Budget 2025: Everything you need to know on Defence (and my thoughts)

Well the budget is finally here.

For weeks we have been waiting to see exactly what would be included in this budget. There have been lots of rumors, lots of debate, and a whole lot of secrecy around what we would see. Understandably, it's had me a bit on edge.

We were promised a budget with defence as a primary focus, and a focus it is. The budget is massive with lots of funding and lots of priorities, a lot of which might slip through the cracks.

Now that we have it though, it's safe to say that while promising, the budget might not be as extensive as some had hoped. While I was planning to do a quicker write-up on this topic, I wanted to take the time to go through everything and give my overall thoughts on the subject matter.

That way we can take this step by step. Defence isn't pure, it is a multifaceted, whole of government approach. That means that we need to look at parts of the budget that might otherwise be missed by the general audience. That is what we will try to figure out today.

So, lets dive right into it!

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Starting with defence

To start, lets take a look at defence spending proper.

Budget 2025 outlines the government’s generational investment to quote, "defend Canada's people and values, secure its sovereignty, and position the nation as a strong, reliable partner to its allies." This starts by initiating a process of rebuilding, rearming, and reinvesting in the DND, CCG, and CAF to provide everyone with the necessary tools and equipment to protect sovereignty and bolster security.

Budget 2025 starts by outlining the government’s previous commitment to accelerate investments to meet NATO’s 2 per cent defence-spending target this year, which is five years ahead of schedule.

Budget 2025 goes a step further by setting Canada on a path to meet NATO's 5 per cent Defence Investment Pledge by 2035. This will be broken down into two categories, 3.5 per cent of GDP by 2035 in core military needs, including supporting the CAF, modernising equipment and technology, and building up defence industries, and 1.5 per cent on security-related infrastructure and investments.

This reinvestment in defence and security is the largest in decades, totaling $30 billion over a five-year horizon on an accrual basis. This funding is allocated across three main pillars: $20 billion for capabilities, $5 billion for infrastructure and equipment, and $5 billion for industrial support.

On a cash basis, Budget 2025 proposes to provide $81.8 billion over five years, starting in 2025-26, to rebuild, rearm, and reinvest in the CAF. This figure includes over $9 billion in 2025-26 that was previously announced in June 2025. This is the funding previously set out for Canada to reach the 2 per cent NATO target.

Key investments from this $81.8 billion fund include $20.4 billion over five years to recruit and retain a strong fighting force, which incorporates the previously announced updates to pay and support for CAF health care.

An additional $19.0 billion over five years is allocated to repair and sustain CAF capabilities and invest in defence infrastructure, including the expansion of ammunition and training infrastructure. Upgrades to digital infrastructure for the Department of National Defence, CAF, and the Communications Security Establishment, particularly for cyber defence, are funded with $10.5 billion over five years.

Finally, $17.9 billion over five years is designated to expand Canada's military capabilities, with investments in logistics, utility, and armoured vehicles, as well as counter-drone, long-range precision strike capabilities, and domestic ammunition production.

This is a serious chunk of change, although sadly, and as you will see, we don't get a major breakdown of what this looks like. What we are left with are general piles of money, which isn't always a bad thing. It's also expected. The budget is set for a timeline before many critical capabilities will be delivered, so they won't be included. Almost everything comes after 2030.

The massive support for digital and cyber modernization is one of the standouts here. The many digital projects in the works, projects like Joint Fires Modernization, Pan-Domain Command and Control, and the wonderfully named Information Technology Infrastructure in Support of Command and Control projects are the future backbone of the future battlespace.

Digitalization is a key aspect of the Canadian Army’s modernization. It is a key requirement for the future battlespace. It is also an insanely expensive effort that has a severe backlog of projects waiting for funding. They're the threads that bind the tapestry together.

Everything comes together through them. Future capabilities like HIMARS, F-35, IFM, AEWC will all require these networks, and their infrastructure to funnel, process, and relay information across an ever-integrated battlefield.

So to see it get a mass amount of funding over the next few years is important. This infrastructure is needed before we see a lot of these capabilities come into service, especially platforms like the F-35. It's not a want but a requirement. Without them a lot of these assets won't be able to function to their full potential. That puts a massive time crunch, especially with digital sovereignty at play.

The rest of this funding is broken down fairly generally. Of course, tens of billions over five years is massive, and its effects can't be underscored. However, it isn't much more than already discussed before. We don't get insight into what is being funded or how it's being distributed. A lot of the money for recruiting and retention will go into funding the recently announced pay package as well.

Here I would have liked to see more, more on training, on physical infrastructure. General funding is nice, but it doesn’t get into some of the core issues that need work, especially with Army Modernization in full swing.

