REPORTING OF DEFENCE SPENDING NATO This policy highlights significant additional investments by the Government of Canada. This is consistent with the NATO trend of reversing declining expenditures to meet the commitments agreed to in the Defence Investment Pledge. While defence spending is an important part of ensuring appropriate defence capability, it is not the most effective measure of fair burden sharing. Within the Alliance, Canada continues to place a premium on tangible operational contributions, as well as demonstrating a commitment and capacity to deploy and sustain personnel in support of the Alliance. As part of the Defence Policy Review, Defence conducted a study to ensure that the methodologies used by Canada to report defence spending as a percentage of gross domestic product to NATO were consistent with the eligibility criteria established by NATO and with those currently being utilized and reported by our Allies. The study revealed that Canada has been underreporting its defence spending. The key factor related to the under-reporting has been the exclusion of defence spending that has been incurred by other government departments. Recent consultations with NATO staff and our Allies have resulted in a clearer understanding of Canada’s defence spending. Future reporting will now include defence spending from other government departments, such as: • payments made directly to veterans; • peacekeeping and humanitarian operations; • direct information technology support to defence; • centrally funded defence personnel costs; and • direct program support to defence. It should be noted that additional expenses related to services provided by Veterans Affairs Canada are not currently included. Canada will continue to consult with NATO officials to ensure that costs reported going forward are reflective of defence spending in support of NATO. The investments in Strong, Secure, Engaged decisively reverse Canada’s declining defence spending in recent years. Total forecasted defence spending under this policy is expected to reach 1.40 percent of gross domestic product by 2024-25. It will also position Canada to exceed NATO’s target to spend 20 percent of defence expenditure on major equipment, which under this policy is forecasted to reach 32.2 percent in 2024-25. Table 2 identifies the revised defence spending forecast as a percentage of gross domestic product and major equipment spending as a percentage of defence spending. Table 2: Forecasted Defence Spending as a Percentage of Gross Domestic Product (Cash Basis) National Defence Spending Defence Spending - Other Departments Forecasted Defence Spending Major Equipment as a Percentage of Defence Spending National Defence Spending Defence Spending - Other Departments Sub-Total Changes to Defence Policy Forecasted Defence Spending Major Equipment as a Percentage of Defence Spending 46 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 1.30% 1.30% 1.39% 1.16% 1.23% 1.10% 0.99% 1.01% N/A N/A N/A N/A N/A N/A N/A N/A 1.30% 1.30% 1.39% 1.16% 1.23% 1.10% 0.99% 1.01% 14.80% 13.00% 12.80% 13.80% 9.70% 8.31% 11.16% 13.03% 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 0.96% 0.97% 0.94% 0.98% 0.93% 0.91% 0.87% 0.85% 0.82% 0.79% 0.24% 0.22% 0.26% 0.22% 0.20% 0.19% 0.19% 0.18% 0.18% 0.17% 1.20% 1.19% 1.20% 1.20% 1.13% 1.10% 1.05% 1.04% 1.00% 0.97% 0.00% 0.00% 0.11% 0.06% 0.09% 0.19% 0.23% 0.24% 0.37% 0.43% 1.20% 1.19% 1.31% 1.26% 1.22% 1.29% 1.29% 1.27% 1.37% 1.40% 10.50% 10.84% 19.42% 19.77% 16.80% 21.83% 23.70% 23.15% 29.38% 32.17%