Canada’s budget watchdog shows what NATO’s 2035 target costs, and what governments have not yet told voters
By Jose E. Navarro, MBA | The Navarro Report
SAN DIEGO. Signing a spending pledge takes a minute. Paying for it takes a decade. NATO’s pledge to spend 5 percent of national income on defence by 2035 is now being priced in public, and the first itemized invoice comes from Canada’s own budget watchdog.
Start with what the allies actually promised. The Hague Summit Declaration commits members to at least 3.5 percent of GDP a year on core defence by 2035, plus up to 1.5 percent on related security spending such as infrastructure, cyber defence and civil preparedness. The declaration says the trajectory and balance of that plan will be reviewed in 2029.
Canada’s Parliamentary Budget Officer put numbers on the climb in a February report. Reaching 3.5 percent would require C$159.1 billion in core defence spending in 2035-36, which is C$68.2 billion more than holding at 2 percent of GDP. The PBO estimates the extra spending would widen that year’s deficit by C$63.0 billion, or 1.4 percent of GDP, and leave federal debt 6.3 percentage points of GDP higher. The extra cash outlay would average about C$33.5 billion a year over the decade. Those figures assume the extra money is borrowed at a fixed 3 percent.
The more telling finding concerned disclosure. The PBO said the government had not published supporting projections, and that the Department of National Defence, asked for a year-by-year path, did not provide one. It pointed instead to rough estimates for 2035. Ottawa’s published fiscal projections still reach only 2030-31, according to Canadian Press reporting in July. A promise with no schedule is not a budget. It is a press release.
This week the PBO returned to the subject. According to CBC’s coverage of the new report, direct military spending could reach C$163.6 billion by 2035, and many unknowns remain that could affect government finances. Those unknowns are the point. Taxpayers are being asked to underwrite a number the government itself has not fully shown.
There is also an accounting wrinkle every controller will recognize. NATO measures defence spending on a cash basis, while Ottawa reports its deficit on an accrual basis. The PBO explains that equipment purchases are recorded up front under cash accounting but spread across the asset’s service life under accrual accounting. A fast buildup therefore lifts the alliance scorecard quickly, while the deficit impact arrives gradually. A government can look compliant long before the full bill reaches its books.
Canada is a case study, not an exception. The Kiel Institute estimates that European NATO members could spend an additional 831 billion euros a year on security by 2035, and cautions that weak procurement design could deliver aging systems at inflated prices with little added capability.
France shows what the squeeze looks like. On September 17, Prime Minister Sébastien Lecornu presented a 2027 budget built on roughly 54 billion euros in savings, warning that without them the deficit would approach 6.5 percent of GDP. Setting aside a 10 billion euro rise in debt interest and a 6.4 billion euro rise in defence spending, the state’s budget would be frozen in nominal terms. Defence and interest are protected. Everything else pays. Parliament must still approve the plan.
The two cases show the same trade-off from opposite ends. Canada has announced the target without publishing the path. France has published the savings, and they fall on everything except defence and interest. Every dollar or euro spent on interceptors, ships and drones comes from higher taxes, more borrowing or cuts elsewhere.
The 2029 review is the natural checkpoint, but a review without a baseline reviews nothing. Governments should publish that baseline now, so that in 2029 legislators and voters can compare the plan with what was actually spent.
Ottawa’s side deserves a hearing. The finance minister has said Canada is on track to meet the NATO targets and has pointed to measures planned in the 2026 budget. The threat behind the pledge is also real: the declaration itself names Russia as a long-term danger to Euro-Atlantic security, and deterrence has value. None of that excuses a missing schedule.
Three steps would give taxpayers an honest accounting. First, every government that signed the pledge should publish a year-by-year spending path through 2035, exactly what the PBO asked Canada’s defence department to provide. Second, each should state in the same document how the money will be raised: taxes, borrowing or cuts. Third, governments should report cash and accrual figures side by side and commission independent costing before the 2029 review.
Voters can reasonably disagree about whether 5 percent is the right number. They should not have to guess what it costs, who pays and when. A pledge without a payment plan is a promise someone else will have to keep.
Jose E. Navarro, MBA, is a financial controller and founder of The Navarro Report, a public finance and government accountability publication based in San Diego, California. He is not related to Peter Navarro.
Human-Directed AI Journalism: topic, analysis and final text by Jose Navarro; AI assists with research and drafting.