Defence Spending

Lord Beamish Excerpts

Thursday 19th June 2014 Commons Chamber

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

May I begin with a double apology? My first apology is for the fact that, unfortunately, as is so often the case, I have committed to addressing a group of people about the workings of the Intelligence and Security Committee. That is at 4 o’clock, so I will not be able to return in time for the wind-ups, and I apologise to both Front-Bench teams and to the House more widely for that. My second apology is for the fact that, having only yesterday stepped off a transatlantic plane, my contribution today may be slightly more incoherent even than usual. [Hon. Members: “No, no!”] On cue, all my hon. Friends rush in to disagree, and I am very touched by that.

Seldom does a decade go by without one realising how brilliantly foresighted George Orwell’s classic political novel “Nineteen Eighty-Four” was for one reason or another, whether it be on state surveillance, the abuse of linguistics, or—as is relevant to this debate—the constantly shifting conflicts that arise between blocs of countries. Orwell may have had in mind the dilemma of the democracies in the inter-war years, which were torn between confronting Nazism and appeasing it, and between confronting Bolshevism and learning to live with it. Often, the reason why people found that to be such a dilemma was that they felt that they could not do both, and they were not sure which was the greater of the two evils.

These days, one might say that we are in a similar position. The democracies are faced with at least two worrying blocs: the Russia, Iran and Syria axis; and the movement of jihadism on an international scale—this is extremely topical—involving not only the takeover of Muslim countries but the infiltration of non-Muslim countries and the carrying out of terrorist acts there. Whichever side one takes as to which conflict is the more important or which enemy is the greater, the one thing we can all agree on is that we are living in dangerous times indeed. Even the one thing that everybody thought had gone away, namely the traditional cold war threat from the former Soviet Union, has reappeared. Therefore, we have to ask ourselves whether we are spending enough on defence.

I propose to adopt the Speaker Bercow speech essential that has been drummed into me over 30 long years, which is that any speech, in the House of Commons or elsewhere, should preferably have one main point. My one main point is that I want to hear from the Government that as long as this Government and this Prime Minister are in office, this country will never spend less than the recommended NATO 2% minimum.

My mind goes back—that is the trouble; it happens to people when they have been in this place for a long time—to the beginning of 2007, when The Daily Telegraph reported the Conservatives as bemoaning the fact that

“defence spending as a proportion of the UK’s gross domestic product is at its lowest since 1930”.

The article stated:

“Government figures show that 2.5 per cent of the UK’s GDP—or around £32 billion—was likely to be spent on defence in 2005/6 compared with 4.4 per cent in 1987/88.”

Of course, we know what had happened between the late 1980s and the early 21st century. The cold war had come to an end and there had been something called the peace dividend, so obviously defence spending had declined as a proportion of GDP.

In fact, in 2007, when the Conservatives were sitting on the Opposition Benches, we made much of the fact that when the Labour Government of Tony Blair had come into office they had reduced defence spending as a percentage of GDP in successive years. It went from 2.9% to 2.6%, to 2.8%, to 2.7%, to 2.7% again, to 2.5%, to 2.5% again, to 2.6% and so on. The bit we really did not like about that was that within the rough figure of 2.5% at which it settled was included the cost of the two ongoing operations in Afghanistan and Iraq, costs that were officially met from the Treasury reserve but that in reality were effectively met from the core defence budget. If the total figure was 2.5%, it did not really matter which budget was taking the cut, as it were, but effectively the real defence budget was much nearer 2.1% or 2.2%. That is where we stand at the moment, including the costs of our current military operational deployments. I must give immense congratulations to my hon. Friend the Member for Basildon and Billericay (Mr Baron), who has consistently raised that point. As he pointed out, the figures quoted in the Financial Times on 16 June suggested that

“the UK’s military expenditure will hit 1.9% of the size of the country’s economy by 2017,”

which would, of course, be below the NATO target of 2%.

I found it almost incredible that this Government would ever dip below the 2% NATO GDP recommended minimum, so I have been trying to get the Prime Minister to confirm that we would do no such thing. I have not been doing too well. There was an exchange on 26 March in which the Prime Minister said:

“We should encourage other countries to do what Britain is doing in matching our at-least-2% contribution in terms of GDP and defence spending.”

