Defence Spending

(Limited Text - Ministerial Extracts only)

Tuesday 16th July 2019 Westminster Hall

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate the hon. Member for Berwick-upon-Tweed (Anne-Marie Trevelyan) on securing this important debate and on setting out the case. She highlighted the fact that defence does not feature in our postbags, as we are all aware, and as a result it does not get the focus it needs. She also talked about the conscious choice by Government in recent years to reduce Government spending on defence, which, as she said, was based on a false premise.

There were some excellent contributions to the debate, from my right hon. Friend the Member for North Durham (Mr Jones), the right hon. Members for New Forest East (Dr Lewis) and for Rayleigh and Wickford (Mr Francois), my hon. Friends the Members for Plymouth, Sutton and Devonport (Luke Pollard) and for Glasgow North East (Mr Sweeney), as well as the hon. Members for Strangford (Jim Shannon), for St Ives (Derek Thomas), for Somerton and Frome (David Warburton), for Filton and Bradley Stoke (Jack Lopresti), for Witney (Robert Courts) and for Ayr, Carrick and Cumnock (Bill Grant). One point of consensus that all the speakers highlighted in different ways was the need to increase defence spending.

Labour is committed to spending at least 2% of GDP on defence, in line with our NATO commitments. The last Labour Government consistently spent well above the 2% figure. Sadly, since then we have seen a sharp fall in the real-terms value of the defence budget. Independent analysis by the House of Commons Library has shown that defence spending in the last financial year was £9.3 billion lower in real terms than when Labour left office.

The debate is ongoing on the appropriate level of defence spending, with both candidates for the Conservative leadership adding their thoughts. That is particularly galling when both of them have consistently voted for budgets that have slashed defence spending to what it is today.

[The Minister for the Armed Forces (Mark Lancaster)]

In his haste to criticise the leadership candidates for their commitments to increase defence spending, can the hon. Gentleman point to a single speech where the Leader of the Labour party—not its defence spokesman—has indicated that he wishes to increase defence spending?

[Gerald Jones]

I was not attacking the comments of the candidates for the Conservative party—they are welcome. I was saying that it is galling that they voted for cuts. The Leader of the Opposition has highlighted, as did the last Labour party manifesto, our commitment to a 2% minimum for defence spending, in line with the NATO commitment. He has also said that we cannot do defence on the cheap. He is as committed as our party to spending on defence.

Added to the squeeze on defence spending is the fact that the MOD’s purchasing power has suffered from the fall in the value of sterling after the Brexit vote. Of course, what matters is not just what is spent, but how it is spent. As we debated last Thursday in this Chamber, we need to use the defence pound to support UK prosperity and to back UK defence workers. Labour wants more MOD defence contracts to be awarded here in the UK, and we would like to start with UK-only competition for the fleet solid support ships. As my right hon. Friend the Member for Warley (John Spellar) highlighted, that is a matter of political will. Not only is it vital that we support the UK defence industry to retain our sovereign capability; we also know that investing in the UK leads to additional revenue coming back to the Exchequer in taxation, higher national insurance contributions and lower social security payments—not to mention the value of apprenticeships and spending in the wider economy.

We know from reports by Oxford Economics that the UK defence industry has an output multiplier of 2.3, which means that a £100 million investment in the UK industry generates some £230 million to the UK economy. Its reports have also highlighted the fact that each additional job created in the manufacturing element of the defence industry results in a further 1.8 jobs being created in the wider economy. I am sure that the Minister will want to convey that message to the Treasury. Of course, sufficient levels of defence spending depend on an economy that is growing, so I hope that the Minister will join the Opposition in opposing a harmful no-deal Brexit, which would be damaging to our GDP and would therefore threaten all Government spending, including spending on defence.

--- Later in debate ---

[The Minister for the Armed Forces (Mark Lancaster)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate my hon. Friend the Member for Berwick-upon-Tweed (Anne-Marie Trevelyan) on introducing the debate. There can be few in Parliament so passionate about the armed forces and I am not surprised that it is she who called the debate. It has been highly constructive and has demonstrated a gratifying commitment to the defence sector on both sides of the House. We should start on a note of agreement: clearly everyone in the Chamber wants the defence budget to continue to rise, and that is gratifying. It is tempting to pick up on another point where we all agree—that it is the Treasury that is the enemy; but I cannot possibly say that. With a reshuffle coming next week, I do not want to limit my options too far. They are already pretty narrow, so let us not go further.

