Defence Expenditure

Thursday 27th October 2016 Westminster Hall

[Relevant documents: Second Report from the Defence Committee of Session 2015-16, Shifting the goalposts? Defence expenditure and the 2% pledge, HC 494, and the Government response, HC 465.]

[Mr Peter Bone (in the Chair)]

If Members wish to remove their jackets, that is totally in order. I apologise for the fact that one of the green clocks is not working, but the other two are.

13:30

[Dr Julian Lewis (New Forest East) (Con)]

I beg to move,

That this House has considered the Second Report from the Defence Committee of Session 2015-16, Shifting the goalposts? Defence expenditure and the 2% pledge, HC 494, and the Government response, HC 465.

It is a privilege to present the findings of our report entitled “Shifting the goalposts? Defence expenditure and the 2% pledge” to the public once again—it was published some time ago. I doubt whether anybody two or three years ago would have registered the significance of the term “2% of GDP” in connection with defence, because it was only relatively recently that the prospect of Britain’s falling below the NATO recommended minimum expenditure on defence for the first time came to the public’s attention. For many years, we spent a great deal of money on defence. The purpose of the report is to track the history of that expenditure to check the extent to which we are continuing to meet the NATO minimum and to see whether there has been any financial jiggery-pokery to enable us to do so.

In a nutshell, we found that no rules have been broken. The Government’s figures and methodology conform to the NATO guidelines. It is true that, on the basis of including such things as armed forces pensions, which were not previously included but are allowed to be included, the Government will reach the 2% minimum. I use the word “minimum” advisedly, because that is what it is. It is not a target, but the minimum expected of each NATO country to contribute as a proportion of their gross domestic product to their defence. One could argue that it remains a target for countries that have never managed to reach it, but for those of us who have always exceeded it, often by very large amounts, it remains a floor, not a target, let alone a ceiling.

I know it is frowned upon to use props in debates in any Chamber, but the sheet of paper I have is so vivid that, even at a considerable distance and through the lens of a television camera, it is easy to read. The bar graph shows a consistent and steady decline in the percentage of GDP spent on defence since the mid-1950s. In the mid-1950s, we spent more than 7% of GDP on defence. In about 1963-64, that downward-falling graph crossed the upward-rising graph of what we spent as a proportion of GDP on welfare. Far from spending more on defence than on welfare, as we did until about 1963, we spend six times on welfare what we spend on defence. In the mid-1980s, we were spending roughly the same amount on defence, education and health. Since then, the descending graphs for defence expenditure and the rising graph for education and health have similarly crossed over, and we have declined closer to the 2% minimum. We now spend almost four times on health and about two and a half times on education what we spend on defence.

[Mr James Gray (North Wiltshire) (Con)]

I am interested in the chart that my right hon. Friend is describing, which appears as a corrigendum to our report. More interesting than the three Departments he mentions is the fact that, during that period, spending on overseas aid increased by a significant amount while spending on defence declined. Is that not a significant correlation?

[Dr Lewis]

It is significant, and it is indeed included on the chart. The only reason why I did not mention it is that, in comparison with the total spent on the other high-spending Departments, it is a relatively small proportion of our GDP. However, my hon. Friend is absolutely right because, such has been the decline in defence, our commitment to spend 0.7% on international development now amounts to one third of the total that we spend on defence, which comes in just above the 2% minimum.

When we called the report “Shifting the goalposts?”, we put a question mark at the end because we did not wish to prejudge it. There are two ways in which the Government could be said to have shifted the goalposts: first, by including things they are not allowed to include—we absolved them of that—and, secondly, by including things that they are allowed to include but never included in the past, which would mean that we are not comparing like with like in terms of our previous methods of calculating UK defence expenditure. The Defence Committee inquiry found that the NATO minimum would not have been fulfilled if UK accounting practices had not been modified, albeit in ways that are permitted by the NATO guidelines.

[Patrick Grady (Glasgow North) (SNP)]

Is the right hon. Gentleman aware that some of the money that is counted in the 0.7% official development assistance is also counted towards the 2%? I might take issue with some of his line of argument, but it sounds like he is arguing that that double counting should not be double counted.

[Dr Lewis]

We did not find a hard and fast case of double counting, but we noticed in the past that there are items of expenditure that are highly relevant to defence and security that could fairly and usefully be catered for by the international development funds. Given that the 0.7% is protected, and given that one sometimes hears stories of the Department for International Development struggling to find creative ways of spending the money it has to dispose of, there is an opportunity, particularly in relation to soft power, to use elements of the international development money for measures that add to our security.

Of course, this is a rather crude measure, because gross domestic product can vary. If this country’s gross domestic product goes down but we spend the same amount on defence, it might appear that we are doing more when we are doing nothing of the sort. Similarly, when the value of the pound changes, as has happened in the short term following the Brexit decision, we see the effect on what we are able to buy for the money we have available for defence when we purchase big-ticket items such as the P-8 maritime patrol aircraft from the Americans, although a considerable amount of that purchase will find its way to the British defence industry. What I am driving at is that perhaps we ought to be talking not about shifting the goalposts, but trying to move the benchmark.

We should be reminding people that, in the 1980s—the last time we faced a significant threat from the east in Europe in the second and closing phase of the cold war—we regularly spent between 4.5% and 5.1% of GDP on defence. The similarity lies not only in the international situation. In the 1980s, we simultaneously faced a very significant terrorist threat in the form of Irish republican terrorism. We now face a similar threat in the form of fundamentalist Islamist terrorism.

It therefore seems appropriate to note that and, in the week that we were told that the first of the successor submarines for the nuclear deterrent will be named HMS Dreadnought, to remember a previous HMS Dreadnought, the battleship that changed the whole nature of sea power as far as capital ships were concerned in the years approaching the first world war. A famous naval arms race was going on between this country and Germany and, around 1909, there was a great deal of controversy that the German navy was drawing level with the grand fleet of the British Royal Navy in terms of dreadnought battleships. A public campaign was mounted, encapsulated by the phrase of the Unionist politician George Wyndham:

“We want eight and we won’t wait!”

My view, which I believe is shared by at least some other members of the Defence Committee, is that a new benchmark is perhaps needed for the percentage of GPD to be spent on defence: “We want three to keep us free!” In reality, if we go on at the 2% level, we are in danger of finding ourselves incapable of meeting the threats that face us today and will continue to face us in future.

[Mr James Gray]

We want four, or we’ll show the Government the door.

[Dr Lewis]

As always, I am delighted to be trumped by my hon. Friend in that direction. That is an absolutely splendid intervention and I thank him for it. I hope the Minister will go one better even and think of something to rhyme with five.

[Mr John Spellar (Warley) (Lab)]

Yes, the threshold is important for a whole number of reasons, and we want to look at the overall level and get that focus of Government, but it is not the most important thing. The right hon. Gentleman might be about to come to this point, but we ought to be pressing the Government on what capability we are getting as a consequence in terms not only of materiel, but of manpower, and experienced manpower in particular.

[Dr Lewis]

The right hon. Gentleman is absolutely spot on, and of course that is what underlies my remarks about the fact that the figures are only, at best, the crudest guides. Nevertheless, they give us some sort of measure of comparison. Spending a certain amount of money on defence—or, should we say, investing it in defence—is not a sufficient condition for the reason that the vice-chairman of the Committee has just explained. It is, however, a necessary condition: if we do not spend enough, we cannot possibly have the potential. If we have enough to spend, we can consider how to ensure that we spend it in the most efficient and productive ways.

At this point, I pay tribute to the staff who help the Defence Committee to prepare our reports and, in particular, to one member of staff, Dr Megan Edwards, who did all the background research for the appendices to the report. They show, on as near as it is humanly possible to express the same terms, how much we have spent every year since 1955-56 up to the present day. That sort of original research work is of lasting value, because it sets into context the minuscule efforts that we make these days in comparison with the efforts that we had to make in the past. The reason that I single out Dr Edwards is that today is her last day working as a specialist member of the staff of the Defence Committee—our loss will be the Cabinet Office’s gain, and we wish her well in her new post and congratulate her on it.

Another aspect of the financial calculations that causes particular concern is the constant emphasis on efficiency savings. The most recent tranche of efficiency savings that the Government required from the Ministry of Defence was, I believe, some £0.5 billion, just before the 2015 strategic defence and security review. Some estimates put the aggregated total of efficiency saving requirements in recent years at something in excess of £1 billion, carried forward year on year. Theoretically, savings are ploughed back into the MOD. In practice, I understand from people who know about such things, it is hard to track that money, to apply those notional savings in concrete terms and to see where exactly the savings have gone in terms of new capacity.

A few days ago, on 18 October, that matter came up during a hearing on the Ministry of Defence’s annual report and accounts for 2015-16. The Defence Committee was interviewing Mr Stephen Lovegrove, the new permanent secretary at the MOD; Lieutenant General Mark Poffley, Deputy Chief of the Defence Staff for military capability; and Ms Louise Tulett, director general of finance at the MOD. They made an impressive trio of witnesses.

