Debt and spending · Investigation
Ottawa Added $22 billion to Its NATO Count in One Year. On Defence’s Own Forecast, About Half Was New Military Money.
The rest: a civilian coast guard counted whole, a veterans’ department counted wider, and $7.4 billion to $7.6 billion of growth no published document splits.
By Grant Levy · October 2026 · Tap any number for its source · See it beside the rest of federal spending
One year, one count: NATO’s figure for Canada, 2024-25 to 2025-26
Sources: NATO, 2026 report, Table 1; National Defence, Departmental Plan 2026-27, Table 10.1 (2025-26 is its forecast); Veterans Affairs, April 2026 note. Red is newly counted, with the Coast Guard net of the share counted before it moved (a range on the 2023-24 figures; bars drawn at National Defence’s); grey is growth no published document splits.
The receipt
NATO’s count: 2.03% of GDP, as Ottawa reported it. The military money is National Defence’s forecast less the Coast Guard, on NATO’s own GDP (our arithmetic; method on the methodology page).
In 2024-25, NATO’s count of Canada’s defence spending, as Ottawa reported it, was $43.9 billion, or 1.41% of the economy. One year later it was $65.9 billion: 2.03%. Ottawa reports the target met.
That is $22.0 billion more “defence” in twelve months, a rise of 50%. National Defence’s own forecast for the same year, without the Coast Guard it took over in September, is $44.6 billion. That is the military money. The other $21.3 billion, 32% of the count, sits outside it yet is counted as defence. The department’s actual spending for the year comes with the 2026 Public Accounts and its 2025-26 results report. Until then, every 2025-26 figure for National Defence here is its forecast.
Measured on National Defence’s own spending alone, without the Coast Guard, the country spent about 1.4% of GDP on its armed forces in the year Ottawa says it hit 2% (on the forecast, with the pension and research items still open below counted at nothing).
The promise
On 9 June 2025 the Prime Minister announced: “With this increase, Canada will achieve NATO's 2% target this year”. On 26 March 2026 his office said “Canada has achieved the 2% defence expenditure target”, “half a decade ahead of the previous government's schedule” PM, 26 March 2026. The Spring Economic Update put it plainly: “In March 2026, NATO confirmed that Canada achieved its 2 per cent of GDP defence expenditure target” Spring Economic Update 2026, 1.6.
Defence Minister David McGuinty, 13 May 2026: “Reaching the NATO benchmark of two percent of gross domestic product for defence spending is more than meeting a target.” Message to the Defence Team, The Maple Leaf
On their own count, they kept the promise. This piece is about the count.
Their case, first
Ottawa’s defence has four parts, and each is true as far as it goes.
1. NATO’s rule is the allies’ common rule. National Defence: “National Defence follows guidelines established by NATO and agreed to by Allies to ensure a common approach to defining defence expenditures.” Each ally’s defence ministry reports to NATO on agreed definitions NATO, 2026 report, and they reach past the defence department. NATO: “Retirement pensions payments made directly by the government to retired military and civilian employees of military departments and for active personnel is included in the NATO defence expenditure definition.” “Research and development (R&D) costs are included in defence expenditure.” Defence spending “might also include parts of other forces such as Ministry of Interior troops, national police forces, coast guards, etc.” NATO, What counts
2. Canada under-counted before. National Defence: “Historically, only a portion of the CCG's budget counted towards Canadian defence expenditures.” Its note to a Senate committee says the Coast Guard’s whole budget now counts, “whereas previously only 67% of its budget was counted” National Defence, Senate note. Its integration page says the Coast Guard’s contribution would have grown anyway, with spending on icebreakers and “an expanded security mandate” National Defence, Coast Guard integration.
3. Veterans count. Veterans Affairs: “Veteran benefits represent a direct and significant contribution to achieving Canada's NATO target.” Under NATO’s accounting methodology, it says, program payments to veterans, particularly disability benefits, “are counted as part of eligible defence spending” VAC-2026-QP-00018.
4. Much of the money is new. The June 2025 increase was real money: “The investment for 2025-26 will be over $9 billion.” PM, 9 June 2025. Its largest lines pay and keep soldiers, and the Prime Minister’s office called the August 2025 raise “the largest pay raise for the Canadian Armed Forces members in a generation” PM, 8 August 2025. Pay, upkeep and operations are military capacity.
