James Gray
Main Page: James Gray (Conservative - North Wiltshire)Department Debates - View all James Gray's debates with the Ministry of Defence
(8 years ago)
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Dr Julian Lewis (New Forest East) (Con)
I beg to move,
That this House has considered the Second Report from the Defence Committee of Session 2015-16, Shifting the goalposts? Defence expenditure and the 2% pledge, HC 494, and the Government response, HC 465.
It is a privilege to present the findings of our report entitled “Shifting the goalposts? Defence expenditure and the 2% pledge” to the public once again—it was published some time ago. I doubt whether anybody two or three years ago would have registered the significance of the term “2% of GDP” in connection with defence, because it was only relatively recently that the prospect of Britain’s falling below the NATO recommended minimum expenditure on defence for the first time came to the public’s attention. For many years, we spent a great deal of money on defence. The purpose of the report is to track the history of that expenditure to check the extent to which we are continuing to meet the NATO minimum and to see whether there has been any financial jiggery-pokery to enable us to do so.
In a nutshell, we found that no rules have been broken. The Government’s figures and methodology conform to the NATO guidelines. It is true that, on the basis of including such things as armed forces pensions, which were not previously included but are allowed to be included, the Government will reach the 2% minimum. I use the word “minimum” advisedly, because that is what it is. It is not a target, but the minimum expected of each NATO country to contribute as a proportion of their gross domestic product to their defence. One could argue that it remains a target for countries that have never managed to reach it, but for those of us who have always exceeded it, often by very large amounts, it remains a floor, not a target, let alone a ceiling.
I know it is frowned upon to use props in debates in any Chamber, but the sheet of paper I have is so vivid that, even at a considerable distance and through the lens of a television camera, it is easy to read. The bar graph shows a consistent and steady decline in the percentage of GDP spent on defence since the mid-1950s. In the mid-1950s, we spent more than 7% of GDP on defence. In about 1963-64, that downward-falling graph crossed the upward-rising graph of what we spent as a proportion of GDP on welfare. Far from spending more on defence than on welfare, as we did until about 1963, we spend six times on welfare what we spend on defence. In the mid-1980s, we were spending roughly the same amount on defence, education and health. Since then, the descending graphs for defence expenditure and the rising graph for education and health have similarly crossed over, and we have declined closer to the 2% minimum. We now spend almost four times on health and about two and a half times on education what we spend on defence.
Mr James Gray (North Wiltshire) (Con)
I am interested in the chart that my right hon. Friend is describing, which appears as a corrigendum to our report. More interesting than the three Departments he mentions is the fact that, during that period, spending on overseas aid increased by a significant amount while spending on defence declined. Is that not a significant correlation?
Dr Lewis
It is significant, and it is indeed included on the chart. The only reason why I did not mention it is that, in comparison with the total spent on the other high-spending Departments, it is a relatively small proportion of our GDP. However, my hon. Friend is absolutely right because, such has been the decline in defence, our commitment to spend 0.7% on international development now amounts to one third of the total that we spend on defence, which comes in just above the 2% minimum.
When we called the report “Shifting the goalposts?”, we put a question mark at the end because we did not wish to prejudge it. There are two ways in which the Government could be said to have shifted the goalposts: first, by including things they are not allowed to include—we absolved them of that—and, secondly, by including things that they are allowed to include but never included in the past, which would mean that we are not comparing like with like in terms of our previous methods of calculating UK defence expenditure. The Defence Committee inquiry found that the NATO minimum would not have been fulfilled if UK accounting practices had not been modified, albeit in ways that are permitted by the NATO guidelines.
Dr Lewis
We did not find a hard and fast case of double counting, but we noticed in the past that there are items of expenditure that are highly relevant to defence and security that could fairly and usefully be catered for by the international development funds. Given that the 0.7% is protected, and given that one sometimes hears stories of the Department for International Development struggling to find creative ways of spending the money it has to dispose of, there is an opportunity, particularly in relation to soft power, to use elements of the international development money for measures that add to our security.
Of course, this is a rather crude measure, because gross domestic product can vary. If this country’s gross domestic product goes down but we spend the same amount on defence, it might appear that we are doing more when we are doing nothing of the sort. Similarly, when the value of the pound changes, as has happened in the short term following the Brexit decision, we see the effect on what we are able to buy for the money we have available for defence when we purchase big-ticket items such as the P-8 maritime patrol aircraft from the Americans, although a considerable amount of that purchase will find its way to the British defence industry. What I am driving at is that perhaps we ought to be talking not about shifting the goalposts, but trying to move the benchmark.
