The Canadian military is on the verge of another round of internal belt-tightening, despite an enormous influx of cash from the federal government, CBC News has learned.

It appears to be a combination of past and current budget initiatives colliding with the expectations and demands associated with the gush of defence spending.

The Department of National Defence has been told to focus its billions of extra dollars on priority areas, including the purchase of much-needed new combat equipment.

At the same time, it is still subject to the demand for operations and maintenance reductions announced by the Trudeau government in 2023 and enacted in the 2024 federal budget.

Ottawa gives defence buying agency more muscle — and more independence Direct spending on Canadian military could reach more than $163B by 2035: budget watchdog Those cuts — described at the time as internal reallocation by former defence minister Bill Blair — saw an $810-million reduction in the year they were introduced and planned for $908-million cuts each following year. A federal official, who spoke on background, said that schedule is unchanged and the previous government's budget directive has not been rescinded.

To that end, the federal Treasury Board Secretariat, which directs day-to-day government spending, is examining defence operational spending with an eye to reducing expenses by 10 per cent, said two confidential sources who were not authorized to speak publicly.

Defence is getting more money overall, just not as much as may have been expected. Experts warn care needs to be taken with how and where the internal cuts are made and expenses reined in.

Military readiness has suffered over the years because of an absence of operations and maintenance funding. According to the latest federal budget, the current operational readiness of the military overall hovers around 61.3 per cent.

Canadians 'expect us to be sensible' around ramped up defence spending, Carney says July 8 Duration A little over three weeks ago, the vice-chief of the defence staff, who manages day-to-day activities within the military, delivered the news that internal savings needed to be found and that the military's aggressive growth plans will also have to be tempered, said a third source, with knowledge of the presentation.

In 2025, when Prime Minister Mark Carney's government came in, it imposed its own sweeping expenditure review process across the whole of the federal government, but largely exempted the Department of National Defence (DND).

DND has been told to take serious steps to reduce outside consultants, like the rest of the federal government.

As part of meeting Canada's NATO defence spending commitment, tens of billions of fresh dollars have been poured into the military over the last year along with plans to spend more in the coming decade. But a lot of that cash is being chewed up by a bevy of promises made by the Liberal government and the wage increase given to members of the Forces A spokesperson for Finance Minister François-Philippe Champagne said the new government's intention is to protect the Defence Department as much as possible.

Analysis How NATO is prepping in the Baltic skies for a possible confrontation with Russia In shifting geopolitical landscape, Canada, U.S. and Denmark militaries train together in Greenland "We have however asked DND, as with every other department, to reorient its spending such that it prioritizes capital expenditures — mechanisms that grow and modernize the [Canadian Armed Forces], improve its readiness in an increasingly dangerous world and render it more competitive — and spends less on operating expenditures," said John Fragos, Champagne's press secretary, in a written statement.

"We want results and our plan to spend less on operations and more on capital expenditure is central to that work and in keeping with our plan to rearm the CAF, grow the economy all while balancing operating expenses by 2027-28.”New dollars already earmarked Dave Perry, president of the Canadian Global Affairs Institute and one of the country's leading experts on defence finances, said in the past when there's been internal belt-tightening it has meant a straight cut, rather than internal reallocation of funds to higher priority areas.

There's been a lot of fanfare around the enormous increase in defence spending and Perry said that has led to a lot of high expectations within the military about what's possible.

"I think it's created this impression that there's gazillions of dollars that could be allocated to any number of new initiatives in the near-term window," Perry said. "And I think that's not really the case." He said he believes there's not nearly as much "available, investable and disposable cash" as people have been led to believe.

Defence spending is set to rise from the current $75 billion annually to $95.6 billion by 2030 the Parliamentary Budget Office recently reported. Perry said the Defence Department and the military are discovering that much of that cash is already spoken for.

Sources say there's also legacy equipment that Defence continues to pay for and plans that have been made which — if stopped — could generate internal savings. One area mentioned was several IT projects that were planned with the thought that the money will come but are now deemed as unaffordable.

There are also expensive, outdated pieces of equipment with hefty maintenance bills that, if retired, could produce savings. The Victoria-class submarines are an often cited internal example at the Defence Department.

Only one of the four boats are operational. There are both deep maintenance and modernization plans extending to 2038.

It is conceivable, now that the government has initiated the process of replacing the submarines that some of those projects could be scaled back.

In 2011, retired lieutenant-general Andrew Leslie was asked to conduct a landmark study of DND that recommended cutting over $1 billion annually by slashing headquarters staff and shifting resources to front-line combat units. It recommended moving or eliminating thousands of civilian and military personnel, primarily concentrated at National Defence Headquarters in Ottawa.

The report also advocated for streamlining structures, including reducing the number of reservists, cutting back on outside contractors and consultants and reorganizing command levels to maximize efficiency.

Leslie's blunt recommendations faced significant political and bureaucratic resistance. Only a portion of the sweeping cuts he recommended were implemented.

In a recent interview, Leslie said he had one clear, simple message for the Carney government: "If you have to make budget reductions, reduce the Department of National Defence. Don't touch the Canadian Armed Forces." Lurkers in the deep: How Canada's new submarines will be used in peace and potential war 'Thrown under the bus': Former defence chief's memoir lays bare his battles with the Trudeau government With the threat of war in Europe and elsewhere, he said there's some funding that needs to be protected at all costs.

"Whatever you do, do not cut operations, training and maintenance because that is the lifeblood of the military," Leslie said. "In the final analysis, the people who get the money first are the troops. Air, land, sea, special forces and coast guard, who actually can go out there and do the work." Leslie said the military has less margin for error than when he wrote his report 15 years ago.

"Our side won't be deciding when the next war or conflict occurs," Leslie said. "It'll be Russia, probably. They have to be well equipped, they have to have the right equipment. And the whole purpose of the prime minister's rearmament for Canada was to make sure that we married together well-trained troops with the right equipment, the right leadership, the right support."