The strongest version of their case: NATO’s definition lets every ally count pensions, research and some paramilitary forces; Canada left money on the table for years; it spent more and counted more, and the rules allow both.
Here is how much of each.
The jump, line by line
The rise from 2024-25 to 2025-26. National Defence’s lines are its 2024-25 actual spending and its 2025-26 forecast, from the same table Departmental Plan 2026-27, Table 10.1. NATO’s count is NATO’s NATO, 2026 report, Table 1.
| Line | 2024-25 | 2025-26 | Change |
|---|---|---|---|
| NATO’s count, as Ottawa reported it | $43.9 billion | $65.9 billion | $22.0 billion |
| National Defence, without the Coast Guard | $33.9 billion | $44.6 billion | $10.7 billion |
| The Coast Guard (counted in part at Fisheries and Oceans before; whole inside National Defence after) | not published; $559.6M to $750.0M in 2023-24 | $2.1 billion gross | $1.4 billion to $1.6 billion net |
| Veterans Affairs, as counted | $5.5 billion | $7.8 billion | $2.3 billion |
| Everything else, not split | $3.7 billion to $3.9 billion | $11.3 billion | $7.4 billion to $7.6 billion |
Read down the last column.
New money in the military’s own books: $10.7 billion, 49% of the jump. By National Defence’s core responsibilities: procurement of capabilities up $5.0 billion, the Defence Team (pay, recruiting and support) up $2.4 billion, ready forces up $1.4 billion, operations up $1.4 billion, bases, IT and infrastructure up $0.8 billion, internal services up $0.04 billion, and Future Force Design, where National Defence’s own research sits, down $0.3 billion. That is their best case, and it is real: this half is spending, most of it on the forces. On research it is weaker than it sounds: the top-up’s research line went up, but National Defence’s own research line went down.
Where the new military money went, 2025-26 forecast against 2024-25
Change by core responsibility. Source: National Defence, Departmental Plan 2026-27, Table 10.1.
The Coast Guard, newly in the department: $1.4 billion to $1.6 billion net, 6.3% to 7.2%. Inside National Defence it is forecast to spend $2.1 billion gross from September 2025 to March 2026. The same agency, doing the same work, moved from Fisheries and Oceans on 2 September 2025, and part of its budget was already in NATO’s count there. That earlier share is not published for 2024-25; for 2023-24 the Library of Parliament puts it at $559.6M and National Defence at over $750M. Netting it out moves it into the 2024-25 base, where it sat. If Fisheries and Oceans’ share for April to August 2025 was also counted, it sits in the last line, not this one.
Veterans Affairs: $2.3 billion, 10%. Most of it is a wider count, not a bigger department. Veterans Affairs counted $5.5 billion of $7.6 billion spent in 2024-25 (its results report), and $7.8 billion of a $7.9 billion budget in 2025-26 (its November 2025 note: “The total 2025-26 budget for Veterans Affairs Canada is $7.9 billion.”). One is spending and one is a budget, so this is approximate.
Not split by any published document: $7.4 billion to $7.6 billion, 33.6% to 34.4%. This is the growth in the count outside National Defence, the Coast Guard and Veterans Affairs. National Defence’s note names the departments that contribute: “This includes Veterans Affairs Canada, Treasury Board of Canada Secretariat, Global Affairs Canada, Shared Services Canada, and others that cannot be disclosed publicly.” It gives no amounts.
So the split the sources carry: about half new military money (on the forecast), about a sixth newly counted (the Coast Guard net of its earlier share, and the veterans’ rise), and about a third that no published document splits between the two. What is missing is the department-by-department count Ottawa sent NATO.