At one point, it was put to the witnesses that, of the almost £26 billion of equipment commitments that came out of the SDSR, almost a quarter really was new money, nearly £11 billion was so-called headroom or contingency, which is understood to be used up at appropriate points in the programmes, but the rest of it was in fact efficiency savings. It is therefore understandable if we feel a bit worried that what seems on paper to be a substantial commitment to spending large sums of money is, in a significant respect, notional, because it is dependent on the redistribution of money that the MOD already has but is supposed to spend more efficiently in some way or another.

[Mr Spellar]

May we forbear on the nomenclature of the civil service—the so-called efficiency savings? Efficiency, as I understand it, is when we are running a payroll office and using 100 people, but we bring in new equipment and only employ 50 as a result, while keeping outputs the same. Efficiency is when people find new and improved ways of undertaking their work. Everything else is cuts. We should be clear that many of the things we are discussing are not efficiency savings but cuts, and we should describe them as such.

[Dr Lewis]

The right hon. Gentleman perfectly exhibits the cross-party basis on which we try to find agreement on such matters in Committee, and the extent to which we succeed in doing so. He is of course absolutely right.

I do not intend to speak much longer, because it is excellent to see so many would-be contributors to this short debate, but I will first refer to the question that was put to Mr Lovegrove. We asked, basically, when the point will arrive at which an organisation can truthfully say, “We are just about as efficient as can be and, indeed, any further ‘savings’ that we make must amount to cutting into the bone, having already cut through the flesh.” The permanent secretary’s response was as follows:

“There may be a moment at which that happens. It is not on the horizon right now. There are certainly efficiency savings that we can get at in the Department, and our focus is on doing that and seeing whether or not we can go even further. It is only at that point that we would start engaging in the kinds of conversations that you suggest.”

With the greatest respect to the permanent secretary, who as I say made a good impression and was a credible witness in our examination of the annual report and accounts, we hear time and again from within the armed forces the same underlying fear: that we are in danger of creating a hollow force, which may have exquisite equipment—perhaps not enough so-called platforms, but exquisite nevertheless—but not enough people to man it.

The trouble is that short-term cuts—I beg your pardon; efficiency savings—can lead to long-term problems. That applies in particular to training. With the carriers coming on stream, the big frigate programme having to get under way and the new F-35 joint strike fighters taking over the maritime air role from the sadly missed Harriers, which will have filled too long a gap in our naval capabilities, now is the time when we should inject maximum effort into training. Yet we find ourselves in a position—perhaps for reasons of morale or under-investment, or perhaps because insufficient emphasis is being placed on defence in our national priorities—of struggling to recruit and retain the people we need even as we cut the size of the armed forces.

The Government have not broken any rules, but they have scraped over the line by the narrowest of margins. There is no guarantee that we will not dip below the 2% figure. People usually come up with the response, “Just remember that we are the second highest spender on defence in NATO.” I remember that sort of argument from back in the 1980s, when people who wanted us to spend less on defence—we were spending quite a lot in those days; between 4.5% and 5%—said, “Why should we spend this amount on defence when Germany and so many other European countries spend so much less than we do?” The answer, as the author of a short and pithy letter to The Times pointed out, was that the countries that we were being compared with were all on our side. We have to judge our defence expenditure by what our potential adversaries spend and what defence and attack capability they get for the money that they invest.

We do not want to engage in a race to the bottom. We do not want to preen ourselves on doing a good job because people on our own side are spending even less than we are. Our percentage expenditure on defence is lower than it has ever been—even on the new calculation, it is 0.1% lower than it was in the previous financial year. Something has gone wrong with our scale of national priorities, and the purpose of the Committee’s report is to draw attention to that, in the hope that the Government will renew their emphasis on their first duty: to keep our nation safe.

[Several hon. Members rose—]

[Mr Peter Bone (in the Chair)]

Order. It may help Members to know that I hope to finish this debate at around 3 o’clock. It is not my intention to put a time limit on speeches, so perhaps Members will bear that in mind.

13:54

[Mrs Madeleine Moon (Bridgend) (Lab)]

I will not delay everyone for long. Although the Committee found that the Government’s accounting criteria fell firmly within the NATO guidelines, we also found that those criteria had been amended to include several significant items that had not previously been included when the UK calculated its defence expenditure. That is the nub of the issue that we must address. The Committee is concerned that the inclusion of such items, which were critical in attaining the 2%, could undermine the promises in the SDSR of new money for defence.

During our inquiry, there was considerable discussion of the 2% as an indicator of Britain’s political willingness. Witnesses said that

“2% is good politically”

and not to meet the 2%

“would have been damaging to our reputation politically.”

The 2% was said to have

“a…powerful symbolic meaning”.

The UK has made great play of that 2% as demonstrating its commitment to collective defence in NATO, but the inclusion of items that had not previously been included, such as pensions, has not gone unnoticed—with considerable contempt—across the alliance. As well as being a member of the Defence Committee, I represent the UK on the NATO Parliamentary Assembly, and I have found that other countries, when talking about their expenditure and accepting that it does not reach 2%, take great delight in pointing out that their figures do not include pensions, as they have no wish to use creative accounting to bolster their spending. That is divisive within NATO and damages our credibility and capability to defend our shores and those of our allies.

Our report highlighted that 2% should be a minimum, not a target, and certainly should not be seen as an indicator of capability or capacity, or give a false glow of competency and readiness. The report also urged the Government to provide a calculation of what defence expenditure would be if we left out the new items such as pensions and used the same items as we had under the 2010 accounting rules. We still await those figures.

A perfect storm is building of cuts to personnel, cuts to training, problems in procurement and gaps in capability. With the 2%, there is a disparity between our procurement aspirations and their affordability—and our capacity to deal with major defence equipment deficiencies, such as the engines for the Type 45 destroyers and the delays in replacing the Type 23 frigates and logistics supply ships. I have a major concern in particular about the Royal Navy’s capacity and capability. If we went back to realistic accounting, perhaps we would be able to deal with those issues.

I do not want to take too much time, because I know that colleagues want to speak, but I must emphasise that in our report, the Committee expressed concern that the UK must not become a hollow force. Sadly, despite the great commitment and bravery of our personnel and their amazing “make do and mend” ingenuity, I fear that we are hiding our vulnerability behind the cardboard shield of 2%.

13:58

[Mr James Gray (North Wiltshire) (Con)]

It was just outside the constituency of the hon. Member for Bridgend (Mrs Moon) that Her Majesty’s Government first committed two or three years ago to the 2% target—or the 2% figure; I will come back to the target in a moment. I would be ungracious if I did not start by saying that I warmly welcomed that that was the case. Until then, through five years of coalition government, that had not been the case. It probably would not be the case—dare I say, without being too party political—if we had a Labour Government; people would seek to find savings from defence to spend on schools and hospitals. The first thing that we ought to say is that thank goodness we have that 2%. I am glad that the previous Prime Minister made that firm and rather surprising commitment at the Wales summit.

[Mr Spellar]

Will the hon. Gentleman tell me in which year under a Labour Government expenditure fell below 2%?

[Mr Gray]

The trouble is that under Labour Governments we always have wars and things so we have to keep spending up—that is the difficulty. However, the right hon. Gentleman is absolutely correct. I am not suggesting that the Labour party made cuts in previous years, but, from listening to some of the speeches produced by the current leader of the Labour party, it would be perfectly reasonable to expect that significant defence cuts would be made were Labour to be in power today.

[Mr Spellar]

Will the hon. Gentleman give way?

[Mr Gray]

If the right hon. Gentleman will forgive me—[Interruption.] If the right hon. Gentleman will forgive me—[Interruption.]

[Mr Peter Bone (in the Chair)]

Order. The hon. Gentleman is not giving way.

[Mr Gray]

Before the right hon. Gentleman leaps in to enter into a party political discussion of the matter, the purpose of the debate is not to have a party political pop across the Chamber—and of course I would not wish to tread unreasonably on the Opposition’s personal grief on this subject.

[Mr Spellar]

Will the hon. Gentleman give way?

[Mr Gray]

I would really rather not. We have not got very long—[Interruption.]

[Mr Spellar]

On a point of order, Mr Bone. As we are having a debate on defence, it is perfectly proper for the hon. Gentleman, who is normally much better behaved in the Defence Committee, to make partisan points. What I think is improper and verging on being out of order is then not giving way for a response, because I for one do not believe in unilateral disarmament either in the Chamber or in our defence policy.

[Mr Peter Bone (in the Chair)]

The right hon. Gentleman is very experienced and knows full well that that was in no way a point of order.

[Mr Gray]

I am most grateful.

[Mr Spellar]

Will the hon. Gentleman now give way?

[Mr Gray]

No, if the right hon. Gentleman will forgive me. We have a short debate and I have one or two things to say. I do not want to go on too long, but too many interventions of that kind will simply delay the proceedings. He knows perfectly well, because he and I are close friends—

[Mr Spellar]

Give way, then!

