Canada's 2% solution

Lots more money for defence. A familiar face is the new Clerk. The Wisdom of Solomon.

As part of a tour of the Fort York Armoury in Toronto last Monday, Prime Minister Mark Carney announced that Canada’s spending on defence in 2025-26 would reach $62.7 billion. This would put Canada more or less right on the NATO target of members spending 2% of GDP on defence. Carney tweeted that we would be reaching that target “half a decade ahead of schedule”, but since NATO actually adopted the target in 2006, our math puts it at two full decades behind schedule.

But what’s past is past. What matters, all else being equal, is that Canada is finally starting to pull its weight in the alliance. As Carney put it: “In an increasingly dangerous world, we will be ready to protect our people, our sovereignty, and our Allies.”

But of course, not everything is equal, not least because NATO is already hinting at increasing the spending floor to 3.5% of GDP. But also, while the top-line numbers seem impressive – $9 billion into the CAF budget, with $14 billion more for other defence-related spending – a number of defence observers have noted that a lot of the details remain pretty hazy.

That’s to be somewhat expected. In his defence newsletter, Carleton professor Philippe Lagassé does a good job of using Carney’s announcement as a guide less toward specific expenditures, and more on where it seems to be taking Canada. You should read the whole thing here but we took particular notice of this part of Lagassé’s note:

Fifth, there is new money for emerging technologies, with a focus on Canadian suppliers. This makes sense given Canada’s strengths in AI, quantum, and autonomous systems. To make sure that these emerging tech firms thrive and develop the best possible solutions for Canada, though, the government should also be thinking about providing initial capital for Canada’s founders and innovators. Since the announcement included funding for the Canadian defence industrial base, I’m hopeful that we’ll see a defence innovation investment fund come out of that.

In this light, we would like to draw your attention to a few memos Build Canada put out in the past few months, in particular this mandate letter for the defence minister (aiming to hit the 2% spending target) and this memo sponsored by Shaun Francis, calling for a root-and-branch modernization of the Canadian military. Also, according to the pre-election survey that Build Canada commissioned through Pollara, fully three quarters of Canadians support increasing military spending, with a focus on modernization of the military. That fits with a more recent poll from Angus Reid that showed at least two-thirds of Canadians supporting the 2% target.

A few other takes on Carney’s defence announcement:

• “Canadians are all-in on defence” from The Icebreaker

• Matt Gurney interviews RMC professor Chrstian Leuprecht over at The Line

• In the Globe and Mail, Eugene Lang says Carney shows how to have guns and butter

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There’s a new clerk in town

Prime Minister Carney continues to add people to his roster. This week, he appointed Michael Sabia as Clerk of the Privy Council. He’ll be responsible for advising the Prime Minister and his team from an objective, non-partisan, public policy perspective.

Sabia has got quite the resume for the role – he’s the former CEO of Hydro Quebec, former CEO of Quebec’s pension fund, and had a run at the Munk School of Global Affairs & Public Policy. He has also talked about Canada’s “ambition deficit” and how he wants to see more investment in Canada.

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AI is our Gutenberg moment

In his first speech as Canada’s first-ever AI minister, Evan Solomon said Canada will move away from “over-indexing on warnings and regulation” and instead focus on its economic benefits.

He noted how economies that master AI will grow. Those that don’t will fall behind, which is “an existential threat to our future”. “Essentially we are at a Gutenberg-like moment” and Solomon wants to scale up Canada’s AI industry and drive AI adoption. If he’s looking for big ideas, we’d like to point his attention to the latest Build Canada memo:

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Make AI a basic right for Canadians

The Build Canada team has started up its policy memos again to continue to push forward bold ideas for Canada’s growth. We released a memo from Ada’s Mike Murchison calling for Canada to be the world’s most AI-literate nation by giving every Canadian Universal Basic Compute. This would give everyone access to free AI tools. Coupled with targeted training programs, the idea is to increase AI adoption and literacy.

✨ Read the memo on universal AI access

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G7 this weekend

Leaders from around the world are meeting in Alberta for the G7 summit this weekend. This is an opportunity to re-forge trade and diplomatic relations with key allies. That is, if the agenda isn’t completely sidelined by big personalities. Expectations on an agreement are “so dim that Canada is not planning for a joint communiqué at its conclusion.”

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What else we’ve been reading

To change requires change

Back in February, the federal government announced its plans for Alto, a high-speed rail from Toronto to Quebec City. Despite rightful skepticisms, we were excited by the idea, and released a memo to encourage Canada to use this as an opportunity to show the world how we can build ambitious projects right. One of our memo’s recommendations was to hire global experts from Europe and Asia to learn how to do so.

Metrolinx did exactly that in its plans to expand the GO regional network, hiring the German team Deutsche Bahn. Unfortunately, the relationship soured and they quit:

Metrolinx frequently gave the Germans new requirements focused on improving the agency’s “current methodology” instead of transforming it.

“So they weren't really interested in changing the way they ran trains,” they said.

Decisions about GO Expansion regularly fell to senior management, which led to frustration among employees who saw key proposals deferred across multiple desks until they ended up at the top or disappeared altogether, three sources said.

🗞️ How Metrolinx’s plan to deliver European-style train service went off the rails [The Trillium]

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Energy is the bottleneck

Alberta is leading the way on building AI data centres, with large ambitions to build $100 billion worth in the next five years. The good news is that they have no trouble attracting them to come. The bad news is that there’s not enough energy to power them:

But the 29 proposed projects would demand more than 16 gigawatts combined, a level of demand the province has never experienced, said AESO CEO Aaron Engen…

To illustrate the level of demand Alberta is seeing, AESO noted that the city of Edmonton has a load of roughly 1.4 gigawatts.

🗞️ Alberta's power grid 'cannot possibly connect' all proposed data centres, system operator says [CBC]