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If you care about Canada’s security, 2023 was a year of substantial disappointment

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From the MacDonald Laurier Institute

By Richard Shimooka

And it’s unlikely to get any better in 2024

As the calendar turns over to 2024, I’ve been reflecting on the year that was in Canadian security and defence. It started off with great promise. There was the potential for a new defence policy update that would address many of the government’s shortcomings with respect to defence policy and the military capabilities of the armed forces, and there was the potential for the procurement of the P-8 alongside a number of other capabilities.

Furthermore, there was hope for progress in dealing with substantiative issues around culture change and recruitment/retention. After General Eyre’s directive on reconstitution in October 2022, there was good evidence to suggest that the political leadership understood the poor material shape the Canadian Armed Forces were in and would become more discriminating as to what missions it was sent on. Relatedly the government as a whole seemed to better understand the national security environment it found itself in, especially after the publication of the Indo-Pacific Strategy in November of 2022.

Yet the close of 2023 highlights just how much this was a year of substantial disappointment for those who care about Canada’s military, defence capabilities, and its place in the world.

Rather than the beginnings of a renewal, the CAF is in a worse state and facing an even deeper hole it needs to dig out of. The delay of the defence policy update, reportedly due to its cost, as well as the shuffling out of Anita Anand, a popular minister within the department, tore out the tender shoots of hope many military members had nurtured for the military’s revival. The announced budget cutbacks of approximately $1 billion dollars over the next three years further put this to bed.

While there were some funding announcements, such as the P-8 and the Remotely Piloted Air System program, they are being layered onto a military that has haemorrhaged much of its key personnel. Many individuals, who are already overtasked, rightly wonder who will be there to integrate, operate, or sustain these new capabilities.

None of this even acknowledges the increased threat environment or the massive technological change that is affecting a CAF that desperately requires modernization. While National Defence has outlined several efforts to address this challenge, such as the pan-domain strategy, its requirement to simply survive on an austere budget means there are no resources or intellectual capacity left to implement them.

Looking back at the past year, I have been searching for historical precedents to compare it to. One has come to mind a few times: 2003.

Similar to the present, the country was faced with a number of serious security challenges: 9/11, Afghanistan, and the debate over the impending Iraq war. The 2003 CAF faced serious material and manpower challenges—what General Rick Hillier would later describe as the “decade of darkness” of the 1990s. In 2003 the military faced multiple crises simultaneously: a rust-out crisis of aging military equipment, a personnel crisis, and multiple open-ended missions. As one influential study, titled “Canada Without Armed Forces” published in 2003 suggested:

The next government will be caught up in a cascading policy entanglement initiated by the rapid collapse of Canadian Forces core assets and core capabilities. This problem will inevitably disarm foreign policy as Canada repeatedly backs away from international commitments because it lacks adequate military forces. In these circumstances, new policy initiatives aimed at ‘being useful to the United States in our own interests’ may well be derailed.

Sound familiar? While some of the direst of predictions did not immediately emerge, they were only delayed. The military received substantial investments, but a large portion of it was tied to funding the operations in Afghanistan or helping build a military that would continue similar operations. Modernization was delayed on capabilities that would help defend Canada and its allies from great power conflict, and in some cases entire capability sets were retired with no replacement forthcoming.

Looking back at the past year, one way to look at my columns is that they are chronicling the consequences of the inadequate modernization of the Canadian Armed Forces since 2003. It is a likely outcome that by 2028, the country will likely have a navy and air force that are effectively unable to provide a basic level of defence in key areas, and an army that will be unable to assist our allies with previously announced commitments.

But this does not explain why we’ve arrived at this moment. Over the years, many observers of Canadian foreign and defence policy have noted that the fundamental “problem” of the country’s national defence is that there are no “pressing” threats to its security. I’ve personally had difficulties with this perspective, as it lazily excuses present-day inaction. It ignores (or, perhaps more accurately, confirms) the perspective that it is not actually to do with the threats themselves, but Canadians’ perception of them. One book, also published in 2003, diagnosed this problem well: Andrew Cohen’s While Canada Slept. It is still worth reading today.

