 2001, lacks clarity in addressing the above situation. For example, when it sets out to illustrate "incremental defence funding"from 1999 to 2001, it provides information in a manner that could mislead the reader.
The following statement from the box on page 99 of the Budget Plan 2001 illustrates the point:
The $3.9 billion of new funding in the budgets of 1999 and 2000, together with the more than $1.2 billion of new funding in this budget, means that the Government will have increased DND funding by $5.1 billion over the next five years.
The total of $5.1 billion is computed as follows:
Budget 1999 $550 million
Budget 2000 3.350 billion
Budget 2001 1.202 billion
Total $5.102 billion
It has already been shown in earlier paragraphs of this memo that only $510 million of the $1.2 billion allocated to DND in Budget 2001 would be available to support existing military capabilities of the CF. Moreover, this amount is designated in advance for specific expenditures.
The $550 million from the actions taken in Budget 1999 is being applied to Quality of Life projects – very necessary, but not directly applicable to rehabilitation of military capabilities. As well it could be critiqued in the same vein as illustrated in the next paragraph.
It is, however, the totals of $3.350 billion shown for Budget 2000, and the Grand Total (Budgets 1999, 2000, 20001) of $5.102 billion that are most questionable in the manner in which they are presented. The problem lies with confusion over approved rises in the’ base’ of the DND budget in a given year, versus cumulative totals shown for succeeding years. The first rise is indeed an increase in funding which raises the level of the budget base. However, the government refers to the ongoing insertion of the rise over a period of years as an "investment." This may be correct, but there is also an implication that the level of the base has continued to rise past the first year, when that is not the case. There are clear differences in meaning between the two terms – ‘raise the base,’ and ‘total investment’-- and these are explored in detail in the attached annex.
Political Intent
Paragraph 2 on page 99 of Budget Plan 2001reads as follows:
This budget therefore commits substantial funding to enhance emergency response and preparedness. It allocates more than $1.6 billion over the next five years to improve the Government’s ability to detect, prevent and respond to threats, and to fund Canada’s military participation in the international coalition against terrorism.
In conjunction with this quotation it should be noted that the form of Budget 2001 is quite different from previous practice. Instead of making allocations directly to government departments and agencies, it assigns money to a number of "agendas." DND and the CF are included in the Security Agenda. For this reason, most of the $1.6 billion will not be available for DND expenditure (as already noted above for the Emergency Preparedness allotment). Moreover, even within the DND allocation funds are assigned to objects of expenditure in advance, many outside of DND; for example, nuclear, chemical, biological threats.
The political intent of the above quotation may be interpreted as follows:
To respond to public concerns regarding the economic downturn and terrorism;
To channel most of the new DND funds into local economies;
To deflect criticism by allies and analysts that the CF, including elements assigned to Operation APOLLO, are not ‘battle ready.’ (Elsewhere the government has recognized this deficiency by stating that Operation APOLLO forces would not be committed to combat operations).
Evaluation
The results of Budget 2001 indicate the following:
The operational readiness of the CF will continue to decline, mainly as a result of under funding, which leads to a lack of trained manpower and the progressive "rust-out" of equipment, and inadequate logistics support;
The government does not intend to raise defence expenditures above the level of 1.1% of GDP, and therefore the policy stated in 1994 White Paper on Defence will remain largely unaffordable in the context of government priorities.
Recommendation
The Government initiate at once a broad national security review, comprising comprehensive public and parliamentary examination of Canada’s needs in the realms of foreign policy and defence policy. At the conclusion of the process, publish a new White Paper on Defence, with a government commitment to adequate long-term funding written into it. This process was recently undertaken and implemented in Australia.
Sean Henry. Senior Defence Analyst CDA
ANNEX
The figures and explanations provided in the box on page 99 of the Budget Plan 2001 document are the most contentious in terms of misleading the reader (and the public).
To analyse them one must understand the basic framework of departmental budgets. The latter should be perceived in two parts: a foundation and a smaller superstructure – both of which exist for only one year, and which must re rebuilt at the start each new fiscal year. The foundation is known as the ‘base’, and the superstructure comprises sums of money added outside the base during the year. The complete structure is described in the annual departmental estimates. Recently, in the case of DND, the so-called ‘fiscal framework’(Budget) has been running at about $9.5 billion per annum, and the Estimates at about $11.5 billion.
It is important that the DND budget base be set high enough to fund the commitments assigned to the CF in the 1994 White Paper on Defence. An adequate budget base provides stability, allows coherent forward planning, and keeps the CF in an effective state of operational readiness.
If there is no federal budget to provide additional money to DND, or if a given budget does not provide an additional allocation, then the Central Agencies simply rebuild the base as it was in the previous year, and approvals at Cabinet, Treasury Board, Department of Finance, and Privy Council Office add the superstructure as required – for example in Supplementary Estimates for expenditures approved during the year. The important point is that the base is made up of individual bricks, most comprising increases approved for the base in previous years. Hence, if a base increase is approved in a given year, it must be inserted again in each succeeding year. Therefore, it is only a ’real increase’ in defence funding the first year it appears. In succeeding years, it is merely re-inserted to keep the base at the approved level.
Since the last base increase in Budget 2000, this brick has come to be known as "Program Integrity" or "Sustainability." In FY 00/01 it was set at $400 million. Since the additional funds allocated to DND in Budget 2000 totalled $3.3 billion (including subsequent extrapolations out to FY 06/07), one may ask why the brick is only worth $400 million. Part of the answer is that the $3.3 billion represents the cumulative funding (original + yearly insertions) over the extended period, i.e., FY 99/00 to FY 06/07. As well, other funds were designated and applied directly to such objects of expenditure as provincial disaster relief and the war in Kosovo. These and other factors meant that in the end the brick of ‘real’ new money applied to the base in the first year was only $400 million. A similar analysis could be applied to the ‘brick’ for Quality of Life, added in Budget 99, and amounting to $140 million.
On the other hand, the base-raising brick of $400 million approved in Budget 2000 has subsequently received approval to appreciate in a limited amount over the period out to FY 06/07. This will raise the budget base incrementally during that period by an amount totalling $300 million. This means that between FY 00/01 and FY 06/07, the DND budget base will rise by $400 million + $300 million = $700 million
The government’s interpretation of this situation differs from the above analysis. The government adds up all the bricks (the initial one, plus the annual re-insertions) in cumulative fashion, and calls it "total investment in defence" – amounting to $5.1 billion. This could mislead those unfamiliar with budget procedures into believing that the government has made ‘additions’ to the DND budget base, when it has only made ‘insertions’ to the budget. (Using the government’s logic, it could be said that the cumulative DND budget allocations from 00/01 to 06/07, totalling some $60 billion are also an "investment in defence").
The annual insertion of bricks serves to preserve the new level of money originally approved in a given budget, but afterwards they are not an "increase" in funding. What is not acknowledged in the current situation, is the fact that the foundation is not large enough to address the annual and ongoing DND deficit of $1.3 billion per annum identified by the Auditor-General in her report of December 7, 2001. What is required to resolve the severe underfunding problem within DND is to add new and larger bricks to the DND budget base, of the order of $1 billion per annum in each of the next five years, to bring the budget base up to a steady state of some $14 -15 billion.
Until that happens, to use another analogy, any lesser increase in real funding will only serve to maintain the life support systems, rather than to cure the patient.
