Canada’s Defence Department is being asked to trim spending by 7.5% starting 2026, even as its overall budget rises under PM Carney’s fiscal strategy.
Spending Cuts Target All Departments
The Department of National Defence will be expected to reduce its operating budget despite receiving billions in new funding, as part of Prime Minister Mark Carney’s wider cost-cutting initiative. Finance Minister François-Philippe Champagne has instructed all cabinet ministers to cut program spending by 7.5% in 2026, rising to 15% by 2028.
New Defence Funds Offset by Cut Mandates
The directive comes just weeks after Carney announced an additional $9.3 billion in defence funding this year, aimed at meeting NATO’s new goal of allocating 5% of GDP to defence and security by 2035. Despite that commitment, Champagne’s office confirmed that no departments, including National Defence, are exempt from the savings mandate.
Ministers React to Cost Pressures
At a press conference Monday at CFB Trenton, Defence Minister David McGuinty acknowledged receiving the finance minister’s letter but provided little detail on how the cuts would be implemented. “The question of redistribution of expenditures is one I would much rather leave with the minister of finance,” he said.
Budget Balancing vs. Capital Spending
Carney’s platform, launched after taking over the Liberal leadership, promises to balance the federal operating budget by 2028 while allowing continued deficits for capital investments. The current federal deficit stands at $62 billion, and without a spring fiscal update, critics warn that new spending could push that figure even higher.
Public Service Union Warns of Job Losses
The Public Service Alliance of Canada raised concerns Tuesday, warning that Ottawa’s proposed cuts could lead to widespread layoffs and degraded services across departments. While the union expressed openness to collaboration on efficiency, it cautioned that programs like passport processing and benefits delivery could face serious delays.
Red Tape Review Launched to Spur Efficiency
In tandem with budget trimming, Treasury Board President Shafqat Ali on Wednesday announced a red tape reduction initiative across federal departments. Ministers have 60 days to propose ways to modernize outdated regulations, eliminate duplication, and streamline service delivery.
Bureaucracy Under Pressure to Reform
Michael Sabia, the new head of the Privy Council Office, echoed that sentiment in a letter to public servants Monday, calling internal government processes “too complicated.” He emphasized that simplifying operations is a critical priority for federal reform going forward.
The fall 2025 budget is expected to offer more clarity on how departments, including National Defence, will meet their savings targets. Until then, federal officials face the challenge of balancing fiscal restraint with the rising demands of national security and public service delivery.
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