[Mr Gray]

I have the strongest respect—[Laughter.] Allow me to finish the sentence. I have the strongest respect for the strength of commitment by Labour members of the House of Commons Defence Committee to the defence of the realm. Perhaps the right hon. Gentleman is right in saying that I have been a little ungracious in talking about some other parts of his party’s approach to defence because I know the members of the Labour party on the Defence Committee are strongly committed to that.

[Mr Spellar]

rose—

[Mr Gray]

I am happy to give way.

[Mr Spellar]

May I thank the hon. Gentleman, my friend from the Committee, for giving way? I point out that in fact he cannot point to any Labour party policy. The policy of the party is decided at our party conference, as indeed is our commitment to Trident. In the previous Parliament, when decisions were being put off on Trident, there was an overwhelming majority in the Labour party to support the Labour party policy of renewal of Trident. It is the same for the defence budget.

[Mr Gray]

I am most grateful and greatly reassured by the right hon. Gentleman’s commitment both to Trident and to an increase in defence spending. I look forward to that vision being repeated by the hon. Member for Leeds North East (Fabian Hamilton) when he replies to the debate from the Front Bench. It is good news to know that that is what Labour thinks.

In all events, the debate is not about which party will spend more on defence. I think perhaps we should move away from that parti pris squabble and move on to discuss the report in front of us, which is a very well worded, calculated and researched paper. The first thing I would say, however, is that the Ministry of Defence’s accounts are second only to the Schleswig-Holstein question in being completely and utterly incomprehensible. I think there is nobody alive today who fully understands the MOD accounts, so the one or two accountants in the Department are well able to move figures around and fiddle with them in such a way that no normal human being can understand or follow.

Indeed, much of the language used is equally incomprehensible. For example, in paragraph 14 of the Government’s reply they are talking about the £11.2 billion of efficiency savings—we asked where they would find that. It lays out a few efficiency savings first and then says:

“A further £2 billion will be delivered through the reprioritisation of existing funding.”

They will save £2 billion through the reprioritisation of existing funding. They then go on to say that £2.1 billion that will come in from the joint security fund will in fact allow cuts in the ordinary defence spending. Therefore, that is not extra money coming in from the joint security fund at all; that is merely replacing moneys that otherwise were to be cut. There are many other examples of precisely the same thing.

Without a PhD in such matters it is simply impossible to understand exactly how the MOD accounts work and I am slightly concerned that the Government’s response tends not to try to clarify matters but to make them even more complicated than before. That makes comparators extremely difficult. It is very difficult indeed to compare our spending today with what we spent in the past. My right hon. Friend the Member for New Forest East (Dr Lewis) touched on this: it is perfectly true that when I was born in 1954 we were spending something like 7.8%—if I remember rightly from the charts in the report—and today we spend about 2%. Therefore, the cut has been gigantic. However, comparing what we were spending then with what we spend today is extraordinarily difficult because of the accounting procedures.

It is unclear whether things like urgent operational requirements, or several other things that occurred in the past, are included, not least because, as the MOD said in its reply, it keeps its accounts only for seven years. Therefore, if we ask officials about any financial matter before seven years ago, they do not know. They are unable to give answers on what happened in the 1950s, 1960s and 1970s because they do not keep the accounts. It seems to me simply bizarre that a Government Department should not keep accounts in perpetuity—it ought to be able to give an answer on what Government spending on defence was at the time of Waterloo if we asked the question sensibly. To say that it does not know for more than seven years ago is simply extraordinary. We therefore do not know how our spending today compares with previously because of that rule and we cannot compare our spending with other NATO countries for the same reason: it is all lost in the shrouds of mystery and antiquity.

My right hon. Friend made the extremely important point that 2% is all very well, but it is not a target and it is not even a floor—it is absolutely the minimum. In terms of the rhetoric, the Government appear as if they are claiming, “Haven’t we done well? We have achieved 2%.” No, never in the history of British defence before have we ever had to spend only 2% of GDP. Actually, that is the lowest figure we have ever been at. Moreover, if we were to listen to the previous Chancellor of the Exchequer and we were to face quite a significant recession post-Brexit—I personally do not believe that will occur, but he said so plainly—2% of GDP would presumably mean a significant cut in the pounds spent on defence. Therefore, the 2% figure is, to some degree at least, misleading. What we need to know is that this year we are spending £35 billion or thereabouts on defence and that that will increase every year irrespective of what happens to the economy.

The opposite applies as well. Supposing the economy were to grow at some fantastic rate thanks to Brexit—let us imagine that we see 2%, 3% or 4% growth—does that really mean that we will spend billions and billions of pounds more on defence than we have currently programmed to do? If so, how on earth will we find things to spend the money on? I am not certain that the 2% figure necessarily allows for sensible comparators with other Departments or that it is quite the right way to judge it.

We need to know how much the Government will spend and, as my right hon. Friend and the hon. Member for Bridgend said, not only how they will spend it but what they will spend it on. What we need to know is what we can do in defence terms—how many ships, tanks, soldiers and sailors and all the other things we need, such as cyber, will we have in the future? The 2% figure does not necessarily tell us that. It is a question of capabilities and not necessarily of money.

While I very much welcome the Government’s commitment to the 2%, which is certainly a step in the right direction, that by no means reassures me that we as a nation are ready to face the appalling threats we now face. Russia is a bigger threat to us today than it has been since the cold war, the middle east is in complete turmoil and much of the rest of the world is a disaster area and we are struggling to maintain a level of spending that we have never before seen.

It seems to me that we are in danger of failing in our primary responsibility of defending the realm by allowing ourselves to be fooled by a piece of camouflage: “Aren’t we being great? We are spending 2% of GDP”. Are we able to defend the realm? I suggest that we may well not be.

[Several hon. Members rose—]

[Mr Peter Bone (in the Chair)]

I know this is a very important debate and I have six Back-Bench Members who want to catch my eye as well as the Front Benchers, so could Members keep their remarks as brief as possible?

14:08

[Patrick Grady (Glasgow North) (SNP)]

Thank you, Mr Bone. I will try to be as brief as possible because I also hope to catch the Chair’s eye in the next debate— I have half a speech to give because at first I thought there would be one debate.

Of all the Government’s commitments, we can point at and quantify two—2% of gross national income on defence and 0.7% on aid—and the others go up and down. The right hon. Member for New Forest East (Dr Lewis) appeared to imply that somehow that was a bad thing and that spending more on welfare than defence, showing compassion to the most vulnerable and needy in our society and providing that social security safety net of which we all ought to be so proud, was somehow at odds with finding the money we need to spend on the defence of the realm.

The right hon. Gentleman also spoke of investment, which I think is also quite important when considering the international aid budget. I would argue that spending money on international aid is an investment in our security and in our enlightened self-interest—helping to build a more stable and secure world by lifting people out of poverty and helping them get the food and education that they need.

It is particularly interesting that the 0.7% target, which admittedly was agreed some time ago, was based on a calculation of what was needed to meet the globally agreed goals for poverty eradication, including ending hunger, access to education and so on. I am not entirely clear where the 2% target came from. Is it a needs-based assessment of what NATO countries ought to be spending in order to effectively defend themselves or, as the report seems to say, a political target—an arbitrary amount? I think that has serious implications.

Even if we are meeting the 2% target, the key point I make is that there is a serious risk of conflation between those two targets. This might be a point of agreement: by definition, the double counting of money that is spent on aid and money that is spent on defence means the total amount of money being spent on each of those is less than it ought to be. That might be permitted under OECD rules, and sometimes there might be a good reason, but both the people who support the aid budget, like I do, and people who support the minimum defence spending target are effectively being short-changed by the Government’s practices in this regard.

There is also the question of what the 2% is actually spent on. I was in Westminster Hall not that long ago and was told that money could not be found for the Type 26 frigates, yet there seems to be a blank cheque for weapons of mass destruction on the Clyde. I have spent a lot of time in Westminster Hall this week discussing the Chagos islands and Libya, as has the Labour Front-Bench spokesperson, the hon. Member for Leeds North East (Fabian Hamilton). We heard a worrying amount of language that sounded an awful lot like old-style projection of power and a frankly old-style colonialist mind-set that belongs in the past. If the Government insist on setting these targets for defence spending and want to spend that, fine, but please spend it on what we need, such as modern counter-terrorism or conventional forces in places such as Fort George near Inverness, which is where I grew up. Do not conflate that spending with aid and do not waste it on weapons of mass destruction.

14:09

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to serve under your chairmanship, Mr Bone. I commend the Chair of the Defence Committee on the leadership he has shown in bringing the Committee together, as is obvious from our work. While there may have been a wee bit of spat today, the fact is we all work together because we all share the same goals. It is good to be able to tell people outside of the Chamber that we were able to work together on behalf of our service personnel. It is always wonderful to be able to do that.

As a member of the Defence Committee, this is an issue I feel strongly about, and other hon. Members have strongly expressed themselves as well. The evidence that came before the Committee was incredibly persuasive, and I believe the Government have issued their conclusive response since April 2016. The crux of the matter is clear. I have a direct quote from the press release for the report, which I agree with. It says that

“the Government has achieved its 2% commitment to defence spending in the last year only through what appears to be creative (albeit permissible) accounting.”

