Defence Expenditure (NATO Target) Bill

Philip Dunne Excerpts

Friday 23rd October 2015 Commons Chamber

[Sir Edward Leigh]

Absolutely. We survived by the skin of our teeth in 1940. Incidentally, it is sometimes forgotten that when Guy Gibson was killed in his Mosquito over Holland in 1944 serving his country, he was already an adopted Conservative candidate for this place. What a wonderful MP he would have been, and what a loss he was to our nation with his untimely death.

Let me move on to the future, and this Bill, which I warmly support. In his magisterial opening, my hon. Friend the Member for Aldershot (Sir Gerald Howarth) really delved down into the detail, which is desperately important. Like many hon. Friends, I am deeply concerned about the increasing tendency to ring-fence Government Departments. As a former Chairman of the Public Accounts Committee, I believe that that is a bad way of running Government. Government—it does not matter whether it is health, education, international aid or defence—should be run by working out what you want to do, what you have to do, and what you can afford, and then having a negotiation with the Treasury on that basis.

We now have an extraordinary situation where the entire budget of the Foreign Office, which we must remember is absolutely critical to this country in terms of promoting trade and good relations, is now only twice that of our aid programme to Ethiopia. That is not a sensible way of running Government. It gives rise to all sorts of other stresses. Of course, I am as committed as anybody in this House to international aid. I have two daughters working in that sector. We all know the wonderful work that DFID is doing. However, it does not make sense to have an accounting procedure that results in DFID chasing after international aid agencies in Geneva at the end of the accounting year just to meet its 0.7% target. The International Development Secretary has said that trying to sort out her budget is like landing a helicopter on a moving handkerchief. When I put that analogy to my right hon. Friend the Member for New Forest East (Dr Lewis), he said, “Well, of course we just have to ensure that the aircraft carrier on which the helicopter lands is big enough.”

If we see the commitment to hit 2% as an accounting device, we are in a disastrous situation. In the Public Accounts Committee, we found time and again that there were fantastically complex and difficult cost and time overruns in MOD procurement programmes. I fear that in a desperate bid to meet its 2% target, using all the accounting mechanisms that my right hon. Friend mentioned, we could be skewing the whole procurement process in a very dangerous way. I take his point, and that of my hon. Friend the Member for Aldershot (Sir Gerald Howarth), that we must therefore see 2% as an “at least” target. That is in the Bill, and that is why I support it.

[The Minister for Defence Procurement (Mr Philip Dunne)]

I am most grateful to my hon. Friend for giving the House the benefit of his experience as a former Chairman of the PAC. I was pleased to serve on his Committee for two years. He mentions defence procurement. Yesterday we published the fourth iteration of the annual equipment plan, in which we demonstrated, for the second year in succession, an improvement in the delivery of major projects on time and to budget. I hope he will have the opportunity to read that report and recognise the good progress that we have made over the past few years.

[Sir Edward Leigh]

I am grateful to the Minister. We have learned lessons from previous procurement programmes, and we are building in time overruns, which is a sensible thing to do so that the MOD is not embarrassed. We all pay tribute to my hon. Friend, who is doing sterling work in this area. Nobody doubts his commitment to what he is trying to achieve. I was not making any criticism of the work that he is doing or that the Government are doing. I am merely saying that in the long term, just as we have stresses and strains in the international development budget, we might get similar stresses and strains in the MOD budget, which is infinitely more complex. Perhaps we could bear that in mind.

Let me paint the picture, as my hon. Friend the Member for Beckenham (Bob Stewart) has done, of what is happening in Europe as a whole. We all know that for too long we have ridden on the coat tails of America. Since the 1990s and the end of the cold war, I am afraid that we have witnessed a radical downturn in the US military commitment on the European continent. That means that in order to make up the capability shortfall, European states must step up, but they are not stepping up; and that they must invest more, but they are not. By the way, it is extraordinary what is happening to the German defence budget. It is unbelievable how small its land army now is, for a great continental power. What is happening in the German military programme is very worrying. How extraordinary that a Conservative Member of Parliament should be saying that, given our history, but it is worrying.