These things will of course come from this funding, and again, this only stretches to the 2030 timeline so a lot won't be included, even if I wish we got more mentions and some commitments. It doesn't take much to mention more projects.

Best to remember this isn’t a Defence Policy Update. We won't see a bunch of new projects funded and such.

We will talk more on that later. Let's talk operations for a second.

The CAF is currently active in 37 operations globally. These range from Operation AMARNA, which maintains security in the Middle East, to Operation NANOOK, conducting sovereignty patrols in the Arctic. A primary mission is Operation REASSURANCE, which, following Russia's first invasion of Ukraine in 2014, remains the CAF's largest overseas mission. Canada leads the NATO multinational Brigade-Latvia, commanding approximately 3,000 troops from 14 nations to deter Russian aggression on NATO's eastern flank.

Prime Minister Carney announced in August 2025 that this operation will be renewed for three years, starting in 2026-27. Budget 2025 supports this renewal with $2.7 billion over three years. Concurrently, the new Operation AMARNA is proposed to receive $300.1 million over three years, starting in 2025-26, to adapt to security challenges in the Middle East, partly offset by $155.8 million from existing DND resources.

Funding for OP REASSURANCE is welcomed. OP AMARNA replaced both OP ARTEMIS and IMPACT in the Middle East. Committing some chunk of change to both, separate from the general funding, is welcome. However, I would have liked to see more ambition here.

We have previous commitments to increasing funding for the NANOOK exercises, however many, like CARIBBE, HORIZON, and NEON are left out here despite their rising importance and the value of investing more into them. A bit of a nitpick, yes. It isn’t a major thing, but these operations play a critical role in international security, and are critical parts of Canada’s soft diplomatic and defence posturing, especially in the Indo-Pacific.

But from operations we move to something that we've been teased about for a while, our first look at the Defence Industrial Strategy.

A central component of Budget 2025 is the launch of a new Defence Industrial Strategy. The strategy presents itself as strengthening Canada's industrial capabilities, providing the tools to meet defence requirements, and seizing new economic opportunities.

Here defence spending is framed as being about more than security, possessing the potential to catalyse economic growth, innovation, and long-term prosperity.

The strategy aims to align Canada's defence investments with the goal of creating a whole-of-government approach to building sovereign defence capacity.

The funding is substantial, $6.6 billion over five years, starting in 2025-26, to strengthen the defence industry and develop a defence industrial base that allows more military capabilities to be procured from Canadian supply chains. Of this, $4.6 billion is already being allocated over five years for initial investments under the forthcoming strategy, which will be released in parts over the coming months.

That we knew, although we now get our first numbers on what these targeted investments will look like. We already know aerospace will be a massive component of it, with the government aiming to replicate the success of the National Shipbuilding Strategy here.

These investments aim to improve access to capital, drive research and innovation, bolster domestic supply chains, and grow critical resource stockpiles.

Initial investments under the Defence Industrial Strategy include $68.2 million over three years to establish the Bureau of Research, Engineering and Advanced Leadership in Innovation and Science. Remember that? Now you do. Borealis aims to promote Canadian sovereignty and advancement through research and development in key sectors like AI, quantum computing, and advanced manufacturing.

A new Defence and Security Business Mobilization Program will be created at the Business Development Bank of Canada with $1.0 billion in 2025-26 to provide loans, venture capital, and advisory services to small and medium-sized businesses. This was teased a few months ago as BDC was given a new mandate to support defence investment. That also included the promise of an injection of funding to support that.

First I hear of a new investment stream though I do welcome it. Access to capital is important, and new Canadian ventures like Calian Ventures, ONE9, and Vimy Forge are taking the lead in complementing this new funding with private capital, just as the Prime Minister wants to see.

So this is a welcomed complement. Invest more publicly in tandem with private capital. That includes aligning goals and interests in the future, but a step at a time.

Further investments include $656.9 million over five years to Innovation, Science and Economic Development Canada to commercialise dual civilian-military technologies in sectors like aerospace, marine, cybersecurity, and AI. A sum of $334.3 million over five years is allocated to ISED, the National Research Council, and the Natural Sciences and Engineering Research Council to anchor quantum technology companies.

To support critical minerals projects and stockpiling, $443.0 million is provided over five years to Natural Resources Canada and ISED. Finally, $182.6 million over three years is directed to DND to establish a sovereign space launch capability.

All of these are fantastic. The mention of commercialization with ISED makes me hope and pray that reforms are coming to the current system of how we commercialize and support defence research. Programs like MINDS and IDEAS are great, but lack the tools and authority to do more than fund contests.

