Carney budget adds $11.2 billion to defence but leaves 2035 NATO target unpriced

The Carney government’s 2026 budget, tabled Thursday, books $11.2 billion in new defence spending over five years, a small fraction of the $81.8 billion the 2025 budget committed over the same span. The government’s own projections show Canada’s progress toward its core NATO target levelling off after 2027-28, then stopping at 2030, five years short of the deadline Canada accepted at The Hague.

At NATO’s 2025 summit, allies agreed to spend the equivalent of 5 percent of GDP on defence by 2035: 3.5 percent on core military spending such as weapons, ammunition and personnel, and 1.5 percent on defence- and security-related infrastructure. Thursday’s budget projects total defence spending of slightly more than 4 percent of GDP, roughly $157 billion, by 2030-31. But nearly all the remaining distance is in the core category. The budget has core spending rising to 2.6 percent of GDP in 2027-28 and holding there through 2030-31, when it would reach about $99.2 billion. The 1.5 percent infrastructure target, by the government’s accounting, is already being met.

That leaves a large bill for the next decade. The Globe and Mail calculates that even in 2030, Canada would still be about $37 billion a year short of the spending needed to meet the 3.5 percent core commitment. Parliamentary Budget Officer Annette Ryan has estimated core spending would need to reach $163.6 billion in 2035 to hit the target, up from $43.9 billion in 2024.

The headline figure also overstates how much fresh money is on the table. The Globe reported that much of the budget’s defence spending is funded by reallocating money from other areas, and The Canadian Press counted only $755 million in genuinely new defence funding over five years. The largest single item, $7.6 billion over five years, extends Operation Reassurance, the Canadian Armed Forces’ deployment in Latvia.

A plan that stops at 2030

The shortened horizon has drawn criticism. Former parliamentary budget officer Kevin Page has argued Ottawa is not being transparent by ending its projections at 2030, and said in May that the government must show how it will ramp up spending through 2035.

Finance Minister François-Philippe Champagne defended the document Thursday, saying it offers more transparency than most G7 countries. “You’ll see the spending on a cash basis for every year until 2030,” he said.

Prime Minister Mark Carney has made a different case: that a full 10-year plan would be outdated quickly given how fast modern warfare is changing, and that NATO has agreed to review the 2035 targets in 2030 regardless. Page said in May he remained unconvinced by that explanation.

Capacity, not cash

Some analysts argue the plateau reflects what the system can absorb. Philippe Lagassé, a Carleton University professor who specializes in defence procurement, told the Globe the government doesn’t have the capacity to spend on defence any faster. “The idea that you have never run a marathon and tomorrow you’re going to run a marathon—well that’s not going to work,” Lagassé said.

In a post the day after the budget, Lagassé offered a more charitable reading: laying a 2.6 percent foundation over five years, then making a second push toward 3.5 percent after 2030, is a defensible sequence. He also said the budget amounts to a reality check for the federal Defence Industrial Strategy, since the projected sums fall well short of the boom expectations that greeted its release in February.

Questions about what the money buys

Hub contributors have warned for months that the buildup risks prioritizing industrial benefits over military capability. Richard Shimooka, a Hub contributing writer and senior fellow at the Macdonald-Laurier Institute, wrote in September that he could envisage defence spending plateauing at around 2.5 to 2.8 percent of GDP after 2030. The budget bears that out, three years early. Reaching 3.5 percent, he noted, would mean nearly tripling the defence budget from its baseline.

Shimooka was unimpressed with the government’s starting point. “By any metric one can imagine, the military’s capability to defend Canada is clearly insufficient to the challenges the country faces,” he wrote. He also argued the Defence Industrial Strategy, which aims to steer 70 percent of defence acquisitions to Canadian firms and create 125,000 jobs over a decade, is better understood as an industrial strategy for defence spending than a defence strategy, with too little attention to warfighting or to what the Canadian Armed Forces actually need.

Sean Speer, The Hub‘s editor-at-large, raised a related concern in March, warning against making domestic ownership a primary criterion in defence procurement. “The danger is that Canada’s long-overdue defence buildup becomes a costly and distortionary exercise in rent-seeking,” he wrote.

What to watch

The budget’s year-by-year figures end in 2030-31, and the government has not said when, or whether, it will publish projections out to 2035. The next markers are the revised defence policy and NATO’s 2030 review of the targets, which could reset the finish line before Canada reaches the steepest stretch of the climb.

The Hub Staff