NATO member states’ failure to meet the 2% minimum target exposes Europe to risks both known and unknown. Jan Techau of the Carnegie International Endowment for Peace has warned:

“Since the end of the Cold War in 1990, overall defense spending among NATO members has been cut so significantly and so persistently that serious concerns have arisen about the alliance’s military readiness and its ability to keep credible its security guarantee to its member states.”

Yet, as we have heard, only a handful of countries are meeting the target. I asked my right hon. Friend the Member for New Forest East, who is an expert in these matters, who dreamed up the 2% target, and he thought it might have been George Robertson. Perhaps we can investigate that and the Minister will deal with it later. The target has proved very useful. It might be unscientific, but at least it is doing a good service in holding our feet to the fire, and those of other countries, and showing up exactly what is happening.

NATO’s experts estimate that four European countries have met the target: Greece, with 2.4%; Poland, with 2.2%; the United Kingdom—some have argued about this—with 2.1%; and Estonia, with a level 2%. We might be surprised that Greece, in the midst of economic turmoil, has the highest defence spending as a percentage of GDP, but the recent refugee crisis should help to remind us that it has a massive maritime patrol area as its responsibility. We have talked a lot about defence, but we have not mentioned migrants. There is a real role for NATO, and for our armed forces, including the Royal Navy, in dealing with migrants.

--- Later in debate ---

[The Minister for Defence Procurement (Mr Philip Dunne)]

It is a great pleasure to conclude this debate, and I congratulate my hon. Friend the Member for Aldershot (Sir Gerald Howarth)—a predecessor in my Department—on his commitment to defence. That commitment is well known not just in this House but to every citizen of Aldershot, whether they vote for him or not, and not least by the Royal Air Force, with which he spends a great deal of his time outside this Chamber. His commitment is much appreciated by all those who come across him.

My hon. Friend’s commitment to this Bill is in no doubt, and although the Government may have issues about legislating for such a commitment, we have none whatever with the intent to ensure that the country makes a full contribution to meeting our NATO pledges. Having secured such an elevated status in the ballot for private Members’ Bills, he chose defence as his topic, and we all owe him a debt of gratitude for the opportunity to hold this debate, even if we are not all in wholehearted agreement with the precise wording of his Bill—despite that, most of the people who have spoken thus far would appear to be.

The Government fully support the objective of spending 2% of GDP on defence and we are delivering on that, but I have some reservations that I will set out in my remarks. My hon. Friend’s desire to legislate for Government spending on defence to constitute no less than 2% of gross domestic product is founded on admirable intent, and reflects a sense of the absolute importance that we place on that guideline. It is yet another reminder of the Chancellor’s announcement in the July Budget that we will not only meet the NATO guideline to spend 2% of GDP on defence this year, but we will meet it each year for the rest of this Parliament.

In July the Chancellor also confirmed that our budget will rise by 0.5% above inflation until 2021, and that up to £1.5 billion will be made available by the end of this Parliament for the armed forces and the security and intelligence agencies to bid into. Those combinations, which I will touch on later, make us confident that we will meet the 2% target, which some hon. Members have questioned.

[Sir Gerald Howarth]

On the joint security fund, will the Minister explain how we get to £1.5 billion? Will there be a progressive increase, and what does he anticipate the bidding process will be?

[Mr Dunne]

My hon. Friend tempts me to venture into the inner workings of the comprehensive spending review that is being conducted by my hon. Friends in the Treasury, but he will not have too long to wait before we get a proper and comprehensive answer to his question. The profiling and allocation of the fund will be determined through the spending review and the strategic defence and security review, and all will be revealed before the end of the year. I am sure that he will scrutinise it with considerable interest.