The bridge for 2025-26: from the military money to NATO’s number
| Step | Amount | Source |
|---|---|---|
| National Defence, forecast spending | $46.8 billion | Departmental Plan 2026-27, Table 10.1 |
| less the Coast Guard’s two core responsibilities | $2.1 billion | same table |
| The military money | $44.6 billion | our arithmetic |
| NATO’s count, as Ottawa reported it | $65.9 billion | NATO, 2026 report |
| Counted as defence, outside the military money | $21.3 billion | our arithmetic |
| Veterans Affairs (over this amount, by its note) | $7.8 billion | Veterans Affairs note, 27 April 2026 |
| The Coast Guard, if counted whole (acceptance not published) | $2.1 billion | Departmental Plan (September to March only) |
| CSE, total authorities, if counted outside National Defence (placement unresolved) | $1.65 billion | National Defence, Senate note; $1.39 billion spent by 13 March 2026 |
| No published split for 2025-26 | about $9.7 billion to $12.0 billion | our arithmetic: the low end on both assumptions below, the high end on neither |
NATO’s $65.9 billion for 2025-26, split
- The military money: $44.6 billion
- The Coast Guard, if counted whole: $2.1 billion
- Veterans Affairs: $7.8 billion
- CSE, if counted outside National Defence: $1.7 billion
- No published split (low end): $9.7 billion
Sources: NATO, 2026 report; National Defence, Departmental Plan 2026-27 and its Senate note of 27 April 2026; Veterans Affairs, April 2026 note. Our arithmetic.
The low end assumes both lines in the table above: the Coast Guard at 100%, which NATO’s acceptance of is not published, and CSE counted outside National Defence at its full authorities, which is unresolved. With the Coast Guard at its earlier 67% and CSE left out, it is about $12.0 billion. What could sit in it, each unresolved:
- Military pensions. NATO counts retirement pensions paid directly by the government . The Canadian Armed Forces pension plans paid $4.0 billion in pension benefits in 2024-25 CAF Pension Plans Annual Report 2025, Table 6, shown for scale only: the 2025-26 figure was not found, and whether those payments sit inside National Defence’s spending or on top of it is not published.
- The other departments. The latest published split is for 2023-24, from a government answer tabled in the House (Sessional Paper 8555-441-3054, as the Library of Parliament reports it): Global Affairs, Shared Services and the Treasury Board Secretariat $1.3 billion, and organizations it reports as unnamed for national security $1.3 billion. Another year’s amounts, shown for scale only.
For scale: what could sit in the unsplit part (other years, as marked)
Sources: CAF Pension Plans Annual Report 2025; National Defence, Senate note; Library of Parliament HillNote (secondary). Not additive: years and bases differ.
- Research. NATO counts research and development. National Defence’s own research sits in its Future Force Design line, inside the military money. Research by other departments, if counted, is not published.
- The Communications Security Establishment is named in the table above for 2025-26. In 2023-24 it is not named and may sit among the unnamed; mixing the two years would count it twice, which is why the table uses one year.
National Defence’s note to the Senate names some of the contributing departments and says others cannot be disclosed publicly. It gives no amounts.
Pattern: a third of the count is outside the military, and about half of that third has no published split.
Four totals for one year
Four published totals for 2025-26 do not agree.
- The Parliamentary Budget Officer, from the government’s plans in June 2025: $48.1 billion under National Defence and $14.6 billion under other departments PBO, 16 June 2025. Together, $62.7 billion.
- NATO, June 2025: $62.7 billion, its estimate a year early NATO, 2025 report, Table 1.
- National Defence to the Senate, April 2026: “Approximately $63.45 billion was spent in this timeframe across the Defence Team and other government departments.” The note dates it to fiscal 2025-26, before the year’s books closed, so it is a figure to date.
- NATO, July 2026: $65.9 billion.
NATO warns, on page one, that its figures “may considerably diverge from those that are referenced by media, published by national authorities or given in national budgets” NATO, 2026 report, p. 1. That is NATO’s caution about its own table, quoted as theirs.
Pattern: the number that hit the target is the biggest of the four, and nobody reconciles them.
Where the jump went, by NATO’s categories
NATO splits each ally’s count into categories. For Canada, its 2026 report gives the share in each NATO, 2026 report, Tables 8a and 8b:
| Category | 2024-25 | 2025-26 |
|---|---|---|
| Equipment, research and development included | 19.59% | 21.97% |
| Personnel, pensions included | 44.66% | 38.31% |
| Infrastructure | 2.34% | 2.64% |
Multiply each share by NATO’s total, and the $22.0 billion jump breaks down like this (our arithmetic): equipment, research included, up $5.9 billion; infrastructure up $0.7 billion; personnel and pensions up $5.6 billion; everything else (operations, maintenance and the rest) up $9.8 billion.
