Defence Spending

Martin Horwood Excerpts

Thursday 19th June 2014 Commons Chamber

[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.

--- Later in debate ---

[Martin Horwood]

The shadow Minister shakes his head, but in their last year, the Labour Government clocked up a record overspend of £3.3 billion on the defence budget, which could not continue.

The best way to reduce defence expenditure is to reduce the need for it, and the current Government have signed up to the international arms trade treaty and have an important strategy of building stability overseas. Such things, which contribute to peacekeeping and the reduction of threats, are quite important, but inevitably we have to face up to some threats. It is right to look at Ukraine, and at Russia’s posture, and be concerned about it, and that should be reflected in our defence strategy. However, it is also right that we look at the different nature of the threat that we face now from that during the cold war. There is increasing need for flexibility and adaptability, and the Future Force 2020 strategy, with more emphasis on the reserves, is right. We can examine the potential for more co-operation with NATO and EU partners, and there are good models, such as Operation Atalanta, the anti-piracy operation.

Of course, I have to finish by pointing out that continuous at-sea deterrence, currently run in the same way as it was at the height of the cold war, offers some opportunity for savings. Only Liberal Democrats have really emphasised that opportunity, but I close by commending it to the Minister.