Let me look briefly back in history and remind hon. Members about the origins of the 2% GDP guideline, which was a question raised by my hon. Friend the Member for Gainsborough (Sir Edward Leigh). The target was first found in NATO resource guidance during the cold war, and it underlined the political and military need

“to improve NATO’s conventional defence capabilities in relation to those of the Warsaw Pact in order to narrow the gap and reduce dependence on the early recourse to nuclear weapons.”

It stressed:

“Those nations which have not met it in the past should make every effort to do so in the future.”

When that ambition was set, the reasons for the guidance were self-evident. I am not the oldest Member in the Chamber. I was born in 1958, and that frames my recollections of the later stages of the cold war in the 1970s and 1980s. One or two Members might be able to go back a decade before that, but very few—with the possible exception of the Leader of the Opposition—could go back to the origins of the cold war in the 1950s. Those who lived through those dark times have not forgotten what it was like, with armies of the east and west facing off against each other, and the ever-present fear of not just conventional war, but a potential nuclear attack.

After the fall of the Berlin wall in 1989 and the downfall of the Soviet Union, attitudes to defence spending changed. Nations—including this one—spoke of a peace dividend, and chose to channel defence spending into social programmes rather than military hardware. Yet more recently, nations have begun to redress that position. In 2006 the then United States Ambassador to NATO, Victoria Nuland, referred to 2% as the “unofficial floor” on defence spending in NATO. One month later at the NATO summit in Riga, further comprehensive political guidance helped to redefine the role of the alliance, and 2% became a genuine aspiration. Despite that, the likelihood of reversing the downward trajectory of defence spending seemed remote until last year when, at the NATO summit in Wales, and as we faced the greatest crises since the end of the cold war, nations finally agreed to raise the profile of the 2% pledge to make it meaningful.

I am sure that Conservative Members at least will remember the Prime Minister standing shoulder to shoulder with President Obama at Celtic Manor in Wales last year, urging all 28 nations to step up to the plate, and signing a landmark declaration. It might be helpful to the House if I remind hon. Members of exactly what was said—I hope that you will indulge a longish quote, Madam Deputy Speaker. It was declared:

“We agree to reverse the trend of declining defence budgets, to make the most effective use of our funds and to further a more balanced sharing of costs and responsibilities. Our overall security and defence depend both on how much we spend and how we spend it. Increased investments should be directed towards meeting our capability priorities, and Allies also need to display the political will to provide required capabilities and deploy forces when they are needed. A strong defence industry across the Alliance, including a stronger defence industry in Europe…and across the Atlantic, remains essential for delivering the required capabilities. NATO and EU efforts to strengthen defence capabilities are complementary. Taking current commitments into account, we are guided by the following considerations:

Allies currently meeting the NATO guideline to spend a minimum of 2% of their Gross Domestic Product (GDP) on defence will aim to continue to do so. Likewise, Allies spending more than 20% of their defence budgets on major equipment, including related Research & Development, will continue to do so…Allies whose current proportion of GDP spent on defence is below this level will halt any decline in defence expenditure; aim to increase defence expenditure in real terms as GDP grows; aim to move towards the 2% guideline within a decade with a view to meeting their NATO Capability Targets and filling NATO’s capability shortfalls

Allies who currently spend less than 20% of their annual defence spending on major new equipment, including related Research & Development, will aim, within a decade, to increase their annual investments to 20% or more of total defence expenditures. All Allies will ensure that their land, air and maritime forces meet NATO agreed guidelines for deployability and sustainability and other agreed output metrics and ensure that their armed forces can operate together effectively, including through the implementation of agreed NATO standards and doctrines…Allies will review national progress annually, and that will be discussed at future defence ministerial meetings and reviewed by heads of state and government at future summits.”

[Sir Edward Leigh]

Will the Minister comment on the German problem? Germany is a massive political and economic power in Europe and a lot of us are very concerned about what has happened to its defence budget.

