Canada’s upcoming federal budget, to be tabled Tuesday, is expected to mark a historic shift in the country’s defence policy — laying the groundwork to meet NATO’s 5% defence spending target by 2035.

After years of lagging behind allies, the federal government under Prime Minister Mark Carney is set to inject billions into National Defence and related infrastructure, even as other departments face spending cuts to fund what Carney has called “generational investments.”

“I think what we’ll be doing in the budget is laying track to meet the five per cent target by 2035,” said Defence Minister David McGuinty, following a tour of the Hanwha Ocean Ltd. shipyard in South Korea — one of the bidders for Canada’s new submarine program.

The target, agreed upon by NATO allies, allocates 3.5% of GDP for military operations and 1.5% for defence-related infrastructure.

Submarine Program Tops the Wishlist

At the heart of the anticipated funding is the multi-billion-dollar submarine replacement program, a project that currently lacks dedicated financing.

“We’re still working to refine the costs,” said Vice-Admiral Angus Topshee, adding that the program fits within the government’s broader commitment to NATO’s target.

Defence analyst Dave Perry noted that while Carney has visited potential submarine suppliers, “the project does not yet have a budget,” making Tuesday’s announcement a critical moment to see if real funding will be assigned.

Billions in Backlog

The Parliamentary Budget Office estimates that between 2017 and 2023, the Department of National Defence underspent $18.3 billion on planned equipment acquisitions. Many initiatives from the 2017 defence policy remain stalled due to a lack of financial commitment.

Perry said this budget must include clear financial forecasts and not just pledges:

“Canadians need to see actual figures showing how spending will rise over time.”

Building Canada’s Defence Industry

Alongside rearmament, the government plans to strengthen the domestic defence industrial base — a key element of Carney’s economic agenda.

Recent agreements with the European Union and South Korea are expected to open new markets for Canadian defence manufacturers. However, experts estimate at least $800 million will be required to expand ammunition production and modernize manufacturing lines.

“It would make sense for the budget to show how Ottawa plans to build capacity and define its wider defence industrial strategy,” Perry added.

While the government’s Defence Industrial Strategy is still being finalized, the budget is expected to provide early details and fiscal direction.

A Strategic Shift

The push to meet NATO’s 5% spending target comes amid heightened global tensions — with ongoing conflicts in Ukraine and the Middle East — and increasing pressure from allies, especially the United States.

If fulfilled, the new commitments would place Canada among NATO’s top spenders, a dramatic turnaround for a country long criticized for underinvesting in defence.

The 2025 budget may not finalize every project, but it will chart a course for Canada’s most ambitious military modernization plan in decades.

Currie Dixon’s Yukon Party has swept to a majority victory in Monday’s territorial election, ending nearly a decade of Liberal rule and ushering in what Dixon called a “new era of change” for the territory.

The conservative-leaning party is projected to win 14 of 21 ridings, reclaiming government after nine years in opposition. Dixon, 40, will become Yukon’s 12th premier — and the first to be born in the territory.

“Tonight Yukoners chose to move on from the status quo. They chose a new path. They chose change,” Dixon said during his victory speech.

The Liberals, led by Mike Pemberton, suffered a dramatic collapse, holding a narrow lead in just one seat — the northernmost riding of Vuntut Gwichin, which will go to a recount. It marks a stunning reversal for the party, which governed since 2016 and relied on NDP support for the past four years.

Meanwhile, Kate White’s NDP made major gains, securing six seats to become the Official Opposition for the first time in a decade.

“We know Yukoners are struggling with affordability, health care, and housing,” White said. “Now our job is to hold the new government to account.”

The campaign centered on the cost of living, health-care access, housing shortages, and community safety — issues Dixon promised to address immediately.

“The Yukon government should no longer be an impediment to private sector growth,” Dixon said. “Yukoners have told us they want to see change — and change is here.”

Among the key results, the Yukon Party picked up former Liberal premier Ranj Pillai’s seat in Porter Creek South, as well as Whitehorse West, where newcomer Laura Lang defeated Pemberton.

Longtime Yukon Party MLAs Brad Cathers, Scott Kent, Wade Istchenko, Patti McLeod, and Yvonne Clarke all held their seats, joined by several new faces including Linda Benoit (Whistle Bend South) and Jen Gehmair (Marsh Lake–Mount Lorne–Golden Horn).

The NDP, in turn, captured four former Liberal ridings — Klondike, Mountainview, Riverdale South, and Riverdale North — in one of the party’s best showings in years.

In a concurrent plebiscite on electoral reform, 56 per cent of Yukoners voted in favour of adopting a ranked ballot system, though the results are non-binding. Dixon has indicated he will not move forward with changing the voting system.

Voter turnout fell to 53 per cent, down sharply from 65 per cent in 2021 and 76 per cent in 2016.

With the Yukon Party’s victory, Currie Dixon now faces the task of forming a government that promises to deliver on its central message — that change has finally arrived.

Liberals Drop 2B Tree Pledge Ahead of Budget

The Liberal government under Prime Minister Mark Carney is set to abandon Canada’s target of planting two billion trees by 2031 — a flagship climate initiative launched during Justin Trudeau’s tenure — according to senior government sources.

Officials say the government will continue to honour existing contracts to plant one billion trees by 2031 but will not pursue the doubled goal set under Trudeau. The decision, expected to be confirmed in Tuesday’s federal budget, marks another major shift in Ottawa’s climate strategy.

The $3.2-billion tree-planting program was announced during the 2019 election campaign as part of Trudeau’s broader environmental platform. Sources indicate that unallocated funds from the program will now be redirected to other spending priorities.

Natural Resources Canada’s latest figures show only 228 million trees have been planted so far—leaving more than 1.7 billion short of the original target. The program has repeatedly missed its annual milestones over the past two years.

Carney has previously ended the consumer carbon tax and delayed the electric-vehicle sales mandate, positioning his “climate competitiveness strategy” as a more pragmatic economic plan. He has also committed to balancing the government’s day-to-day budget within three years, signalling cuts and a focus on program efficiency.

“The transformation of our economy will take sacrifice and time,” Carney said last month, noting that the upcoming budget aims to strengthen Canada’s competitiveness amid a “more dynamic and hostile” global landscape.

Budget insiders say the fiscal plan will include tax structure changes to promote investment, including revised credits for capital expenses. The overall deficit, however, is expected to rise compared to the last fiscal update.

Sources requested anonymity as they were not authorized to speak publicly about the contents of the budget.