From 1945 to 1968, successive Canadian governments from Louis St. Laurent to Lester B. Pearson viewed international security as a critical focus. Many had fought or been a direct participant in one or both World Wars and saw the ruinous cost of inaction and unpreparedness. They had built close relationships with senior officials of all of Canada’s major allies, which allowed them to tackle problems in lock-step with each other. Canada was present at the creation of the key institutes that have provided for our economic prosperity and security. Cohen’s book lamented the decline of Canada’s principal foreign policy instruments due to neglect that occurred even as Canadians agreed that being a good international partner was in the country’s national interest.

That really hasn’t improved over the subsequent twenty years. Rather, the reality is grimmer. Like in 2003, the international system has changed radically, this time with Russia and China actively undermining the rules-based order. In the 2000s, both Paul Martin (and later Stephen Harper) understood the poor material state of the CAF and made efforts to address it. Unlike then, however, the government of today has been extremely slow to acknowledge this reality, and in some cases ignores it for their own political interests.

This has given me the most pause over the past year. Rather than acknowledge or address the real possibility of capability collapse or the broader international challenges, the political leadership has chosen to obfuscate these issues and continue policies that have already contributed to the state it currently is in. There is a preference for big, showy announcements while ignoring the much more desperately needed substantial action to fix the armed forces and foreign policy writ large.

Just this week the minister of national defence announced the deployment nine helicopters to Latvia followed by sending a handful of personnel to support the multinational effort to provide security in the  Red Sea. These are token contributions that are unsustainable in aggregate for the military, yet they serve the political purpose of showing Canada doing “something.” Domestic priorities, no matter how small, will trump international ones for this government.

This was evident last July at the NATO meeting in Latvia, which was focused on the threat posed by Russia and the war in Ukraine. Rather than focus on the topic at hand, Prime Minister Trudeau took to lecturing the assembled leaders on the threat posed by climate change, which was not well received by the gathering. Even in non-defence areas, such as with foreign interference, similar preferences are visible. The continual delay in establishing an inquiry while trying to control its scope is an example of putting parochial interests over that of the country writ large.

Considering the hope that the year started with and how it ended, it’s unlikely that much will change in 2024. Even a cursory look at the political interests of the Liberal and NDP parties (joined by their supply and confidence agreement) suggests that it is unlikely that the government will accelerate their spending on defence—rather they are more likely introduce more delays. Yet the military and other instruments of the country’s foreign and security policy will not be able to wait. Their failings need to be addressed now, or we will collectively suffer its consequences.

Richard Shimooka is a Hub contributing writer and a senior fellow at the Macdonald-Laurier Institute who writes on defence policy.

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Canada among NATO members that could face penalties for lack of military spending

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From the Daily Caller News Foundation

By J.D. Foster

Trump should insist on these measures and order that unless they are carried out the United States will not participate in NATO. If Canada is allowed entry to the Brussels headquarters, then United States representatives would stay out.

Steps Trump Could Take To Get NATO Free Riders Off America’s Back

In thinking about NATO, one has to ask: “How stupid do they think we are?”

The “they,” of course, are many of the other NATO members, and the answer is they think we are as stupid as we have been for the last quarter century. As President-elect Donald Trump observed in his NBC interview, NATO “takes advantage of the U.S.”

Canada is among the “they.” In November, The Economist reported that Canada spends about 1.3% of GDP on defense. The ridiculously low NATO minimum is 2%. Not to worry, though, Premier Justin Trudeau promises Canada will hit 2% — by 2032.

quarter of NATO’s 32 members fall short of the 2% minimum. The con goes like this: We are short now, but we will get there eventually. Trust us, wink, wink.

The United States has put up with this nonsense from some members since the collapse of the Soviet Union. That is how stupid we have been.

Trump once threatened to pull the United States out of NATO, then he suggested the United States might not come to the defense of a NATO member like Canada. Naturally, free-riding NATO members grumbled.

In another context, former Army Lt. Gen. Russell Honore famously outlined the first step in how the United States should approach NATO: Don’t get stuck on stupid.

NATO is a coalition of mutual defense. Members who contribute little to the mutual defense are useless. Any country not spending its 2% of GDP on defense by mid-year 2025 should see its membership suspended immediately.

What does suspended mean? Consequences. Its military should not be permitted to participate in any NATO planning or exercises. And its offices at NATO headquarters and all other NATO facilities should be shuttered and its citizens banned until such time as their membership returns to good standing. And, of course, the famous Article V assuring mutual defense would be suspended.