[Mr Dunne]

We have a close and growing defence relationship with Germany. I would anticipate that, as part of the SDSR, we will see an increasing strand of activity, looking to work in a more interoperable way with German armed forces and to bring them into more of our alliances, and bilateral and multilateral relationships within NATO. We are certainly doing what we can to encourage our friends in Germany to play their part.

[Sir Edward Leigh]

That is all fine, but I just wonder what discussions are going on. Is there any chance of Germany meeting this target?

[Mr Dunne]

I will come on to the targets shortly, if I may, in relation to individual nations. The point is that we are increasingly recognising a need to engage with the German military to bring it more into line with operations training and other defence needs.

The reason for reading out such an extensive quote from last year’s NATO summit is to emphasise the importance of the words included in that statement. They are at the heart of the alliance. The commitment to an annual review of investment pledges by Heads of Government was new and is significant. It helps, for the purposes of this debate, to ensure that there is no doubt whatever about why our 2% spending commitment matters. That is what I shall go on now to address. There are three principal strands.

First, it will give the UK the capability we need to face the dangers ahead. It is no secret that our national security strategy will confirm that we are living in a darker, more dangerous world. That has been referred to by many hon. Members, not least by my hon. Friend the Member for Aldershot in opening this debate. We have seen other nations upping their spending and, as we have also heard from Members today, upgrading their capability.

Russia has continued to modernise its military capability, bringing in new missile systems, aircraft, submarines and surface vessels, and armoured vehicles. As President Putin regularly reminds us, it is also upgrading its nuclear capability, preparing to deploy a variety of land-based intercontinental ballistic missile classes, planning to reintroduce rail-based intercontinental missiles, and commissioning a new Dolgoruky class of eight SSBN vessels.

I am sure hon. Members will be interested, if they are not already well aware, to know that this class of vessel is named after the Russian medieval founder of Moscow, Yuri Dolgoruky. Dolgoruky, my friends, literally means “long arms”, a rather sombre metaphor for President Putin’s ambitions to extend Russia’s military reach around the world.

This new military capability and assertiveness, as most recently seen in Ukraine and Syria, must inform our national security risk assessment that we are undertaking as a precursor to the SDSR. It also underlines the arguments in support of our decision to press ahead with the Successor replacement for our own Vanguard class strategic deterrent—on which more later.

I note the comments from the hon. Member for York Central (Rachael Maskell) that the Opposition are undertaking a strategic review of defence. I urge them to do that as swiftly as they can, so that they will have made their mind up by the time of the decision.

[Dr Julian Lewis]

I am a little surprised at the vagueness of the Opposition today. I thought the position was absolutely clear—namely, that the Opposition are committed to continuous at-sea deterrence and the continuation of Trident under the Successor programme, because that was the position adopted by the Labour party and endorsed by its recent conference. The decision was taken not to change the policy. If a free vote is necessary for the Opposition, it will be the Leader of the Opposition who has to take advantage of it, not the people who believe in Trident.

[Mr Dunne]

My right hon. Friend has highlighted one of perhaps a number of apparent inconsistencies between certain leading members of the Opposition and those on their current Front Bench. I do not want to prey on the misery of the hon. Member for York Central (Rachael Maskell). I should have started by welcoming her to her position. [Hon. Members: “Hear, hear.”] This is her second appearance in the Chamber this week in her new role as a Defence Minister. She is doing an admirable job, if I may say so, completely unsupported as she is in this debate by a single colleague. That speaks volumes for the interest the Opposition parties en bloc take in defence. I do not want to put her under any more pressure than my right hon. Friend has done. It is really for her to decide whether she wants to intervene to clarify the position. I would be very happy to take such an intervention, but I would not be surprised if she chose not to make one at this particular moment.

Moving beyond Russia, our friends from China are here in the UK today. They are already the world’s second-highest military spenders, with the world’s largest standing army. The Chinese are investing in high-tech equipment, such as submarines and stealth jets, and upgrading their naval forces, including their first aircraft carrier.