That is the fact of the case. The hon. Member for North Wiltshire (Mr Gray), who spoke very clearly, outlined that. We are all saying together that there has been creative accounting and that, while the figures may show that the percentage has been met, it is not where we wanted it to be. That is the clear issue and what we are about.

I am a straight man. If I can do something for someone, I will tell them and then do it. If I cannot do something, I will tell them that it cannot be done, and together we can work to find an alternative plan. We do that in the House, in the advice centre back home, in the constituency office and in life in general. I understand that Government bodies cannot always achieve miracles and that people cannot do everything I would like them to do, but this is life. By the same token, if someone says they can and will do something, I expect it to be done. That is the fact of it, and that is what the debate is about.

When the Government made the pledge, I was among the first to stand up and congratulate them on taking this step to ensure that our armed forces were at full strength in all aspects. Why, because of creative accounting, has the pledge not been met in real terms? Why have I seen so much evidence that the 2% pledge has not been fulfilled? Today, along with other members of the Committee, I am holding the Minister and the Government to account on the reasoning behind the failure simply to do what they committed themselves to do with the statements they made a long time ago.

The Government’s commitment to not fall below the NATO-recommended minimum defence spending of 2% of GDP for the rest of the current Parliament was not simply a message to our armed forces that they will not be sent out without adequate equipment, training and intelligence. It also sent an important message to our partners and potential adversaries that we are a force to be reckoned with and that we will continue to improve and enhance our defence with an appropriate budget. As other hon. Members have said, we have to respond adequately and strongly to threats, and send a message that defence and our ability to take up arms if necessary is a Government priority. That message has been diluted and clouded by rhetoric, and has not amounted to much in reality.

It is unclear what accounts have been included in the definitive defence budget, both now and in the past. The Ministry of Defence has been unable to provide a robust dataset that identifies which years the costs of operations or the purchase of urgent operational requirements were included in the calculations it submits to NATO. Such inclusions are allowed by NATO, but the lack of clarity confuses anyone’s ability to make year-on-year comparisons of the defence budgets. The MOD must be secretive—that is the very nature of it—but there is no need for shading in that respect, unless it is because the Government hope to get away with not doing what they said they would do. If that is not the case, it could easily be cleared up and rectified with a clear, simple and transparent spreadsheet. That has not been done. I am sure the Minister will respond to that when the time comes.

In accounts provided by the MOD for 2010 and 2015, the new inclusions of the 2015 accounting strategy are difficult to identify. The new inclusions should be outlined and shown from which Department each was previously funded, such as war pensions, intelligence gathering and all of the other things that may be found in the budget for the first time that have suddenly been introduced as part of the 2%. Hon. Members will understand why the Defence Committee is concerned; others who are not on the Committee have expressed concerns as well. My mother often talked of “robbing Peter to pay Paul”. That is what appears to have happened. We have enlarged one defence budget by doing away with others. In the end, Peter and Paul have the same combined amount as they did before. It really is hard to understand how it all works.

As I said in March 2015, my concern is not and never has been about the pennies. My concern is about provision and whether we have in place what we need to actually do the job we want. That was mentioned by the hon. Member for Glasgow North (Patrick Grady), who spoke before me. Is there enough? I do not believe there is enough spending, and the report backs up the fact that that has not changed. My first concern is not having the adequate manpower or provision to step in and offer adequate aid to buttress against further pressures in the areas in which we are involved, which is in the wider context of heightened security tensions across Europe and the middle east and across the Atlantic.

I and other members of the Defence Committee have expressed concerns before about the numbers of reservists and how we get those numbers up. How do we deliver that? How do we retain our regulars? How do we ensure that our service personnel are adequately trained and equipped, and that we have the frigates and ships to fulfil the Royal Navy’s roles? Sometimes Members who are not here or not on the Defence Committee may not know what those roles are. Do we have an RAF that can carry out its responsibilities, from as far away as the Falklands to the piracy in the horn of Africa? Can we be effective in the middle east? We need to be, and we need to have the money in place to do that.

We face threats of both an internal and existential nature, which we need to be prepared to meet. Those threats stretch the capacity of our defence capabilities, first, to maintain the standard of assistance in areas in which we are involved and, secondly, to meet the prospect of further demands. That is what we have to do: meet those further demands.

Those concerns have been shown to be truth over the past 18 months, as we have become involved in more and not fewer situations that require, if not a presence, then intelligence and preparation. We cannot stretch ourselves to such a limit that we are no longer able to protect our citizens, or commit to and deliver our responsibilities, wherever in the world they may be.

As I stood then for at least a 2% of GDP spend, I stand today. We will not be pacified with pie charts and graphs, as the Chair of the Defence Committee presented it to us at an earlier stage, or columns of this or that. We need an honest and open account, and that is not what we have received.

I am conscious that other Members wish to speak, so I will conclude. I say to the Government: do the right thing. Be a Government who stand by their word. Do not seek to pull the wool over the eyes of the Defence Committee or anybody else outside it, when our national security and the lives of men and women are at stake. Our men and women whom we are very proud to see serving and honouring the pledge they have made to defend all these shores and all our interests deserve no less, and their service demands that we cease the disservice that has been done. The Government should simply do what they said they would do by delivering on the 2% and ensuring it is a real 2%. At this time, I do not believe it is.

14:20

[Ruth Smeeth (Stoke-on-Trent North) (Lab)]

It is a pleasure to speak under your chairmanship, Mr Bone. It is always a challenge to follow my informed colleagues in these debates, so I apologise for any repetition.

The first duty of any Government is the defence of the realm and security of their citizens, so I welcome this opportunity to discuss the Government’s ongoing defence commitments. We are living through a period of global turmoil and national uncertainty. Though Britain is preparing to exit the European Union, we must remain an outward-looking nation, committed to fulfilling our role in the world and supporting the efforts for peace and international stability across the globe.

The threats to that peace are many and varied: an emboldened Russian Federation, continuing instability in the middle east, a Europe struggling to come to terms with the historic migrant crisis, ever-adapting terror networks, and modern technology that expands the potential threats to our country and that has revolutionised the theatre of war. In these uncertain times, it is more important than ever that the UK is committed to maintaining a military that is capable of dealing with whatever threats the future may hold and that meets the capacity and capability needs identified by the strategic defence and security review. That can be achieved only by ensuring sufficient year-on-year funding to maintain and expand our armed forces capability. That is why I and my colleagues on the Defence Committee welcome the Government’s continued commitment to the 2% pledge on defence spending, to ensure our NATO compliance. That commitment sends an important message to our allies in NATO and beyond that the UK remains committed to fulfilling our role in the world, and to defending and supporting our friends, wherever and whenever that need arises.

As we have heard, the UK has the largest defence budget in the EU, the second largest in NATO and the fifth largest in the world, but money alone will not solve these issues. I hope that the 2% pledge is a commitment to maintaining our military strength in the long term. It is important that we do not simply take the figure of 2% as an arbitrary one or as the final word on Britain’s spending and procurement in the years ahead. In charting the future of the UK’s military capacity, we must always endeavour to work from first principles. What is required to keep our country safe?

In our Committee’s report, we raised a number of initial points in response to the Government’s spending plans. We noted that while the Government met their 2% commitment to defence spending last year, they did so with the aid of what appeared to be a measure of creative accounting, albeit creative accounting that was accepted by NATO, as was outlined by the Chair of the Committee, the right hon. Member for New Forest East (Dr Lewis). By revising the criteria by which defence expenditure is calculated, the predicted Government spend for 2015-16 rises from £36.8 billion, or 1.97% of GDP, to £39 billion, equivalent to 2.08%. That was achieved by including expenditure from other funds, such as the conflict, stability and security fund, which is controlled jointly by the MOD and the Department for International Development.

I have no doubt that the Government’s commitment to defence spending and recognition of the challenges our country faces is sincere. However, our troops deserve more than financial wizardry. I hope that, in future years, the Government work to ensure that the necessary resources are put into defence, and ensure that we are spending a minimum of 2% annually in real terms, so that we have sufficient resources to fund our capabilities as well as to invest in our future.

I also welcome the Government’s commitment to maintaining the size of our armed forces, with plans to grow the size of the Royal Navy to 30,600 in 2025—an increase of 400 personnel and an uplift of 1,600 over the position initially laid out by the previous Government in 2010. However, as we have discussed today, with the planned retirement of HMS Ocean, even those numbers are insufficient to fully man our current capabilities. I have significant concerns about proposed cuts to our Royal Marines in terms of absolute numbers, which I hope our Committee will continue to investigate.

Considering the ongoing active deployments of our RAF forces, plans to expand the strength of RAF regular personnel to a baseline of 31,750 are welcome. However, with the imminent arrival of not enough F-35s, we will have to review that number. I remain sceptical of the Government’s suggestion that an integrated Army of 112,000 personnel is sufficient to deliver the Army’s contribution to joint force 2025, but time will tell, and I am sure we will revisit that.

