Armed Forces Act (Continuation) Order 2017

Lord Rosser Excerpts

Tuesday 21st March 2017 Lords Chamber

[Lord Rosser (Lab)]

My Lords, as one could have safely predicted from the speakers list, this has been an informed and thoughtful debate, during the course of which a number of different concerns have been raised, to which no doubt the Minister will respond shortly.

As my noble friend Lady Dean of Thornton-le-Fylde reminded us, the 2015 spending review and Autumn Statement said that the Government would invest £11 billion in new capabilities, innovation and the defence estate, of which some £7.2 billion would come from efficiency savings. Those efficiency savings apparently included military and civilian pay restraint, which is an interesting definition of the word “efficiency” and, as has been said, will inevitably have repercussions for recruitment and retention, as well as for morale. In the light of views expressed by the Joint Committee on the National Security Strategy that the savings target presented “a significant risk” to the delivery capabilities set out in the strategic defence and security review, and a statement in a Royal United Services Institute paper that the Ministry of Defence is “struggling” to produce the efficiency savings required, can the Government say where those efficiency savings will actually come from, and when?

In July 2015, the Government stated that they would meet the properly measured NATO pledge to spend 2% of national income on defence every year of this decade. However, concerns have been expressed about how the 2% spending target is measured—not least by the House of Commons Defence Committee, which stated that the Government had achieved their commitment to spend 2% of GDP on defence partly by revising the criteria used to calculate the UK defence budget reported to NATO so that it now included expenditure that had not previously been included but had been being incurred, such as, but not exclusively, pensions. According to the House of Commons Library, the Government’s Ministry of Defence net cash requirement for 2015-16 was £36.4 billion, compared to the £39 billion on the UK’s NATO return. No doubt the reason is that the NATO return includes elements of the Government’s cybersecurity spending, parts of the Conflict, Stability and Security Fund relating to peacekeeping, war pensions, and pension payments to retired Ministry of Defence civil servants.

However, creative accountancy and moving items from one set of accounts to another will not ease the pressures on our Armed Forces, at a time when the world hardly seems to be becoming a stable and more secure place, with the threats to our country and our interests diminishing rather than increasing. The Government anticipate moving more items from one account to another in future years, in a bid to stick to their commitment to increase defence expenditure by 0.5% annually over the next five years and keep pace with meeting the 2% NATO target. Under the Government’s projected growth targets, in terms of GDP defence expenditure is likely to fall below the 2% figure by 2020-21, which means that fulfilling the 2% commitment will require further financial contributions. Could the Minister indicate what those further financial contributions to meet the deficit are likely to be, if the Government’s most recent projected growth targets are hit?

The Government have already indicated that the deficit will be met by an additional inclusion of intelligence funding, on the basis that a significant proportion of the annual expenditure that funds the UK intelligence agencies is in support of military activities, with further sums coming from the new joint security fund, which provides money for security-related activities. Again, this does not represent additional resources available for increasing or even maintaining the capabilities of our Armed Forces. It is simply moving existing items of expenditure around, from one account to another, in order to be able to claim that the percentage expenditure commitment has been met.

Could the Minister say how much additional money would have been available for enhancing the capacity and capabilities of our Armed Forces if the additional money to bring us to the 2% of GDP figure on defence spending had been new, additional money, and had not been achieved by including in the figures items of expenditure already being incurred but previously not included in the total?

The reality is that defence spending has fallen, even taking into account the latest accountancy wheezes. The House of Commons Library has calculated that, between 2010-11 and 2015-16, defence spending as measured by the UK’s NATO return has, as my noble friend Lady Dean of Thornton-le-Fylde pointed out, been reduced by 6.9% in real terms. Using NATO’s data, the UK’s average proportion of GDP devoted to defence expenditure dropped from 2.6% to 2.1% between 2010 and 2015.

A further factor impacting adversely on the level of defence resources is the weaker pound, which appears to have been the result of Brexit, and with it an increase in the cost of defence imports. The National Audit Office expressed concern about that issue in a report the other day. Can the Minister say what the fall in the value of the pound since the referendum vote would mean in additional defence import costs over the next five years, if the value of the pound against other currencies were to remain unchanged? One estimate from a Royal United Services Institute source has suggested that, if the decline in the pound is sustained, the cost of our defence imports could increase by around £700 million per year from 2018-19—or around 2% of the total defence budget.