Russia and China are far from the last of the big spenders in defence around the world. India has announced a core defence budget of $41 billion for this fiscal year. Perhaps most understandably, South Korea plans to increase its defence budget sharply next year, with its ministry of national defence requesting a budget of $36 billion to bolster its combat power at the border with North Korea and to increase funding for anti-submarine warfare systems. Some of this increasing international commitment to defence spending brings with it opportunity. Where we can develop greater interoperability of equipment and capability with our partners and allies, we will seek to do so.

If we look at the emerging international picture, it helps to crystallise our need to stay competitive and keep ahead of the curve. That is why we have spent the past few years transforming defence, eliminating the black hole in our finances and turning our procurement arm, Defence Equipment and Support, into a bespoke trading organisation that is able to operate along more commercial lines with an agreed operating cost and more business-like relationship with industry. The reason we are doing this is to meet some of the challenges that have been posed by hon. Members in their remarks. If we are going to have a growing defence budget, we need to make sure we spend it wisely.

The reforms we have enacted so far have allowed us to put in place the £166 billion 10-year equipment plan I referenced earlier in my intervention on my hon. Friend the Member for Gainsborough. I commend it to the House. It was published yesterday and I have a copy here. It is a relatively easy read and has some helpful pictures to encourage hon. Members to get through the document readily. It provides us with a plan for the future to spend our growing budget, in particular our commitment on new equipment. We will do so meeting our NATO pledge throughout this Parliament.

This new financial rigour allows us to get far more bang for our buck by procuring more efficiently. Yesterday, alongside our equipment plan, the public spending watchdog, the National Audit Office, published its independent audit of our major projects and the equipment plan. It found that the cost of the Department’s 13 largest equipment programmes fell by £247 million last year. With the exception of one additional requirement to refuel a Vanguard class submarine, we brought the delivery-on-time performance for those 13 major projects down to an in-year increase of only eight months. If I may take a moment, I would like to contrast that with the performance highlighted by the NAO’s 2009 report, the last full year of the previous Labour Government, where the in-year delivery performance was on aggregate 93 months out of time. In real terms and in real English, that is around eight years. We have brought that down to eight months, which I think is the most graphic illustration I can provide of how we are transforming defence acquisition—an issue raised by several of my hon. Friends.

When we introduced the equipment plan, it was characterised as “hopeful” by the then shadow Defence team in that it was based on a number of assumptions. We have been publishing the plan and getting it reviewed by the National Audit Office each year, so the assumptions we have made each year are being assessed. I am pleased to say that in each of the four years, greater confidence has been gained in the assumptions being made. The proposals in this particular document have been described as more stable than in any of the previous years. The NAO believes that we are set to remain “affordable” for the rest of the Parliament under current conditions.

As my hon. Friend the Member for Gainsborough will appreciate as former Chairman of the Public Accounts Committee—he had some of the closest dealings with the NAO—it is rare to receive praise from the NAO. For that office to declare a programme as “stable” is about as close as one can get to a positive red star. We are very pleased with the report. Perhaps a gold star is more appropriate in the school context.

Let me now touch on the capability that we will be able to call on as a result of our reforms. Some programmes have already been referenced by hon. Members. Of course, one of the largest programmes currently in build is the construction of the two Queen Elizabeth class aircraft carriers, each 68,000 tonnes—the most powerful ships ever built in this country. Earlier this month, I was privileged to visit BAE Systems shipyard in Govan on the Clyde and see the latest blocks of HMS Prince of Wales before they were barged to Rosyth to be assembled. Shortly after I was there, the largest single block—over 11,000 tonnes—sent round to Rosyth was attached to the existing dry dock, and the process was described as “skidding”, whereby a block on a barge is gently moved into place. This was the largest such move of a block of shipbuilding anywhere in Europe ever. It happened successfully and to within the tolerance of 3 mm that it was working towards, which is an astonishing feat of engineering by any standards.