Further, Trump should insist on these measures and order that unless they are carried out the United States will not participate in NATO. If Canada is allowed entry to the Brussels headquarters, then United States representatives would stay out.

Nor should he stop there. The 2% threshold would be fine in a world at peace with no enemies lurking. That does not describe the world today. Trump should declare the threshold for avoiding membership suspension will be 2.5% in 2026 and 3% by 2028 – not 2030 as some suggest.

The purpose is not to destroy NATO, but to force NATO to be relevant. America needs strong defense partners who pull their weight, not defense welfare queens. If NATO’s members cannot abide by these terms, then it is time to move on and let NATO go the way of the League of Nations.

Trump may need to take the lead in creating a new coalition of those willing to defend Western values. As he did in rewriting the former U.S.-Mexico-Canada trade agreement, it may be time to replace a defective arrangement with a much better one.

This still leaves the problem of free riders. Take Belgium, for example, another security free rider. Suppose a new defense coalition arises including the United States and Poland and others bordering Russia. Hiding behind the coalition’s protection, Belgium could just quit all defense spending to focus on making chocolates.

This won’t do. The members of the new defense coalition must also agree to impose a tariff regime on the security free riders to help pay for the defense provided.

The best solution is for NATO to rise to our mutual security challenges. If NATO can’t do this, then other arrangements will be needed. But it is time to move on from stupid.

J.D. Foster is the former chief economist at the Office of Management and Budget and former chief economist and senior vice president at the U.S. Chamber of Commerce. He now resides in relative freedom in the hills of Idaho.

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You wouldn’t believe how complicated distributing public money can get

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The Audit

 David Clinton

Veteran Affairs: the Big Picture

While researching posts for The Audit, I’ll often confront massive datasets representing the operations of agencies with which I’m not in the least familiar. Getting to the point where all the raw numbers turn into a useful picture can take considerable effort, but it’s a satisfying process.

But my first attempts to understand Veteran Affairs Canada (VAC) felt a bit different. I wasn’t just looking at funding and costs, but at the frustrations and suffering of people who, to a greater or lesser degree, were harmed through their service to the country. Here, I hope, is part of their story.

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Veterans Affairs Funding

There are currently more than 460,000 living veterans of the Canadian military. The estimated 2024-25 spending allocation for Veteran Affairs Canada – whose mandate is to serve that population – is around $4.8 billion. The department employs less than four thousand people, which is actually around eight percent fewer than in 2010. Having said that, employment at the distinct Veterans Review and Appeal Board has grown from zero to 161 since 2017.

Besides VAC, the Office of Infrastructure of Canada will spend around $16.5 million on their Veteran Homelessness Program, and Department of National Defence has another $1.6 million budgeted for Community Support for Sexual Misconduct Survivors Program – something for which veterans will also be eligible.

In addition, nearly $2.5 million in grants from various government agencies (including Canada Mortgage and Housing Corporation) was given in 2023 to the Homes for Heroes Foundation, which provides housing and support for at-risk veterans.

Non-government agencies also work to support veterans. In 2023, for instance, the War Amps reported spending $2.7 million on “Service Bureau and Advocacy” and around $700,000 on “Veterans Issues – Special”. The Royal Canadian Legion Dominion Command spent around $1.15 million on veterans services in 2022.

The True Patriot Love Foundation is also a big player in this area, channeling nearly $2.7 million in 2024 to other charities working for veterans. At the same time, more than 30 percent of their own budget came from government sources.

One example of such flow-through funding was the $360,000 given by True Patriot Love to Veterans Transition Network in 2024. In 2023, Veterans Transition Network themselves received another $2.2 million from government along with a total of $1.7 million from other charities.

These kinds of ultra-complex relationships are common in Canada’s charitable sector. The complexity may provide benefits that outsiders can’t easily see. At the same time, knowing whether moving funds through multiple organizations leads to unnecessary inefficiencies and waste is something that would probably require a serious forensic audit.

Veterans Affairs Spending

The largest line items in this year’s VAC spending include $1.6 billion for pain and suffering compensation, $1.34 billion for the Income Replacement Benefit, and $990 million for pensions for disability and death.

