Baroness Smith of Newnham (LD)
I thank the noble Baroness; I am told that this is indeed page 20.
The percentage of GDP that is being looked at starts at 2.32% for 2024-25 and goes up, according to this, to 2.5%, in line with His Majesty’s Government’s commitment outlined yesterday, 24 April. But I note the words:
“Memo—UK GDP based on OBR’s latest forecasts”.
There is sometimes a little scepticism about OBR forecasts. While far be it from me to raise the sort of concerns and scepticism that a former Prime Minister might have raised about the OBR, can the Minister reassure the House that the forecasts for two, three, four and up to six years out are actually likely to be correct? It matters enormously to these commitments that the OBR predictions should be right, because the commitments being made now are vital.
The noble Baroness, Lady Anderson, asked why the announcement was this week. As something of a cynic, I wonder whether it was not simply part of the Prime Minister working his way up to a general election, because every day this week we seemed to have a new announcement, whether it was flights going to Rwanda or the commitments to defence. While on Rwanda we might disagree, on defending Britain we do not disagree at all that it is vital. In that sense, the Statement is welcome.
I have a few questions for the Minister. Clearly, the commitment is there to defence expenditure—it follows on from the commitment to improving defence procurement—but this is a relatively short timeframe of six years. In the context of global crises, which we see from authoritarian regimes—as His Majesty’s Government have suggested, Iran, Russia, North Korea and China all seem to work in consort in some arenas—do His Majesty’s Government think that this commitment, while in itself welcome, will deliver change sufficiently swiftly? How far are His Majesty’s Government looking not just to closer co-operation with our NATO allies as a collective—obviously, we are also committed to NATO—but to strengthening bilateral relations, for example with France, in addition to the commitments made in Germany two days ago?
Further, to what extent do His Majesty’s Government think that other regional patterns of co-operation, such as AUKUS, will help them to take the leading role in NATO, which has been stated is an ambition?
In the policy document, the Secretary of State reminds us that in his Lancaster House speech he noted that, clearly,
“the era of the peace dividend is over”.
That is obviously right. In terms of procurement and ensuring that we have the right industrial defence base, 2030 is actually very close. Does the Minister feel that this Statement goes far enough? Will he commit to coming regularly to the House to tell us how it can be delivered and, in particular, about the numbers of civil servants who might be still in post in the MoD? Are their numbers vulnerable alongside those of other civil servants to pay for this deal?
The Minister of State, Ministry of Defence (The Earl of Minto) (Con)
My Lords, this is indeed a very historic document, and I am extremely grateful for the support that we have received from all sides of the House, as well as outside it. Noble Lords will be well aware of my views on defence spending—they should be by now, anyway—so I am delighted to follow the commitments made by the Prime Minister and the Secretary of State in the other place that we will now reach the 2.5% of GDP that we have long talked about by 2030.
The headline figure throughout, where I appreciate noble Lords want to see more detail, and quite rightly so, is the £75 billion spent between now and then. Over the next six years, this additional funding to the budget will take us to the 2.5% of GDP, which at that point will work out at £87 billion in defence spending by 2030.
If your Lordships will allow me to get into the weeds for a moment, on page 20 of the pledge document—I promise the noble Baroness, Lady Smith, that there is a page 20 in this document—they will see how we intend to reach this trajectory. It is a flat line from now—it does not tip up at the end. They will also see how the NATO qualifying defence spend matches up against the core defence budget, as footnote 2 explains. To be clear, this is the same metric used across the NATO alliance. The figures used are also based on the OBR March 2024 GDP forecasts, as is standard practice, and cash totals will be confirmed at the relevant spending reviews as time progresses.
In short, this increase to 2.5% will be funded in full through savings, reallocation of resources, more efficient outputs, ruthlessly pursuing waste and delay—of which we know there has been a lot—and projected economic growth, and driving productivity throughout the MoD without any increase in borrowing or debt.
We will better invest in our relationship with industry—a critical point—in including £10 billion over the next 10 years on a new munitions strategy. In addition, through the integrated procurement model we will radically reform and modernise our Armed Forces following the Haythornthwaite review, and we will capitalise on our existing research and innovation expertise through the new defence innovation agency—the DIA.
What is more, this is in addition to the further substantial package of support also announced this week, our largest yet to our allies in Ukraine—many thanks to noble Lords for the continuing support on that. There will be some £500 million of support, as well as these 60 boats, including raiding craft, 1,600 strike and air defence missiles and more Storm Shadows, a mixture of 400 protected, armoured and all-terrain vehicles, and nearly 4 million additional rounds of small-arms ammunition.
We can all agree that this is significant news and, most importantly, the 2.5% must be spent wisely. As the Prime Minister stated in Poland earlier this week, we did not choose this moment, but it falls to us to meet it. Finally, before answering the questions, I will say that in the heightened area of instability that we now face, our first duty in the Ministry of Defence is to the national security and defence of our nation at any cost.
