DND walks back entirety of minister’s ‘substantial increase’ pledge

Canada’s defence minister last week pledged a “substantially increased investment” in new northern military hubs, suggesting the figure had increased more than ten-fold. But it wasn’t true.

Bill Blair had discussed the amount of funding available in the course of announcing Yellowknife, Inuvik and Iqaluit as the first three northern operational support hubs. The selection of those communities remains correct.

In 2024, the federal government had said $218 million would be available to build those hubs – but only $18 million in the opening five years, a low sum for infrastructure in the North.

Asked by Cabin Radio about the $218 million and the smaller figure for the next five years, Blair replied: “I’ll be announcing a substantially increased investment in the northern operational support hubs today. It’s about $2.67 billion and it’s our intent to move quickly so that could be done over the next five years.”

When the interviewer, repeating back Blair’s answer, said that would mean more than a ten-fold increase in funding, Blair said his government had “come to the realization that there’s a huge opportunity and also a requirement to invest in the North.”

He added: “Last year, before we issued our defence policy update, there was very tepid support for additional defence spending among Canadians. But their world has changed, and Canadians are now insisting that we make investments.”

Later, at a press conference, a Radio-Canada reporter asked Blair: “Last year, you announced $218 million for this infrastructure. Today, it’s $2.67 billion. I was curious what motivated this increase?”

“Conversations that we’ve had with our partners in the North and with the Canadian Armed Forces,” Blair responded.

Only when pressed by email for an explanation of where the new money was coming from did the Department of National Defence, after several days, respond to say there is actually no new investment at all.

The department said the same amount of money has been allocated to the northern hubs all along.

Skip this part if you haven’t done your taxes

For an explanation of how the federal government got from $218 million to $2.67 billion without actually spending any new money, we will have to get into some intensely dull accounting chat.

First, the paper trail.

In April 2024, the federal government unveiled its defence spending plans for the next 20 years. In documents issued to journalists at the time, Ottawa said the northern hubs would receive $218 million over those two decades.

Last week, with no attached explanation and no suggestion that things had ever been otherwise, the federal government said the northern hubs would receive $2.67 billion. This is the point at which Blair, drawing attention to the new figure, said it was a “substantially increased investment.”

According to DND, what actually happened is the department decided to switch the type of accounting it was using to get its figures, without telling anyone. (Whether even the minister knew or fully understood this is unclear, based on his statements.)

There are two types of accounting going on here. One is cash-basis accounting and the other is accrual accounting.

Let’s say you receive $20,000 from a particularly nice aunt to make your yard nicer. Your aunt expects you to gradually spend it over 20 years.

Cash-basis accounting would mean entering $20,000 in the column for the year that you got the money. Job done, thanks for coming, the end.

Accrual accounting would be more likely to mean entering $1,000 for each of the 20 years that form the expected life of the yard project. It still equals $20,000, but it’s spread over time.

We could spend a lifetime discussing which system accountants might pick in a given situation and why.

For the purposes of this article: the federal government picked the accrual system when it first announced the money in April 2024, then magically and silently changed to the cash-basis system last week. When asked about it, the minister responsible said it was an increase instead of explaining the accounting change.

A spokesperson for Blair, Laurent de Casanove, insisted on Monday night that he had been simply “emphasizing the scale of investment being made in the North and Arctic.”

De Casanove said the federal government switched to the cash-basis figure because $2.67 billion “more accurately captures the broader financial commitment being made to strengthen Arctic infrastructure and operations.”

According to the Library of Parliament, the Canadian government has used full accrual accounting for its budget since 2003.

What is the outcome here?

There are various ways to look at what we should take away from this.

Firstly, the minister misrepresented what was happening – perhaps inadvertently, though it’s not clear. No new funding was announced last week. More broadly, the federal government introduced a massive change in the figures it chose to publicize without explaining why, despite having multiple opportunities to do so.

Secondly, looked at through the cash-basis lens, Ottawa’s commitment of $2.67 billion over 20 years – a commitment you can find, armed with hindsight, if you look hard enough in last year’s defence spending appendices – is a lot of money. That headline figure remains intact, even if it wasn’t an increase.

But lastly, all other spending figures from last year appear to be intact, too. And those figures raise some questions about what happens next.

No matter whether you look at the cash-basis or accrual accounting for the northern operational support hubs, there is only $18 million allocated to all of the hubs, collectively, between 2025 and 2029.

The big money appears to come much later, well into the 2030s. Blair did tell us he wanted to “move quickly” on the funding, but DND has not backed up that assertion with any confirmation that the distribution of funds has been moved up from the initial timeline.

In Yellowknife, you would be lucky to get a tennis court out of the city’s share of that $18 million for the next five years.

What the federal government intends to do with that sum is not clear.