Creating a pathway to commercialization, or at least to contracting, a real pathway would go a long way to fulfilling this goal of commercializing innovative technologies. We already fund a lot of amazing, awesome companies through these kinds of programs.

So why not leverage those existing programs? I hope that's the plan at least. I'm also happy to see critical mineral stockpiling get some love from the defence portfolio. Obviously a lot of the funding regarding this isn’t here. Critical minerals get an entire section in the budget, but acknowledging the need to stockpile specifically for defence-related activities is welcome.

And of course you know I'm ecstatic about sovereign launch. I knew it was coming, but I expected far less. Almost 200 million is allocated here to support a sovereign launch capability in Canada, something I just wrote about last week.

I've seen a lot of people jump on this. MDA just bought into Maritime Launch, Nordspace is working on their first launch, and I recently got to speak to another company looking at domestic launch options in Canada. That one not only aims for the mythical medium-launch capability gap, but even includes former SpaceX personnel.

Space is hot, it's important. You need to have a sovereign launch capability to thrive in the modern world. This funding won't get us all the way there, but it will set the stage and get the ball rolling on it. You can of course read more about it here.

This strategy is part of a broader push for the renewed industrialisation of Canada. It works in concert with the new government’s Buy Canadian Policy, which requires that building be done with Canadian goods and suppliers to create One Canadian Economy by removing internal trade barriers.

To facilitate this, the policy will ensure that Buy Canadian aspects of federal procurement are not subject to review by the Canadian International Trade Tribunal. This new approach will extend to all federal agencies and Crown corporations, leveraging all public spending to strengthen the economy, create jobs, and build domestic capacity.

To support the implementation of this policy, Budget 2025 proposes $98.2 million over five years, starting in 2026-27, and $9.8 million ongoing to Public Services and Procurement Canada and the Treasury Board Secretariat. To ensure this policy benefits businesses of all sizes, the government is also establishing a Small and Medium Business Procurement Program.

This program is designed to help Canadian small and medium-sized enterprises access federal procurement opportunities and is supported by a proposed $79.9 million over five years, starting in 2026-27, to Innovation, Science and Economic Development Canada.

My faith in such a program is skeptical, however I shall wait to see on this one.

Budget 2025 lays things out quite clearly. The defence sector currently accounts for over 81,200 direct and indirect jobs, with past projects generating high-paying local jobs. Examples include the 1,300 jobs created by the new B Jetty in CFB Esquimalt, the 3,400 jobs annually from the $11.2 billion Future Aircrew Training program, and the over 5,000 jobs expected from the River-class Destroyer project.

But this industry is hamstrung by a procurement system that fosters risk avoidance, slowness, and complexity. That is why this government has established the new Defence Investment Agency.

The DIA is intended to overhaul and streamline defence procurement to reinforce sovereignty, bolster industrial capacity, and create new careers in aerospace, shipbuilding, and advanced manufacturing.

Budget 2025 proposes $30.8 million over four years, starting in 2026-27, to establish the DIA. The agency will focus on procurements valued at $100 million and above, including submarines. An additional $52.5 million over five years is proposed to modernise the Industrial Security Program to support the DIA.

CPSP is currently the only program under the DIA banner that I have been able to confirm, though more will be added in the coming months.

The Defence Investment Agency will operate with three primary objectives. First, it will consolidate procurement processes by removing duplicative approvals and red tape to accelerate procurement and provide industry with greater certainty. Second, it will target procurements to support strategic defence sectors in Canada, meeting CAF capability needs while simultaneously growing the economy. Third, the agency will ensure earlier engagement between the CAF and Canada's defence industry, allowing the military to communicate operational needs and industry to provide realistic assessments of timelines, costs, and technological options.

Beyond military reinvestment, the budget outlines funding for complementary initiatives. This includes $6.2 billion over five years to expand defence partnerships, such as military assistance for Ukraine and increased international policy programming. An additional $805 million over five years is provided to the Canadian Coast Guard, the Canadian Security Intelligence Service, and Public Services and Procurement Canada.

If you're curious about funding tables, there isn't much, however it does give us some numbers to work with. We see funding for the River-class, Future Fighter, and investments in the North as examples. I wouldn't read too much into these numbers, as again this only accounts up to 2030.

We also get a look into reductions. Budget 2025 outlines the steps that each department will take to cut expenses through its Comprehensive Expenditure Review. If you forgot, the Prime Minister laid out his mandate for reductions and spending cuts in June.

