Defence Expenditure (NATO Target) Bill

Gerald Howarth Excerpts

Friday 23rd October 2015 Commons Chamber

[Sir Gerald Howarth (Aldershot) (Con)]

I beg to move, That the Bill be now read a Second time.

[Bob Stewart (Beckenham) (Con)]

Chocks away!

[Sir Gerald Howarth]

I thank my hon. Friend from the Army for reminding the House of my interest and experience in aviation.

I am genuinely delighted to open this important debate on defence spending and to introduce my Bill to give legal effect to the Government’s welcome commitment to meet the NATO target of spending 2% of gross domestic product on defence. It is an additional pleasure to do so as a former Defence Minister and the Member of Parliament for Aldershot, the home of the British Army, and for Farnborough, the birthplace of British aviation and the home of many of Britain’s finest and world-leading defence companies, whose contribution to our national security is invaluable.

It is also very good to see my hon. Friend the Minister for Defence Procurement, who is responsible for defence equipment and support. He is representing the Government today, but he is a very great friend of mine who is discharging his responsibilities with extraordinary dedication and professionalism.

By the same token, although I have not known the hon. Member for York Central (Rachael Maskell) for as long, I had the pleasure of meeting her earlier this week and I warmly welcome her to her role as shadow Minister. She will find that it is one of the most exciting privileges in this place to have some responsibility for the management of the defence of our country and I wish her well as she seeks to hold the Government to account, as, of course, do we on the Government Benches, fulfilling our constitutional duty.

Before I address the detail of the Bill, I want to set out the context as I see it. I am sure that you will understand, Mr Speaker, but the full force of my argument in support of the Bill cannot be made without reference to the context. Since my right hon. Friends and I produced the strategic defence and security review of 2010 there has been a massive change in the international scene. In a nutshell, we live in an increasingly dangerous world. The turmoil created by the Arab spring, the Syrian uprising, the Libyan campaign, Russia’s illegal annexation of the Crimea, which itself followed the illegal annexation of a part of Georgia in 2008, and the rise of ISIL has transformed the international landscape, but that is not the end of it. The jury is out on Iran’s intentions and North Korea remains an utterly irresponsible dictatorship, determined to develop further weapons of mass destruction. The stand-off between India and Pakistan, both nuclear powers, from time to time threatens to destabilise that important region.

Most importantly, in this, the week of the state visit by the President of the People’s Republic of China, that country is causing concern not just to the Japanese but more widely across the region. As I reminded the House again on Monday, China has recently embarked on a relentless process of colonising uninhabited but disputed atolls in the South China sea, where it is building runways and port facilities. In May, US Defence Secretary Ash Carter prodded China on its continued rapid reclamation efforts, which have resulted in 2,000 acres of land that China claims as sovereign territory but that the United States refuses to recognise. Although China claims this as sovereign territory, many of the islands, including the Spratly islands—that is a wonderful name; I always like putting it on the record—are claimed by other regional powers.

The US Defence Secretary said in some prepared remarks in May that

“China is out of step with both the international rules and norms that underscore the Asia-Pacific’s security architecture, and the regional consensus that favors diplomacy and opposes coercion.”

He reinforced that message more recently when he said that the United States

“will fly, sail, and operate wherever the international law permits… at the times and places of our choosing”.

Last night’s news that TalkTalk had been subjected to a massive cyber-attack serves as a timely reminder of the ever-increasing threat to our security and our intellectual property from such attacks, often committed by criminals, but from time to time committed by nation states, including the People’s Republic of China.

[Sir Greg Knight (East Yorkshire) (Con)]

My hon. Friend is making an effective case for adequate and proper defence spending, but as he and I are both against unnecessary red tape I hope that during his remarks he will deal with why he feels we should have the straitjacket of legislation in this area.

[Sir Gerald Howarth]

I am grateful to my right hon. Friend and of course I shall come on to that. As I explained at the outset, in order to explain why I believe this Bill is so important, it is critical to set out the international scene as I see it, for defence can be undertaken only in the context of an analysis of the threats we face. That is why a strategic—I emphasise strategic—defence and security review is under way at present. We could not cover the strategic element in the last SDSR because we had only five months in which to prepare, our having come into government in May 2010. That review was largely Treasury-driven and needed to be Treasury-driven. The present one is different.

[Bob Stewart]

On my hon. Friend’s comment about China and cyber-warfare, I am sure he knows as well as I do that China has a dedicated cyber-warfare division, which it exercises—it last did so, as far as I know, three years ago—and practises attacks against the west.

[Sir Gerald Howarth]

Indeed. My hon. and gallant Friend has come to my support, for I was about to say that it was our recognition of the significance of cyber-security that led us, when my right hon. Friend the Member for North Somerset (Dr Fox) was Secretary of State—I am sure he is in the Chamber—to identify cyber as what he called an up-arrow. At the time there did not appear to be a threat from Russia, so heavy armour became a down-arrow—that is, an area where we felt we could take a hit—but cyber was identified in 2010 as being one of the areas we needed to prioritise. That led us to earmark £650 million over five years to address that threat. As the then Secretary of State and now Foreign Secretary, my right hon. Friend the Member for Runnymede and Weybridge (Mr Hammond), revealed last year, some of those funds are being directed at the development by the UK of an offensive cyber capability, which I thoroughly support.

To give the House a bit of the flavour of what we are talking about in the cyber-attack context, The Times published an article on 10 September headed “Cyber criminals make Britain their top target”. A company had analysed 75 million raids on international businesses over three months. It showed that Britain was the criminals’ favourite country, followed by America. Online lenders and financial services are losing up to £2 billion a year to hackers stealing passwords and creating false accounts. The scale of the challenge is highlighted by the volume of attacks, with all those attempts being recorded between May and July this year alone.

[Mr Christopher Chope (Christchurch) (Con)]

It so happens that last weekend I was stopped in the street by a constituent who works at Roke Manor, who told me that this is a really serious problem. She raised it in the context of the Chinese visit.

[Sir Gerald Howarth]

I am grateful to my hon. Friend for two reasons—first, he reinforces my argument, and, secondly, he puts on the record an institution of phenomenal value to this country, Roke Manor Research, formerly owned by a German company and now very much in British hands. As I am sure the Minister knows, Roke Manor is doing outstanding work. It is an example of the leading-edge technology that is available to defence in this country and that it is so important we maintain.

[Mrs Cheryl Gillan (Chesham and Amersham) (Con)]

I congratulate my hon. Friend on introducing this Bill for discussion in the House today. Does he agree that the situation is even more alarming when we look at the size of Chinese defence spending, which was recently announced to be $144.2 billion—a 10% year-on-year increase, approximately?

[Sir Gerald Howarth]

I am most grateful to my right hon. Friend for independently adding to the case on what we face around the world. Russia is engaged in about the same ramping up of its defence spending and, accordingly, its capability. I am very grateful to her for making that point.

Significantly, the message for those engaged in drawing up defence planning assumptions is that in the space of barely three years the assumptions on which we worked in 2010 were blown apart. None of the events I listed earlier was remotely foreseen. For those of us brought up in the shadow of the iron curtain, over which two massive superpowers pivoted in an uneasy equilibrium—I was brought up in Germany—today’s outlook seems decidedly more complex and more dangerous. It is against that backdrop of a seriously turbulent world that we need to judge the priority we accord to defence of the realm.

There is no doubt that Europe’s security and peace for the past 70 years has been largely delivered by the North Atlantic Treaty Organisation—NATO. The north Atlantic treaty was signed on 4 April 1949 as a means of establishing enduring stability and peace in Europe. Under article 5, the new allies agreed

“that an armed attack against one or more of them…shall be considered an attack against them all”

and that were such an attack to take place, each ally would take

“such action as it deems necessary, including the use of armed force”

in response. Understandably, much has been made of article 5 as the foundation stone of north Atlantic peace, and the onus it places on all alliance members, but it is also worth considering article 3, which states that

“the Parties, separately and jointly, by means of continuous and effective self-help and mutual aid, will maintain and develop their individual and collective capacity to resist armed attack.”

Arguably, this set the precedent for the 2% target long before it was first mooted in 2006, and it has subsequently become the target for alliance members.

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

May I urge my hon. Friend not to use the word “target”? It is in fact a minimum. Those countries that are below the minimum may have it as a target; those that have always been above it should not be ringing the church bells just because we have decided not to go below it.

[Mr Speaker]

Order. I think the right hon. Member for New Forest East (Dr Lewis) is pleading for terminological exactitude.

[Sir Gerald Howarth]

I quite understand that that finds the most enormous favour with you, Sir. My right hon. Friend is to be commended, I am sure you will agree, for his terminological exactitude. However, he anticipates something I shall say later.

