Canada's spending on defence as a share of the overall economy is going to be substantially less this year than previously thought, according to a new Senate defence committee report.

The bipartisan committee estimates that in the current budget year, the country will devote 0.88 per cent of its gross domestic product towards the military — far short of the two per cent target established by NATO.

It would be, according to figures tabled with the report Thursday, a historic low.

Last month, the military alliance's annual report pegged Canada's budgetary contribution to defence at approximately 1.02 of GDP — or 23rd out of 28 member countries.

The reality is: Canada is freeloading. It is not spending enough on defence, and relying entirely on the Americans to provide for our defence. - Senator Colin Kenny

The Senate figures using new economic data were compiled for the committee by the Library of Parliament and they present the Trudeau government with a significant political problem in light of the Trump administration's ongoing demand that allies meet the NATO goal.

Conservative Senator Dan Lang, the committee chair, denied the suggestion the Senate was giving U.S. President Donald Trump ammunition.

"The report is to point out exactly the realities of what we face in Canada for Canadians," said Lang. "And this report is not for Mr. Trump, President Trump. This report is for Canadians."

Raising defence spending

The analysis blames both the Liberals and former prime minister Stephen Harper's Conservatives for the situation.

"We can't change the numbers. We didn't make up the numbers," said Senator Colin Kenny, the former chair of the committee who was appointed as a Liberal. "The reality is: Canada is freeloading. It is not spending enough on defence, and relying entirely on the Americans to provide for our defence."

Last summer, former U.S. president Barak Obama chided Canada's Parliament and urged members to meet the NATO benchmark. Trump has been more blunt in his criticism of allies and Kenny says people are inclined to believe the new president will act on his grievances.

Behind the scenes recently, the U.S. has been consistent in its message that it wants to see each country roll out a plan to meet the target, which was agreed on by allies during the 2014 NATO Summit in Wales.

Lang, centre, Senator Colin Kenny and Senator Jean-Guy Dagenais listen to a question at the news conference. (Adrian Wyld/Canadian Press)

The Senate committee proposes a roadmap for the government to increase the defence budget to two per cent of GDP over the next 11 years, more than doubling from the current $18.7 billion annually.

It could be done in stages, with the first target being an increase to 1.5 per cent of GDP by 2023.

"I don't think we have any choice but to move towards that two per cent target," said Lang. "And the government has a responsibility. Because their first responsibility is the public security of Canadians."

NATO target seen as aspirational

Both the Liberals and the Conservatives before them have argued that the NATO benchmark is aspirational and that the real measure of defence is not what you spend, but the contribution you make to the alliance when asked.

A spokesperson for Defence Minister Harjit Sajjan stuck to that position on Thursday.

"Canada has consistently shown it is ready to step up with the necessary political will, equipment, and personnel when it matters," said Jordan Owens, who noted Canada will soon deploy a battle group to Latvia as part of a NATO mission to deter Russia in eastern Europe.

Later in the spring, the Liberals are expected to release their defence policy review and Lang said the committee hopes some of its 16 recommendations find their way into the government's plan.

"We look forward to addressing many of the issues in the Senate's report in Canada's new defence policy, and we thank them for participating in our consultations," said Owens.

Responding to Kenny's assertion that Canada is "freeloading," Owens pointed to remarks by U.S. Defence Secretary James Mattis who has praised his country's "indispensable partnership with Canada."

Overhaul procurement — again

Among the recommendations is a call for the federal government to move the military procurement system, often criticized as muddled and dysfunctional, away from public works and place it squarely in the hands a specialized agency under National Defence.

That idea was rejected by the former Conservative government when it overhauled defence procurement three years ago.

A U.S. F-35 jet sits on the tarmac at Hill Air Force Base, in Utah. A Canadian Senate committee says the federal government should overhaul the defence procurement system. (Rick Bowmer/The Canadian Press)

The purchase of military equipment is an inter-departmental responsibility that includes not only defence and public works, but also Innovation, Science and Economic Development Canada.

It is the "most egregious" part of the current system, said Kenny.

"Each of those departments have their own agenda. The heart of the problem is that there are too many people claiming a piece of the pie. Nobody is responsible and people are using their seat at the table to slow things down."

To support his argument, Kenny pointed out that between 2007 and last year, a total of $9 billion in capital funding for military hardware was not spent.