There is much in the Government’s response to our report that is welcome, but I wish to stress the importance of ensuring that capacity is met and that our defence spending is sufficient to meet our needs, even when that may necessitate a spending increase over and above the 2%, which, despite what the hon. Member for North Wiltshire (Mr Gray) said, many Members on the Labour Benches would support. We must understand that the 2% pledge represents a minimum annual spend, and we should never seek to curtail or compromise our military capacity in order to stay within that amount. Our report stated that

“the Government must be clear that 2% is a minimum—not a target—and be prepared to increase defence expenditure further, in order to reflect the increasing threats faced by both the UK and our Allies.”

We must also take into account the UK’s situation in the wake of the EU referendum and the role that the current uncertainty may play in our economic outlook. With the additional financial and geopolitical challenges that Brexit may pose in the short to medium term, it is vital that the Government recognise those concerns and act to ensure that our military remains on solid financial and operational ground in the years ahead. A report from the Resolution Foundation suggested that the economic upheaval thrown up by uncertainty around Brexit could cost the UK economy up to £84 billion over the next five years, which would have a significant impact on the 2%. The real value of the Government’s 2% pledge ebbs and flows with the country’s economic fortunes. As outlined by the hon. Member for North Wiltshire, the commensurate drop in GDP resulting from that would be reflected in a drop in the value of the 2% set aside for annual defence expenditure, which could have a devastating effect on our capability, especially if the 2% comes to be seen as a spending cap rather than a minimum.

A further concern is the declining value of sterling and the impact that it may have on overseas procurement. One particular issue is the purchase of military equipment bought in US dollars, at prices that could greatly exceed initial estimates. For instance, the MOD recently announced the purchase of nine P-8A Poseidon maritime patrol aircraft from Boeing via a foreign military sale. The predicted cost, including training, infrastructure and the necessary support at RAF Lossiemouth, was recently estimated to be £3 billion over the next decade. However, with the pound slumping to its lowest value against the dollar in some time, the initial costs of purchase could greatly exceed initial predictions unless appropriate—

[The Minister for the Armed Forces (Mike Penning)]

I apologise for interrupting, but as former Ministers in the room and the Chair of the Defence Committee will know, these sorts of contract are offset, and predictions are put in—the Treasury has that capability. If we build a road project, we put in the project cost and the inflation cost. That risk is built into the project, which former Ministers in the Chamber know.

[Ruth Smeeth]

I thank the Minister for that. The end of my sentence was, “unless appropriate hedging is put in the contract.”

[Mike Penning]

It always is.

[Ruth Smeeth]

While I appreciate that it probably is, I do not think anyone could have anticipated the likely devaluation of the pound in recent days. I hope very much that that is the case, but we will see what happens in the long term when we get the full figures.

[Mr Spellar]

Is it not even more significant that, in giving this order directly to Boeing, the MOD did not seek to get any offset in other programmes in order to create work back in the UK?

[Ruth Smeeth]

I totally agree with my right hon. Friend. With the P-8A and even the F-35, we get only 20% of the build in the UK.

[Mr Spellar]

And the Apache.

[Ruth Smeeth]

And the Apache. There are significant concerns about British manufacturing capabilities within the current procurement programme.

As the UK comes to terms with our future outside the European Union, it is more important than ever that we maintain a strong independent military presence. I believe the Government recognise that. I again welcome their response to the Defence Committee’s report and their ongoing commitment to supporting a robust UK military. I for one believe these issues to be above party politics.

14:29

[Steven Paterson (Stirling) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Bone.

I was going to talk about the 2% pledge, but many of the points I was going to make have been covered today and were extensively covered in the report, so I will confine my remarks to chapter 4 of the report: “UK defence: what can we afford”. It considers that question in the context of the 2% pledge.

In paragraph 75, the Ministry of Defence is quoted as saying that the SDSR would

“determine priorities for investment to ensure that the UK has a full suite of capabilities with which to respond to defence and security threats”.

Indeed, page 67 of the “National Security Strategy and Strategic Defence and Security Review” document of last year identifies the three tiers of domestic and overseas risks we face, grading them as tier 1, 2 or 3

“based on a judgement of the combination of both likelihood and impact.”

Taking that at face value, the National Security Council has identified terrorism, international military conflict, cyber, public health, major natural hazards and instability overseas as the tier 1 threats facing the UK.

With that exercise having been undertaken, one would have thought the resources would follow the perceived threats and their perceived likelihood, but that does not seem to be the approach followed by the Ministry of Defence. For example, it is extremely concerning that the Government seem to be hellbent on pursuing their ideological obsession with a new generation of nuclear weapons, which its proponents argue are to deter an attack using chemical, biological or nuclear weapons—a tier 2 threat according to the National Security Council risk assessment.

Meanwhile, the Government have delayed commissioning and building the promised Type 26 frigates on the Clyde, which my hon. Friend the Member for Glasgow North (Patrick Grady) mentioned. Those are essential to address tier 1 threats—international military conflict and instability overseas.

[Bob Stewart (Beckenham) (Con)]

May I ask whether the hon. Gentleman is in favour of continuing to produce Type 26 global combat ships on the Clyde when their primary role is the protection of our independent nuclear deterrent, which he detests?

[Steven Paterson]

I am in favour of fulfilling the promise made in 2013 to have 13 ships built on the Clyde. If the hon. Gentleman goes to the Ministry of Defence website he will see that its description of those ships’ role includes a whole range of things in addition to protecting the nuclear deterrent.

We wait to see whether the national shipbuilding strategy, which is due by 23 November, sees an end to the disgraceful delay in commissioning those ships on the Clyde. We wait to see whether there is a guarantee that the five multi-purpose frigates will be built on the Clyde, or whether they will be commissioned to be built overseas. Based on the answers to those questions, we will evaluate the long-term prospects for the Clyde yards, which provide vital capability infrastructure, enabling the UK to address tier 1 threats set out in its own national security strategy and SDSR.

Originally, of course, the Government promised that 13 Type 26 frigates would be built on the Clyde, but they revised that substantially to eight, with five general purpose frigates to make up the shortfall. In paragraph 90 of the report, the Committee correctly identifies the risk:

“Should…the ‘concept study’ to investigate the potential for a new class of lighter, flexible general purpose frigate be unsuccessful, we wish to be informed at the earliest opportunity of the MoD’s contingency plans to deliver the extra ships to satisfy the total originally promised.”

The Government’s response to these concerns merely indicates a willingness to keep the Committee informed, and we must hope that there will be no further backtracking on the general purpose frigates. Further, we await confirmation that they will be built on the Clyde. Should that not occur, as well as being a betrayal of the skilled workers employed at those shipyards, it will threaten the yards’ capacity to deliver complex warships in the future and undermine the UK’s ability to meet the challenges identified in the national security strategy and SDSR.

The report also identifies clear concerns among the witnesses the Committee questioned about the MOD’s ability to maintain the size of the armed forces at the levels envisaged in the SDSR, which several speakers touched on today. Those concerns were voiced more than six months before the EU referendum and the economic impact of that vote. Should the decision of the UK as a whole to leave the EU result in an adverse economic impact on the UK, as seems likely given its impact in the months since the vote, there will be further pressure on the UK’s ability to deliver expensive military capability and manpower in future.

In particular, the collapse in the value of the pound may have a serious impact on the affordability of imported military systems, of which we have many and plan many. Spending 2% of a significantly smaller pot will have serious implications for the delivery of ships and planes and the maintenance of manpower, particularly if, as seems inevitable, the costs of vastly expensive programmes such as the successor nuclear weapon submarines spiral.

I thank the Defence Committee for its work in this area—it does an excellent job looking at this policy. I am very happy to have had the opportunity to speak today.

14:34

[Phil Wilson (Sedgefield) (Lab)]

It is a pleasure to speak under your chairmanship, Mr Bone.

This debate is about what sort of country we see ourselves as being. I have always seen the UK as a force for good, and I mean that not just in military terms but in our humanitarian role in the world and how we have defended liberal democracy over the decades. The issue is not just the 2% pledge, but whether we have the capability to achieve what we set out to do as a military nation. In 2013, the UK’s GDP was £1.6 trillion, with a defence budget of £37 billion, or 2.3% of GDP. In 2014, our GDP was £1.7 trillion and the defence budget was 2.17% of GDP. At the same time as the budget has fallen significantly over that period, Russia’s defence budget went up by 21% last year alone. That is what we must consider.

I do not think the Russians want to enter into a war with the west, but times are uncertain. Russia might be a declining power, but insecure powers, like insecure people, may lash out, and that country also has nuclear weapons. I read in The Times at the beginning of this week that Russia has just unveiled a new sort of intercontinental ballistic missile. We know that it has put nuclear weapons into Kaliningrad, and we know what it does in Syria. We definitely know what it did in Ukraine. Russia is flexing its muscles, and we must be prepared for that.

General Sir Richard Shirreff said in his evidence to the Committee that even if all NATO’s member states put 2% of their GDP into the defence of the west, he was sceptical about whether that would be enough to see off the threat from countries such as Russia. We must realise that many of the military conflicts and issues around the world are asymmetrical, and there are all sorts of issues such as cyber and terrorism. Russia is one nation that we could find ourselves in conflict with.