Equipment and infrastructure together are 30% of the jump, and NATO’s equipment line includes “research and development devoted to major equipment” NATO, 2026 report, p. 1.
The top-up’s own lines
The Parliamentary Budget Officer listed what National Defence’s $8.2 billion of the June 2025 increase was for PBO, 16 June 2025:
- $2.1 billion “for the recruitment, retention, and support programs for the Canadian Armed Forces”
- $2.1 billion “for defence research and development, and support for the Canadian defence industry”
- $2.0 billion “for military aid to Ukraine and to expand defence partnerships”
- $1.0 billion “for strategic military capabilities, such as the Arctic Over-the-Horizon radar system, Joint Support Ships, and additional vehicles”
- $0.8 billion “for new and existing Canadian Armed Forces equipment and infrastructure”
- $0.2 billion “for digital tools and capabilities”
The three equipment, infrastructure and digital lines, new and existing, come to $2.0 billion: 24% of National Defence’s lines. Recruitment and retention is the same size again, and it is military capacity. The Ukraine and partnerships line is as large as the equipment lines: aid and partnerships abroad. National Defence puts what Canada committed in military assistance to Ukraine for the year at $2.42 billion National Defence, Senate note: a commitment, not a record of what was spent.
The Budget Officer was “actively seeking related information from the Government, such as whether previous timelines were accelerated, if amounts were newly added to existing projects …”. And: “A detailed mapping of planned defence spending by both DND and OGDs is necessary to verify the Government's plans.” PBO, 16 June 2025 No such mapping has been published.
Pattern: under a quarter of the new lines buys or keeps up equipment; the rest is people, research and industry, and aid abroad.
Veterans Affairs: the whole department, booked as defence
Veterans Affairs keeps a running tally of what it adds to the NATO count. Its own figures VAC-2026-QP-00018: $4.2 billion in 2023-24; $5.5 billion in 2024-25, of $7.6 billion spent; and $7.8 billion in 2025-26, of a $7.9 billion budget. That is up $3.6 billion in two years, and up $2.3 billion in the year Ottawa says Canada reached 2%, about 10% of the one-year jump.
Then read its two notes side by side.
- 19 November 2025: “For 2025-26, $7.3B in benefits and services for Veterans will be included as part of Canada's contribution to NATO spending target.” The department’s whole budget that year: “The total 2025-26 budget for Veterans Affairs Canada is $7.9 billion.” VAC-2025-QP-00018
- 27 April 2026: “All expenditures within Veterans Affairs Canada (VAC) contribute to Canada's NATO target.” And: “For 2025-26, VAC programs represented over $7.8B of Canada's contribution to the NATO spending target.” VAC-2026-QP-00018
In five months the count went from benefits and services to all its expenditures. The November note names who decides: “NATO and the Department of National Defence (DND) decide which programs and services qualify as NATO spending.”
Its own explanation for the growth: “VAC's contribution to NATO spending has increased rapidly due to the growing volume of benefits and services provided to Veterans.” That is their case, stated as theirs. On its own figures, the department’s spending grew by about $0.3 billion into 2025-26 and its count by $2.3 billion. NATO’s definition, as published, names retirement pensions. It does not name disability benefits or a veterans department’s whole budget. Veterans Affairs says NATO’s methodology counts disability benefits; the document that shows NATO agreed is Canada’s submission, which is not published.
The spending is real. Disabled veterans are owed it. Our read: none of it buys a ship, a jet, a radar or a soldier.
The Coast Guard: counted whole, beside NATO’s proportional rule
On 11 July 2024, at the NATO summit in Washington, the Prime Minister of the day, Justin Trudeau, was asked about Canada’s spending. “We’ve always questioned the 2 per cent as the be-all and end-all of evaluating contributions to NATO,” he told reporters, as The Globe and Mail reported it. And: “So, yes, there may be ways where we could shift some accounting or make a little tweak here or give every Coast Guard member a handgun and say, ‘Okay, we’ve done our job.’ Would that make Canada safer? Would that make Canadians better off?” The Globe and Mail, 11 July 2024; no government transcript found. The Globe summed up his remarks: Canada “could do so through creative accounting, or by militarizing the Coast Guard”. Our read: he was dismissing the idea of reaching the target by changing the count.