I will address some of the specific issues. On the question of Ukraine, we have now raised the contribution this year to £3 billion and that level will continue. As to why this was not covered in the Budget, I say that there was an enormous amount of negotiation going on at the time, and this is in the relatively recent past. We were putting the plan together, but it just was not ready. If you look at the situation now, the economic plan is starting to work properly; inflation is down from over 11% to 3.2%. We have a security environment that is continuing to deteriorate, and that has given us an opportunity to set the 2.5% target.
The Chancellor made a statement that he wants to return the numbers in the Civil Service, across government, to where they were before the pandemic struck, and the Ministry of Defence will be a beneficiary of that. There is no suggestion of a cliff edge—the cuts will take place in a gradual process over three years. The turn and vacancy level is quite perceivable within that period, and although there is not a recruitment ban there is a 2-for-1 in place at the MoD.
On the size of the forces, capability is as important as much as anything else. We should not hark back to the size of the Army 200 years ago; things were quite different then, although they were not that different 50 years ago. We have learned an enormous amount with the issue in Ukraine, and that is why the DIA is being set up. That hopes to achieve a grouping together of all existing R&D bodies into a single responsible and empowered organisation, particularly with the enormous and remarkable strength this country has in DSTL, and to scale up R&D, drive cutting-edge defence technology in high-tech stuff such as DragonFire and hypersonic missiles, and low-cost, high-impact stuff such as single-direction attack drones. I will mention DragonFire as an example—the Secretary of State did as well. My honourable friend the Minister for Procurement has used the new integrated procurement model to work on DragonFire, and has brought the gestation period forward five years. When we were talking about the new procurement model, there was an issue about how effective that would be. and on this exercise it proved very effective.
On NATO, which has never been more important than it is now, the commitment to move to 2.5% has been widely welcomed and accepted. It was not long ago when the idea of most NATO countries moving to 2% was quite a difficult ask. As Jens Stoltenberg said, the UK is “leading by example” in moving to 2.5%. There is a hope and an expectation that that example will help to move other NATO countries in that direction, both bilaterally and as a defence alliance. That is certainly the intention and I understand that it has been very well received. In fact, I have just come from a meeting with some colleagues from the United States. They were extremely appreciative and absolutely understood where we were coming from, so that was very good indeed.
AUKUS and GCAP are absolutely fundamental to our international relationships. It depends how long I am here, but I certainly will commit to the House that I will come to keep everybody absolutely up to date, particularly about the size of the Civil Service within the MoD and all other matters relating to what is a very considerable ask on the British public.
Lord Lancaster of Kimbolton (Con)
My Lords, I remind your Lordships’ House of my specific interest as a member of the executive committee of the Army Board. I welcome this announcement. It is a significant amount of money and I commend the Government. However, my noble friend will forgive me if I judge success not by financial input but by what capabilities this money will deliver and, crucially, when. Our Armed Forces have been hollowed out, principally by gifting to Ukraine, so can he reassure me that some of this money is not just for new capabilities but for replacing existing capabilities that have been gifted? Finally, if there is one enemy in all this it is the Treasury. In my humble experience, it is all very well having a commitment of money to defence, but unless we get prompt Treasury approvals on time all this capability will be delayed. Can my noble friend simply reassure me that appropriate conversations have been had with the Treasury?
The Earl of Minto (Con)
My Lords, I thank my noble friend for that question. On the Treasury, the Chancellor has absolutely been involved throughout this entire conversation and is fully supportive, as is the Prime Minister, of exactly what we are trying to achieve. On gifting and the replenishment of munitions and stocks, everything that we have gifted, including in the announcement this week, is within its sell-by date but is no longer really necessary. Replacements are coming in of new, modern equipment. The Army is perfectly happy to gift this to the Ukrainian effort.
Lord Kerr of Kinlochard (CB)
My Lords, I used to work for Peter Carrington and Denis Healey, two great Defence Secretaries. I have been trying to work out how they would have reacted to this Statement. They would certainly have welcomed the increase in defence spending. It is clearly necessary and they would have said so. I think they both would have said that it is not enough but that it is certainly to be welcomed.
Denis Healey certainly would have found it impossible to accept the construction of the £75 billion. Could the Minister confirm that £75 billion is reached only by making the rather ludicrous assumption that the baseline is flat in cash terms, with reductions in real terms in every year of the six-year period? That is the baseline on which one can build annual increments summing to £75 billion. Perhaps he could confirm that is the case. Denis Healey would never have tried such odd accounting.
Peter Carrington would have argued that it is unwise not to prepare the country for a certain amount of pain. The Government are trying to present necessary defence increases as painless. It might be better to admit that there will be a cost, either in taxation or in less money for domestic programmes. The defence of the realm is the first task of government.