China’s defence budget is well over $200 billion. The rest of that region’s defence budget put together is only $45 billion. A figure I came across at the beginning of the week is that there are more than 100,000 UN peacekeepers around the world in 16 locations, many of them in Africa. The world situation is very turbulent. Are we in a position to defend ourselves?

Sir Richard Barrons said in The Daily Telegraph on 17 September that the UK’s armed forces are withered. I do not want to talk down our armed forces and the brave men and women who serve in them, but this man knows what he is talking about, so he should be listened to. He referred in the Financial Times to Britain’s ability to defend itself from aerial attacks and said:

“UK air defence now consists of the”

working Type 45 destroyers,

“enough ground-based air defence to protect roughly Whitehall only, and RAF fast jets. Neither the UK homeland nor a deployed force—let alone both concurrently— could be protected from a concerted Russian air effort.”

These issues are worrying for me and, I believe, for the other people in this Chamber and the Defence Committee.

Is 2% enough? When other things, such as pensions and so on, are included, and there is creative accounting, do the Government really mean 2%? We must sit down and think whether it is enough. Efficiencies are brilliant and fantastic. We all agree with that, but the one thing we must do is to protect this country. We must have a serious look at whether 2% is what we should be paying.

We have two brilliant aircraft carriers that will come into service in a little while, but have we got enough ships to defend them? Have we got the submarines to defend them? Have we got the skills to man them? We need to look at that. If we are to punch above our weight, let us ensure that we can actually do that. We just have to be honest with ourselves. Is 2% enough? Is the 2% actually 2%? Should the figure be higher? We need to hear from the Minister on that.

14:40

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

It is always a pleasure to serve under your chairmanship, Mr Bone. I thank the right hon. Member for New Forest East (Dr Lewis) for his input this afternoon and for his chairmanship of the Defence Committee. I associate the Scottish National party with his comments about the excellence of the Committee staff.

In preparing for today’s debate, I not only read the report and the Government response, but looked back over my notes from last year of the evidence that the Committee took. It speaks well of the quality of the witnesses to the inquiry that much of what they said is now coming to pass. I will touch on some of that evidence today.

This is obviously a vast subject that really deserves a day’s debate in the House. However, time pressures will restrict me to only dipping into some of the issues raised in the report. Those are the decidedly squidgy nature of what 2% means; the pressure that that will inevitably put on future procurement projects; and the overwhelming feeling that the Government are confusing “preserving the shop window”, which is typified by the pledge, with actual hard-headed strategic thinking that links in to capability. The focus on inputs has simply provided a useful smokescreen for a distinct lack of usable outputs in our defence capability.

The report is unequivocal that although 2% may act as a useful benchmark and a statement of intent, we should not kid ourselves that it means anything more than the MOD wants it to mean, because, quite simply, using previous measures of defence spending will bring us below the desired figure. Shifting the goalposts means bringing into that figure a whole range of spending priorities, from pensions right through to Trident, that would not have been included before. That has conspired with a whole range of other restraints and ring fences in a way that will see the MOD increasingly tie itself in knots.

Let us take pay restraint, for example. Central to future budgets of the Department is a commitment to ensuring that any rise in the pay of personnel does not exceed 1%. Any upwards movement on salaries would, given the nature of such a target, mean less money for other projects. As inflation rises in post-Brexit Britain, so our dedicated and selfless armed forces personnel will face a pay “crunch”, as Dr Robin Niblett of Chatham House foresaw in his evidence to the Committee last October.

In that regard, although giving hard-pressed personnel a pay rise will be out of the question, the one part of the 2% that there will be no problem with is funding the weapons of mass destruction. I and my colleagues have been relentless in asking the Government to address that anomaly. In fact, if the SNP Defence team could be renamed, I am sure that we would be called HMS Relentless, because we know that every penny spent on Trident is a penny less spent on conventional defence, and that also mean fewer pennies for the salaries of serving personnel.

The right hon. Member for New Forest East suggested that we should move to “three to be free”. I think that a great campaign would be to go for “nil to save on the bill”. Perhaps the Minister can comment on that.

As the Member for Dunfermline and West Fife, I am sad to say that every penny spent on Trident also means less money to support the stunning Queen Elizabeth-class carriers being built in my constituency. Those amazing vessels deserve and require a host of capabilities around them, but in the Government response to the report, we do not get much idea of how they will be paid for. Other hon. Members have alluded to the Type 26s, for example. Whether we are talking about the F-35B joint strike fighters that will fly from the carriers or the Type 26s that will protect them, it seems that in putting forward their pledge, the Government may have caught themselves in a trap of their own making. Of course, as the Great British pound continues to fall in value against the dollar, each of the planned 138 F-35s becomes that bit more expensive, even allowing for what the Minister alluded to earlier. Every day that passes without a timetable being given for the Type 26 programme means that the hard work of my constituents in ensuring that the carriers are delivered on time and on budget is being undermined. I hope that, along with addressing the other substantial points from the report today, the Minister will take the time to let us see what his Department plans to do to ensure that those projects are not adversely affected by the plummeting pound.

Ultimately, the problem is that the 2% pledge should not be confused with a strategy—a charge made by many witnesses in their evidence to the Committee and most forcefully by Professor Julian Lindley-French. The problem is well illuminated in the recent document leaked to the Financial Times, in which General Sir Richard Barrons critiqued the Ministry of Defence for its focus on “preserving the shop window” over its most basic national security duties. The 2% pledge obviously sits very nicely in that shop window.

Also in the shop window sit projects such as Trident, which the Government hope will boost our international prestige and look good in a press release, but which bear no relation to the threats that this country faces and are taking a terrible toll on real, usable procurement projects and, indeed, our armed forces personnel. As we float off into the uncertain waters of Brexit Britain, I would hope that at the very least we could have some form of real stability in our national defence, but as the report shows, as it is with Brexit, so it is with defence—there are more questions than answers.

[Mr Peter Bone (in the Chair)]

I thank hon. Members for their participation. Because we have run over a little bit—I thought it was right to do so—we will try to wind this debate up at 3.15 pm.

14:46

[Brendan O’Hara (Argyll and Bute) (SNP)]

It is always a pleasure to serve under your chairmanship, Mr Bone. I add my voice to those congratulating the right hon. Member for New Forest East (Dr Lewis) on securing this important debate. As we have heard from other hon. Members, he has been an excellent chair of the Defence Committee. I congratulate him and his Committee on their report “Shifting the goalposts? Defence expenditure and the 2% pledge”.

I thank all hon. Members who have taken part in the debate, but particularly my hon. Friends the Members for Stirling (Steven Paterson), for Dunfermline and West Fife (Douglas Chapman) and for Glasgow North (Patrick Grady). [Interruption.] And the hon. Member for North Wiltshire (Mr Gray) of course, although I will have to caveat that by saying that I agreed with much of what my hon. Friends said and, as the hon. Gentleman will not be too upset to discover, I did not agree with a great deal of what he had to say.

What has been confirmed to us today is that the 2% target was created to redress the balance between the defence budgets of the United Kingdom, the other European NATO members and the United States. It has been correctly pointed out that it does not necessarily follow that achieving the 2% target will deliver the defence capabilities required by the UK. The Defence Committee was very aware of the limitations of the arbitrary 2% figure in delivering capability. It may well, as has often been stated in this debate, have a powerful symbolic meaning in the context of the perceived commitment of the UK to our NATO allies. As the report says, it

“sends an important message to all the UK’s partners and potential adversaries.”

However, as I am sure the right hon. Member for New Forest East would agree, that is a far cry from saying that we are getting this right. Committing a minimum percentage of GDP to defence may well send the desired message, but—as my hon. Friend the Member for Stirling said—it does not adequately protect us from the threats that we ourselves have identified. I need not remind hon. Members of the words of General Sir Richard Barrons just last month. He said that the UK armed forces had lost much of their ability to fight a conventional war and accused the MOD of sidestepping “profoundly difficult” strategic challenges. He also said that there is

“no military plan to defend the UK in a conventional conflict.”

Let us be clear: that is because we have made in this country the political choice to go down a nuclear route at the expense of a conventional route. That will have massive consequences for what we can do now and in future. Do not just take my word for it. Just last year, when General Sir Richard Shirreff spoke at the Defence Committee, he said one either goes

“down the line of a nuclear capability at the expense of conventional capability, or conventional capability at the expense of nuclear.”

As a result of our decisions, our vital conventional defence capability has been sacrificed on the altar of this Government’s obsession with nuclear weapons. As my hon. Friends the Members for Glasgow North and for Stirling said, the most notable casualty of that is the Type 26 programme, which has been cut, delayed, cut again and further delayed while the Ministry of Defence struggles to find the money to cut the first steel on the Type 26 frigates. Lord West, a former First Sea Lord, said:

“Because of pressures…our numbers have declined. Not only is that a problem for our defence capability and the security of our nation and our people; it is a problem for our shipbuilding and our defence industries.”