The US and Britain have long been meeting this target given the necessity of a strong defence during the cold war. We were spending about 10% on defence in the 1950s and 4% to 5% in the ’80s, and we are hovering at 2% today. Of course, the higher level of defence spending was because of the cold war. While we are not in the same state of emergency now, Russia’s aggression in Ukraine led the then NATO Secretary-General, Anders Fogh Rasmussen, to whom I pay tribute for his work, to say in March 2014:

“We live in a different world than we did less than a month ago.”

However, it became clear that there was a perceived imbalance in the structure of the alliance, with the current volume of US defence expenditure representing 73%—almost three quarters—of the defence spending of the entire alliance as a whole. It spent 3.5% on defence last year compared with our 2.2% and Germany’s less than 1.5%. NATO would not continue under America’s patronage if the alliance were to meet its necessary credibility as a politico-military organisation, with all 28 members committed to the treaty and its requirements.

Today 28 states all stand committed under article 5 of the NATO treaty to come to each other’s defence if one of them were to be attacked by a foreign aggressor. Together with the commitment of the United States and the United Kingdom to maintain a continuous at-sea nuclear deterrent, article 5 has for the past 70 years served to preserve the security of all of western Europe and has been the central tenet underpinning Britain’s defence and security strategy for my entire lifetime. It is not the European Union but NATO that has been the guarantor of the peace in Europe. Furthermore, recent operations in Afghanistan and Libya have proved that NATO has a valuable out-of-area role to play.

It is essential for our present and future peace and prosperity that in all strategic decisions we make as a nation we show our unwavering support for the alliance. That includes ensuring we have the manpower to conduct operations such as those in Kosovo, Iraq and Afghanistan, as well as the hardware to defend alliance countries through the deployment of assets such as Royal Air Force Typhoons patrolling our skies and those of former Soviet satellite states such as Latvia, Lithuania and Estonia, which are under increasing pressure and hostility from Russia.

NATO requires all alliance members to meet its defence expenditure target of 2% of GDP. Currently only four do so: the United States, the United Kingdom, Greece and Estonia. This Bill, when passed into law, will ensure that the Government maintain their leading position in the alliance by ensuring that we keep spending at least 2% on our national defence. That is not an arbitrary figure. It is totemic in its importance for Britain’s standing in the world, Europe’s security and for maintaining our special relationship with our closest ally, the United States of America.

I am particularly pleased to see present some of my hon. Friends who argued so passionately in support of the Liberal Democrats’ International Development (Official Development Assistance Target) Act 2015 in the last parliamentary Session, to enshrine in law that we commit 0.7% of our gross national income to international aid. They are fulfilling the offer they made then to support this Bill if I were fortunate enough to secure a place in the ballot. I particularly appreciate the support of my hon. Friend the Member for Congleton (Fiona Bruce). She was a doughty champion of the 2015 Act and she told me that she agreed that we should do the same for defence, so I am grateful to her for her presence today.

[Sir Edward Leigh (Gainsborough) (Con)]

From a public accounts point of view, the concept of protecting Departments is causing enormous stresses in Government. For instance, the entire budget of the Foreign Office is only twice the amount of aid we give to Ethiopia. We must address that, and surely the way to do so, particularly given the possibility of massive procurement overruns, is not for MOD accountants to aim for 2%. As my right hon. Friend the Member for New Forest East (Dr Lewis) has said, that has to be seen as a minimum; otherwise there will be chaos in procurement.

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[Sir Gerald Howarth]

My hon. Friend is absolutely right, and that is why clause 1 of my Bill states that the figure should be at least 2%. It is therefore a base, not a ceiling.

[Philip Davies (Shipley) (Con)]

I commend my hon. Friend for promoting this Bill. I am sure he will agree that the Minister is a good man. Does he share my hope that the Minister will not insult our intelligence by saying that the Government will not support the Bill and that it is unnecessary because we are already hitting the 2% target, given that we were already hitting the 0.7% target for overseas aid when the Government supported enshrining that into law?

[Sir Gerald Howarth]

My hon. Friend has the capacity for perspicacity and anticipates a point I shall make shortly. I agree with him entirely. My Bill seeks to follow, almost slavishly, the principle set by the 2015 Act. I did that intentionally, to encourage the Government to give this Bill, promoted by a Conservative, the same strength of support they gave to a Liberal Democrat Bill.

[John Glen (Salisbury) (Con)]

One of the issues that concerns me is the inherent flexibility in the definition of what NATO says is acceptable as constituting part of the 2%. If for the first time this year war pensions, pensions of retired civilian MOD personnel and contributions to UN peacekeeping missions are deemed acceptable, is there not a risk that there will be flexibility in what is included in the 2% and that underlying expenditure on defence capabilities will be unclear?

[Sir Gerald Howarth]

My hon. Friend is absolutely right. I want to address that issue. The Bill involves a number of technicalities, and that is one of them.

I have always accepted that overseas aid has a role to play, but I have consistently opposed the extraordinary increase that the Department for International Development has enjoyed from Government ring-fencing since 2010—up from £8.5 billion in 2010 to £13 billion in 2014—to meet the figure of 0.7% of gross national income.

It may benefit you, Mr Speaker, and the House if I explain the difference between GDP and GNI. I am advised that GDP is the market value of all services and goods within the borders of a nation, the measure of a country’s overall economic output, and GNI is the total value produced within a country, comprising GDP plus the income obtained from overseas through businesses and so on that have foreign operations. GNI is therefore a more generous fiscal measurement, which naturally inflates the amount of overseas aid required to meet the 0.7% figure.

[Mr Henry Bellingham (North West Norfolk) (Con)]

It is important to bear in mind the Government’s policy on overseas aid. They have made it very clear that as countries move to middle-income status, so aid will be withdrawn and we will move to more of a trade relationship. In theory, the 0.7% would therefore become redundant. Does my hon. Friend agree that the country’s duty to defend itself will never become redundant?

[Sir Gerald Howarth]

My hon. Friend is absolutely right.

The problem is that today’s policy is driven by a belief that a key way to respond to the challenges we face is to increase our intervention upstream so that, by providing aid to poor and dysfunctional countries, we reduce the causes of tension and thus our need for hard power. My response is twofold.

First, there is little evidence, despite committing the massive figure of £13 billion of public money, that such soft power delivers the effect sought. We have provided more than £1 billion to assist refugee camps to cope with the Syrian crisis, yet there has been palpably no reduction in the tidal wave of migrants, whether economic migrants or those genuinely fleeing persecution. I support what the Government are doing in Syria, which is noble and right. We should seek to maintain refugees near their country of origin, not to uproot them and import them into the continent of Europe. I strongly support that policy.

Secondly, there seems to be a quaint idea that the exercise of soft power offers an alternative to hard power. Make no mistake, Mr Speaker: without serious hard power, your soft power is completely non-existent. As Theodore Roosevelt said, it is better to “carry a big stick”, and then you can speak softly.

[Kevin Foster (Torbay) (Con)]

My hon. Friend is making a powerful point. Does he agree that the two budgets are not mutually exclusive? As things such as Operation Gritrock have shown, military capability gives us choices to deliver humanitarian goals.

[Sir Gerald Howarth]

I could not agree more. There is an argument that we should combine all such budgets. I am not in favour of that, because it might turn out to be an excuse for reducing our defence budget. I am not opposed to overseas aid, which has a role to play. We are talking about priorities or quantum. In trying to establish our priorities, I am pointing out that soft power— overseas aid is a massive implement of soft power—has limited value in terms of the threats we face around the world.

[Philip Davies]

Is it therefore the case that the Government could claim to be spending one amount of money to hit both the 0.7% target on aid and the 2% target on defence, in effect double counting the same money?

[Sir Gerald Howarth]

That is entirely possible, but I am sure the Chancellor of the Exchequer would not be guilty of such double counting, for he is our right hon. Friend.

Some have said that my Bill has been rendered redundant because the Chancellor guaranteed in July that the Government would commit to the 2% target until 2020. Given my party’s reticence to make such a pledge during the general election campaign, I was naturally delighted by that somewhat surprising announcement. However, it soon became clear that to meet the 2% target, the Government had to engage in a certain amount of creative accounting by including several items in our NATO return for 2015 that had hitherto not been included in the defence budget.