I thought that that was an opportunity for me to be helpful to him, as I like to be when I can, and I intervened and said:

“May I take it from what the Prime Minister has just said that there is then no question of the British defence budget dropping below 2% of GDP?”

His answer was:

“We currently meet the 2% threshold. These things are calculated by different countries in different ways, but I am confident that we will go on meeting our obligations to NATO.”—[Official Report, 26 March 2014; Vol. 578, c. 359.]

That sounded reasonably encouraging, but he did not actually say that we were going to keep on spending the 2%, so I tried again on 7 May. This time, I asked whether he would

“confirm that under his leadership this country will never spend less than the NATO recommended minimum of 2% of GDP on defence”,

to which the answer was:

“We are spending in excess of 2% and we are one of the only countries in Europe to do that. The Greeks, I believe, are spending more than 2% but, if I can put it this way, not all on things that are useful for all of NATO. We should continue to make sure we fulfil all our commitments on defence spending.”—[Official Report, 7 May 2014; Vol. 580, c. 147.]

My final attempt was on 4 June when I again asked the Prime Minister to give that commitment, and he said:

“It is very important to meet such commitments. We will set our detailed plans in our manifesto, but throughout the time for which I have been Prime Minister, we have kept—more than kept—that commitment”.—[Official Report, 4 June 2014; Vol. 582, c. 23-24.]

This is all very encouraging stuff and I like to think that the thing is that we have a NATO summit coming up.

[Mr Kevan Jones (North Durham) (Lab)]

The hon. Gentleman need only to look at the Red Book, where the figures used in the Financial Times are quite clear. There is no need to wait for the manifesto.

[Dr Lewis]

I am talking about trying to get a future commitment. I want to hear that as long as my right hon. Friend the Prime Minister is Prime Minister this country will always spend the NATO recommended minimum of 2% of GDP on defence. We have not quite had that commitment yet. He might be intending to make that commitment at the NATO summit and to encourage other NATO countries to do the same, in which case I will applaud him. I do not wish to spoil his timing.

I will conclude with this point: it is necessary and understandable that this country’s intelligence services have a policy of “neither confirm, nor deny” in certain areas, but I do not think that that policy will do for this country’s Government when it comes to saying how much, as a minimum, we will spend on the defence of the United Kingdom.

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[Martin Horwood (Cheltenham) (LD)]

I welcome this timely debate. It is healthy that on a Thursday when there is a one-line Whip, there is such pressure on time because of the number of Members who wish to contribute. That reflects the importance of the subject.

As always, it is right to begin by paying tribute to the professionalism and courage of our armed forces and the sacrifices that they so often make. We owe them our thanks.

The world in which the armed forces and the British Government operate is changing. We have rightly talked about the changing nature of the threats, but another way in which the world has changed is that our financial resources are not as great as they were. I am sure that even the hon. Member for Basildon and Billericay (Mr Baron) understands that. He mentioned by how much China is increasing its defence expenditure. I quickly looked up the figures of the International Monetary Fund on gross government debt as a percentage of GDP. China’s is only 22%; ours is 90%. That is a risky financial situation and is one of the reasons why we must have good fiscal discipline.

Otherwise, we might end up in the same situation as some of our NATO allies. Italy’s gross government debt as a percentage of GDP is 126%. Greece’s is 158%. If they allow that to continue, we all know what path they will have to go down—they will have to cut all sorts of expenditure, not least defence expenditure. If I had to speculate as to why Greece is one of the few countries within NATO that is achieving the 2% target for defence spending as a percentage of GDP, I would suggest that it is less to do with skyrocketing defence expenditure than with plummeting GDP.

That is one reason why we have to be a little careful about using such absolute percentages. If we were spending just above 2% and we had a good year in which GDP grew unexpectedly, we might fall below 2% mathematically without cutting our defence expenditure. If that happened temporarily, we would all regret it, but we must not fixate too much on the absolute percentage. Nevertheless, I agree with the broad thrust of the many contributors who have said that we need to encourage other NATO partners, when they can afford to do so, to step up to the plate. I certainly agree with the hon. Member for Filton and Bradley Stoke (Jack Lopresti) that we cannot guarantee that America will continue effectively to subsidise the defence of Europe. We have seen the risk of American isolationism in the past and it may well raise its head again.

