Defence Expenditure

Debate between Lord Spellar and Julian Lewis

Thursday 27th October 2016 Westminster Hall

[Dr Lewis]

As always, I am delighted to be trumped by my hon. Friend in that direction. That is an absolutely splendid intervention and I thank him for it. I hope the Minister will go one better even and think of something to rhyme with five.

[Mr John Spellar (Warley) (Lab)]

Yes, the threshold is important for a whole number of reasons, and we want to look at the overall level and get that focus of Government, but it is not the most important thing. The right hon. Gentleman might be about to come to this point, but we ought to be pressing the Government on what capability we are getting as a consequence in terms not only of materiel, but of manpower, and experienced manpower in particular.

--- Later in debate ---

[Dr Lewis]

The right hon. Gentleman is absolutely spot on, and of course that is what underlies my remarks about the fact that the figures are only, at best, the crudest guides. Nevertheless, they give us some sort of measure of comparison. Spending a certain amount of money on defence—or, should we say, investing it in defence—is not a sufficient condition for the reason that the vice-chairman of the Committee has just explained. It is, however, a necessary condition: if we do not spend enough, we cannot possibly have the potential. If we have enough to spend, we can consider how to ensure that we spend it in the most efficient and productive ways.

At this point, I pay tribute to the staff who help the Defence Committee to prepare our reports and, in particular, to one member of staff, Dr Megan Edwards, who did all the background research for the appendices to the report. They show, on as near as it is humanly possible to express the same terms, how much we have spent every year since 1955-56 up to the present day. That sort of original research work is of lasting value, because it sets into context the minuscule efforts that we make these days in comparison with the efforts that we had to make in the past. The reason that I single out Dr Edwards is that today is her last day working as a specialist member of the staff of the Defence Committee—our loss will be the Cabinet Office’s gain, and we wish her well in her new post and congratulate her on it.

Another aspect of the financial calculations that causes particular concern is the constant emphasis on efficiency savings. The most recent tranche of efficiency savings that the Government required from the Ministry of Defence was, I believe, some £0.5 billion, just before the 2015 strategic defence and security review. Some estimates put the aggregated total of efficiency saving requirements in recent years at something in excess of £1 billion, carried forward year on year. Theoretically, savings are ploughed back into the MOD. In practice, I understand from people who know about such things, it is hard to track that money, to apply those notional savings in concrete terms and to see where exactly the savings have gone in terms of new capacity.

A few days ago, on 18 October, that matter came up during a hearing on the Ministry of Defence’s annual report and accounts for 2015-16. The Defence Committee was interviewing Mr Stephen Lovegrove, the new permanent secretary at the MOD; Lieutenant General Mark Poffley, Deputy Chief of the Defence Staff for military capability; and Ms Louise Tulett, director general of finance at the MOD. They made an impressive trio of witnesses.

At one point, it was put to the witnesses that, of the almost £26 billion of equipment commitments that came out of the SDSR, almost a quarter really was new money, nearly £11 billion was so-called headroom or contingency, which is understood to be used up at appropriate points in the programmes, but the rest of it was in fact efficiency savings. It is therefore understandable if we feel a bit worried that what seems on paper to be a substantial commitment to spending large sums of money is, in a significant respect, notional, because it is dependent on the redistribution of money that the MOD already has but is supposed to spend more efficiently in some way or another.

[Mr Spellar]

May we forbear on the nomenclature of the civil service—the so-called efficiency savings? Efficiency, as I understand it, is when we are running a payroll office and using 100 people, but we bring in new equipment and only employ 50 as a result, while keeping outputs the same. Efficiency is when people find new and improved ways of undertaking their work. Everything else is cuts. We should be clear that many of the things we are discussing are not efficiency savings but cuts, and we should describe them as such.

[Dr Lewis]

The right hon. Gentleman perfectly exhibits the cross-party basis on which we try to find agreement on such matters in Committee, and the extent to which we succeed in doing so. He is of course absolutely right.

I do not intend to speak much longer, because it is excellent to see so many would-be contributors to this short debate, but I will first refer to the question that was put to Mr Lovegrove. We asked, basically, when the point will arrive at which an organisation can truthfully say, “We are just about as efficient as can be and, indeed, any further ‘savings’ that we make must amount to cutting into the bone, having already cut through the flesh.” The permanent secretary’s response was as follows:

“There may be a moment at which that happens. It is not on the horizon right now. There are certainly efficiency savings that we can get at in the Department, and our focus is on doing that and seeing whether or not we can go even further. It is only at that point that we would start engaging in the kinds of conversations that you suggest.”

With the greatest respect to the permanent secretary, who as I say made a good impression and was a credible witness in our examination of the annual report and accounts, we hear time and again from within the armed forces the same underlying fear: that we are in danger of creating a hollow force, which may have exquisite equipment—perhaps not enough so-called platforms, but exquisite nevertheless—but not enough people to man it.

The trouble is that short-term cuts—I beg your pardon; efficiency savings—can lead to long-term problems. That applies in particular to training. With the carriers coming on stream, the big frigate programme having to get under way and the new F-35 joint strike fighters taking over the maritime air role from the sadly missed Harriers, which will have filled too long a gap in our naval capabilities, now is the time when we should inject maximum effort into training. Yet we find ourselves in a position—perhaps for reasons of morale or under-investment, or perhaps because insufficient emphasis is being placed on defence in our national priorities—of struggling to recruit and retain the people we need even as we cut the size of the armed forces.

The Government have not broken any rules, but they have scraped over the line by the narrowest of margins. There is no guarantee that we will not dip below the 2% figure. People usually come up with the response, “Just remember that we are the second highest spender on defence in NATO.” I remember that sort of argument from back in the 1980s, when people who wanted us to spend less on defence—we were spending quite a lot in those days; between 4.5% and 5%—said, “Why should we spend this amount on defence when Germany and so many other European countries spend so much less than we do?” The answer, as the author of a short and pithy letter to The Times pointed out, was that the countries that we were being compared with were all on our side. We have to judge our defence expenditure by what our potential adversaries spend and what defence and attack capability they get for the money that they invest.

We do not want to engage in a race to the bottom. We do not want to preen ourselves on doing a good job because people on our own side are spending even less than we are. Our percentage expenditure on defence is lower than it has ever been—even on the new calculation, it is 0.1% lower than it was in the previous financial year. Something has gone wrong with our scale of national priorities, and the purpose of the Committee’s report is to draw attention to that, in the hope that the Government will renew their emphasis on their first duty: to keep our nation safe.