Looking at the specific financial detail of our current defence expenditure is complex, as NATO does not have a clear set of parameters on what constitutes defence spending, unlike the OECD in its monitoring of aid spending. Furthermore, NATO’s definition of spending and the Government’s definition differ, in as much as NATO publishes its figures retrospectively and is thus able to include costs from military operations, whereas the British Government’s defence expenditure document is forward-looking and is unable to account for unforeseen operational requirements. The NATO figure is therefore higher than the Government’s. To simplify the debate, I am using the Government’s calculation of our defence expenditure.

The House of Commons Library, to which I pay tribute for the fantastic job that it does in serving us entirely impartially and incredibly professionally, advised me a few days ago that, according to figures published by NATO on 22 June, the United Kingdom is projected to spend just over £39 billion on defence in 2015-16. That is reckoned to be 2.08% of GDP.

However, when reporting to NATO, the United Kingdom included several items of expenditure that had not been included in previous years: provision for war pensions of about £820 million; assessed contributions to UK peacekeeping missions of £400 million; pensions for retired civilian MOD personnel, possibly amounting to £200 million; and much of the MOD’s income of about £1.4 billion, including £164 million received as a result of the sale of the Defence Support Group to Babcock, for which the Minister was entirely responsible and on which I congratulate him.

Although it is perfectly legitimate under NATO’s rules to include those items, their inclusion serves only one purpose: to assert that we are meeting the NATO target, albeit by the skin of our teeth. It adds no new money to meet the essential demands of defence. I understand that the Minister will tell us that the income of £1.4 billion is new money, and I am happy to accept that, but that still means that of the £39 billion, another £1.4 billion has been transferred in from other budgets. If that sum were stripped out, we would clearly fall below 2%.

In an excellent briefing paper from the Royal United Services Institute, Professor Malcolm Chalmers explains that if we had used the same parameters as in previous years, we would be on course to spend £36.82 billion on defence in the current year, including £500 million on operations. That amounts to 1.97% of GDP, meaning that we would have fallen below the NATO target for the first time. Thus, it is only by introducing the new accounting rules that we have pushed our defence expenditure over the 2% target.

Although NATO has accepted the changes, it is likely that further such changes will need to be made if the Government are to meet the 2% target for the next five years. As Professor Chalmers observes:

“While the MoD budget is set to grow by 0.5 per cent per annum over the next five years, national income (GDP) is projected to grow by an average of 2.4 per cent per annum over the same period. If these assumptions are correct, UK NATO-countable spending would fall from 2.08 per cent of GDP in 2015/16 to 1.85 per cent of GDP in 2020/21, assuming the recently introduced counting methods are still used. A further £2.7 billion per annum would be needed in 2019/20, and a further £3.5 billion in 2020/21, in order to bring NATO-countable defence spending up to 2.00 per cent of GDP.”

The Budget statement explained that the gap would be filled by including the single intelligence account, which is set to total £2.2 billion by 2020-21. That will close the gap until 2018-19. The further allocation of the £1.5 billion joint security fund by 2020-21 could be sufficient to cover the shortfall by the end of this Parliament, provided that NATO accepts all those additional accounts as being eligible.

Although funds such as the single intelligence account are committed to Britain’s security, the SIA will not equip conventional ground troops or build ships, and it is still unclear what will be included in the joint security fund and how it will be apportioned. I understand that the idea is that it will be up to the MOD, DFID, the agencies and the Foreign and Commonwealth Office to bid for the funds, so there is no guarantee that they will plug the gap in the apparent shortfall later in the decade, as predicted by Professor Chalmers, unless the MOD gets the lion’s share.

I acknowledge that NATO has allowed the inclusion of the SIA budget in our annual defence return, and that according to 2013 figures it is estimated that more than 90% of US intelligence programme spending is reported to Congress through the Department of Defence budget. It can justifiably be argued that if our main ally, and the main contributor to defence spending in the alliance, includes secret intelligence funding in its budget, we should be entitled to do the same. Nevertheless, the point remains that the Government are introducing into the defence budget funds that were previously allocated elsewhere.

I know the Government believe that they have met their obligation, but I am concerned by how it has been done. It is hard to see how we are not making ourselves more vulnerable by bringing in other budgets to shore up our 2% commitment rather than spending the money on manpower, equipment and combat readiness, which the increase in our projected GDP would demand by the end of the decade if we were to maintain the 2% spending.

As a direct result of that major shift in the accounting arrangements, I have included in my Bill a clause that is not to be found in the 2015 Act. Clause 4 provides that the Secretary of State be required to

“make arrangements for the independent evaluation of the extent to which United Kingdom defence expenditure meets the criteria established by NATO for determining whether expenditure qualifies as defence expenditure.”

The intention is to hold the Secretary of State to account for what is included in our NATO return and not allow extraneous funds to be included in our defence expenditure.

Before I leave the issue of accounting, I acknowledge that the Chancellor has committed to a 0.5% real-terms increase in defence spending during this Parliament. Although of course I welcome that commitment, I am not sure whether it is a departure from earlier policy. As I recall, when my right hon. Friend the Member for North Somerset was Secretary of State, he secured an undertaking from the Prime Minister that in recognition of our taking a pretty substantial hit, the MOD would receive a 1% per annum real-terms increase in the equipment budget from next year. As equipment accounts for about half of the total MOD budget, is it not the case that the 0.5% is no more than the fulfilling of that undertaking given by the Prime Minister in 2010? I know not the answer and would welcome the Minister’s response.

[Dr Liam Fox (North Somerset) (Con)]

For the sake of clarity, the undertaking that was given was not just a defence budget rise. In fact, it was impossible to meet the commitments of Future Force 2020 without that increase.

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[Sir Gerald Howarth]

I am grateful to my right hon. Friend, with whom I had the pleasure and honour of working for such a long time and to whom we all owe a debt of gratitude for having sorted out the mess that was the MOD’s accounts when we first arrived in government in 2010. That was a major achievement.

I recognise that this is all very dry stuff, but this debate provides the opportunity to drill down into an analysis of the detail underpinning the Chancellor’s trumpeted commitment to meet the 2% target. Why is that so important? There are two reasons. First, the Prime Minister made much at last September’s NATO summit at Newport of the importance of NATO’s European members stepping up to the plate and delivering effective capability by honouring the NATO obligation to spend 2% on defence. As a result of that Newport summit,

“every NATO member not spending 2% will halt any decline in defence spending and aim to increase it in real terms as GDP grows, and to move towards 2% within a decade.”

As the host nation, our failure to honour that Wales pledge would clearly damage seriously our leadership within NATO, so meeting the 2% target is not simply an accounting matter but goes to the heart of our resolve to prioritise defence in a dangerous world.

Secondly, in recent months, open concern has been expressed by the US about the UK’s spending levels and how they affect our ability to fight alongside it. We bring real value to the relationship, which goes beyond men and equipment, not least in the field of intelligence. Underpinning that relationship must be an ability to deliver a critical mass that is able to operate alongside the US.

The 2% target bears an element of the totemic, but the Bill provides for us to set that 2% national target as a minimum. Many of us argue that we should spend as much as we can afford, so as to provide Her Majesty’s armed forces with the equipment and manpower that they need to meet the threats and potential threats that we face. Only yesterday, one Labour Member—he is not in his place today; he shall remain nameless but he takes a keen interest in defence—told me that he wants a target of at least 3%, and I know that my right hon. Friend the Member for New Forest East (Dr Lewis), Chair of the Defence Committee, is in the same camp.

There have been plenty of stories about how DFID has struggled to find projects on which to spend the embarras de richesses from which it has benefited, with 62% of its budget being distributed through agencies such as the World Bank and the EU. One story earlier this year spoke of £1 billion being up for grabs before the year end in March. In contrast, our armed forces lost whole capabilities and suffered cuts in manpower to meet the Treasury demands that drove the 2010 SDSR. We desperately need a replacement for the Nimrod maritime patrol aircraft.

The RAF is operating at the very margin, as illustrated by the late reprieve for a Tornado squadron, without which we could not have conducted the current tempo of operations in Iraq. I welcome what my right hon. Friend the Secretary of State did with that squadron, but how on earth can we sustain more intensive operations, particularly against a more sophisticated enemy and where we have suffered losses? I simply do not buy the argument that was advanced some years ago by my great friend Geoff Hoon, former Defence Secretary, which was that platform numbers do not matter because each one is more sophisticated than previous generations of aircraft and ships.

Consider the Falklands war of 33 years ago. We lost six ships, two Type 42 destroyers, and two Type 21 frigates—the RFA Sir Galahad, and most critically the Atlantic Conveyor with its precious load of helicopters. In 1980 we had a complement of 48 frigates, destroyers and cruisers, but today the loss of two Type 45 destroyers would cut the fleet by one third. If a further third were in maintenance, just two ships would be left to provide one carrier with air defence. The Royal Navy is struggling to meet its standing commitments, and there are real manpower concerns with engineers in short supply and questions over the manning of two new aircraft carriers. The Minister is still unable to confirm whether the new Type 26 global combat ship fleet will be maintained at 13—I very much hope that it will be, but even if it is, 19 frigates and destroyers is woefully inadequate for a seafaring nation such as ours.