Concerns have been expressed by the Joint Committee on the National Security Strategy about the ability of our Armed Forces to fulfil the tasks given to them in the National Security Strategy and Strategic Defence and Security Review 2015, in the light of the capabilities, manpower and funding allocated. A recently retired head of the UK’s Joint Forces Command was reported last autumn as having said that the capability of our Armed Forces had been “withered by design”, and that there were capability shortfalls, dependence on small numbers of highly expensive pieces of military equipment, and dangerously squeezed manpower.

On top of this, we now have the potential impact of leaving the European Union, which must surely have an impact on some of the assumptions and strategies in the 2015 strategic defence and security review, to which the noble Lord, Lord Wallace of Saltaire, referred, as well as on our foreign policy objectives, to which the SDSR should be closely related if we are to ensure that the money spent on defence is spent on the right things. Do the Government have a view on whether our withdrawal from the EU will have an impact on the tasks set out for our Armed Forces in the National Security Strategy and Strategic Defence and Security Review 2015, and on our present alliances? If so, do they anticipate that fewer or more resources will be required by our Armed Forces to carry out their future role post Brexit? Or is this another Brexit-related issue on which the Government have no public view at all, despite the fact that the Foreign Secretary has already opined that we are now back east of Suez? The noble Lord, Lord Hennessy of Nympsfield, spoke about the need to reassess, determine and clarify our future role and place in the world as it has become today.

Before concluding, I would like to place on record once again our admiration for, and gratitude to, the members of our Armed Forces, who protect our nation at home and our interests abroad, and in so doing are prepared to put their own personal well-being and safety on the line. As my noble friend Lord Touhig said, the most valuable asset our Armed Forces have is the men and women who serve. Yet the 2016 continuous attitude survey revealed that only one in three of forces personnel believes they are valued, with just one in three planning to stay in service as long as they can. The noble Lord, Lord Robathan, referred to that issue.

One of the concerns that has often been expressed in this House is how we address the issues faced by many veterans—issues related, for example, to health, to employment and to housing. On the issue of housing for veterans, I want to refer to recent reports about the disposal of parts of the defence estate and accommodation in London, and apparent suggestions that it might be sold off and developed as up-market luxury housing or offices. What are the Government’s intentions in respect of the disposal of parts of the defence estate in London? There is a shortage of accommodation for those on low incomes in central London, not least among veterans, despite the fact that London is a major centre for jobs and employment. Can the Minister give an assurance that, where parts of the defence estate, particularly in central London, are disposed of, every effort will be made to ensure that it is developed to provide low-cost housing for Armed Forces veterans, and not sold off to be developed only for those with great wealth, whether from this country or from abroad? When it comes to considering bids, there can surely be no higher bidders than Armed Forces veterans and those on low incomes.

My noble friend Lord Touhig asked a question in his opening contribution from these Benches, to which the Minister will no doubt respond. He pointed out that Labour in government committed resources to the defence of Britain, and spent on average 2.3% of our GDP on defence between 1997 and 2010—a figure, incidentally, well below that called for by the noble and gallant Lord, Lord Stirrup, in this debate. My noble friend asked whether the Government would now give a commitment to match that figure of 2.3%—and not through more creative accounting—in the light of the many new challenges we now face. My noble friend referred to those challenges in some detail. They include cyber conflict and cyber warfare, and they mean that the world can hardly be described as a safe place today—as the Minister himself recognised, and on which subject the noble and gallant Lord, Lord Stirrup, my noble friend Lord West of Spithead, and the noble Lord, Lord Howell of Guildford, among others, spoke so powerfully.

Particularly in the current climate of significant change and uncertainty, it is vital that we are clear about the role and capabilities of our Armed Forces in protecting our nation and meeting our foreign policy goals. It is equally important that we then provide our Armed Forces with the necessary resources, manpower, training and skills to undertake effectively the objectives we require them to meet and deliver. Doubts have been expressed today about whether that is what is happening in reality, and we now await the Government’s response to the many questions and concerns that have been raised by noble Lords in this debate.