The government has provided DND with a reduction target of 2 per cent of its review base. The objective is not to cut overall funding, but rather to streamline and recalibrate current spending that is not cost-effective. The resources freed up from this recalibration will be reinvested within the defence portfolio, a move intended to help Canada achieve the North Atlantic Treaty Organization’s Defence Investment Pledge. To achieve these efficiencies, DND will implement several key measures.

First, the department will retire select fleets that are nearing the end of their service lives through a Fleet Divestment Strategy. This will target platforms that face unsustainable costs and do not align with future operational requirements. These platforms will not be replaced, instead, resources will be focused on acquiring and fielding modern capabilities for which replacements have already been identified.

Second, DND will readjust its real property portfolio through the divestment of underutilized, obsolete, or surplus assets. These properties may be repurposed by other levels of government or sold to the private sector, creating additional public value.

Third, DND will expand its use of the proven Energy Performance Contract model. This initiative involves retrofitting defence facilities with energy-efficient systems. These retrofits are financed by third-party Energy Service Companies, which are then repaid using the guaranteed cost savings from reduced energy consumption.

Finally, DND will modernize its governance practices and internal services. This is intended to address systemic inefficiencies and administrative bottlenecks that contribute to project delivery delays. By reducing this administrative burden, DND and its partners can focus on execution and accelerate the delivery of new capabilities.

This comprehensive review identifies specific reductions, totaling $479.3 million in 2026-27 and rising to $480.2 million by 2028-29, with an ongoing reduction of $477.2 million. These reductions are primarily drawn from the Department of National Defence, which accounts for $457.7 million in 2026-27, and the Communications Security Establishment, which accounts for $19.9 million in 2026-27.

This review coincides with the integration of the Canadian Coast Guard, which joined the Department of National Defence on September 2, 2025. As this integration proceeds, the department will report back on opportunities to improve efficiency and effectiveness, and to reduce duplication.

Overall I think we can all be happy here. There are serious investments made, with an average of sixteen billion year on year being pumped into defence. That isn't insignificant. However, there's still some other things I want to discuss before I jump into rambling.

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The other stuff

Along with pure defence spending, Budget 2025 also has several other initiatives laid out that directly tie into the defence and security of Canada. These are scattered throughout the document, and I thought it keen to highlight some of them.

This is primarily related to infrastructure. There's lots of it here, and if you weren’t looking carefully you might have missed a lot of it.

Budget 2025 proposes the creation of a new Arctic Infrastructure Fund, allocating $1.0 billion over four years to Transport Canada, starting in 2025-26. This fund is designated for major transportation projects in the North that possess dual-use applications for civilian and military use.

The investments will focus on building and expanding critical transportation assets such as airports, seaports, deep-water ports, airstrips, sealift infrastructure, and all-season roads. These projects are intended to directly strengthen Canada's sovereignty, support economic development, and advance Indigenous economic reconciliation, with the government acknowledging that "Indigenous partnerships are critical to Canada's sovereignty and security-related investments."

To facilitate the timely delivery of these northern projects, Budget 2025 also proposes $25.5 million over four years to Crown-Indigenous Relations and Northern Affairs Canada, and $41.7 million over four years to the Canadian Northern Economic Development Agency, to accelerate regulatory processes and consultations.

Beyond the Arctic, the budget also allocates funding for dual-use priorities at a national level. It proposes $35.2 million over four years, starting in 2026-27, to Transport Canada to support safety-related infrastructure projects and upgrades at local and regional airports. This funding, delivered through the Airports Capital Assistance Program, specifically includes support for projects that advance "dual-use priorities," further integrating defence considerations into national transportation infrastructure.

Specific mentions include both the Arctic Security Corridor and the Port of Churchill plus projects. I spoke on the Arctic a few weeks ago when I talked about the Mackenzie. That was emotional for me, and there is more to be done. This funding though is a good first step.

Budget 2025 also expands the current government’s desire to diversify exports and strengthen long-term resilience by enhancing ties with the Indo-Pacific and Europe. This strategy is framed as a move beyond traditional north-south trade patterns to instead strengthen collaboration with reliable trading partners and allies.

This pivot aims to leverage Canada's position as the G7 country with the most expansive free trade network to take advantage of established export links, similar business cultures, and shared geopolitical interests.

In Europe several key strategic opportunities with direct defence and security implications are highlighted. The first is Continental Defence, where Canadian firms are positioned to support increased European defence spending. A second, related opportunity is Ukraine's reconstruction needs, which are noted as potentially totaling in the trillions and offering enormous opportunities across nearly every sector.

A central component of this strategy is leveraging minerals and metals as a key export. This opportunity is explicitly linked to national security, as Canada's mining sector has the potential to supply a significant amount of critical minerals such as aluminum, nickel, and platinum to support the European Union's electrification, decarbonization, and security goals.