There is a decision to reduce Army regulars to 82,000—all of whom could fill Twickenham tomorrow night—as a cost-saving measure. Yes, we are contributing small numbers of personnel around the globe in pursuit of our welcome defence engagement strategy, but during operations in Afghanistan we could barely meet that commitment.

Let us not forget defence research. As the Minister’s predecessor, Lord Drayson, stated in his excellent policy document, “Defence industrial strategy”, so much of our leading battle-winning technology today is a result of yesterday’s investment. If we fail to invest today, how much risk do we assume for the future of our military power? Defence expenditure on research has fallen from £4.3 billion in 1980 to £1.3 billion in 2011-12.

As Sir John Major said to me earlier this week, it is remarkable and encouraging how favourably the United Kingdom is still regarded around the world. We are hugely respected, but much of that derives from our big stick, which in my view is much smaller than it needs to be. In that context, it is critical that the United Kingdom stands shoulder to shoulder with our closest ally, the United States. Its concerns about defence spending have been voiced publicly by a number of senior figures from President Obama down. General Raymond Odierno, head of the US army, said in March this year:

“We have a bilateral agreement between our two countries to work together. It is about having a partner that has very close values and the same goals as we do…What has changed, though, is the level of capability. In the past we would have a British Army division working alongside an American army division.”

He feared that with any further cuts to Britain’s defences, the US military would have to work on the assumption that we would produce only half that number in the future, forming a brigade under US leadership rather than a division in its own right. This would, of course, be catastrophic for Britain’s international credibility.

I am encouraged that the Minister was well received in Washington following the Chancellor’s Budget commitment, but adding real money—not juggling the accounting—will be the only way to maintain that reassurance. It is no exaggeration, as Malcom Chalmers pointed out, that the US sees us in a special category of our own, a category we must continue to guarantee. I submit that by enacting this measure we will be sending a clear signal to our allies about the seriousness of our intent.

We have to take note that the United States is seeking to re-evaluate its position. There was much talk earlier of its pivot to the Pacific, with the then Secretary of State Hillary Clinton, in 2011, recalling America’s commitment to Europe after world war two by saying:

“The time has come for the United States to make similar investments as a Pacific power.”

I am sure that Russia ramping up both its defence spending and its interventions, as in Ukraine and Syria, has tempered any tendency for the US to switch too sharply in the direction of the Pacific, but we should never place ourselves at risk of a sudden US reorientation, which could still occur if China continues its policy of military expansion.

Before I conclude, let me just address the argument that the Government’s commitment is enough and we do not need to enshrine it in law. Had it not been for the decision to enshrine our overseas aid target to 0.7%, I might have accepted that. However, as a Conservative who believes the first duty of Government is the defence of the realm, I really struggle to understand why they are prepared to enshrine the law on overseas aid yet doggedly refuse to apply the same principle to defence. It is not as though aid is unique in this context. In the previous Parliament, we were prepared to enshrine in law holding an in/out EU referendum by the end of 2017. Indeed, we all, including my right hon. Friend the Prime Minister, trooped enthusiastically through the Lobby on successive Fridays in support of my hon. Friend the Member for Stockton South (James Wharton). As recently as last week, we voted on the charter for budget responsibility, requiring Governments in normal times to spend less than they take in tax. Much like the European Union Referendum Bill, this measure was seen as a way for the Government to provide a reassurance that they will stick to their commitment, in this case, to eliminate the deficit.

Why are the Government so eager to enshrine certain budgets in law and yet disregard the one that ensures our safety and security? Why have the Government been so keen to ensure future Administrations commit to the aid budget and yet refuse to offer a similar reassurance to the armed forces that they share the same commitment to defence? I fear that the only logical conclusion one can come to is that the Government prioritise overseas aid over defence.

I want to conclude, because I have spoken for rather longer than I had intended. I do not suggest for one minute that the United Kingdom is not a world leader—we are. We are the fifth most important defence power in the world. We have our nuclear deterrent and this Government are committed to the renewal of that deterrent. We have new carriers, which were ordered by the Labour party and are being delivered by us. We have the new joint strike fighter coming on stream. We also have a Prime Minister who entirely, properly and rightly wants Britain to help to shape the world and not simply be shaped by it. To that extent, as the world continues to be a very dangerous place and events clearly show the need for Britain to maintain its strong defence—with north Africa in turmoil, the middle east as fractured as ever, renewed tensions on the eastern border of Europe through Russia’s aggression, and with China engaged with adventures on the South China sea—this is not a time to be playing with the figures on our defence spending. We need to ensure that our armed forces are properly resourced to defend Britain and protect our interests abroad. Our commitment to NATO, the cornerstone of Atlantic peace, remains paramount for our future and the future of the alliance if the treaty is worth the paper on which it is written. We must commit to spend at least 2% of GDP on defence and not draft in other funds to the defence budget in a pretence that we are honouring this commitment. What is more, we must show we mean business by enshrining this commitment in law to send the key message to our allies, most importantly the United States, that we take our place and responsibility in the world extremely seriously, and that we are prepared to defend ourselves and our allies against attack.

At the Conservative party conference, the Prime Minister spoke of security, stability, opportunity. The first two of these can only be achieved through strong defence.

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[Mr Henry Bellingham (North West Norfolk) (Con)]

It is a great pleasure to follow my hon. Friend the Member for Eddisbury (Antoinette Sandbach), who made a very good speech.

I congratulate my hon. Friend the Member for Aldershot (Sir Gerald Howarth) on his Bill and on the way he introduced it. He is one of the most knowledgeable people in this House, and probably in the country, and his expertise and judgment on the issue deserve to be recognised and respected. He gave us a superb tour d’horizon of the world today. We live in an ever more troubled and dangerous world and I agree with what he said about Russia and China. We also should not forget those rogue states in the world—those potential rogue nuclear states—that could put our security at risk. I agree with him when he says that all the previous norms and assumptions have been torn up, and the Chairman of the Select Committee on Defence, my right hon. Friend the Member for New Forest East (Dr Lewis), made that very same point.

Never before in the 30 years since the end of the cold war has our nation’s security been more important. Many of us had a rosy vision of what the world might have looked like in this part of the 21st century, but how wrong we were. I welcome the Government’s response to this new troubled world security environment. I am grateful for their commitment to spend more on defence and to spend at least 2%.

I have always been a glass half full person, and there are some good programmes coming on stream in the near future—the carriers, the Dauntless class destroyers, which are incredibly formidable vessels, the joint strike fighter, which has relevance to west Norfolk and RAF Marham, and the numerous upgrades that are taking place. As my hon. Friend the Member for Aldershot pointed out, there are still some significant gaps in our defence capabilities, not least our maritime reconnaissance capability; the carriers are obviously not yet operational and there is a carrier gap with the Harriers having been mothballed and sold.

I mentioned RAF Marham, which is the proud home of the Tornado force. That aircraft has been the workhorse of the RAF over many years and, as we speak, is playing a vital part in the campaign against ISIS and deploying its state-of-the-art reconnaissance system, RAPTOR. It is also the only platform that can deploy the Brimstone precision bomb system. It is very valuable in that theatre.

I pay tribute to the airmen and Air Force women, their families, the other personnel and the civil servants stationed at RAF Marham. They serve this country with huge competence and we should be very proud of them. The base also has a great impact on west Norfolk and is a vital and integral part of our local community. Only those colleagues with an airbase or a barracks in or near their constituency will understand how the armed forces always want to be involved, and play a part, in the community, the wider family and civic life.

[Sir Gerald Howarth]

I hugely appreciate my hon. Friend’s support for the Bill. May I draw his attention to the fact that one of the squadrons based at RAF Marham is 31 Squadron—the “Goldstars”—with which my father served during the second world war?

[Mr Bellingham]

That is an incredibly important connection, too, and I am grateful to my hon. Friend for mentioning it. I am also grateful that he mentioned the reprieve given to the third squadron at RAF Marham, because that is crucial to the squadrons rotation through RAF Akrotiri. Had we gone down to two squadrons, the rotation would have been at least six months and perhaps nine months, which, with unaccompanied tours, would have put immense pressure on the families. Keeping the third squadron enables a three-month rotation.

I am very pleased that the joint strike fighter, the Lightning II, will be coming to RAF Marham in 2018. We are looking forward to this superb aircraft coming to west Norfolk.