About fourteen months later the next government moved the Coast Guard. National Defence: “On September 2, 2025, the CCG was transferred to the Department of National Defence as a civilian Special Operating Agency through an Order in Council.” And: “While 100% of the Coast Guard's budget will now be counted toward our NATO commitment with its integration under the Defence portfolio” National Defence, Coast Guard integration.
How much of the Coast Guard counted before depends on which document you read:
- The Library of Parliament’s HillNote (secondary), citing a government answer tabled in the House, 2023-24: $559.6M HillNotes, 13 March 2025.
- National Defence, same year: over $750M National Defence.
- National Defence to the Senate: “whereas previously only 67% of its budget was counted” Senate note
None is reconciled. A senator gave a fourth figure in Question Period on 25 June 2025. Senator David Wells: “Jonathan Moor, Assistant Deputy Minister and Chief Financial Officer at the Department of National Defence, stated that 60% of the Canadian Coast Guard budget is already included in the military spending Canada reports to NATO.” Senate of Canada, Debates, 25 June 2025 It is a senator’s account in a question; Moor’s own words were not found in committee evidence, and nothing here rests on it.
What is not in dispute is the rule. NATO counts a coast guard only “in proportion to the forces that are trained in military tactics, are equipped as a military force, can operate under direct military authority in deployed operations, and can, realistically, be deployed outside national territory in support of a military force.” NATO, What counts National Defence calls the Coast Guard civilian and says all of it now counts. Ottawa’s best case: the Coast Guard has “an expanded security mandate”, NATO’s definition allows coast guards, and NATO may have accepted the full count; its 2026 report reached 2.03% with whatever Canada submitted. Whether NATO accepted 100% is not published.
For 2026-27, National Defence plans $3.96 billion for the Coast Guard. Moving it from 67% to 100% adds about $1.3 billion a year to the count. Nothing new is bought by that step. The same ships do the same work under a new name on the org chart.
Pattern: the Coast Guard did not change. The label did.
The next 1.5%: expected from spending already planned
NATO’s Hague summit declaration adds a second pledge: “Allies will account for up to 1.5% of GDP annually to inter alia protect our critical infrastructure, defend our networks, ensure our civil preparedness and resilience, unleash innovation, and strengthen our defence industrial base.” Budget 2025 answers it: “The government expects that currently planned spending by federal, provincial, territorial, and municipal governments will meet this 1.5 per cent commitment.” Budget 2025, chapter 4
That sentence is about the 1.5% pledge, not the 2%, and it is an expectation, not a result. Our read: Ottawa expects to meet the next target with spending every level of government had already planned.
Their case, answered
NATO’s rule. Partly. NATO’s rule counts pensions, research and the military part of mixed forces, and a coast guard only in proportion to its military-trained forces. Ottawa counts its civilian coast guard whole; whether NATO accepted that is not published. NATO’s published definition names retirement pensions; Veterans Affairs now counts all its spending. Our read: the rule says what may be counted, not that the result is rearmament.
Canada under-counted. The government’s own documents put the earlier Coast Guard count at $559.6M, over $750M or 67% of its budget, and do not agree by how much. Our read: a correction to the count is the same spending booked differently, not new defence.
NATO’s $65.9 billion for 2025-26, split
- The military money: $44.6 billion
- The Coast Guard, if counted whole: $2.1 billion
- Veterans Affairs: $7.8 billion
- CSE, if counted outside National Defence: $1.7 billion
- No published split (low end): $9.7 billion
Sources: NATO, 2026 report; National Defence, Departmental Plan 2026-27 and its Senate note of 27 April 2026; Veterans Affairs, April 2026 note. Our arithmetic.
Veterans are a cost of defence. They are, and the country owes them. Our read: a growing veterans’ budget does not make the Armed Forces bigger, better armed or more ready.
Much of the money is new. It is: about half the jump, on National Defence’s own forecast, most of it pay, operations, readiness and procurement. That half is real. The rest is the question.
Our read
This is our read of the record above, as a pragmatic person would take it.
