10 June, 2025
2% Is the Floor, Not the Strategy
After years of criticism, deferrals, and incrementalism, the Government of Canada has announced its intention to meet NATO’s 2% of GDP defence spending target—on a cash basis—in the current fiscal year, 2025–26. If realized, this would mark the first time since the Cold War that Canada meets the threshold using NATO’s own accounting metric: actual disbursed expenditures. But while this plan is politically and diplomatically significant, its strategic importance hinges not on the number itself, but on the structure and intent behind it.
As Prime Minister Mark Carney emphasized in his 09 June speech, “Our defence policy and spending should not be determined by NATO accountants.”
This is more than a rhetorical flourish. It signals a reframing of the 2% benchmark—not as a target, but as an entry point into a more deliberate, integrated, and sovereign defence strategy.
The 2% Plan: What It Is, and What It Isn’t
The current government’s plan outlines over $9.5 billion in new spending this fiscal year, focused on areas that can move quickly through the financial system and have tangible operational impact:
- $2.6 billion to expand and retain personnel—targeting a Regular Force of 71,500 and Reserve Force of 30,000 by 2030.
- $1 billion for capability development, especially Arctic operations and domestically sourced systems.
- $844 million for infrastructure maintenance and sustainment of existing platforms.
- $560 million for cyber and digital modernization—targeting resilience and system readiness.
These are not long-horizon capital projects with decade-long procurement cycles. They are spendable, deployable lines of effort that, if managed well, can materially improve readiness and responsiveness in the short to medium term.
But despite its significance, this move does not represent a historic peak. During the Cold War, Canada’s defence spending routinely exceeded 2 percent of GDP. What’s changed is not the amount, but the environment of strategic urgency and fiscal constraint in which this decision is now being made.
Why This Matters Now: Positioning, Credibility, and Strategic Timing
There are two reasons this plan is politically and strategically timed.
First, the June 2025 NATO Summit looms large. Canada has faced growing pressure to demonstrate tangible commitment to the alliance, especially as the war in Ukraine drags on, Arctic security intensifies, and American expectations of allied burden-sharing sharpen in an unpredictable U.S. political climate. Structuring cash-flow to land in this fiscal year is not an accident—it’s a calculated move to pre-position Canada diplomatically.
Second, this plan marks a departure from fragmented or symbolic announcements of the past. It shows signs of a more integrated approach to national defence: one that ties funding to procurement reform, industrial capacity, operational readiness, personnel policy, and sovereign defence manufacturing. In short, it points toward strategy, not just expenditure.
From Compliance to Capability: The Strategic Pivot
Carney’s dismissal of “NATO accountants” is not a rejection of the alliance—it’s a statement of strategic autonomy. The 2% target may be useful as a political forcing function, but it is not sufficient. The real question is not “Have we hit the number?” but rather, “What have we built?”
The capability lens forces us to ask:
- Can Canada generate and regenerate force credibly across multiple domains?
- Are we developing logistics, communications, cyber, and command systems that are interoperable but also sovereign?
- Do we have a defence industrial base that can support domestic and allied operations under conditions of disruption or denial?
- Is our Arctic posture a symbolic presence or an actual force capable of deterrence, control, and response?
These are not questions of budget alone. They are questions of structure, readiness, and grand strategic coherence.
Risks and Conditions
While this announcement is a promising step, several risks remain:
- Execution risk
Cash-based planning is one thing; effective disbursement, contracting, and results-driven program management are another. The Canadian defence procurement system is not known for speed. - Sustainability risk
Will these spending levels and strategic coherence survive a change of government or economic downturn? - Cultural risk
Will the Canadian Armed Forces be empowered, resourced, and supported to align with this strategy, or will institutional friction and political micromanagement dilute its effects?
The moment demands clarity, resolve, and strategic consistency—not a temporary surge or performative compliance.
Conclusion: Sovereignty Through Structure
Canada’s announcement that it intends to meet the NATO 2% target on a cash basis this fiscal year is meaningful—but not because it satisfies an external benchmark. It is meaningful because it creates the conditions for a strategic pivot: from dispersed and reactive policy to integrated sovereign capability.
If this spending is executed as planned, it will buy more than equipment and personnel. It will buy credibility, time, and strategic options. But only if it is embedded in a durable, whole-of-government grand strategy that treats defence not as a cost center or political afterthought, but as the structural foundation of national sovereignty.
2% is the floor. Capability is the ceiling. Strategy is the frame.
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About the Author
Richard Martin is the founder and president of Alcera Consulting Inc., and the creator of The Strategic Code—a doctrine for leaders navigating volatility, constraint, and conflict.
His mission is simple: equip leaders to exploit change and achieve strategic coherence. Through his advisory work, writing, and tools, he helps senior decision-makers see clearly, understand deeply, and act decisively in high-stakes environments.
Richard is the author of Brilliant Manoeuvres: How to Use Military Wisdom to Win Business Battles, and the developer of Strategic Epistemology and Worldview Warfare—frameworks that decode the beliefs, values, and power structures shaping strategic action in a contested world.
www.exploitingchange.com
© 2025 Richard Martin