I mentioned RAF Akrotiri—I shall not digress too much—and yesterday’s news of refugees arriving on its shores is extremely worrying. I understand that 17 refugees arrived there 15 years ago and their status is still uncertain. If this is opened up as a new route into Europe, it will be incredibly dangerous and I very much hope the Government will take firm action. We have the two sovereign base areas and it is essential that extra personnel and capability are put in place properly to guard the coastline and stop these very unfortunate people landing there. Does that not reinforce the Prime Minister’s decision to take refugees direct from the camps in the region, rather than encouraging people to make such a perilous journey across the Mediterranean?

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[Sir Edward Leigh]

Absolutely. My youngest son has just left the air cadets after serving for five years. He adored it. In the heritage museum in RAF Scampton, there is Guy Gibson’s office and all that wonderful stuff and a room devoted to the air cadets, because this is taken extraordinarily seriously by the RAF and the other armed services. By the way, what an honour it was for me when I was visiting RAF Scampton a week or two ago that another visitor there was a veteran of the raid on the Tirpitz. Is that not extraordinary—this old man in a wheelchair who, all those years ago, had taken such appalling risks on behalf of our country?

[Sir Gerald Howarth]

My hon. Friend mentioned one of my great heroes, Wing Commander Guy Gibson, VC, Distinguished Flying Cross and Bar, Distinguished Service Order and Bar—an amazing man. He made the point in a book he wrote, “Enemy Coast Ahead”, that it was down not just to the pilots of the Royal Air Force, but to all the others who contributed—the maintenance crews, the Women’s Auxiliary Air Force and all the rest of it. It was also down to technology. We had an edge because we had invested in radar and other forms of technology. Is there not a lesson from Guy Gibson to us today that if we do not invest heavily in technology in the future, we will not have the battle-winning technology we need to defeat any future enemy?

[Sir Edward Leigh]

Absolutely. We survived by the skin of our teeth in 1940. Incidentally, it is sometimes forgotten that when Guy Gibson was killed in his Mosquito over Holland in 1944 serving his country, he was already an adopted Conservative candidate for this place. What a wonderful MP he would have been, and what a loss he was to our nation with his untimely death.

Let me move on to the future, and this Bill, which I warmly support. In his magisterial opening, my hon. Friend the Member for Aldershot (Sir Gerald Howarth) really delved down into the detail, which is desperately important. Like many hon. Friends, I am deeply concerned about the increasing tendency to ring-fence Government Departments. As a former Chairman of the Public Accounts Committee, I believe that that is a bad way of running Government. Government—it does not matter whether it is health, education, international aid or defence—should be run by working out what you want to do, what you have to do, and what you can afford, and then having a negotiation with the Treasury on that basis.

We now have an extraordinary situation where the entire budget of the Foreign Office, which we must remember is absolutely critical to this country in terms of promoting trade and good relations, is now only twice that of our aid programme to Ethiopia. That is not a sensible way of running Government. It gives rise to all sorts of other stresses. Of course, I am as committed as anybody in this House to international aid. I have two daughters working in that sector. We all know the wonderful work that DFID is doing. However, it does not make sense to have an accounting procedure that results in DFID chasing after international aid agencies in Geneva at the end of the accounting year just to meet its 0.7% target. The International Development Secretary has said that trying to sort out her budget is like landing a helicopter on a moving handkerchief. When I put that analogy to my right hon. Friend the Member for New Forest East (Dr Lewis), he said, “Well, of course we just have to ensure that the aircraft carrier on which the helicopter lands is big enough.”

If we see the commitment to hit 2% as an accounting device, we are in a disastrous situation. In the Public Accounts Committee, we found time and again that there were fantastically complex and difficult cost and time overruns in MOD procurement programmes. I fear that in a desperate bid to meet its 2% target, using all the accounting mechanisms that my right hon. Friend mentioned, we could be skewing the whole procurement process in a very dangerous way. I take his point, and that of my hon. Friend the Member for Aldershot (Sir Gerald Howarth), that we must therefore see 2% as an “at least” target. That is in the Bill, and that is why I support it.

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[Kevin Foster (Torbay) (Con)]

It is a pleasure to support the Bill. I welcome the fact that it has been brought forward by my hon. Friend the Member for Aldershot (Sir Gerald Howarth).

It is safe to say that I am probably only here because of the Royal Navy. In 1944, Philip and Dorothy Foster—both RN—met in a galley. He was in charge of the stewards and she was in charge of the Wrens in the kitchen. They both had a view on how the galley could perform better and they each blamed the other. Hon. Members can imagine what followed.

To know why the Bill is so important, we need think only about what we see when we are out and about as members of the armed forces parliamentary scheme, meeting many people in the Navy and looking at what they are delivering. I will stick with the Navy, because I am with that service, although the Royal Air Force and the Army also provide such a valuable role. As my grandfather would have said, however, I know which is the senior of the three services.

This is about defending and protecting our nation from all threats, not just military ones. The crew of HMS Iron Duke have been out in the Baltic to deal with a more traditional threat, but, as my hon. Friend the Member for Congleton (Fiona Bruce) has said, others went out to fight Ebola, a virus that would have threatened lives in this country had it been allowed to spread. That is key: it was as much about saving lives here as about saving lives out in Africa. Had it become a pandemic, it would have reached this country. We could not keep out the black death in the middle ages, and we would not have kept out Ebola in the interconnected 21st-century world.

The Bill is about providing a basic level of support—a floor—in spending as an insurance policy. Why should that be put into law? In the past, I would have emphasised the view that it is for the Chancellor in each Parliament to set out the spending commitments and plans, and to put forward Budgets for approval by the House. The Act to enshrine the international aid commitment has changed my view. For the first time, the commitment of a specific part of GNI—in this case, it is of GDP—was enshrined in law. Now that such a precedent has been set, it is right to put into law one of our other key international pledges, the 2% of GDP on defence.

How we spend the 2% is key—nobody is arguing that it should be wasted or put into inefficient projects—but at 2% of GDP, given some of the historical spending figures that have been cited, we are hardly being spendthrift. It is vital to keep a minimum capability to be able to act. That should be not just through our nuclear deterrent, which we regularly talk about, but, as I said in an intervention, through the conventional deterrent that NATO needs to provide.

My hon. Friend the Member for Gainsborough (Sir Edward Leigh) spoke about the German defence budget. Fundamentally, having a bulwark of conventional forces that can be rapidly expanded at a time of crisis is as much a part of NATO’s article 5 deterrence as is the threat of nuclear retaliation if an aggressor state uses weapons of mass destruction against any NATO member. For me, the Bill is about that.

The Bill is also about encouraging our allies by enshrining the commitment in legislation. A country cannot have the Rolls-Royce insurance policy of article 5 mutual self-defence if its budget is that of an old banger. Some countries are building such a capability, but others need to do the same, not least the larger European countries such as Germany and Italy. I would join my hon. Friend in saying that for Germany—a modern, democratic Germany, committed to human rights—to have a capable and effective military is as key a part of keeping security and stability and deterring potential threats to our allies as it is for the United States and the United Kingdom. We obviously had a few differences in history, but we need to look at the future threats, not reminisce about the past.

Putting the target into legislation will secure us against future Governments who do not have the same priorities as we have today. I believe that the current Chancellor and Prime Minister are committed to meeting the target of spending a minimum of 2% of GDP on defence, in accordance with the NATO standard, but imagine if we had a Prime Minister who took the following view:

“Wouldn’t it be wonderful if every politician around the world, instead of taking pride in the size of their armed forces…abolished their army and took pride in the fact they don’t have an army… That is the way we should be going forward.”

I do not think that the British people are very likely to elect to that role someone who believes that, but it is important to have a bulwark to ensure our ongoing capability. The NATO alliance is based on knowing that the allies that would come to one’s rescue will have their capabilities for 10, 15 or 20 years, not just for the lifetime of one Government.

As I said in a couple of interventions, I do not accept the argument that there is a conflict between our 0.7% commitment on international aid and our 2% commitment on defence. Our expenditure is about providing a military capability that gives this House and our Government—in particular the Prime Minister, who exercises the royal prerogative—choices when faced with situations. The choice could be to exercise lethal force to take out a threat to this country’s security in a lawless area where the application of international law or a request for extradition would be an almost meaningless gesture, as occurred recently.

The choice could also be to provide unarmed assistance, as in Operation Gritrock, which has been mentioned, thereby using the ability of the military to go anywhere, to deploy and to deliver a capability for a humanitarian end. That could be setting up a field hospital, providing medicine or providing people who are skilled and trained in dealing with biological and chemical warfare agents, whose skills are eminently applicable when a major illness or disease breaks out. As has been said, the military can deliver soft power as well as the hard power that we traditionally assume it will use.

