3 FIXING DEFENCE FUNDING STABLE, PREDICTABLE, REALISTIC FUNDING The vision and new initiatives set out in Strong, Secure, Engaged are backed by a long-term funding commitment and model that fully provide the resources for implementation. To meet Canada’s defence needs at home and abroad, the Government will grow annual defence spending over the next 10 years from $17.1 billion in 2016-17 to $24.6 billion in 2026-27 on an accrual basis. This translates to a rise in annual defence spending on a cash basis from $18.9 billion in 2016-17 to $32.7 billion in 2026-27, an increase of over 70 percent. The total funding available to Defence over the next 20 years will be $497.0 billion on an accrual basis, or $553.0 billion on a cash basis (Table 1). Total forecasted defence spending as a percentage of gross domestic product is expected to reach 1.40 percent by 2024-25. This level of funding is affordable, achievable, and has been informed by a rigorous, evidence-based analysis of Canada’s defence needs and the resources required to effectively deliver upon them over a 20-year horizon. Over the next 20 years, Strong, Secure, Engaged includes new funding for defence of $48.9 billion on an accrual basis, or $62.3 billion on a cash basis. Defence investments will no longer be only planned in theory, then partially implemented or not implemented at all, because of imprecise or changing cost estimates. For the first time, this model is transparent, rigorously costed, and fully funded, including not just acquisition costs, but also operating and sustainment costs of new equipment. In accordance with long-standing practice, the Government of Canada will take the funding decisions necessary for future military deployments as well as decisions related to continental defence and NORAD modernization. Additional funding may be approved in the future in order to ensure the Canadian Armed Forces can continue to fulfill its mandate in an evolving environment. The Canadian Armed Forces must be able to plan well into the future. This policy ensures it can. This funding is realistic and will provide the stability and certainty required to make defence investments that meet today’s needs while also planning for the future. Accrual Basis: the cost of acquiring an asset is spread over its useful life, rather than being recorded at the time the bills are paid. Operating funding for the asset is recorded in the year that the expenditure is made. Cash Basis: funding for cash payments related to the acquisition of capital assets and operating funding is allocated in the year in which the expenditure is made (immediately). See Annex B for a more in-depth exploration of the difference between Accrual and Cash accounting. Table 1: Defence Funding ($ millions)* *Not including future mission costs 43