We should be reminding people that, in the 1980s—the last time we faced a significant threat from the east in Europe in the second and closing phase of the cold war—we regularly spent between 4.5% and 5.1% of GDP on defence. The similarity lies not only in the international situation. In the 1980s, we simultaneously faced a very significant terrorist threat in the form of Irish republican terrorism. We now face a similar threat in the form of fundamentalist Islamist terrorism.
It therefore seems appropriate to note that and, in the week that we were told that the first of the successor submarines for the nuclear deterrent will be named HMS Dreadnought, to remember a previous HMS Dreadnought, the battleship that changed the whole nature of sea power as far as capital ships were concerned in the years approaching the first world war. A famous naval arms race was going on between this country and Germany and, around 1909, there was a great deal of controversy that the German navy was drawing level with the grand fleet of the British Royal Navy in terms of dreadnought battleships. A public campaign was mounted, encapsulated by the phrase of the Unionist politician George Wyndham:
“We want eight and we won’t wait!”
My view, which I believe is shared by at least some other members of the Defence Committee, is that a new benchmark is perhaps needed for the percentage of GPD to be spent on defence: “We want three to keep us free!” In reality, if we go on at the 2% level, we are in danger of finding ourselves incapable of meeting the threats that face us today and will continue to face us in future.
Mr James Gray (North Wiltshire) (Con)
It was just outside the constituency of the hon. Member for Bridgend (Mrs Moon) that Her Majesty’s Government first committed two or three years ago to the 2% target—or the 2% figure; I will come back to the target in a moment. I would be ungracious if I did not start by saying that I warmly welcomed that that was the case. Until then, through five years of coalition government, that had not been the case. It probably would not be the case—dare I say, without being too party political—if we had a Labour Government; people would seek to find savings from defence to spend on schools and hospitals. The first thing that we ought to say is that thank goodness we have that 2%. I am glad that the previous Prime Minister made that firm and rather surprising commitment at the Wales summit.
Mr Spellar
Will the hon. Gentleman tell me in which year under a Labour Government expenditure fell below 2%?
Mr Gray
The trouble is that under Labour Governments we always have wars and things so we have to keep spending up—that is the difficulty. However, the right hon. Gentleman is absolutely correct. I am not suggesting that the Labour party made cuts in previous years, but, from listening to some of the speeches produced by the current leader of the Labour party, it would be perfectly reasonable to expect that significant defence cuts would be made were Labour to be in power today.
Mr Gray
Before the right hon. Gentleman leaps in to enter into a party political discussion of the matter, the purpose of the debate is not to have a party political pop across the Chamber—and of course I would not wish to tread unreasonably on the Opposition’s personal grief on this subject.
Mr Spellar
On a point of order, Mr Bone. As we are having a debate on defence, it is perfectly proper for the hon. Gentleman, who is normally much better behaved in the Defence Committee, to make partisan points. What I think is improper and verging on being out of order is then not giving way for a response, because I for one do not believe in unilateral disarmament either in the Chamber or in our defence policy.
Mr Peter Bone (in the Chair)
The right hon. Gentleman is very experienced and knows full well that that was in no way a point of order.
Mr Gray
I have the strongest respect—[Laughter.] Allow me to finish the sentence. I have the strongest respect for the strength of commitment by Labour members of the House of Commons Defence Committee to the defence of the realm. Perhaps the right hon. Gentleman is right in saying that I have been a little ungracious in talking about some other parts of his party’s approach to defence because I know the members of the Labour party on the Defence Committee are strongly committed to that.
Mr Spellar
May I thank the hon. Gentleman, my friend from the Committee, for giving way? I point out that in fact he cannot point to any Labour party policy. The policy of the party is decided at our party conference, as indeed is our commitment to Trident. In the previous Parliament, when decisions were being put off on Trident, there was an overwhelming majority in the Labour party to support the Labour party policy of renewal of Trident. It is the same for the defence budget.
Mr Gray
I am most grateful and greatly reassured by the right hon. Gentleman’s commitment both to Trident and to an increase in defence spending. I look forward to that vision being repeated by the hon. Member for Leeds North East (Fabian Hamilton) when he replies to the debate from the Front Bench. It is good news to know that that is what Labour thinks.