The example that I always give is HMS Ocean, which I have visited. It can be viewed as an amphibious helicopter landing platform. I recently saw it used as part of the Wader exercise, which involved deploying marines and planning a beach raid. It can also be seen as a hospital, a place that can feed thousands of people in an hour and a place that can provide infrastructure for a country that has just had its infrastructure shattered by an earthquake or other natural disaster. It is still the same capability and the same money is being spent.

[Sir Gerald Howarth]

HMS Ocean serves a further purpose. It provides a magnificent backdrop for signing a treaty with Brazil, which I was privileged to do as a Minister.

[Kevin Foster]

Indeed, our Navy has always been part of our diplomatic missions across the seas. It has provided a platform not just for war fighting but for trade and diplomacy. It has literally flown our flag for all purposes, not just the traditional purpose of deterrence. Plenty of treaties have been signed on board our ships in the past, and hopefully plenty more will be signed in the coming years.

It is appropriate to commit to the target in the Bill because we do not know exactly what the future threats will be. Two hundred and ten years ago, our predecessors in this House were still awaiting the news of Nelson’s victory at Trafalgar, because HMS Pickle was still on its way to Falmouth. The threats we face today would have been unimaginable at that time. For me, this is about making sure that we have a minimum expenditure on capability enshrined in law, so that whatever threat comes along over the next 20 to 30 years we have armed forces that are able to respond to it in their current form or able to expand, as they did in the great crises of 1939 and 1914 to meet a new aggressive threat. At the core of those forces must be professionals who have been in the military for many years and can take their skills with them into an expanded military.

I believe that this is the right step to take. It is certainly one that many of our constituents wish us to take. If we had not put into law one international target, I would accept the argument that we should not put such targets into our national law, but the precedent has been set. It is therefore time to put this target into our law and send a similarly powerful message to other countries about our commitment to the north Atlantic alliance as that which we have sent about our commitment to the UN’s development goals. I might have accepted the arguments about relevance and so forth, but they were all dealt with in the consideration of the other Bill.

As has been said, NATO has now expanded to 26 members, and it is vital—

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[The Minister for Defence Procurement (Mr Philip Dunne)]

It is a great pleasure to conclude this debate, and I congratulate my hon. Friend the Member for Aldershot (Sir Gerald Howarth)—a predecessor in my Department—on his commitment to defence. That commitment is well known not just in this House but to every citizen of Aldershot, whether they vote for him or not, and not least by the Royal Air Force, with which he spends a great deal of his time outside this Chamber. His commitment is much appreciated by all those who come across him.

My hon. Friend’s commitment to this Bill is in no doubt, and although the Government may have issues about legislating for such a commitment, we have none whatever with the intent to ensure that the country makes a full contribution to meeting our NATO pledges. Having secured such an elevated status in the ballot for private Members’ Bills, he chose defence as his topic, and we all owe him a debt of gratitude for the opportunity to hold this debate, even if we are not all in wholehearted agreement with the precise wording of his Bill—despite that, most of the people who have spoken thus far would appear to be.

The Government fully support the objective of spending 2% of GDP on defence and we are delivering on that, but I have some reservations that I will set out in my remarks. My hon. Friend’s desire to legislate for Government spending on defence to constitute no less than 2% of gross domestic product is founded on admirable intent, and reflects a sense of the absolute importance that we place on that guideline. It is yet another reminder of the Chancellor’s announcement in the July Budget that we will not only meet the NATO guideline to spend 2% of GDP on defence this year, but we will meet it each year for the rest of this Parliament.

In July the Chancellor also confirmed that our budget will rise by 0.5% above inflation until 2021, and that up to £1.5 billion will be made available by the end of this Parliament for the armed forces and the security and intelligence agencies to bid into. Those combinations, which I will touch on later, make us confident that we will meet the 2% target, which some hon. Members have questioned.

[Sir Gerald Howarth]

On the joint security fund, will the Minister explain how we get to £1.5 billion? Will there be a progressive increase, and what does he anticipate the bidding process will be?

[Mr Dunne]

My hon. Friend tempts me to venture into the inner workings of the comprehensive spending review that is being conducted by my hon. Friends in the Treasury, but he will not have too long to wait before we get a proper and comprehensive answer to his question. The profiling and allocation of the fund will be determined through the spending review and the strategic defence and security review, and all will be revealed before the end of the year. I am sure that he will scrutinise it with considerable interest.

Let me look briefly back in history and remind hon. Members about the origins of the 2% GDP guideline, which was a question raised by my hon. Friend the Member for Gainsborough (Sir Edward Leigh). The target was first found in NATO resource guidance during the cold war, and it underlined the political and military need

“to improve NATO’s conventional defence capabilities in relation to those of the Warsaw Pact in order to narrow the gap and reduce dependence on the early recourse to nuclear weapons.”

It stressed:

“Those nations which have not met it in the past should make every effort to do so in the future.”

When that ambition was set, the reasons for the guidance were self-evident. I am not the oldest Member in the Chamber. I was born in 1958, and that frames my recollections of the later stages of the cold war in the 1970s and 1980s. One or two Members might be able to go back a decade before that, but very few—with the possible exception of the Leader of the Opposition—could go back to the origins of the cold war in the 1950s. Those who lived through those dark times have not forgotten what it was like, with armies of the east and west facing off against each other, and the ever-present fear of not just conventional war, but a potential nuclear attack.

After the fall of the Berlin wall in 1989 and the downfall of the Soviet Union, attitudes to defence spending changed. Nations—including this one—spoke of a peace dividend, and chose to channel defence spending into social programmes rather than military hardware. Yet more recently, nations have begun to redress that position. In 2006 the then United States Ambassador to NATO, Victoria Nuland, referred to 2% as the “unofficial floor” on defence spending in NATO. One month later at the NATO summit in Riga, further comprehensive political guidance helped to redefine the role of the alliance, and 2% became a genuine aspiration. Despite that, the likelihood of reversing the downward trajectory of defence spending seemed remote until last year when, at the NATO summit in Wales, and as we faced the greatest crises since the end of the cold war, nations finally agreed to raise the profile of the 2% pledge to make it meaningful.

I am sure that Conservative Members at least will remember the Prime Minister standing shoulder to shoulder with President Obama at Celtic Manor in Wales last year, urging all 28 nations to step up to the plate, and signing a landmark declaration. It might be helpful to the House if I remind hon. Members of exactly what was said—I hope that you will indulge a longish quote, Madam Deputy Speaker. It was declared:

“We agree to reverse the trend of declining defence budgets, to make the most effective use of our funds and to further a more balanced sharing of costs and responsibilities. Our overall security and defence depend both on how much we spend and how we spend it. Increased investments should be directed towards meeting our capability priorities, and Allies also need to display the political will to provide required capabilities and deploy forces when they are needed. A strong defence industry across the Alliance, including a stronger defence industry in Europe…and across the Atlantic, remains essential for delivering the required capabilities. NATO and EU efforts to strengthen defence capabilities are complementary. Taking current commitments into account, we are guided by the following considerations:

Allies currently meeting the NATO guideline to spend a minimum of 2% of their Gross Domestic Product (GDP) on defence will aim to continue to do so. Likewise, Allies spending more than 20% of their defence budgets on major equipment, including related Research & Development, will continue to do so…Allies whose current proportion of GDP spent on defence is below this level will halt any decline in defence expenditure; aim to increase defence expenditure in real terms as GDP grows; aim to move towards the 2% guideline within a decade with a view to meeting their NATO Capability Targets and filling NATO’s capability shortfalls

Allies who currently spend less than 20% of their annual defence spending on major new equipment, including related Research & Development, will aim, within a decade, to increase their annual investments to 20% or more of total defence expenditures. All Allies will ensure that their land, air and maritime forces meet NATO agreed guidelines for deployability and sustainability and other agreed output metrics and ensure that their armed forces can operate together effectively, including through the implementation of agreed NATO standards and doctrines…Allies will review national progress annually, and that will be discussed at future defence ministerial meetings and reviewed by heads of state and government at future summits.”

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[Mr Dunne]

I am grateful for that suggestion, and will happily take it up with Lockheed Martin, who I believe organised the event, to establish whether it would be willing to repeat it. On the issue of prosperity, I can give my right hon. Friend another sneak preview ahead of publication of the SDSR, in that there is likely to be a theme coursing through that document of how much defence contributes to our economy and the nation’s prosperity.