It is also absurd, in the week in which President Biden and Speaker Johnson have come forward with a rather substantial programme of assistance to Ukraine, for our Defence Secretary to stand up and say that the NATO partners looked to each other for leadership and the UK Government stepped forward to provide the alliance with the decisive leadership demanded in this knife-edge moment and that, in the build-up to the NATO summit in Washington, he—Mr Shapps—would be doing all he could to get alliance members to follow our lead. This is absurd talk. We should speak softly and carry a big stick. The stick is slightly bigger—not big enough in my view—after this week’s announcement, but we must learn to avoid the bluster and bravado and speak more sensibly.
The Earl of Minto (Con)
My Lords, the financial detail is quite complicated and I think it is better if we write and explain how the figures are built up.
It is clearly an ask for the British public. The cake is finite, as I have said before, and defence needs more. It is not an inconsiderable amount of money that we are increasing the defence budget by, and there is a question of how much money you can spend over time. It is rather like building a house, in that you cannot spend it all at once; you have to build up. If you look at where the investment focus is within the next few years, you find that, first, it is on firing up the UK industrial base, including £10 billion for a new munitions strategy. That is extremely important. Secondly, it is on ensuring that our Armed Forces benefit from the very latest technology, through the DIA. Thirdly, it is on guaranteeing long-term support for Ukraine; if we do not do that, it is just going to become more and more expensive. As the Secretary-General said the other day, this is the cheapest time to defeat the Russians. Fourthly, it is on ensuring that expenditure is effective through radical procurement reform, which I have already covered.
Lord Robertson of Port Ellen (Lab)
My Lords, all of us will welcome any increase to defence expenditure at a time of maximum turmoil and trouble in the world. There is much in this Statement which is to be welcomed, not just the extra money but the aspects on resilience and the rest.
However, I turn the Minister’s attention back to what the noble Lord, Lord Kerr, said. These increases in defence expenditure matter only in terms of the capability that they will produce, and that depends very much on whether or not these figures are accurate and whether the contention that they are going to be fully funded is correct. Many of the economists and experts outside, having looked at the figures overnight, are questioning very deeply their veracity—not only the fact that the £75 billion championed here is based on an assumption about flat cash values of expenditure but the fact that there is a gap between the £4.5 billion a year the Government say they will spend and the £7 billion. How is it going to be produced? Mr Ben Zaranko of the Institute for Fiscal Studies says that what is proposed will not be fully funded. He said:
“It’s in the ballpark of full-throttle austerity”.
The Resolution Foundation says that the contention that it is fully funded is a “joke”. Since we are not laughing, and since these matters are of national and international importance, can the Minister now tell us precisely what is the veracity of the figures that have been produced?
The Earl of Minto (Con)
My Lords, I really appreciate the detail of that question. Of course, the importance of getting the figures right and where the money is coming from is critical to the success of the entire endeavour. The detail is such that I would rather write than try to answer the question now, but there is no doubt that the commitment to this level of expenditure has been made and will be delivered.
Lord Taylor of Goss Moor (LD)
My Lords, the commitments to Ukraine—both the short-term increased commitment and, perhaps even more importantly, the long-term commitment the Minister referred to—are immensely important today, because Russia must be defeated for the sake of all democracies globally. Right now, Ukrainians right across the country are experiencing ballistic missile attacks on energy and heating infrastructure, homes, hospitals and schools, which they do not have the systems to defend, and the increasing use of Russian air assets on the front line. This country is short of ballistic missiles and defence systems, so what will be done to improve that in the long run? More immediately, what can the UK do to join those pressing for the supply of Patriot and other systems capable of defeating these missiles? A number of European countries that are not able to supply them themselves have offered to fund the purchase of such systems. Is the UK supporting that work?
The Earl of Minto (Con)
The noble Lord makes a very good point. Most of the conversations about the issues Ukraine is facing start with air defence missiles. It is not just Ukraine but other states that could be threatened by the Russian Federation. There is an enormous effort in the production of these missiles to try to provide what is necessary, not just in the short term, which is moving them around, but in the long term. It was extremely good news to see the United States pass through their commitment to Ukraine. Some of the missiles have already been delivered.
Baroness Bennett of Manor Castle (GP)
My Lords, in 2021, the Government published the integrated review entitled Global Britain in a competitive age, which was refreshed in 2023. It was described as setting out the UK’s overarching national security and international strategy, which covers defence, security, resilience, diplomacy, development and trade, as well as elements of economic and science and technology policy. In making this spending announcement on defence, and operating within that systemic approach to security, did the Government give full consideration to the possible need to increase spending on diplomacy and issues such as the climate emergency? Has this all been considered systemically in the round when looking at the allocation of resources?
