Defence Expenditure (NATO Target) Bill

Debate between Gerald Howarth and Liam Fox

Friday 23rd October 2015 Commons Chamber

[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.

Gibraltar

Debate between Gerald Howarth and Liam Fox

Thursday 8th January 2015 Commons Chamber

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

May I begin by congratulating the Committee on producing such an excellent and well thought out report and, perhaps more importantly, the people and the Government of Gibraltar on creating an undoubted international success story? Anyone who has visited Gibraltar in recent times will have seen that it has a vibrant, booming economy, not least because of the low-tax regime the Government operate, which this House would do well to look at.

Visitors to Gibraltar can see the level of investment, such as that by international hotel chains, which is testament to international investors’ confidence in Gibraltar’s future. They can see, as the hon. Member for Ilford South (Mike Gapes) said, the queues of those coming into Gibraltar to work from Spain, whose economy is less than robust at present. Shops in Gibraltar are crammed with Spanish consumers trying to buy goods at lower prices. This is a great opportunity not only for Gibraltar but for the wider region. It is an economic success story, in that only 7% of the Gibraltar economy is now dependent on military spending of any sort.

This is more than just an economic success, however. The population of Gibraltar is confident and secure in Gibraltar’s status as a British overseas territory. The population were given UK citizenship under the British Nationality Act 1981, and they have overwhelmingly restated their desire to remain British, reaffirming their democratic mandate in the 2002 referendum. I make these points because every single one of those facts puts the people of Gibraltar on the right side of international law, and our own Government should make that point clearly at every possible opportunity.

As a former Defence Secretary, I naturally look favourably on Gibraltar’s strategic advantage to the United Kingdom. It has played a major role in our security since it was ceded by Spain—in perpetuity, let us remember—under the treaty of Utrecht. It has always been an important base for the Royal Navy. It has associations with Trafalgar—the Trafalgar cemetery is testament to that—with Crimea, with world war two and with supporting the taskforce in the liberation of the Falklands. Those were all great contributions to our wider security. As Secretary of State, I visited Gibraltar to thank our Royal Navy personnel following the Libya situation, in which Gibraltar again played an important role.

This is not just about our security, however. As an important NATO base and an important signals intelligence gathering station, Gibraltar contributes to the wider security of the alliance. That includes the Spanish people themselves. The intelligence gathering that we do in Gibraltar is for our wider common security, but that is being undermined by the ridiculous antics of the Spanish Government. Gibraltar is also a major stopping-off point for our nuclear submarines and those of the United States, one of our most important allies. The US understands the importance of Gibraltar as a base.

[Sir Gerald Howarth]

My right hon. Friend mentions the United States. Some people there might indeed understand the importance of Gibraltar, but does he agree that, as the hon. Member for Ilford South (Mike Gapes) pointed out, there are many in the United States who are unfortunately tempted by the antics of the Spanish Government into believing that this is somehow about colonialism? Will my right hon. Friend pay tribute to our mutual friend Luke Coffey, who is the Margaret Thatcher Fellow at the Heritage Foundation in Washington? He has done a tremendous amount to raise awareness on Capitol hill of the importance of Gibraltar not only to the United Kingdom but to NATO and the United States.

[Dr Fox]

I am extremely grateful to my hon. Friend for his intervention. Luke Coffey is not only a mutual friend of ours; he was also a special adviser in the Ministry of Defence. His work at the Heritage Foundation has been instrumental in pushing understanding of the wider issues on Capitol hill. The hon. Member for Ilford South mentioned the resolution in Congress. I shall tell the House exactly what it said. It was a bipartisan resolution, as the hon. Gentleman correctly said, and it was put forward in the House of Representatives. It stated:

“Resolved, That it is the sense of the House of Representatives that—

(1) the United States honors the contribution that Gibraltar has made to advancing United States’ security interests in the Mediterranean region since 1801 and extends its deepest appreciation and thanks to the government of Gibraltar and its citizens;

(2) the views and rights of Gibraltarians should be taken into account in any discussion on the future of Gibraltar.”

Our American allies, and our colleagues in the House of Representatives, understand that being on the right side of international law is of prime importance. We need to make that point as clearly as we possibly can.

To be frank, Spain’s behaviour is at best bullying, petulant, childish and utterly hypocritical. The clearest example in recent times has been the air safety deal, which has already been mentioned. Whatever anyone might think of the merits or demerits of the single European sky, it is intended to reduce delays for European passengers and to minimise the risk of near misses, thus improving passenger safety. There is not, as the European Union has stated, a dispute between Britain and Spain over this matter. This is blatant interference by Spain in an EU project that was progressing very nicely, and this ridiculous obstruction will, by definition, make things less safe for Spanish air passengers. I should like to congratulate the Under-Secretary of State for Transport, my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill) on showing great leadership, clarity and courage in walking out of the meeting on these issues. Absenting himself from what was clearly an Alice in Wonderland situation was the best thing to do, and he deserves great support in the House for having done it.

As has already been mentioned, it is the maritime incursions that most clearly signpost Spain’s behaviour. They have become more frequent and more dangerous. Twice in 2014, the Spanish state survey ship, the Angeles Alvariño, under the command of Spain’s economic ministry, has been responsible for dangerous and irresponsible manoeuvring in British Gibraltarian territorial waters. The Minister for Europe, my right hon. Friend the Member for Aylesbury (Mr Lidington), has said:

“The irresponsible actions and dangerous manoeuvring of this vessel were not only unlawful but also presented a significant risk to the safety of Royal Navy personnel at sea. Under no circumstances should Spanish vessels be provoking a situation that could result in serious injury or a fatality.”

These are our own armed forces, and we must be willing to speak out in the strongest possible terms about the safety of our military personnel.

These activities are part of an attempt to destabilise not only Gibraltar but the wider region. It is worth pointing out what Spain’s behaviour is like in the wider region. She continues to be in disagreement with Morocco over maritime boundaries in the strait of Gibraltar. This is because of Spain’s hold over her north African enclaves and rocks, which she uses to interpret maritime boundaries in her favour. She effectively seeks to deny Morocco any degree of control in the strait. Of course, the Spanish ownership of those north African territories undermines almost every argument she makes about Gibraltar, and demonstrates the most breathtaking hypocrisy in current European policy that I can think of.

On 5 July 2013, Spain sent a letter of official complaint to the United Nations, which the hon. Member for Ilford South mentioned. It complained that Portugal’s Savage islands were rocks. The islands lie halfway between the Canary islands and Madeira. This was yet another attempt by Spain to increase her influence in the wider area. On 17 December 2014—just a month ago—Spain submitted to the Commission on the Limits of the Continental Shelf information on the limits of the shelf beyond 200 nautical miles from the baselines from which the breadth of its territorial sea is measured in respect of the area west of the Canary islands. Again, that move by Spain is at the expense of Portugal and Morocco. There is a clear pattern here; what is happening in Gibraltar is not an isolated incident.

Gibraltar is a great success story and will continue to be one. The people of Gibraltar deserve all the support we can give them. The message to our Spanish colleagues has to be that Gibraltar is British. They need to get over it and start working in a way that is consistent with being a NATO ally and an EU member. But Spain is serious about its approach to Gibraltar. It is time our Government were equally serious about our approach to Spain, if we are serious about Gibraltar ourselves.