[Sir Gerald Howarth]

I would like to endorse what my right hon. Friend the Member for New Forest East (Dr Lewis) said about the F-35 cockpit simulator. I had a chance as a pilot to have a look at it, and I have to say that it was extremely impressive. I agree that that should be made available to more Members because this is going to be a very important programme in the Royal Air Force agenda and in the defence of the United Kingdom.

[Mr Dunne]

I am grateful for that endorsement. I completely agree with my right hon. and hon. Friends that the UK as a tier 1 partner has a unique role to play in the development of this programme over decades to come. It is the single largest defence programme in the world ever—in value terms, although that may be as much to do with inflation as anything else. We have a 15% share in the manufacture in this country of each and every one of those platforms as they come into service in air forces around the world. The contribution it will make to sustaining the vibrancy of our defence industry cannot be overstated.

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[Mr Dunne]

I am delighted to welcome the hon. Gentleman’s intervention, and I am sure his Front-Bench colleague, the hon. Member for York Central will be as pleased to see him here supporting her. I am amused by his reference to what President Reagan said. In answer to his question, I should say that we are already delivering. It is important that we should deliver in a transparent way and I shall come during my concluding remarks to highlight the visibility of the 2% commitment to NATO and how it is assessed.

The defence budget, alongside other departmental budgets, is already approved by Parliament through the estimates process. I was highlighting some of Parliament’s other means of scrutinising defence spending and the proportion of Government revenues spent on defence. The Treasury is content that the estimates process is sufficient for setting in-year budgets. It is our strong view that the Government must safeguard their ability to retain financial flexibility to set forward budgets in line with the policy priorities of the day. The Bill would reduce the financial flexibility available to any Government of the day to set forward budgets in line with policy priorities.

Hon. Members are expecting me to conclude my opening observations. I will cite a quotation from a bit earlier than President Reagan’s. Winston Churchill said:

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

I shall take a few moments to respond to questions posed by my hon. Friend the Member for Aldershot about definitions. The definitions that we have used to meet our NATO spending commitment are not ours, but NATO’s. From time to time, like all member states, we make updates to ensure that we categorise defence spending fully in accordance with NATO’s guidelines. That is important, not least because it helps NATO compare like for like across the alliance.

I have touched on two aspects from the summer Budget that will help us meet those targets. The Chancellor announced two increases in defence budgets for the coming years of this Parliament. First, there was the 0.5% real- terms increase each year, and secondly, the opportunity to bid into a new joint security fund, alongside security agencies, that would reach £1.5 billion in 2019-20. My hon. Friend asked how much of that the MOD could secure to include within the 2% calculation. I am afraid that I cannot give him the answer today, but I can tell him that, as I said in reply to an intervention, the profiling and allocation of the fund are decisions for the SDSR so we will know before too long. However, we will be able to include within the definition the share of the fund secured by defence in our submission to NATO, although we cannot tell what the proportion will be until we know what is in the fund.[Official Report, 29 October 2015, Vol. 601, c. 1MC.]

Our 2015-16 NATO return included some categories of expenditure that we had not included in previous returns. I should like to address that issue, which goes to the heart of a concern behind the debate today. One of the items was MOD-generated income. I should like to explain what that is. The defence budget, £34.6 billion this year, is provided by the Exchequer to the Department; it is our core budget. In addition to that, the Department has for many years generated income that has not previously been declared to NATO although it is entirely legitimate to declare it because it is extra money spent on defence.

I draw my hon. Friend’s attention to the MOD’s annual report and accounts; I am sure he is one of the few Members to read it avidly each year. I happen to have the accounts for the year 2014-15 in front of me. In that year, the MOD generated just over £1.3 billion of its own income, as is clearly shown on page 143, table 6 of the report. That includes, for example, receipts from renting housing out to military personnel. Those living in married quarters pay for that benefit and we use the cash that comes into our coffers to spend on defence outputs. I am sure my hon. Friend would agree that it is legitimate to include that money in our returns to NATO.

[Sir Gerald Howarth]

I am grateful to my hon. Friend for his reference to the MOD’s accounts. He kindly suggested that I might understand those accounts, but I have yet to meet anybody who can, save for Mr James Elder—the only man I know who does. They are the most opaque documents imaginable.

I say with respect to my hon. Friend that the point is that we now classify a number of items as defence expenditure that hitherto we have not. It just happens that, lo and behold, including those items means we meet the 2%. Without them we do not. My hon. Friend owes it to the House to explain why those items have suddenly been included when previously they were not. It might help if he told us when the formula was last changed in that way.

[Mr Dunne]

I have sympathy with my hon. Friend’s comment about the accounts, which are just short of 200 pages long. But there are some helpful guideposts through them—including the photographs, which take up a number of pages; they include an excellent picture of the Red Arrows, which, were he here, my hon. Friend the Member for Gainsborough would surely applaud.

The short answer is that when scrubbing the numbers, as is done from time to time in making declarations, the Department realised that there was a significant gap of billions of pounds between what we spend on defence and what NATO said we spent on defence. We wanted to ensure that we got it right. An exercise was done ahead of this year’s submission to NATO on how much genuine cash was paid by the MOD for defence purposes— it is not the same as the amount of money we receive from the Treasury for spending. It is therefore entirely legitimate for us to take the opportunity to take that into account.

Another example from the income category is the £50 million paid by entitled personnel for food. I am sure my hon. Friend has had the opportunity to visit many messes, particularly in the RAF bases he has visited, and that he has enjoyed the food, for which some payment must be made. I suspect that he has often been the guest of the base commander and that he has not personally had to contribute to the MOD’s coffers, but personnel routinely contribute. That is hard cash that comes into the Department and is spent. It is entirely appropriate to include income we have generated, which for this year amounted in total to £1.3 billion.

We included other categories of expenditure this year when we did the exercise, one of which is Government cyber-security spending. We decided to include spending on some aspects of our cyber-security in the NATO calculation this year because the MOD is taking a more central role in providing cyber-defence and co-ordinating that work across Government Departments. Another category is those elements of the conflict stability and security fund relating to peacekeeping activities undertaken by the MOD. In 2015-16, that is estimated to be £400 million. That money is spent by Defence and is therefore eligible. We have also included the costs of defence pensions, because NATO recognises that that is permissible expenditure and other nations include it. That includes the cost of MOD civil servants’ pensions—such pensions are part of other nations’ calculations. Those are all legitimate expenses and are not a sleight of hand, as has been alleged.

In the same vein, I should like to address hon. Members’ concerns that there is a measure of double-counting in the figures for defence and international aid. Just as NATO sets the guidelines for defence spending, so the OECD sets the guidelines for our official development assistance. We adhere to both sets of guidelines. There is a modest measure of overlap between the two, but that is to be expected. As I will go on to explain in my concluding remarks, defence and development are two sides of the same coin.

The second element of my hon. Friend’s Bill is his desire to

“make provision for verification that NATO’s criteria for defence expenditure are met in calculating the UK’s performance against this target”.

I would argue that that, too, is unnecessary.

[Mr Dunne]

I am sorry that my hon. Friend regards my speech as a wittering one. He has a remarkably impressive credential in the House. His son is a serving officer—a pilot in the Chinook fleet—whom I had the privilege to meet on a base. I discovered that his father is my hon. Friend, which I had not previously appreciated. He takes a great interest in defence. I am sorry he was unable to be in the Chamber for the earlier parts of my speech with other hon. Members, but he will enjoy listening to me describe the Government’s commitment to defence as I continue my remarks on the subject of the verification of NATO figures.

We submit financial data to NATO annually in the form of a detailed, classified financial return. Our NATO returns are independently reviewed and verified by NATO staff, and are peer-reviewed by NATO allies during the defence planning process. That provides independent testing and impartial scrutiny of the UK’s plans, and builds confidence among allies that we will do as we say. It is entirely right that NATO and not the UK decides the definitions of defence expenditure. That is the only way to ensure consistency and build relationships across the alliance. Significantly, even if further verification is put in place, any such findings will be irrelevant, because NATO determines what can be counted as defence spending.

I accept that that is not to say that more cannot be done. I remind the House of the defence pledge from which I have quoted. At the NATO summit in Wales, we agreed not only to review national progress annually, but that the scrutiny would come from the very top—from the Heads of Government—at all future summits.

My hon. Friend’s suggestion of independent UK verification would merely add yet another administrative step to the process, an example of the creeping red tape that bogs down Departments in the very bureaucracy that he and most other hon. Members on our side of the House are keen to see eliminated. My hon. Friend the Member for Gainsborough, as a former Chairman of the Public Accounts Committee, is right to be concerned that enshrining the pledge in legislation would add to the burden of red tape that the Government are seeking to avoid.