The lesson we have learned from this Government is that there will always be money for nuclear weapons and that it will always come at the expense of our conventional defence. How much longer will the workers on the Clyde have to wait to start work on the Type 26 programme? How much longer does the Ministry of Defence believe it can eke out the ageing Type 23 fleet? Those frigates were supposed to have been taken out of commission by 2023, but that is now virtually impossible to see happening. The Type 26 frigates are badly needed by the Navy and are a vital part of our conventional capability; however, they are being sacrificed because of this Government’s obsession with nuclear weapons.

[Bob Stewart]

I thank the hon. Gentleman—he might even be a friend—for giving way. I repeat: a primary role of the Type 26 global combat ship is to preserve our independent nuclear deterrent. Frankly, if we really go down that road, perhaps we do not need the Type 26. If the Scottish National party were in power, it would get rid of our independent nuclear deterrent, make us really vulnerable and get rid of the Type 26 frigates while it was at it.

[Brendan O'Hara]

I appreciate the hon. Gentleman’s repetition and think that my hon. Friend the Member for Stirling adequately answered him previously. There is much more to the Type 26 frigates than simply protecting the deterrent. The workers on the Clyde were initially promised 13, which has subsequently been cut to eight. All we are asking the Government to do is honour their commitment and fulfil their promise to the workers on the Clyde.

Whatever the Government’s method of calculating defence expenditure, we have grave concerns about their strategic choices and the effects those are having on the UK’s defensive posture. As the hon. Member for Bridgend (Mrs Moon) and the hon. Member for North Wiltshire said, the MOD’s creative accountancy and ability to hide a multitude of sins in a fog of statistics is the stuff of legend. Let us be absolutely clear, as Professor Phillips O’Brien at St Andrews University said recently, defence

“cuts have fallen disproportionately on the guts of British defence: the army and logistics.”

The Army is smaller than it has been for centuries while the Government throw obscene amounts of money at Trident.

As my hon. Friend the Member for Dunfermline and West Fife said, although 2% may act as a useful benchmark and a statement of intent, let us not kid ourselves that it means anything more than what the MOD wants it to mean. As we have heard on numerous occasions this afternoon, if we take previous measures of defence spending, it brings us well below the desired figure. Only by adding a whole range of spending priorities, from pensions to Trident, can we achieve that 2%. In many ways, that renders “2%” meaningless—it becomes a totem rather than any meaningful gauge of how we defend this country. The Government have thrown everything into the pot, including the kitchen sink—indeed, we probably could claim against the kitchen sink—in order to play what has become a rather crude numbers game.

On this side of the House, we have said many times that the Select Committee’s report noted that meeting the minimum NATO spending targets does not mean that defence is adequately resourced. That is very clearly the case under this Government and previous ones. Their sums do not add up, and we believe that their decisions have been highly detrimental to the armed forces and to this country’s conventional capabilities.

In his opening statement, the right hon. Member for New Forest East said that there had been no jiggery-pokery by the MOD, but I am sure he would agree that there is, indeed, a strong whiff of jiggery-pokery in reaching the 2% target. The Government have had to rely on childish tricks, including conflating international development and defence spending, to reach this target. They have ignored numerous requests from the Committee to come clean and to explain where that money has been re-accounted for.

In conclusion, this debate has shown that the 2% figure is pretty meaningless; it is a totem and is merely symbolic. The debate is now about what we should be doing with the real money we have, rather than posturing with percentages. It is about the amount of money we have and what we do with it, not whether it is 1%, 2%, 3% or—in the opinion of the hon. Member for North Wiltshire—4%. We can do better if we allocate it properly, which means allocating it to our conventional defences and not pouring it down the black hole that is Trident.

14:56

[Fabian Hamilton (Leeds North East) (Lab)]

It is a pleasure, as always, to serve under your chairmanship, Mr Bone. We have had an extraordinary debate this afternoon here in Westminster Hall. I want to add my congratulations from the Opposition Front Bench position to the right hon. Member for New Forest East (Dr Lewis), who chairs the Defence Committee, and to all the members and staff of his Committee, on producing an excellent report. So far, nine right hon. and hon. Members have spoken about it, plus two Front-Bench spokespersons, and the Minister will speak in a few minutes.

The Chairman of the Committee made it clear at the beginning that what we spend as a percentage of our gross domestic product on defence has radically altered since I was born in 1955, a year after the hon. Member for North Wiltshire (Mr Gray). [Interruption.] Yes, I appreciate he looks considerably younger than I do. When we were born in the ’50s, it was just 10 years after the most momentous world war and the destruction of so many lives and properties throughout this country and the world. Our entire country was effectively one armed force to defend ourselves from the aggression we faced at the time. It was logical, therefore, that we should have scaled down the percentage that we spent. However, one of the themes that has come through clearly during the debate this afternoon, is that it is not about the crude percentage, but about how we spend it and the value for money we get. Speaker after speaker has made that point and I am sure the Minister will underline it when he sums up at the end.

We have heard some very good contributions. My hon. Friend the Member for Bridgend (Mrs Moon) is well known for her hard work on the Defence Committee and for her knowledge of defence. She questioned, yet again, the criteria of the calculation that was amended so that the Government were assisted in reaching that 2%. As many other right hon. and hon. Members have mentioned, including pensions is perhaps a slightly dodgy calculation when trying to make up that 2%. I would welcome the Minister’s view on the inclusion of pensions in the overall percentage. My hon. Friend made the point that the UK’s credibility is being damaged by the way in which we make up the 2% that NATO demands.

We heard a very good contribution, as always, from that expert on the Government side, the hon. Member for North Wiltshire. I have known him for many years and have worked on many campaigns with him—we share that in common. He made the point that we cannot compare the percentage spent in 1954 with the percentage spent today because the world is a totally different place. He also made a very important point about accounts: why are they not kept for more than seven years? I find that surprising. Surely the different accounts must be in the records of this place in Hansard from when estimates have been debated and discussed in the decades since 1954.

The hon. Member for Strangford (Jim Shannon), as always, made his contribution to a debate—it seems that every debate I take part in he is there, making important points. He said that the MOD was unable to provide a robust dataset and that, as his mother used to say, it was robbing Peter to pay Paul.

[Andrew Rosindell in the Chair]

I pay tribute to my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth), who made a thoughtful and well written contribution to the debate. We are the fifth largest defence spender in the world, but it is really important that 2% does not remain a maximum of what we spend to keep the realm safe. She said that we need to spend what is required. We on the Labour Front Bench agree.

My hon. Friend the Member for Sedgefield (Phil Wilson) spoke well, as always, being very knowledgeable in these things and being an active member of the Committee. He pointed to the threat from Russia. In my previous role in the foreign affairs team, I was responsible for our connections with NATO, where I went in June. We heard over and over again, from officials in Brussels and in the Supreme Headquarters Allied Powers Europe in Mons, about the increasing threat from Russia as it flexes its muscles in the world, shows us what it is made of, making up for the deficiencies of the President of that country in internal and domestic policy with aggressive foreign policy. It is very clear that that is what dictators look to divert attention.

In bringing my remarks to a conclusion, Mr Bone—[Interruption.] Sorry, Mr Rosindell. Thank you for pointing that out, Minister. In trying to bring together the points that have been made this afternoon, I make it absolutely clear that Labour’s position is to remain an active, important and strategic member of NATO and to keep our defence spending as we need it to be to defend the realm.

Everyone in the armed forces knows the damage that was done during the last Parliament when our defence spending dipped well below that 2%. Many are questioning, as we have this afternoon, what is now included in the calculation that puts us artificially over that 2% to 2.08%. It has not necessarily been achieved as a result of increases in actual defence spending on our armed forces and on the equipment that they need; it has been done by showing and including other expenditures, such as some of the money spent within the Department for International Development. I would welcome the Minister’s comments on that.

As my colleagues have pointed out, the Labour Government comfortably met that 2% target each year. In fact, the lowest percentage of GDP spent in the 13 years that Labour was in power was 2.4%, so the next Labour Government are certainly committed to spending that NATO minimum. [Interruption.] Sorry, did the Minister want me to give way?

[Mike Penning]

Where did that come from?

[Fabian Hamilton]

Well, that is the calculation that I have been given by my researchers.

As I said, we have the fifth largest defence budget in the world. I am glad to say that defence spending will increase by £5 billion up to 2020-21. That is welcome, but like any competent business purchasing supplies or the resources necessary to make it work, we have to ensure that we get the best possible value for what we buy, and that, as the Chair of the Committee pointed out, we put money into our personnel with adequate, proper and decent training. We all know that without that training, our forces cannot work as a collective whole and cannot work as effectively as possible.

I believe that only Estonia, Turkey, Greece and France spend 2% of GDP or more on defence. There has been anxiety in Washington about the fall in the UK’s defence budget. In the Financial Times recently, the right hon. Member for West Dorset (Sir Oliver Letwin), the former head of policy at No. 10 Downing Street, was reported as saying:

“If we need to get to 2 per cent of GDP, there is a question of whether you can increase overall spending by counting funding of the intelligence agencies as defence spending”.

