Dollars and Sense: Budget 2025 Provides Transformational Defence Funding, but Unclear Direction

By Dave Perry, 27 February 2026

[This is an excerpt of an article in Vol. 21, No. 3 of Canadian Naval Review. For the full free access article, click on the link below.]

Since becoming Prime Minister, Mark Carney has made defence a priority in a way Canada has not seen in decades and his first budget, presented in November 2025, reflects that focus. While reactions to the budget overall have been mixed about whether it was as transformational as the government had suggested it would be, on the defence front Budget 2025 is genuinely transformational. 

At the NATO summit in the Hague in June 2025, allies committed to meet a new investment pledge. The agreed-upon spending metric of allocating 2% of Gross Domestic Product (GDP) to defence was revised to a new commitment to spend 3.5% on ‘core defence’ while making an overall commitment of 5% of GDP, including other investments in resilience, infrastructure and other measures, all by 2035. Budget 2025 unambiguously commits to delivering on this path of increased defence investment stating “Canada will invest 3.5 percent of GDP by 2035 in core military needs” and noting that Canada is on a path to meeting the total commitment by the same year. As well, the 2025 federal budget reinforces the pledge the Prime Minister made to get Canadian defence spending to the old 2% mark this fiscal year. For years after agreeing to the old alliance investment pledge made at the 2014 summit in Wales, the Canadian government failed to follow through. Notably, after making the pledge at the Wales Summit, the government never reflected the commitment in budgetary documents, either with written commitments or actual dollars. The unequivocal commitment to meet the mark in Budget 2025 sends an important signal.

The budget most notably reflects the full impact of the funding decision Prime Minister Carney first announced 9 June 2025 when his government gave the Department of National Defence (DND) and the Canadian Armed Forces (CAF) the $9 billion in extra funding the government estimates is needed to spend 2% of GDP on defence in Fiscal Year 2025/2026. The budget reflects that the $9 billion is just the first part of a massive injection of funding over five years. Including the $9 billion, the Prime Minister announced and put into the Estimates this past June, Budget 2025 outlines a total injection of $81.8 billion on a cash (or actual dollars) basis for a range of defence investments. The funds are spread out over several areas spanning the breadth of the defence portfolio: $20.4 billion for personnel; $19.0 billion for repairing and sustaining capabilities and defence infrastructure; $10.9 billion for upgrades to digital infrastructure; $17.9 billion for new equipment and ammunition; $6.6 billion to implement the Defence Industrial Strategy; $6.2 billion over five years to expand Canada’s defence partnerships; and $805 million for the Canadian Coast Guard, Canadian Security Intelligence Service (CSIS) and Public Services and Procurement Canada for complementary initiatives.  

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Latest CNR: Vol. 21 No. 3 (2026)

The second article, “The Strategic Utility of Aircraft Carriers in China’s Ambitions in East Asia,” discusses the rapid growth of China’s aircraft carrier capability and how and where Beijing would likely use them in the case of war. The third article is “Why Does Canada have a Navy? Reflecting on the Canadian Leaders at Sea Program.” In this article, the author addresses a simple question that was asked while he was participating in the CLaS program, and considers what a navy represents and why Canada has one. The final essay, “SS Nerissa: A Tragic Footnote to History,” tells the little-known story of the last voyage of SS Nerissa that was sunk by a U-boat while transporting troops and civilians across the Atlantic in the Second World War.

If that isn’t enough to spark your interest, we have our usual Making Waves commentaries. We have a commentary about hydrography in the Arctic. Sound boring? It’s not. If Canada is getting submarines that are expected to operate in the Arctic, Ottawa needs to act now to map the seafloor there. We have a commentary about the many historic discussions about moving the Coast Guard into the defence department. We have a commentary about the unthinkable – i.e., having naval ships that can act as ‘tripwires’ in the event that the United States decides to blockade Canada. We have an account of a conference in Australia, Canadian interest in East Asia, and preparing for Russia in the Arctic.

And, of course, we have our regular columns. “A View from the West” looks at North Korea’s increasing focus on its navy. “Dollars and Sense” examines the defence-related parts of Budget 2025, and “Warship Developments” updates us on several interesting recent naval decisions.  

In addition to all this great information, we have our usual amazing photos!

Stay tuned. In a few weeks, the issue will be in the mailbox of people who are lucky enough to be subscribers! It’s not too late for you to subscribe. See here for the Table of Contents.

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