While I was in Scotland, I had the distinct privilege of cutting steel for the first time on HMS Trent, the third of our offshore patrol vessels, the latest class that we are commissioning for the Royal Navy. These projects are, in turn, securing the skills required to build the Type 26 global combat ship, which is another example of our investment in the Royal Navy. It will be one of the most significant programmes undertaken during this Parliament.

[Dr Julian Lewis]

Given that the Minister mentions the Type 26, which I would loosely describe as a replacement frigate, will he take this opportunity to confirm, now that we have just the six Type 45 destroyers, that there is no question of going below the total of 13 Type 26 frigates, thus keeping our total of frigates and destroyers at 19—itself a huge reduction from the 35 we had in 1997?

[Mr Dunne]

I congratulate my right hon. Friend on securing the chairmanship of the Select Committee. I have no doubt that he will press Ministers on many programmatic issues. What I am afraid I cannot be tempted into doing is to pre-empt the conclusion from the SDSR, which will reach its conclusions, as I have said, before the end of the year. What I can tell my right hon. Friend about the approach to the SDSR is that any programmes not committed before the start of the process are on the table for review and consideration of allocation of spending in accordance with other programmes. I am not going to be drawn on what that means for Type 26 in particular, but as I have said, this is going to be one of the biggest programmes we have for the rest of this Parliament.

[Dr Lewis]

Do I therefore understand that when the SDSR comes out, we will know for certain that there will be no reduction from the total of 13 Type 26s?

[Mr Dunne]

I think all I can do is to encourage my right hon. Friend to read the SDSR carefully when it comes out, so that he can draw whatever conclusions he can.

Moving beyond the Navy for a moment, flying from the aircraft carriers will be the F-35B Lightning II Strike Fighters, which have stealth built into their DNA. Their advanced systems give pilots enhanced network connectivity, allowing them to send real-time information untainted and unseen by others from the battlefield to the back office, up to Ministers and back again if necessary to prosecute decisions.

Last month at the defence and security equipment international exhibition, we saw what is going to happen on the land front, but before I move on to land, I believe my right hon. Friend was fortunate enough to visit the showcase that took place when Parliament was in the conference recess and the F-35 cockpit simulator was here in London. He has indicated that this was an outstandingly good event and worthwhile experience, which unfortunately many hon. Members were unable to share because the House was not sitting at the time. I think he may have an observation to make on that.

[Dr Lewis]

I was not intending to intervene, but I cannot resist an invitation like that. This was an outstandingly good event. I am hoping that it may be possible to bring the same presentation—not only the cockpit simulation of the Lightning II, but the presentations by the representatives of many of the firms involved in the supply chain—to illustrate to hon. Members that hard power has economic value, as Lord Sterling is always trying to tell us in the other place.

[Mr Dunne]

I am grateful for that suggestion, and will happily take it up with Lockheed Martin, who I believe organised the event, to establish whether it would be willing to repeat it. On the issue of prosperity, I can give my right hon. Friend another sneak preview ahead of publication of the SDSR, in that there is likely to be a theme coursing through that document of how much defence contributes to our economy and the nation’s prosperity.

[Sir Gerald Howarth]

I would like to endorse what my right hon. Friend the Member for New Forest East (Dr Lewis) said about the F-35 cockpit simulator. I had a chance as a pilot to have a look at it, and I have to say that it was extremely impressive. I agree that that should be made available to more Members because this is going to be a very important programme in the Royal Air Force agenda and in the defence of the United Kingdom.

[Mr Dunne]

I am grateful for that endorsement. I completely agree with my right hon. and hon. Friends that the UK as a tier 1 partner has a unique role to play in the development of this programme over decades to come. It is the single largest defence programme in the world ever—in value terms, although that may be as much to do with inflation as anything else. We have a 15% share in the manufacture in this country of each and every one of those platforms as they come into service in air forces around the world. The contribution it will make to sustaining the vibrancy of our defence industry cannot be overstated.