I would welcome the Minister’s response to that.

The Opposition Front-Bench team believes, like the Government and I think every Member of this Parliament, that the defence of the realm is the No. 1 priority of the Government of the day. We need to spend what is necessary to keep the population of this country safe, but we need to spend it wisely and well.

I will conclude by returning to the remarks that were made by my friend and colleague, my hon. Friend the Member for Sedgefield. He said that even if all the NATO countries put 2% of their GDP into defence, it would not be enough to protect us from our enemies. There are 100,000 UN peacekeepers in 16 countries because the world is in such turbulence at the moment, so the question I leave the Minister with is this: is 2% of GDP sufficient?

15:05

[The Minister for the Armed Forces (Mike Penning)]

It is a pleasure to serve under your chairmanship, Mr Rosindell—I hope I get your name right; I got told off last time, so I will try hard.

This has been a very interesting debate on such an important day—the day that the national poppy appeal is launched, when we remember those who gave so much for us. What a perfect time for this debate to take place. It is my first debate as Minister for the Armed Forces in the Ministry of Defence.

I completely agree with the Committee in asking whether 2% is enough. Could we spend more? I am sure we could, but 2% is a NATO guideline. Would it not be great, as the hon. Member for Bridgend (Mrs Moon) indicated, if the other NATO countries also stepped up to the plate and spent 2% of their GDP on defence?

What great news it was today that our GDP has increased, even though scaremongers, including the BBC and others, said that the economy was in a dive after Brexit. It has gone in the opposite direction, which will mean there is more money to be spent. No Defence Minister would stand up and say, “No, we wouldn’t like to have more money,” and anybody who did would not be telling the truth. However, we have to live within our means and make sure that what we get is spent correctly, which is the crux of today’s debate.

Let us get Trident over and done with first. If we want to be a member of NATO, we have to be under a nuclear umbrella. If we do not want that, we do not stay in NATO. If we took the Scottish National party’s position, not only would we lose thousands of jobs on the Clyde, but we could not really be part of NATO. That debate has been had before. We debated the nuclear deterrent in the House, when the House—not the Conservative party or this Government—made the decision on the future nuclear deterrent by a huge majority. That was the message to the rest of the world and to NATO.

[Brendan O'Hara]

Does the Minister accept, though, that the Scottish Parliament, the Scottish Government, the SNP, the Labour party, the Greens, the Scottish Trades Union Congress, the Scottish churches and great swathes of Scottish civic society have all said no to Trident? Should that voice not be respected?

[Mike Penning]

Perhaps the referendum in Scotland, when the Scottish people decided to stay part of the United Kingdom and under the rule and sovereignty of this Parliament, is another important decision that needs to be taken into account. The percentage of GDP in the Scottish economy from defence spending is huge, and the SNP really have to take that on board in what they say about the future of defence.

[Brendan O'Hara]

Will the Minister give way?

[Mike Penning]

No, I have given the hon. Gentleman an opportunity to intervene and he has had plenty of time.

We have to spend the money correctly. Comparisons are really difficult. My right hon. Friend the Member for New Forest East, the Chair of the Committee, touched on that point in saying that trying to compare like with like is very difficult. National service was still in place when the hon. Member for Leeds North East (Fabian Hamilton) and my hon. Friend the Member for North Wiltshire (Mr Gray) were born, which has been alluded to. When I joined the Army in 1974, I was in the British Army of the Rhine in Germany with the 3rd Armoured Division. We had almost no fuel and almost no ammunition and we hardly ever left the military transport park. We just did not have the money. We sat there knowing full well that we were a deterrent. The boys and girls who were serving at that time were very brave—all the armed forces were brave—but we knew that the money was not being spent correctly. As a young soldier, I could see it then and we have seen it through various Governments that have been in power.

How do we spend the money as well as possible? We get the right kit to deal with the threats, but the threat changes. Most of us thought the cold war was over. We thought we could look at the threats from other parts of the world and apply our defence accordingly. In the past couple of months we have had to look back to the old foe. We saw their fleet sailing through the English channel, probably as a sign of what they could do. We saw black smoke coming out of the top of the aircraft carrier—she could not have gone a knot faster if she had tried because she is so old and decrepit—but she represents a threat. Could they have gone round the north, as they have done before? In fact, the weather was very bad off the west coast at the time, but probably they were sending a message. Our boys and girls in our armed forces shadowed her man for man as she came through. I know that because I was on a frigate in the channel while the aircraft carrier was coming through.

We have to be careful with these defence reports. We are genuinely trying to do the best for our armed forces and make sure they have the right equipment. We must show we are behind them and not undermining them. It is a very thin line.

I have responsibilities as the Ops Minister. Everybody thinks we are home from Afghanistan and Iraq, but we have ops in nearly 39 countries where our armed forces are serving us today. I do not think we have paid enough tribute to those boys and girls—our servicemen and women who are out there on our behalf—during this debate. I know it was touched on in some Members’ speeches, but mostly it was not, and that is a real disappointment because the forces pick up on what we say in this House and see where their support is.

Are we hollowed out? I do not think so; I would not be able to do this job if I thought that was the case. We will continue to fight the Treasury to make sure we have as much as we possibly can. It is enormously difficult to compare what happened in 1956 with what happened in 1974 when I joined the Army. The package we offer our armed forces is absolutely important. The issue is not just about recruitment, but about retention, which I will come to in a moment.

[Kirsten Oswald]

(East Renfrewshire) (SNP): There is genuine support for the armed forces, but when working out what we have to spend, it is difficult to have confidence in the figures we have been given. For the seventh year in a row the Ministry of Defence accounts have been qualified because they cannot meet international accounting requirements. A resolution of that would go a long way to supporting the appropriate spend in the areas that need it. It would also give confidence to our service personnel.

[Mike Penning]

I completely agree. It is way beyond me to understand the accounts of the MOD. I freely admit that.

[Kirsten Oswald]

It’s way beyond anybody to clearly understand them.

[Mike Penning]

I am in my seventh Department in six years and I have struggled to understand the accounts in most of them. That does not make it right—I fully accept that. From my point of view and that of my fellow Ministers, when we are looking at what we can and cannot do around the world and at home in defence of the realm, it is difficult, but at the end of the day, NATO set the 2% so that the rest of the NATO countries would come on board.

The question has been asked whether the international aid budget, which is 0.7% of GDP, should be linked to the MOD budget. Some of us have been in this place a long time. Although I was not elected such a long time ago, I remember a huge argument going on between DFID and Defence when Clare Short was the excellent DFID Secretary of State over helicopters during the flooding in Bangladesh—I may be wrong, but I think it was in Bangladesh. A massive delay took place while they argued about money. Is that the sort of situation that we want to be in today? If our Navy or our armed forces are operating in a humanitarian area, it is right that we help, but should that come from my budget or from DFID’s? We need to work much more closely together.

I will not be able to answer all the questions in the time I have been given, but the crux of the matter is that we are all, no matter what party we are from, pushing for the same thing. We want to respect our armed forces and give them the kit and equipment they need. We will disagree on certain aspects. We disagreed on Trident, which was debated in the House. We will continue the debate, but the House has made a decision and we are pressing ahead. I am really pleased that Her Majesty’s Opposition has committed to 2% of GDP on defence. That is the first time we have heard that. We have had a commitment for this Parliament going forward and I am really pleased that the Labour party has bitten the bullet, for want of a better description, and committed to doing that. I hope the hon. Member for Leeds North East (Fabian Hamilton) has not got into trouble over it, but I will write to him to confirm the commitment when this debate is over. It is a very important message from this House as we go forward.

I felt the report was helpful. As it says, we have not broken any rules. Along with my fellow Ministers, I will spend the money in the best way we possibly can to make sure we continue to have the best armed forces in the world and that they have the kit and equipment they require.

15:15

[Dr Julian Lewis]

I thank everybody who has contributed to the debate. We have had an excellent turnout for a quiet Thursday afternoon. The fact that so many people have given up their afternoon to take part in this debate and made such strong contributions, both from the Back and from the Front Benches of the respective parties, is a matter for congratulations. I think we all agree that adequate funds are a necessary condition, but not a sufficient condition for wise defence expenditure. The question that came up again and again was whether 2% is enough. We heard it from the hon. Member for Sedgefield (Phil Wilson) and from the Front-Bench spokesman for the Labour party, the hon. Member for Leeds North East (Fabian Hamilton).

I started off by referring to the “we want eight” crisis of 1909, of which Winston Churchill wryly noted:

“The Admiralty had demanded six ships; the economists offered four; and we finally compromised on eight.”

Perhaps in the context of this debate we might end up by saying that I want three to keep us free in terms of percentages. My hon. Friend the Member for North Wiltshire (Mr Gray) wants four or the Government should be shown the door. Maybe we can compromise and, like the Bee Gees, say, “We want five for stayin’ alive.”

Question put and agreed to.

Resolved,

That this House has considered the Second Report from the Defence Committee of Session 2015-16, Shifting the goalposts? Defence expenditure and the 2% pledge, HC 494, and the Government response, HC 465.