In 2023, VAC awarded $41.6 million in external contracts. The largest of those was worth $13.8 million and went to 674725 ONTARIO LTD for “Other Business services not Elsewhere Specified”. 674725 Ontario Ltd. appears to be closely associated with a company called Agilec which, in turn, is a part of Excellence CanadaHere’s how Excellence Canada describes itself:

“Founded in 1992 by Industry Canada as the National Quality Institute (NQI), then rebranded as Excellence Canada in 2011, we are an independent, not-for-profit corporation that is dedicated to advancing organizational performance across Canada.”

In that context, it’s interesting that in 2022, VAC awarded a $159 million contract to a joint venture between WCG International Consultants Ltd. and March of Dimes Canada for “Other Health Services not Specified Elsewhere”.

What makes that interesting? Well, WCG also shows up on an Innovation, Science and Economic Development Canada (ISED) page related to compliance with the Investment Canada Act (ICA). The ICA exists to provide transparency relating to foreign investments in the interest of maintaining a fair and competitive marketplace

This particular page identifies a “U.S.” company called Ancora BidCo Pty Ltd as the new owners of a number of businesses under contract with the federal government. Those businesses include 674725 Ontario Ltd. and WCG International Consultants Ltd.

In fact, Ancora isn’t really a U.S. company at all. They’re actually Australian (as the Pty designation suggests). But their parent company – the private equity firm Madison Dearborn Partners, LLC – indeed operates in Chicago.

There’s no direct evidence to suggest there’s anything dark and nefarious happening here. But it is strange that so many discrete contracts turn out to be awarded to what now amounts to a single foreign for-profit company.

External Contracting Patterns

Has VAC been increasing their reliance on external contracts in recent years? Well, as you can see from this graphic, it’s complicated:

I don’t know what policy changes drove those two huge spikes in 2014 ($933 million) and 2021 ($2.25 billion). But I can tell you which specific vendors are responsible for most of the increase.

In 2014, three contracts worth a total of $803 million went to Medavie Inc for “Other Business services not Elsewhere Specified”. That was 86 percent of the sum of all VAC contracts from that year.

An eye-popping 98 percent of 2021’s external spending went to just six contracts worth $2.2 billion. Medavie Inc received one of those contracts – worth $228 million. But the other five (worth a total of $1.99 billion) were all joint ventures involving WCG International Consultants Ltd.

Lifemark Health Corp. (currently owned by Loblaw) partnered with WCG for three of those contracts, and March of Dimes Canada had the other two dance slots.

What Is Medavie?

Medavie Inc. is the owner of:

  • Medavie Blue Cross
  • Medavie EMS Inc.
  • Medavie health Services New Brunswick Inc.
  • Emergency Medical Care Inc.

Between them, those companies provide health insurance, healthcare training, and emergency management services. They also provide public health program administration – which would probably account for the majority of those contract amounts.

What’s not clear to me is why there’s no record of Medavie receiving any federal contracts of any sort since 2021 – despite the fact that the VAC website tells us that they’re still actively engaged in service provision through Partners in Canadian Veterans Rehabilitation Services (PCVRS).

What Is WCG International Consultants Ltd?

As we’ve seen, WCG is now owned by an American private equity firm and is most certainly no longer not-for-profit. Their website tells us that they’re part of the APM Group, which is an Australian company providing “services in early childhood, youth, employment, insurance, justice, veterans, health, disability, and aged care”.

You’re correct to assume the APM Group is more or less synonymous with Ancora BidCo Pty Ltd. More specifically: all of APM’s publicly-traded shares were bought out in the past couple of months on behalf of Madison Dearborn Partners.

Just one more detail: according to WCG’s website, they’re:

“Partners in Canadian Veterans Rehabilitation Services (PCVRS) coordinates and administers the Rehabilitation Services and Vocational Assistance Program on behalf of Veterans Affairs Canada (VAC).”

Curious about PCVRS? Since late 2022, they’ve been tasked with administering all medical, psycho-social and vocational assistance services on behalf of VAC. However, reports suggest that not everyone has been happy with either accessibility or responsiveness under the new system.

None of this is necessarily inappropriate. And if you’re willing to work at it, you’ll be able to use public information sources to uncover a wealth of related relationships and details. But the vast amounts of money involved, along with the operational complexity make abuse possible. Which means external oversight is a good thing.

Besides all that logistical stuff, what really matters is whether veterans themselves are receiving the support and services they deserve. And that’s a question only they can answer.

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