In all events, the debate is not about which party will spend more on defence. I think perhaps we should move away from that parti pris squabble and move on to discuss the report in front of us, which is a very well worded, calculated and researched paper. The first thing I would say, however, is that the Ministry of Defence’s accounts are second only to the Schleswig-Holstein question in being completely and utterly incomprehensible. I think there is nobody alive today who fully understands the MOD accounts, so the one or two accountants in the Department are well able to move figures around and fiddle with them in such a way that no normal human being can understand or follow.
Indeed, much of the language used is equally incomprehensible. For example, in paragraph 14 of the Government’s reply they are talking about the £11.2 billion of efficiency savings—we asked where they would find that. It lays out a few efficiency savings first and then says:
“A further £2 billion will be delivered through the reprioritisation of existing funding.”
They will save £2 billion through the reprioritisation of existing funding. They then go on to say that £2.1 billion that will come in from the joint security fund will in fact allow cuts in the ordinary defence spending. Therefore, that is not extra money coming in from the joint security fund at all; that is merely replacing moneys that otherwise were to be cut. There are many other examples of precisely the same thing.
Without a PhD in such matters it is simply impossible to understand exactly how the MOD accounts work and I am slightly concerned that the Government’s response tends not to try to clarify matters but to make them even more complicated than before. That makes comparators extremely difficult. It is very difficult indeed to compare our spending today with what we spent in the past. My right hon. Friend the Member for New Forest East (Dr Lewis) touched on this: it is perfectly true that when I was born in 1954 we were spending something like 7.8%—if I remember rightly from the charts in the report—and today we spend about 2%. Therefore, the cut has been gigantic. However, comparing what we were spending then with what we spend today is extraordinarily difficult because of the accounting procedures.
It is unclear whether things like urgent operational requirements, or several other things that occurred in the past, are included, not least because, as the MOD said in its reply, it keeps its accounts only for seven years. Therefore, if we ask officials about any financial matter before seven years ago, they do not know. They are unable to give answers on what happened in the 1950s, 1960s and 1970s because they do not keep the accounts. It seems to me simply bizarre that a Government Department should not keep accounts in perpetuity—it ought to be able to give an answer on what Government spending on defence was at the time of Waterloo if we asked the question sensibly. To say that it does not know for more than seven years ago is simply extraordinary. We therefore do not know how our spending today compares with previously because of that rule and we cannot compare our spending with other NATO countries for the same reason: it is all lost in the shrouds of mystery and antiquity.
My right hon. Friend made the extremely important point that 2% is all very well, but it is not a target and it is not even a floor—it is absolutely the minimum. In terms of the rhetoric, the Government appear as if they are claiming, “Haven’t we done well? We have achieved 2%.” No, never in the history of British defence before have we ever had to spend only 2% of GDP. Actually, that is the lowest figure we have ever been at. Moreover, if we were to listen to the previous Chancellor of the Exchequer and we were to face quite a significant recession post-Brexit—I personally do not believe that will occur, but he said so plainly—2% of GDP would presumably mean a significant cut in the pounds spent on defence. Therefore, the 2% figure is, to some degree at least, misleading. What we need to know is that this year we are spending £35 billion or thereabouts on defence and that that will increase every year irrespective of what happens to the economy.
The opposite applies as well. Supposing the economy were to grow at some fantastic rate thanks to Brexit—let us imagine that we see 2%, 3% or 4% growth—does that really mean that we will spend billions and billions of pounds more on defence than we have currently programmed to do? If so, how on earth will we find things to spend the money on? I am not certain that the 2% figure necessarily allows for sensible comparators with other Departments or that it is quite the right way to judge it.
We need to know how much the Government will spend and, as my right hon. Friend and the hon. Member for Bridgend said, not only how they will spend it but what they will spend it on. What we need to know is what we can do in defence terms—how many ships, tanks, soldiers and sailors and all the other things we need, such as cyber, will we have in the future? The 2% figure does not necessarily tell us that. It is a question of capabilities and not necessarily of money.
While I very much welcome the Government’s commitment to the 2%, which is certainly a step in the right direction, that by no means reassures me that we as a nation are ready to face the appalling threats we now face. Russia is a bigger threat to us today than it has been since the cold war, the middle east is in complete turmoil and much of the rest of the world is a disaster area and we are struggling to maintain a level of spending that we have never before seen.
It seems to me that we are in danger of failing in our primary responsibility of defending the realm by allowing ourselves to be fooled by a piece of camouflage: “Aren’t we being great? We are spending 2% of GDP”. Are we able to defend the realm? I suggest that we may well not be.
Several hon. Members rose—