I do not have much time to talk about how we can economise on our defence, but I emphasise that we are still spending £38 billion in 2014-15, giving us one of the best-equipped and most technically advanced military forces in the world. It is still arguably the fourth largest defence budget in the world—it depends on whose figures we use, but I think the worst estimate that I have seen is that it is the sixth largest, which is still substantial for a country of our size—and we are over the 2% of GDP target for NATO members at the moment. We are constructing the two largest aircraft carriers in the Royal Navy’s history, and we are planning a fleet of destroyers, a new fleet of both nuclear and conventionally armed submarines and, further ahead, the joint strike fighter and the Type 26 frigate.

That will all put intense pressure on our defence budget, so we have to consider ways in which we can make it more cost-effective. That is not just about budget cuts—it is a great tribute to the Secretary of State for Defence that he has put such emphasis on efficiency and better management. He may have been slightly disappointed not to have become Chief Secretary to the Treasury at the outset of the coalition, but the Treasury’s loss has been the gain of first the Department for Transport and then the Ministry of Defence. He protected investment in transport infrastructure, and he has been good at prioritising more efficient defence spending and procurement. Both the 2010 strategic defence and security review—the first for 12 years, it has to be said—and more recently the Defence Reform Act 2014 have emphasised the strengthening and reform of defence procurement, perhaps saving as much as £1 billion a year. That compares with the last year of the Labour Government—

[Mr Kevan Jones]

indicated dissent.

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[Richard Drax]

Yes, I have heard that and I am sure there is an element of truth to it. I argue, however—I do not want to go too far down this road—that if a country cannot grow crops, for example, we should send them not billions of pounds but a farmer: we teach them how to do it. That is the way to help people help themselves. If we give them billions or millions of pounds, the money tends to disappear down a plughole or, worse, into some despot’s back pocket and a new fleet of Mercedes-Benz.

I wonder whether some politicians in the House—dare I say, perhaps the more modern politicians—really understand what our armed forces are about. I mean no disrespect to them, but they have not served. I do not say that because I and other Members of the House have served that we are any better, or even any better informed, but I believe we have an instinct—a gut feeling—that the armed forces in our country are the very backbone of the United Kingdom because of our history, and we ignore our history at our peril.

When I was serving in the 1980s we had the Falklands war. Many of my friends went down there and served with great distinction, as did they all. Expenditure then was more than 5% of GDP, and I understand we had more than 60 warships. Expenditure is now 2% of GDP, and we have 19 warships. I do not understand what has changed in the intervening years.

[Mr Kevan Jones]

Technology.

[Richard Drax]

The shadow Minister says technology, and I agree that technology has changed. However, if we have one superb aircraft carrier and 10 Chinese submarines, and those submarines sink our superb aircraft carrier, we have nothing left. Technology is great, but it can be in only one place at one time, although it has a role to play.

Let me mention the list of responsibilities and wars that we have been involved in—I just literally scribbled them down. I asked what has changed, and my answer is “nothing”. The list contains Afghanistan, Bosnia, Iraq, Syria, Libya, Ukraine, Russia—as we heard from my hon. Friend the Member for Penrith and The Border (Rory Stewart), Russia is flexing its muscles, not least in the northern approaches with its submarine fleet and in the air—as well as piracy on the high seas and the Pacific. We as a country have other responsibilities. Northern Ireland has not gone away, and—God forbid it ever happens again—let us not forget that we had 35,000 troops at the height of the troubles. The list goes on: Malta, Gibraltar, Cyprus, the Falklands, Belize, and now Kenya and getting our citizens out of that country if it implodes. We also have NATO commitments, aid to the third world and disaster relief. Those are just some of the vast array of the United Kingdom’s responsibilities.

We are a tiny country with a small budget compared with many others, but we have had and still have huge responsibilities because we stand up—as we have always done—for freedom, democracy and the rule of law. To do that we need some muscle behind us in the event it all goes wrong. As sure as eggs are eggs and history is history it does go wrong, and the Falklands war is a classic case in point. As I have said, we would be pushed to retake those islands were they to be taken now, with no aircraft carrier and no air cover.

I also wish to touch on rumoured reports on the cuts and expenditure. A report of 15 June commissioned from within the British armed forces shows that UK spending will fall to 1.9% in 2017, and 1.6% in 2024-25. Will the Minister assure me that that is not the case?