[Mr Kevan Jones]

DEFRA beckons.

[Mark Lancaster]

I doubt it.

As has been said, the first duty of any Government is the safety and security of the British people at home and abroad. I am proud that the Government have delivered on their NATO pledge to spend at least 2% of GDP on defence. They will be spending more than £186 billion on equipment and equipment support between 2018 and 2028. Aside from ensuring that our armed forces have the latest and best capability, our investment of around £19 billion a year underpins a world- class British industry, providing direct employment for 115,000 people and nearly 400,000 more across the wider supply chains. That substantial and sustained investment is not only vital to our national capability and prosperity and to supporting economic growth. It is also vital to our ability to counter the rising threats that menace us and all NATO members, including a resurgent and increasingly assertive Russia, and extremist terrorism across the world.

This year NATO celebrates 70 years as the foundation of our mutual security. The UK is one of very few NATO members that meet both their core spending guidelines by spending 2% of GDP on defence, of which 20% goes on major equipment and associated research and development. Defence spending in many NATO states is still too low, and although our allies are making progress on burden sharing, they must do more. The increase mirrors rising defence spending across the world, which makes it vital that the UK maintains its position as a leading player on the world stage.

The upcoming spending review is an opportunity to reprioritise our national investments across defence, ensuring that we can meet whatever the future may throw at us in an era of intensifying threats. The Department has done a great deal to drive out inefficiencies in defence, and there is more to be done, but we must also invest in new capabilities and in transforming the way defence operates, so that we can continue to defend the UK and project our influence.

First, we must mobilise defence to meet rising threats. The international situation is darkening. The rules-based order that has kept the peace for so long is under constant pressure and the external threats that confront us increasingly come from multiple directions. Despite the coalition’s success in degrading the power of Daesh, the threat of terrorism is still with us, while malign cyber-warfare and proxy warfare are rapidly changing the face of conflict. The nation’s approach to future spending decisions must reflect those new realities.

Secondly, we have to modernise and innovate—to embrace new technologies to ensure we have a competitive edge over our adversaries and to identify opportunities to sustainably reduce our cost base, which will require some up-front investment. The Department is investing about £800 million through the defence innovation fund to keep us ahead of the curve, and ring-fencing £160 million of its budget this year for the new transformation fund. Thirdly, on efficiencies, defence has to transform the way it does business by liberating new industry thinking and tackling the behaviours and practices that have racked up excessive costs in the past. That means tackling the mindset of short-term decision making that leads to poor value for money. We must invest in technology now for long-term savings.

I want to answer a couple of points raised in the debate. The MOD does not collate defence expenditure figures for regions, but the average spend per person in the UK was £290 in 2017-18, and the MOD spends some £19 billion a year supporting 115,000 jobs. That means that one in every 220 jobs in the UK is in defence. On the accusation that there have been cuts under the present Government, since 2014 defence spending has increased year on year and we now spend £39 billion—rising to £40 billion by 2020. [Interruption.] I would also say to the right hon. Member for North Durham (Mr Jones), having served in Afghanistan in 2006, that the sort of commitment that we had, with so many of our troops serving on operations overseas in Iraq and Afghanistan, made for an environment very different from today’s. With the different threats we face at any one time, it is sometimes difficult to compare like with like. Our relationship with strategic suppliers in the UK defence and security sector is vital. The armed forces support an industrial base in the UK providing employment to about half a million people.

I was delighted that many Members raised the issue of mental health in the debate. In the autumn Budget the Chancellor announced £10 million to support veterans’ mental health and wellbeing needs, and in January the armed forces covenant fund opened a £3 million funding programme to fund innovations and improvements to veterans’ community centres. We are considering investing more in veterans’ mental health. Accommodation is another key issue for many service personnel. We are looking closely at the new accommodation model, which is aimed at giving choice to service personnel. Equally, on pay, the Armed Forces Pay Review Body has recently presented its latest findings, to which the Government will respond in due course.

I end on a note of consensus again. I am delighted that in this Chamber at least we are committed to armed forces personnel, and to a rising defence budget.