Let me turn briefly and almost finally to the question of international aid. It is now becoming far harder to argue that aid does not matter. Globalisation has meant that instability in one part of the world has direct repercussions for us over here, whether in terms of terrorism, mass migration or disease. Whereas defence is essentially reactive, development is proactive. By investing early on, we can avoid counting the cost further down the line, stabilising countries and avoiding the future commitment of our troops.

My hon. Friend the Member for Congleton highlighted our leading work on Ebola in west Africa, which is an excellent example. We have funded laboratories in Sierra Leone to speed up the time taken to diagnose the disease and to help to stop its spread across the country. We have supported 700 Ebola treatment beds that provide direct medical care for up to 8,800 patients over six months and we are working with communities on new burial practices. Thanks to the pioneering work of the Defence Science and Technology Laboratory, in conjunction with the BBI Group, great British brains developed a rapid Ebola test to aid identification in the field and potentially help minimise the spread of the Ebola virus. I know that my hon. Friend the Member for south-west Wiltshire, who is unfortunately not in his place but was making interventions earlier, is a doughty champion for the work of the DSTL in his constituency.

[Sir Gerald Howarth]

May I correct my hon. Friend the Minister? I think that he means my hon. Friend the Member for Salisbury (John Glen).

[Mr Dunne]

I am most grateful. My hon. Friend the Member for Salisbury (John Glen) hosted a visit I paid to DSTL where I met some of the people who had invented the tests that identified Ebola from simple blood samples and were able to rule out up to 20 other diseases with a simple blood test. It was a remarkably efficient and impressive innovation that the military has brought about to the benefit of the civilian population.

The test uses the latest lateral flow technology. We have had some long words already in this debate, and I am now going to use another. The technology is known as lateral flow immunochromatographic assays, to give it its full title, and allows local health teams to complete a test at the bedside without the need for high-tech paraphernalia and yet still get a result within 20 minutes. Aid has not only helped a country tackle a major emergency that put stability at risk but prevented an epidemic from becoming a pandemic that would have threatened our own security.

The MOD has a vital role to play in supporting humanitarian efforts. The cost of conflict stability and security fund programme activities led by the MOD and security and humanitarian operations that are partly refunded from the DFID budget contribute properly to both the ODA and NATO guidelines. That is why the MOD has typically been funding directly up to £5 million only of ODA-eligible activity each year, including disaster relief training and international capacity building. I, for one, support the international definitions of ODA-eligible spending but we need to consider them. I know that the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Bournemouth East (Mr Ellwood), who is sitting on the Front Bench, has been doing that to ensure that they accurately reflect the role of Government today. The guidelines were drawn up nearly 50 years ago and it is appropriate that they should be reviewed from time to time, because there might well be other areas in which it is entirely permissible and appropriate for other Departments’ spending to be included in the effort.

I know that some Members remain concerned about the apparent disparity between our approach to defence and our approach to official development assistance, given that we have enshrined the 0.7% of gross national income commitment in law. But I believe that we are talking about a very different set of circumstances when considering whether to put my hon. Friend’s Bill into law. We have always met our 2% defence guideline and we have never needed the stimulus of legislative requirement to do so, yet the UK only met the 0.7% target for the first time two years ago. My hon. Friend the Member for Shipley (Philip Davies) made a brief intervention earlier—most unusually, he seemed to be present only for breakfast on this sitting Friday, although he is normally such an assiduous attender at our sittings on Fridays. He pointed out that the 0.7% international development target had been met prior to the legislation being concluded earlier this year. He is correct, but that was only after a very considerable increase in funding during the coalition Government, and throughout the 1980s and 1990s this spending was at about half the current level.

--- Later in debate ---

[Sir Gerald Howarth]

This has been a very interesting and informative debate. My hon. Friend the Minister gave a most elegant and interesting response, and did so without hesitation, deviation or repetition. [Interruption.] I may have heard an honest admission from him that there might just have been a smidgen of repetition. Nevertheless, I have to disappoint him, because unfortunately he has come nowhere near the record of Sir Ivan Lawrence, who spoke on a Bill to impose fluoridisation, or compulsory medication—or “poisoning”, as he put it. When he started, he had notes all the way along the Bench where he was sitting. He carried on through the night, as we used to do in those days, and ended up at breakfast time. I am afraid that my hon. Friend has a long way to go in his eloquence in order to break that record.

I am most grateful to my right hon. and hon. Friends for their contributions. I will not repeat them because the Minister encapsulated them superbly. My hon. Friend the Member for Eddisbury (Antoinette Sandbach) told us about her own personal background and the role played by the British forces in the liberation of the Netherlands. One of the things that forever cemented the relationship between the United Kingdom and the Netherlands was the liberation of that country by our forces. In having her here, we are the beneficiaries of that liberation.

I thank my hon. Friend the Member for Torbay (Kevin Foster) for pointing out that one of the purposes of the Bill is to ensure that while no Parliament can bind its successor, it nevertheless sends a message that this commitment would be more difficult for a future Government to unwind.

That brings me to the hon. Member for York Central (Rachael Maskell), who spoke on behalf of the official Opposition—for she is the official Opposition. She should not allow some people who are not here today to claim that they are the official Opposition, because the Scot Nats are not the official Opposition—she is. For as long as Labour’s policy is as she enunciated it today, we should be okay—but who knows? We cannot predict the future.

I am particularly grateful to the Chairman of the Committee, my right hon. Friend the Member for New Forest East (Dr Lewis). This House voted overwhelmingly for him to become Chairman. He is hugely knowledgeable in these matters and has a reputation for forensic analysis.

The Minister is a great friend of mine, and I very much appreciate what he said. I must say, though, that I had no idea the EU had produced some kind of new GDP calculator. Why were we not told? [Interruption.] He says from a sedentary position that we were. I have seen no briefing anywhere indicating that there has been any such change. He was also unable to say whether we had adjusted this formula in the past. I hope that we will not be adjusting it again in future.

What it comes down to is this: we are all agreed. Nobody in this House today has opposed the idea that this nation needs to spend a minimum of 2% of GDP on defence. We are on common ground, and even the hon. Member for Blackpool South (Mr Marsden), who is nodding, is in that camp. The only difference is that every Conservative Member who has spoken in this debate seeks to enshrine that commitment in law. We do not believe that the Government are sending the right signal by saying that they are prepared to enshrine in law a commitment of 0.7% to overseas aid, but that they are not prepared to do that for defence.

My hon. Friend the Minister suggests that passing this Bill would somehow restrict the Treasury’s budget flexibility, but perhaps some thought should have been given to that argument when previous commitments were made to the overseas aid Bill.

My hon. Friend also said that the United States commends us for the work we have done. That is good news, because when I visited Washington last year the US was hugely concerned about Britain’s perceived lack of commitment to defence spending. I hear what my hon. Friend says about Ash Carter, who is proving to be a very good Secretary of Defence and I hope the United States will stick with him.

The reason I am going to press the Bill is not just that, as my hon. Friend the Minister was kind enough to say—and I really appreciate this—I am absolutely committed to the defence of the realm. I am a conviction politician. I came into Parliament because I passionately believe in my country, and I do so not just because I am the Member of Parliament for the home of the British Army or because I was commissioned in the Royal Air Force Volunteer Reserve. I believe with every fibre of my being that we are in a dangerous world. We want to contribute something to make it a better place, and nothing leverages influence in this world as much as defence.

That is why it is imperative that the Government show their commitment to supporting my Bill. I am disappointed that they are not doing so and I will rest my case on what the Minister said. He said that 2% is a sign of our intent. I could not agree with him more. My Bill reinforces that intent with vigour and it should be read a second time.

Question put, That the Bill be read a Second time.

The House proceeded to a Division.

[Madam Deputy Speaker (Natascha Engel)]

I ask the Serjeant at Arms to investigate the delay in the No Lobby.

--- Later in debate ---

[Sir Gerald Howarth]

On a point of order, Madam Deputy Speaker. I heard the Minister say a few moments ago that the Government were opposed to my Bill. I therefore find it slightly surprising that no members of the Government were in the No Lobby. I wondered whether I should take it as a good omen that between my calling for a vote and your calling the Division, the Government had a change of heart and really wish to support my Bill, but were a little reluctant to say so. I hope that means that my Bill can be brought back in a suitable form, and that the Government will accept it in due course.

[Madam Deputy Speaker (Natascha Engel)]

As the hon. Gentleman knows, I am in no position to say whether that assumption is correct. However, just because Members on the Government Benches shouted “No”, that did not oblige them to take part in the vote.