My father and grandfather served in the Royal Navy with great distinction. My grandfather would be turning in his grave. My father is not in his—a long way from it, God bless him—but he is certainly not a happy man. As Admiral Lord West said, the state of our Royal Navy now is a national disgrace. Freedom comes at a price and we must be prepared to pay it.

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[Mr Kevan Jones (North Durham) (Lab)]

I thank the Backbench Business Committee for proposing today’s debate and the hon. Member for Basildon and Billericay (Mr Baron) for introducing it. We have heard 11 contributions on the broad theme of the level of defence expenditure, while some of the new and developing threats to our nation have also been highlighted.

The debate is timely in light of last week’s National Audit Office report on Army 2020. I have seen many NAO and Select Committee reports over the years, but I have to say that this one has to be the most damning and critical I have ever read. The report is important, because it sums up all the shortcomings that characterise this Government’s position on defence. It also shows how the Defence Secretary simply failed to do his basic homework when it came to the Army 2020 reforms.

On page 7, the report says:

“The Department did not test whether increasing the trained strength of the Army Reserve to 30,000 was feasible”.

On page 8, it says:

“The Department did not fully assess the value for money of its decision to reduce the size of the Army.”

On page 19, it goes on to say:

“The Department…did not have a mature workforce model or good data to help it accurately assess how long it would take to recruit the required number of reserves”.

This is not rocket science—these are basic things that the Secretary of State for Defence failed to do in putting forward this defence reform.

Is it any wonder, then, that recruitment to the reserves is stalling? As of April 2014, the trained strength of the Army Reserve was 19,400 personnel, which has actually fallen in number since the plan was announced in 2012. That means that the reserves have recruited 67% fewer personnel than was planned for at this stage, and it is clear exactly how that has been allowed to happen. A series of preventable IT blunders were made because Ministers failed to follow through on their contractual obligations to Capita, the company selected to manage Army and armed forces recruitment. As a result of that basic incompetence, the taxpayer has incurred additional costs of around £70 million, written off an extra £6 million and, on top of all that, is spending an extra £1 million a month until the problem can be solved.

Since his first day in office, the Defence Secretary has prioritised the Treasury bidding and the need to ensure that the MOD meets the Chancellor’s deadline for cuts above all else. It is clear, and the NAO confirms, that there is only one element of the Army reforms on which the Government are making steady progress. It will not surprise Members to learn that, according to page 9 of the NAO report,

“The Army is ahead of its target to reduce its military staff…and deliver the staffing savings required by its reduced budget.”

Last week 1,000 more servicemen and women were made redundant, in addition to the thousands who had already lost their jobs. If Ministers had put as much effort into the detail of the Army 2020 reforms as they are putting into the issuing of P45s, Army 2020 might not be in its present parlous state.

[Paul Uppal (Wolverhampton South West) (Con)]

One sentiment has featured very largely in all the speeches that we have heard this afternoon. Obviously, much has been said about the 2% figure to which we aspire, but a deeper theme has emerged. It has been pointed out that modern politicians are often subject to short-term pressures, but these are, in fact, very long-term issues. I say that as someone who comes from a dual cultural background. When I speak to people in the east, they tend to say that we do not often have the stomach, the commitment or the long-term view to tackle these issues head on.

[Mr Jones]

This is not about a long-term plan; it is about basic competence, which the NAO report has clearly called into question. The report warns that there are “significant risks” to the Army’s operational capability because of the Government’s incompetence in handling these reforms. That is why we have called on the Government not to proceed with their redundancy programme until they have seen evidence that the recruitment of reserves has increased enough to fill the gap.

Defence Ministers have developed a habit of returning to a small number of stock phrases and soundbites, usually when their record is under pressure, and I look forward to the Minister’s trotting out a few of them today. No doubt we shall hear—as this has been their mindset from the start—that the Government had no choice but to make these reductions, because they had inherited a £38 billion “black hole” from their predecessors. Let me, for the umpteenth time, quote from the National Audit Office’s 2009 report. It states:

“The size of the gap is highly sensitive to the budget growth assumptions used. If the Defence budget remained constant in real terms, and using the Department’s forecast for defence inflation of 2.7 per cent, the gap would now be £6 billion over the ten years”—

not the one year that has been cited by some Government Members. No doubt the Government do not want to talk about the fact that the “black hole” has now increased to £74 billion because of the 9% spending reduction in 2010. No one seems to know where they got the £38 billion figure from. I suppose they think that if they repeat it for long enough, people will actually believe in it.