The Earl of Minto (Con)
My Lords, I assure the noble Baroness that exactly those conversations have taken place, and that is one of the reasons why it has perhaps taken slightly longer to get to this position than I and many others would have liked.
Lord Ricketts (CB)
My Lords, there is an intriguing sentence in the Statement: that we are now producing
“a new plan that for the first time brings together the civil and military planning for how we would respond to the most severe risks that our country faces”.—[Official Report, Commons, 24/4/24; col. 939.]
I would have thought that the 1998 defence review by the noble Lord, Lord Robertson, and the post-2010 strategic defence and security review tried to do that as well, but does that plan include co-operation with European partners? There are some impressive figures for defence industrial investment in the Statement, but it reads a little as if we are on our own in Europe in doing this. In fact, Germany is sharply increasing its defence spending and is providing more support to Ukraine than we are, and France is ramping up its defence industrial spending. In terms of resilience, is this not the moment to work more closely with our European partners and co-ordinate on the effect that will have on the scale and speed of developing the weapons and supplying them to Ukraine?
The Earl of Minto (Con)
The answer is yes. The noble Lord is absolutely right: it is critically important that we work with our international allies, whether European or elsewhere, to ensure that what is developed is complementary, but that we are producing what is required rather than unnecessary stockpiles of weapons and munitions. That was also one of the points that our American colleagues brought out earlier this afternoon; they were very pleased indeed with the progress we have made so far.
Lord Balfe (Con)
My Lords, in introducing the Statement, the Defence Secretary said:
“we will remove 72,000 civil servants from the system, not because we do not think they are good people—fortunately, with low unemployment we know they will be gainfully employed elsewhere”.—[Official Report, Commons, 24/4/24; col. 944.]
Can the Minister tell me whether there were any negotiations with the trade unions? Are we to believe that there are 72,000 civil servants doing nothing? If that is not the case, can the Minister tell us what services will be reduced, curtailed or ended altogether? I would like an assurance that there will be negotiations with the trade unions in the implementation of this policy. I do not oppose the policy, but I wonder about that bit of it.
The Earl of Minto (Con)
My Lords, the 72,000 figure comes from the Chancellor’s desire to move the size of the Civil Service back to the situation in 2019, before the Covid virus struck. The Civil Service was required to grow quite considerably to cope with that situation, which has now passed. It seems logical that we start to move, through a period of natural attrition—there is no suggestion of mass requirements—back to a position where the Civil Service is fit for service, lean and nimble.
Lord West of Spithead (Lab)
My Lords, this is too little, too late, but it is still good news because we are actually spending some money on it. The support going to Ukraine is particularly good news. We must defeat and stop Putin in Ukraine, or else we will have to stop him in Europe, so it must be good news that we have done that.
I must say I have some concern about where this money will come from, but on the assumption we are getting it, I will go down into the weeds in one small area. The Royal Fleet Auxiliary is absolutely crucial to the Royal Navy. For example, one of its ships is doing the Gaza support; the littoral response group ships are both RFA ships; and “Proteus”, a new vessel looking at undersea cables, is an RFA ship. A lot of these ships are now stuck in harbour, and there is a real issue because the RFA has suffered real reductions in pay and conditions of service. I ask the Minister to go back to the MoD and ask, as one of the first little kick-starters of money, that this be looked at. Without the Royal Fleet Auxiliary being manned, the Royal Navy actually grinds to a halt. There are also other little things in the manpower arena across the Army and Air Force that will make a huge difference.
The Earl of Minto (Con)
I could not agree more. As to the question of “too little, too late”, it is extremely welcome that we are where we are now. It is absolutely critical that NATO faces up to the Russian Federation and defeats Putin because, as the noble Lord rightly said, if we do not do it now, it will be Europe next, and that will cost an enormous amount more in both human and financial terms.
On the Royal Fleet Auxiliary, I entirely agree. Conversations are taking place. I was in the Black Sea in one of the littoral states last week, where they were talking about the two ships in Portsmouth that are now ready to make their way over and what a good move that is.
Lord Mott (Con)
My Lords, I welcome the Statement on which my noble friend is responding today. Many important questions have been raised today. Will my noble friend give us an update on, and perhaps not forget, the accommodation that our Armed Forces personnel live in, and make sure that their conditions are not forgotten and that the upgrades and improvements that are required are part of this plan?
The Earl of Minto (Con)
My Lords, that is a very good point. Accommodation is critical in recruitment and retention. Within the plan, there is £4 billion expenditure over the next 10 years to upgrade and build new service accommodation. At the moment, 97% of what we have meets the Government’s decent homes standard, but we continue to work with suppliers to make sustained improvements on the existing portfolio of properties. It is a point extremely well made that we must make certain that not just accommodation but all service pay and conditions are at the highest level.