03/29/2012 04:06 EDT | Updated 05/29/2012 05:12 EDT

DND cuts account for one-fifth of federal budget cuts over next three years

OTTAWA - Roughly one-fifth of all federal spending cuts over the next three years will come at the expense of the Defence Department, the budget tabled Thursday by Finance Minister Jim Flaherty indicates.

The hit will be a substantial one for a department that for many years saw generous increases under the Harper government and whose budget approached $21.2 billion last year.

Under the plan tabled by Flaherty, a defence analyst estimates the overall defence budget will fall to "roughly $19 billion and change" by 2014-15.

Brian MacDonald, of the Conference of Defence Associations, said it's hard to peg an exact figure because the government has only released initial figures, and more information is yet to come.

"Yes, there was a large budget reduction, (but) I think the (Canadian Forces) got off a lot lighter than people were expecting," MacDonald said.

Part of the budget hit can be attributed to the decision to move the ultra-secret Communication Security Establishment out of the budget of National Defence and into a stand-alone agency.

The budget did not make clear precisely how the cuts will be made, other than vague references to the department's plan to "streamline contracting procedures, and centralize property and human resources management."

Flaherty's plan cuts operational spending by $327 million at National Defence this year, a figure that ramps up to a total of $1.1 billion by 2014-15 — numbers that translate into an overall 7.4 per cent reduction.

It is unclear from the budget documents how much of a hit the department's $4.1-billion capital budget will take. But Flaherty did make clear that $3.54 billion in equipment spending, which was sprinkled over several years, is being pushed off into the future.

There is no indication which projects are be re-profiled, although a number of programs — including new fixed-wing search planes, maritime helicopters and new supply ships for the navy — are already facing substantial delays.

The spending plan makes a point of saying that the government is committed to retiring the air force's aging CF-18 by "acquiring an affordable replacement," but makes no mention of the controversial and long-delayed F-35 stealth fighter.

That reference grabbed MacDonald's attention.

"The word 'affordable' is not one we've heard before," he said. "That is something I am looking at with great interest."

Associate Defence Minister Julian Fantino took a step back from the program earlier this month by saying the government is still weighing its options about whether to buy the F-35, a plan which at $9 billion for 65 jets is considered the most expensive defence procurement in history.

The slashing of the National Defence operating budget is also forcing the government to backtrack on a commitment to increase the size of the military to 70,000 full-time and 30,000 reserve soldiers.

The budget says the size of the Forces will hold steady at 68,000 regular members and 27,000 part-timers.

The fiscal plan does make a concession to small businesses who employ reservists by compensating them for hiring and training replacements while the employee is deployed overseas.

The measure was something the business community wanted to see during the war in Afghanistan, but with the country's withdrawal from combat last year, the impact is expected to be minimal.

At the same time, Veteran Affairs Canada will face a modest 1.1 per cent budget cut despite the pressure brought to bear on the Conservatives to entirely exempt the department from any and all reductions.

Canadian veterans have been campaigning for the department to be left untouched, following the example of the U.S. and Britain.

The Royal Canadian Legion was blistering in its criticism, saying the reductions will affect veterans and their families, regardless of government assurances to the contrary.

Pat Varga, the Dominion president, described it as unacceptable.

"This is a step in the wrong direction," Varga said.

"The federal government is obliged to support our veterans and their families for their commitment and sacrifice to Canada. This is not the way to treat those that have voluntarily served Canada. It shows no compassion, no heart and no conscience on behalf of the federal government."

One change announced Thursday involves the Veterans Independence Program, which provides housekeeping and other light household services to elderly and disabled veterans.

Instead of having to submit individual receipts and burn up bureaucratic processing time, veterans will now get an annual grant to cover the cost.