Remarkably, it was the former Secretary of State, the right hon. Member for North Somerset (Dr Fox), who first claimed, in September 2011, that he had eradicated the “black hole” in less than a year. Six months later, the present Secretary of State claimed that he had plugged the gap. Perhaps the Minister will tell us who exactly should be credited with this feat. Those two individuals have clearly missed their vocation: if they can make a £38 billion “black hole” disappear in less than 12 months, they should have gone to the Treasury rather than the Ministry of Defence.

At a time when the Government are sacking highly skilled, experienced and brave servicemen and women and scrapping key elements of defence equipment, Ministers must be honest with our forces and the public about why they underspent their 2012-13 budget by almost £2 billion. They also tell us that the UK still has the fourth largest defence budget in the world. That may be true, but we on the Opposition Benches believe such a statistic has little meaning if the allocated budget is not actually being spent, and it is on this count that the Government have failed spectacularly. They gave us aircraft carriers without aircraft. They scrapped the Nimrod programme when three of the aircraft were almost 90% complete, leaving the MOD reliant on Twitter to counter the maritime surveillance threat. They have also sacked regular soldiers before waiting to see whether increased reserve numbers would be able to meet the shortfall.

As the NAO report summarises, the Government

“did not fully assess the value for money of its decision to reduce the size of the Army.”

If the Minister reads the report, he will see that the fact of the matter is that recruiting reservists will be more expensive than having regulars, and that cost will have to be picked up by the Treasury some time in the future. I refer him to page 8 of the report if he wants to read that later.

It is clear that when deciding the future size of the Army, the Government decided on cost savings as their first principle, rather than any strategic underpinning of their decision. The NAO report makes clear on page 6 that

“The future size of the Army was determined by the need to make financial savings”—

an approach which has characterised the MOD under this Government.

Commentators and the Select Committee agree that, blindsided by the desire to achieve savings above all else, strategic considerations have been sacrificed in favour of reductions in personnel and capability. Unfortunately, some people are having to carry the can for this—unfairly, I would suggest. The current Chief of the Defence Staff offered perhaps the most candid description of Army 2020 when he told the Select Committee on Defence:

“I remember the genesis very clearly. It was a financially driven plan. We had to design a new structure that included the run-down of the 102,000 Regular Army to 82,000, which is pretty well advanced now, to follow a funding line that was driven by the austerity with which everybody is very familiar…It triggered the complete redesign of the Army.”

[Mr Brazier]

I have written a reply to that report because I do not agree with it, but all the report says is that there are extra costs associated with recruiting for the next year and a half until the new system is in place, and it also queries some of the figures the MOD has put forward, but it nowhere actually suggests that a man or woman who is employed only for 40 days a year could cost more than a regular soldier. It—

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. This debate finishes at 5 o’clock on the dot, and we have not yet heard from the Minister.

[Mr Jones]

The hon. Gentleman should read chapter 11, on page 8 of the report.

We believe the approach adopted is damagingly short-sighted and plays fast and loose with our nation’s security.

[Jack Lopresti]

Will the hon. Gentleman give way?

[Mr Jones]

I would do, but unfortunately I do not have the time.

Our approach is clear. Instead of having the Treasury-led SDSR conducted by this Government, we believe the UK needs a defence review that is genuinely strategic as well as financially viable. For us, these two factors are two sides of the same coin. This country needs an SDSR that provides strategic leadership and asks the most fundamental questions of all in terms of defence: what do we want our armed forces to actually do? As the shadow Secretary of State, my hon. Friend the Member for Gedling (Vernon Coaker), outlined in his Royal United Services Institute speech, we have got to be ambitious, but we also believe that to withdraw from the rest of the world as though it is not part of our problem is neither desirable nor possible to achieve. We are also realistic and know there are no gains to be made from promises that cannot be delivered; we saw too many of those at the last election by the Conservative party.

