OTTAWA—Canada’s fighting forces are bracing for their next battle — the bottom line.

After years of enjoying big budget hikes, the Canadian Forces are enduring a new reality of cutbacks that has started to hit the frontlines.

And Thursday’s federal budget could force the military to trim even further as the federal Conservatives seek to balance Ottawa’s books by 2015.

Canada’s top general acknowledged the new reality this week, saying finding efficiencies will be the military’s “centre of gravity” for near future.

“While the Canadian Armed Forces will continue to guarantee the delivery of responsive, agile and decisive force to confront emerging threats, there is an economic situation to deal with,” Gen. Tom Lawson, the chief of defence staff, told the Senate defence committee.

“There is a budget to balance and defence must do its part and that has our keen attention.”

Against that backdrop, an internal fight is brewing over where the axe should fall — on a bureaucracy that has swelled significantly in recent years, along with costly outside contractors, or on the frontline, which has already being hit by cuts.

Dave Perry, an analyst with the Conference of Defence Associations Institute, released a study showing that the $20 billion defence budget has dropped by $2.1 billion since 2010 and could further fall further tomorrow.

“There is stuff being taken out of the teeth,” Perry told the Star, referring to the military’s operational abilities.

He said the last three budgets have hit operations and maintenance funding especially hard. “As a result, the Canadian Forces’ readiness has been reduced significantly,” he wrote in his analysis.

Since 2010, the army’s budget has been cut by 22 per cent, according to Lt.-Gen. Peter Devlin, who heads the army.

“As you would expect, that has had an effect on people, infrastructure and training,” Devlin told a parliamentary committee last fall, adding that some budgets for training have been cut by almost half.

More recently, Vice-Admiral Paul Maddison, head of the Royal Canadian Navy, said his budget has been cut by 11 per cent.

Lawson told Senators this week that the military is paring back on its annual Arctic exercises, saying, “it’s very expensive to train in the North” and said broader cuts could be expected to training.

Training “out on the sea, in the air and in the North” will be done only if has to be done in those “environments,” he said.

“The rest of that can be done . . . with simulation and things that decrease the expense of training,” Lawson said.

Yet there are questions whether those reductions defy Prime Minister Stephen Harper’s personal orders to Defence Minister Peter MacKay not to undermine the military’s capabilities.

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Harper pointedly — and privately — told his defence minister last June said that he wanted more teeth and less tail as the defence department reorganized to cope with shrinking budgets.

In a letter to MacKay, the prime minister complained about a “serious imbalance” in the defence department, urging cuts to overhead costs while “avoiding budgetary reductions that impact on operational readiness.”

It was a message that Harper echoed publicly last fall Lawson took over as the top general. Speaking to a crowd of senior officers, Harper said wanted “more teeth and less tail.”

“The forces must be restructured to ensure administrative burdens are reduced and resources freed up for the front line,” Harper said.

Yet at the time, Canada’s defence leaders already had a blueprint for change sitting on the shelf. The extensive report by Lt.-Gen. Andrew Leslie found that the “tail” — headquarters personnel and non-operational staff — had grown by 40 per cent while the tooth — personnel who could be deployed — had grown by just 10 per cent.

The civilian ranks of the defence department had grown by 33 per cent; the department was spending about $2.7 billion a year on consultants, contractors and professional services contracts. Since the report was completed, this amount has swelled by another $500 million a year.

The report by Leslie, who has since retired, also found “multiple “layers of military and civilian bureaucracy.

He urged dramatic action that includes cutting headquarters staff, shuffling 3,500 regular forces personnel and another 3,500 civilians into higher priority areas and cutting contractors by 30 per cent.

Yet Perry says no action has been taken to address Leslie’s 43 recommendations.

“As a result, the bulk of the budget cuts are falling on operational readiness and training,” he noted in his analysis.

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