Federal budget to hide expensive defence-spending realities
TheStar.com – Opinion/Commentary – Delays to defence procurements will keep large commitments off the balance sheet, and preserve the false impression of that the government is on the way to creating a surplus.
Feb 11 2014. By: Michael Byers
Tuesday’s federal budget is expected to lay the table for a surplus in 2015; a surplus the Harper government will use to justify tax cuts just before the next election.
But from anything other than a strict accounting perspective, the surplus is a fiction — because it depends on delays to some very expensive defence procurements.
Take the replacement of the half-century-old Sea King helicopters . The Martin government signed a $1.8-billion acquisition contract for helicopters in 2004, with deliveries promised for 2009. Under the Harper government, the expected delivery date slipped to 2013, and then 2018.
As a result, $1.8 billion in acquisition costs are off the ledger until after the election. For it is the year of spending, not the year of announcing or contracting, which determines when expenditures first show up on the balance sheet.
Replacement search-and-rescue planes were promised in 2006. Six years later, the government insisted the aircraft would be in service by 2015. But the procurement has been delayed again, with the selection of a supplier promised later this year, followed by deliveries in 2017. None of the $1.9 billion in acquisition costs will be incurred before the election.
When Stephen Harper came to power in 2006, replacements for Canada’s Iroquois-class destroyers were already urgently required. But no action was taken until 2011, when the construction of 15 Canadian Surface Combatants was announced — at a currently estimated cost of $26.2 billion, or $5.2 billion for the three ships designated to replace the destroyers. The five-year delay in initiating the procurement ensured that none of this spending would occur until after 2015.
The same stop-and-start manoeuvre has also pushed back many other enormously expensive and much-needed procurements until after 2015: supply ships; a heavy icebreaker (the price of which has risen from $720 million to $1.3 billion); ice-strengthened Arctic/Offshore Patrol Ships; 1,300 armoured trucks; and a fleet of unmanned aerial vehicles.
Finally, there are the F-35 fighter jets chosen to replace the aging CF-18s. Although the F-35s were never due for delivery before 2016, the Harper government was on track to sign a contract in 2014. It was only when questions were raised about the escalating costs that a panel was established to review alternative aircraft. However, the manufacturers of warplanes will not share key technical information in the absence of a full competition, meaning that the only thing accomplished by the panel was the postponement of any contract past 2015, and with that, more awkward questions about costs.
Where does all this leave us?
Using the government’s own numbers, and excluding operating, maintenance and infrastructure costs, more than $16 billion in defence procurements would be showing up on the federal financial statements by 2015 — had they not been delayed.
This includes $1.8 billion for helicopters, $1.9 billion for search-and-rescue planes, $2.6 billion for Joint Support Ships, $3.1 billion for Arctic/Offshore Patrol Ships, $0.8 billion for trucks, $1 billion for drones, and $5.2 billion for the Iroquois-class destroyer replacements.
Some of this equipment, if contracted and delivered in a timely manner, would already be in use — adding billions of dollars to the financial ledger.
Other, longer-term procurements like the F-35s have been delayed for the simple purpose of avoiding awkward questions about 100s of billions of dollars in future spending.
The prime minister, having announced, celebrated, and then delayed a whole series of major defence procurements, is misleading voters with the forecast of a large surplus.
There will be no surplus in 2015, except in a strict accounting sense of the term. And it will come at no little cost to the capability and safety of the Canadian Armed Forces.
Michael Byers holds the Canada Research Chair in Global Politics and International Law at the University of British Columbia.
< http://www.thestar.com/opinion/commentary/2014/02/11/federal_budget_to_hide_expensive_defencespending_realities.html >