It is only by asking these questions and delivering the strategic leadership this Government have signally failed to offer that we can do our armed forces and the British public justice.

[The Minister for the Armed Forces (Mr Mark Francois)]

I congratulate my hon. Friend the Member for Basildon and Billericay (Mr Baron) on securing this important debate. Seventy years ago this month saw the success of Operation Overlord. I take this opportunity to pay tribute to the allied forces who crossed the channel on D-day and who were quite rightly commemorated at events in Normandy recently. Not least of those was former Royal Navy Lieutenant Bernard Jordan who slipped away from his care home to join his former comrades, but thanks to a comprehensive information-operations campaign, assisted by the national press, he mitigated the potential wrath of both Mrs Jordan and his care home on his return. I am sure that the House will want to join me in wishing him well on his 90th birthday, which falls this week.

On Tuesday, I was privileged to attend a memorial service for those members of the 7th Armoured Brigade who lost their lives in their recent tour of Afghanistan, reminding us all in this House that our armed forces continue to exhibit the utmost courage and bravery on our nation’s behalf.

Finally on personnel matters, I understand that my opposite number, the hon. Member for North Durham (Mr Jones), is getting married next week. [Hon. Members: “Ah!”] I wish him all the best for the future, but I must caution him that this key decision may have important budgetary consequences in the long term.

[Mr Jones]

It already has.

[Mr Francois]

Having paid tribute to our personnel, both past and present, I wish to focus now on the Ministry of Defence’s capital programme, which is the largest in Government, accounting for some 20% of total capital spending this year. Our equipment programme comprises some £164 billion over 10 years, and is already published in our defence equipment plan. This will ensure that the Royal Navy continues to be one of the premier navies in the world by procuring and supporting, among other things, two new 65,000 tonne aircraft carriers, with HMS Queen Elizabeth, the first of class, due to be floated up next month in Rosyth; seven Astute-class nuclear attack submarines; six Type 45 destroyers, plus the beginning of the transition from the Type 23 frigate to the new Type 26 global combat ship, which will maintain a force of 19 frigates and destroyers, but with other surface warships as well, including a strong amphibious capability led by HMS Ocean. That amphibious squadron will be able, arguably, to transport the most effective maritime infantry force in the world, the Royal Marines, who celebrate their 350th anniversary this year.

Crucially, we are also making full provision for the successor deterrent system, providing the ultimate guarantee of our national security, and a re-elected Conservative Government will continue with that programme. In mentioning this, I pay tribute to all those who have supported the UK’s continuous at-sea deterrent and who have made sure that since April 1969 the Royal Navy’s ballistic missile boats have not missed one single day on patrol.

Turning to the Royal Air Force, we are investing to enhance the Typhoon via tranche 2 and tranche 3 upgrades to maintain its battle-winning edge, and to procure the new F-35 Lightning II joint strike fighter, placing this country as the only level 1 partner with the US in this key programme. We will further extend our global reach via a highly capable air transport fleet represented by the C-17 and C-130 aircraft, which are now being reinforced by Voyager, as well as the new Airbus A400M Atlas, the first of which is due to enter service before the end of the year. Combined, that will provide us with one of the largest and most modern air transport fleets anywhere in the western world. In addition, we have just taken delivery of the first of 14 new heavy-lift Chinook Mark 6 helicopters at RAF Odiham, which means that the UK has the largest Chinook fleet in Europe.

As part of the next strategic defence and security review, we will be examining the question of a maritime patrol aircraft to see what, if anything, can be done about this area of capability. We will do that as part of the SDSR, and I know that my hon. Friend the Member for Beckenham (Bob Stewart) has taken a particular and long-standing interest in this subject.

As an ex-soldier, I should also add that we are ensuring that the Army remains well equipped. We will: upgrade the Warrior infantry fighting vehicle and also the Challenger 2 main battle tank; expand our fleet of battle-proven Foxhound armoured vehicles; upgrade our fleet of Apache attack helicopters; and procure the new Scout specialist reconnaissance vehicles.

Furthermore and importantly, we are significantly increasing our investment in cyber security—a point well made by my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile)—ensuring that our armed forces are equipped with cutting edge capabilities across all environments. That investment is not only securing the best possible military capability, but helping to secure UK jobs and growth to help complement our long-term economic plan.