With just over a month until Prime Minister Mark Carney tables his first federal budget, Ottawa is preparing to put defence at the heart of its new economic and security agenda. The Carney government has committed to increasing military spending to meet and then exceed NATO’s benchmark of two per cent of GDP, a target Canada has repeatedly promised but never delivered on.
For decades, Canadian governments have rolled out spending plans only to fall short in execution. In defence, one issue has been procurement delays, cancelled programs, and cost overruns. For instance, fighter jet replacements took more than a decade, shipbuilding projects are years behind schedule, and cyber upgrades remain stuck in red tape.
Carney is hoping to break that cycle. His government has signalled that Budget 2025 will be accompanied by a long-awaited Defence Industrial Strategy, intended to provide a roadmap for where billions in new defence dollars will flow. Officials describe it as a once-in-a-generation opportunity to rebuild national resilience, secure supply chains, and leverage defence spending to grow Canada’s economy.
The scale of the commitment is historic. In June, Carney pledged that Canada would reach NATO’s two per cent target this fiscal year and climb to five per cent of GDP by 2035, meaning annual defence spending of roughly $150 billion within the next decade. “This won’t just build our military capacity,” Carney said at the time. “It will build our industries and create good, high-paying jobs at home.”
But optimism is tempered by skepticism. A 2024 House of Commons report catalogued the bureaucracy and risk aversion that plague Canada’s procurement system, from overlapping departmental responsibilities to persistent shortages of specialized staff. The result has often been lapsed funds and wasted opportunities, including $12 billion in procurement money that went unspent between 2017 and 2022.
Carney has promised to confront the issue directly. During his campaign, he pledged to create a stand-alone defence procurement agency to cut through red tape and prioritize buying Canadian gear. The government is also considering reviving wartime-style centralized procurement structures to avoid duplication and delays.
The stakes are rising not just with NATO but also with the United States. New reports have shown that the Department of National Defence has spent more than $1 billion on American cloud providers like Microsoft and Amazon to run “mission-critical” applications. Carney has floated the idea of building a Canadian “sovereign cloud” to reduce reliance on U.S. infrastructure, a project that would tie directly into both defence and industrial policy.
The reliance on foreign platforms underscores the broader challenge: how to ensure that Canada’s massive new defence outlays strengthen domestic industry rather than deepen dependence on foreign suppliers. Roughly 40 per cent of Canada’s defence industrial base is already made up of subsidiaries of U.S. giants such as Lockheed Martin and General Dynamics. At the same time, Canadian firms warn that government timelines are so slow that many Canadian suppliers risk going out of business before contracts are signed.
Carney faces a dual challenge: convincing allies that Canada is finally serious about pulling its weight, and convincing Canadians that unprecedented spending on defence is worth the trade-offs with other priorities. A June poll by the Angus Reid Institute found almost half of Canadians view the five per cent GDP target as too high, fearing it could squeeze out investments in health care, housing, or climate action.
As the budget countdown begins, Carney has framed defence spending as nation-building. The test will be whether Ottawa can translate bold promises into actual ships, aircraft, and digital infrastructure and whether this time, Canada can deliver.
Daniel Perry is the Director of Federal Affairs at the Council of Canadian Innovators, leading national advocacy and engagement efforts. With experience in consulting and roles at the Senate of Canada, Queen’s Park, and the Canadian Criminal Justice Association, Daniel has helped political leaders and clients across various sectors achieve their public policy goals. A frequent media contributor and seasoned campaigner, Daniel holds a Master of Political Management from Carleton University.