[Dr Julian Lewis]

There is, in fact, one other aspect of the F-35 programme that I had not realised until recently: the potential for expansion in a crisis. When the assembly line is operating at its peak in America, it will produce one of these aircraft per day. If ever, heaven forbid, we found ourselves in sudden need of a large number of extra aircraft, that joint capacity between British industry and American industry will enable us to fulfil our needs.

[Mr Dunne]

That is a very interesting observation. At a time of surge and crisis, it will obviously be a challenge to produce a pilot every day at such a pace, but it is clear that that is currently being planned. Given the scale of the programme, which will last for three decades, it will involve a steady and regular introduction of capability to a number of air forces, including ours.

Let me say a little about what is coming to the land environment. At the DSEI exhibition, which a number of Members were able to attend last month, we showed what the next generation of Ajax armoured vehicles would look like. They are fully digital platforms with multi-purpose capability. They will have 360° thermal and visual drive-in cameras, laser detection ability, and numerous other new features that would be expected from a platform that has been designed in the 21st century —the first such platform to be available for our armed forces. They will act as the eyes and ears of commanders on the battlefields of the future.

Thanks to the Warrior capability sustainment programme, Ajax will line up alongside the Army’s fleet of upgraded Warriors, soon to be enhanced with a range of upgrades that will be relevant to their variant role. Some will have state-of-the-art turrets, cannon and electronics, which will keep this highly successful armoured fighting vehicle at the front and centre of combat capability for the next 25 years.

We are not just investing in our traditional single services; we have also created the Joint Forces Command, which has combined our intelligence, surveillance and reconnaissance with our cyber and command, control, co-ordination and communications assets for even greater effect.

That brings me back to the Successor programme, and the other major investment decision that will be made during the current Parliament. On Wednesday, I was pleased to be able to attend at least part of the “keeping our future afloat” event, which brought together the shipbuilding industry, unions and Members of Parliament from all parts of the House. At that meeting, the Defence Secretary again restated our commitment to building four Successor ballistic missile submarines to replace the four Vanguard boats, and to retaining the Trident continuous at-sea nuclear deterrence patrols that provide the ultimate guarantee of our security. He also reminded us why it is so vital to keep remaking the case for our deterrent at a time when the nuclear threats have not disappeared, when emerging states have not stopped seeking nuclear capability, and when we cannot guarantee that it will not be present again in the 2030s, 2040s or 2050s. There has never been a more important time for the United Kingdom to have a credible, operationally independent minimum capable deterrent—and we should not forget that it was Attlee and Bevin who argued for a nuclear deterrent with a Union Jack on the top of it.

I reiterate that I look forward to the conclusion of the review that the hon. Member for York Central is conducting with the shadow Defence Secretary, the hon. Member for Garston and Halewood (Maria Eagle), to clarify the Opposition’s posture, and we look forward to support from Opposition Members in the Division Lobby when we come to vote on the topic. We think it important for politicians of all stripes to put aside politics for the national good, and to work together to keep our country safe. After all, our deterrent advances our prosperity as well as our security.

That was at the forefront of the remarks of the host of Wednesday’s event, the hon. Member for Barrow and Furness (John Woodcock), who is a strong advocate of the deterrent programme—not least because most of it is built in his constituency. He pointed out that in the Members’ Dining Room was a map of the United Kingdom on which were little red dots criss-crossing the whole country—every nation and nearly every county, although I cannot add “every constituency”. It showed the huge number of companies in the supply chain which support our nuclear defence industry: hundreds of businesses providing thousands of jobs. That is, of course, before we consider the physical facilities where the deterrent will be based. I believe that Her Majesty’s naval base Clyde is the largest employment site in Scotland. It currently provides about 6,700 military and civilian jobs, and by 2022 the number will increase to 8,200.

