Last October, the newly created Parliamentary Budget Office (PBO) released The Fiscal Impact of the Canadian Mission in Afghanistan. The report produced some eye popping numbers, predicting that the mission will eventually cost Canadian taxpayers between $14 billion and $18 billion.
The PBO’s estimates are the first official attempt to put a price tag on all components of the war effort and, on this point alone, the report makes a valuable contribution to public understanding of the war. Beyond the numbers themselves, the PBO report also makes a valuable contribution by developing Canadian-specific methodology and data for estimating the costs of any future conflict.
Despite these contributions, the report is most significant, however, for the questions it leaves unanswered.
The report tabulates a variety of costs incurred by DND, CIDA and Veterans Affairs Canada (VAC), but these numbers can essentially be divided into two categories: those generated from government estimates and those calculated by the PBO.
The first category accounts for the bulk of the war’s costs – CIDA’s $1.65 billion aid commitment and DND’s reported “incremental costs,” figures that are readily available elsewhere. It is the second set of numbers, the PBO’s calculations of the costs of veteran’s care and capital equipment that are the report’s real value added.
The estimates for veteran’s costs are the first attempt to predict the costs of caring for wounded Canadian soldiers using Canadian data. While other studies, including my own, have used American data to estimate the costs of caring for Canada’s Afghan vets, the PBO uses the average value of recent VAC claims to create a Canadian specific estimate. This methodology produced a significantly lower estimate than studies using American data, which is partly explained by the fact that the PBO uses the average “Net Present Value” of all recent Canadian veterans’ claims, including those from peacekeeping operations, in its calculations, whereas American data is based exclusively on the claims made by veterans of the first Gulf War.
Only time will tell how the PBO’s predictions hold up, as even their “high” estimate only adds a nominal 30 percent to the average VAC claim to account for what are predicted to be higher costs of care for combat vets.
The second significant contribution of the report is to account for the financial costs of increased wear and tear on equipment deployed in theatre. Lacking both a list of deployed equipment and an official estimate of how much faster it is wearing out, the report uses allied data on equipment use and makes an educated guess about how much of the Canadian inventory is deployed, to peg the cost of battle-used equipment at between $1.5-$3 billion between FYs 01/02 – 07/08. This data was then used, in conjunction with DND’s incremental costs, to determine DND’s cost per deployed soldier, from which the PBO estimates that the total cost of military operations through 2011 will be between roughly $11 billion and $13 billion.
The section on capital equipment exemplifies a key weakness in the report overall – an absence of detailed data from the relevant departments which prevented the PBO from producing a “bottom-up” approach that could have critically evaluated official government estimates, particularly DND’s “incremental costs.”
Lacking the relevant data, the PBO was prevented from conducting what might have otherwise amounted to an arms-length audit of DND’s bookkeeping.
The second weakness of the report is its cursory analysis of the mission’s funding, which is arguably more important. As I discussed a year ago in these pages, the Harper government may have funded up to $1.3 billion of the incremental cost of operations in FYs 06/07 – 07/08 by internally re-allocating DND baseline funding. Unfortunately, the PBO could only offer that the costs of the mission “could exceed the Parliamentary appropriations,” and flagged the issue for consideration by the next parliament.
Having admirably calculated the total cost for Afghanistan, it is disappointing that the PBO could not provide a better assessment of how the government as a whole, and the individual departments in particular, have been footing the bill.
To determine the full fiscal impact of the Afghan war, we need to know both how much it will cost and if the appropriated funding is sufficient. The PBO answered the first question, but the second remains unanswered.
David Perry is a fellow with the Centre for Security and Defence Studies at Carleton University. For the PBO report, see: www.parl.gc.ca/pbo-dpb