To support this, the government is making major investments in critical mineral projects, which are identified as essential for modern technology, collective defence, and advanced manufacturing supply chains. Following the Critical Minerals Production Alliance introduced at the G7 Summit, the government announced new investments on October 31, 2025, to accelerate mineral projects essential for defence and clean energy.

Budget 2025 proposes $2 billion over five years, starting in 2026-27, to Natural Resources Canada to create the Critical Minerals Sovereign Fund. This fund will make strategic investments in critical minerals projects and companies.

An additional $371.8 million over four years is proposed to create the First and Last Mile Fund, which will support the development of critical minerals projects and supply chains, from upstream and mid-stream segments to transportation infrastructure.

Furthermore, Budget 2025 proposes to expand the Critical Mineral Exploration Tax Credit to include 12 additional minerals necessary for defence, semiconductors, and clean technologies, including bismuth, osmium, and chromium.

To facilitate these new defence-industrial and trade connections, the government is creating a new Strategic Exports Office at Global Affairs Canada. This office is designed to coordinate engagement, build a pipeline of international business opportunities, and remove roadblocks for Canadian companies.

It will have a laser focus on resolving longstanding trade irritants, market access barriers, and financing needs. To specifically support this push into Europe, Budget 2025 proposes $8 million over four years to Global Affairs Canada to deepen trade relations and support Canadian Chambers of Commerce in Europe. An additional $26 million over four years is proposed to enhance Global Affairs Canada's capacity to negotiate and implement new trade and investment agreements.

As someone in the thick of the mining industry, I welcome a lot of these funds. I also welcome the large commitment to stockpiling and modernizing the critical minerals we aim to stockpile. Of course the mining industry still has many issues when it comes to leveraging economic benefit to Canada.

Many of those are provincial issues, so I don’t want to bring them here. I also don't want to get too deep into energy and such. This is a defence space after all. We don't want to go through all the budget. I will say extra funding to try and get more trade agreements negotiated and implemented is one of those very small budget items that goes missed but is very important.

We've already seen a plethora of new deals signed. We are at the tail end of negotiating a new free trade agreement with the ASEAN bloc, and are restarting negotiations with partners like India and MERCOSUR. We want these deals negotiated fast. We want new trade relationships. Extra funding won’t suddenly complete these, but they will help speed up the timelines, and every bit counts.

I wanted to take the time to highlight some of these related investments. There are more that could fit here, certainly, but defence is a whole-of-government, a whole-of-society project. Almost everything, in some way, ties back into it. Innovation, AI funding, tax credits, the push to attract researchers to Canada... all tie back into the defence ecosystem.

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Some thoughts

There is nothing overly radical here. There is nothing that will leave you gasping. If you are looking for a miniature defence policy you won’t find it here. What you will find is a committed effort, but a rather expected one.

We all knew spending was coming. We all knew there would be a lot of money into defence, and to credit, there is a lot of it. Almost $90 billion over five years is nothing to scoff at. There is funding in good places to support things like stockpiling, sovereign launch, and digitalization.

It isn’t perfect though. There are gaps in places like military housing, training infrastructure, and other operations that I would have liked to see more. I would have liked to see more on the Coast Guard. I would have liked more on ports and critical infrastructure like cables, beyond a single line, token promise. I am a bit sad they didn’t provide a yearly breakdown like usual. I like to see the yearly spending there.

Would I have liked a bit more radical? Yes. Just a bit. That’s overall as well. There were several non-defence related things I would have liked to see. I hoped we would have seen the promised reforms to flow-through shares. That also counts as a defence-related change outside the defence portfolio.

However, overall, I think this budget is great. I think it’s welcomed, there is money coming in, and it is comprehensive overall. It is very clear there was love and thought put into the defence portfolio. It is clear they take defence seriously and want to invest in it.

This is still nearly a hundred billion over five years. There are questions I have, and I’ll ask them, but this shouldn’t be downplayed because it is general in its targets. I know many expected more details, more meat. That was never coming, and that’s okay. It doesn’t need to be. We can be happy that funding is coming in, even if it isn’t all laid out on what. What programs that are mentioned focus on the foundational, which right now is probably more important, to start building capacity and making sure the money is coming in over being specific.

This budget is a generational investment in defence that we have not seen since the 1950s. It is something that, even a year ago, I never expected we would see in my lifetime. Now that it’s out of the way though, we need to turn our attention to the core. We have laid the foundation of change. Now we need to look to the legislative, the organizational. The money is here, now we have to use it as the catalyst of change it's supposed to be.