On National Defence’s own forecast, about half of the one-year jump is new military money, most of it pay, readiness, operations and procurement. About a sixth is newly counted: a civilian coast guard moved into Defence and booked whole, net of the share counted before, where NATO’s published rule counts a coast guard only in proportion to its military-trained forces and whether NATO accepted the full count is not published; and a veterans’ department whose count grew to nearly its whole budget. About a third, $7.4 billion to $7.6 billion, no published document splits between new money and newly counted, because Ottawa has not published what it sent NATO by department. By NATO’s own categories, less than a third of the jump reached equipment and infrastructure, research included.
Our inference from the dates, not a finding: the Prime Minister promised 2% in June 2025, the Coast Guard moved in September, and by April 2026 Veterans Affairs counted all its spending, so the line around “defence” was drawn wider in the year the deadline fell. National Defence, by Veterans Affairs’ own account, decides with NATO what qualifies, and the ledger of what it decided is not published. “Defence” was the label. The 2% is the presentation. The military money is 1.4% of the economy.
The target was met on paper. The paper is not published.
Still open
What the record does not show yet, and the document that would settle it.
- The $7.4 billion to $7.6 billion of growth, and the $9.7 billion to $12.0 billion with no split for 2025-26. National Defence’s NATO-eligible reconciliation by department for both years, and Canada’s submission to NATO. The Budget Officer sought the same mapping in June 2025.
- How much of the Coast Guard NATO’s count carried in 2024-25, which sets the net figure above. The same reconciliation.
- Whether military pensions are inside National Defence’s spending or counted on top: the reconciliation, or the Public Accounts’ Canadian Forces Superannuation Account.
- Whether NATO accepted the Coast Guard at 100%, and a veterans department’s whole budget. Canada’s submission, or NATO’s country notes to its 2026 report.
- Why NATO’s estimate for the year rose $3.2 billion between its 2025 and 2026 reports.
- How much of the June 2025 top-up was new, and how much was earlier spending moved forward or renamed: the Budget Officer’s open question.
- National Defence’s actual spending for 2025-26. Its results report and the 2026 Public Accounts replace the forecast on this page.
What the military money buys
National Defence’s $44.6 billion for 2025-26, by core responsibility Departmental Plan 2026-27, Table 10.1, beside NATO’s $65.9 billion count. Equipment and infrastructure are 40% of it; the rest is people, readiness and operations.
The military money, 2025-26 forecast, by core responsibility
Source: National Defence, Departmental Plan 2026-27, Table 10.1. Red: equipment and infrastructure.
The next read: the price announced against the bill for the F-35 and the warships. How we count defence.
Sources
- Defence Investment of NATO Countries (2014-2026), NATO
- Defence Expenditure of NATO Countries (2014-2025), NATO
- Defence investment and NATO’s 5% commitment: what counts as defence expenditure, NATO
- The Hague Summit Declaration, NATO
- 2026-27 Departmental Plan, Table 10.1, National Defence
- Appearance before the Senate defence committee: Mandate, Priorities, and NATO 2%, 27 April 2026, National Defence
- Integration of the Canadian Coast Guard, National Defence
- Message from the MND: A year of progress in supporting the CAF, National Defence, The Maple Leaf
- Question Period Note: NATO spending (2025-26), VAC-2026-QP-00018, Veterans Affairs Canada
- Question Period Note: NATO spending (2025-26), VAC-2025-QP-00018, Veterans Affairs Canada
- Departmental Results Report 2024-2025, Veterans Affairs Canada
- Supplementary Estimates (A) and Defence Spending (BLOG-2526-003), Parliamentary Budget Officer
- Canadian Armed Forces Pension Plans Annual Report 2025, Government of Canada
- Making Sense of Canada’s Defence Spending (secondary, citing Sessional Paper 8555-441-3054), Library of Parliament
- News releases of 9 June 2025, 8 August 2025 and 26 March 2026, Prime Minister of Canada
- Budget 2025, Chapter 4, Department of Finance Canada
- Spring Economic Update 2026, Chapter 1, Department of Finance Canada
- Debates, Question Period, 25 June 2025, Senate of Canada
- Canada will meet NATO’s defence-spending target by 2032, Trudeau says, but criticizes the benchmark, The Globe and Mail, 11 July 2024