[Sir Edward Leigh]

Would the Minister welcome a contribution from the Scottish National party Members who are present on their attitude to the Clyde?

[Mr Dunne]

We often hear from members of the SNP in our Chamber, but I regret to say that there do not appear to be any here at all, and not just at this point, when we are discussing the deterrent. None has been present at any point during the day, and we are now more than three hours into the debate. That is regrettable. I am afraid it shows an extraordinary lack of interest in defence and particularly in the Clyde, despite its being the largest employment site in the nation.

Let me now say something about the strategic defence and security review. I have been tempted by colleagues to betray some of the review’s conclusions; that would obviously be premature, but I will spend a few moments discussing the context. We begin the exercise in immeasurably better shape than was the case in 2010, thanks to our growing budget and our new ability to recycle efficiency savings into more front-line capability. That is another significant change that was flagged by the Chancellor in his summer Budget, and it provides real flexibility and incentives for the Ministry and our commands to identify efficiencies that can be reinvested in capability. That is a good position to be in. It is good for the Ministry to be looking forward to a growing budget, and it is good for the commands and everyone involved in defence procurement to be given an incentive to try to secure the benefit of efficiencies that we can invest in our priorities. That was certainly not the position when the last SDSR was undertaken.

As my hon. Friend the Member for Aldershot mentioned earlier, he was a Defence Minister at the time. He gave credit to the former Defence Secretary, the right hon. Member for North Somerset (Dr Fox)—who was in the Chamber earlier—for the role that he had played in handling the £38 billion black hole that we inherited, and helping to get the Department into financial balance. That financial certainty, resulting partly from the summer Budget, has given us the confidence to undertake a full and comprehensive SDSR with unprecedented clarity over our financial baseline.

The SDSR is approaching its climax over the coming weeks. It will enable us to match our future capabilities with future threats while providing a coherent, integrated response covering defence, counter-terrorism and homeland security. It has been led by the Cabinet Office, but it is a truly cross-Government effort, drawing together Defence, the Foreign Office, the Home Office, the security agencies and others. I am pleased that the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Bournemouth East (Mr Ellwood), is present, because he takes a great interest in that work.

Advice has been fed in not just from across Government, but from a spectrum of external experts and allies. I pay tribute to the contributions of, in particular, the United States, France and other NATO allies. As might be imagined, there have also been contributions from various elements of the defence industry, including the trade associations and the individual companies that give such magnificent support to our armed forces. Strangely enough, they all have ideas about capabilities that they happen to manufacture and consider to be suitable for our armed forces to operate. I hope that we shall be able to satisfy some of them, although I doubt that we shall be able to satisfy each and every one.

We believe that our work for SDSR 2015 is better grounded than the work done on any of the previous reviews, and we have been able to make some key priority decisions early in the process. We already lead the way in our intelligence and surveillance capabilities, and we are currently the only coalition nation conducting manned intelligence, surveillance and reconnaissance operations over Syria. However, we believe that we can do more. Earlier this month, the Prime Minister announced our plans to double the fleet of remotely piloted air systems during the current Parliament. The new Protector aircraft will dramatically increase the UK’s ability to identify, track, deter and ultimately counter the potential threats, which will enhance our global intelligence, surveillance and reconnaissance capability. The Prime Minister has also announced that we will upgrade our special forces’ equipment, ensuring that those cutting-edge troops remain at the cutting edge of technology, giving us a clear advantage over our adversaries.

But this is just the beginning of what we hope to achieve through the SDSR. As the US offset strategy recognises, the technological advantage on which the west has relied for decades is gradually being eroded. It was pleasing to hear the hon. Member for York Central emphasising the need to maintain our technological edge. We agree with her on that. It is clear that some of our budget will need to be spent on disruptive technologies, whether in space, data analytics, operational energy, cyber or autonomy. We need to answer certain key questions. How can we increase our underwater capability to counter anti-access area denial? How can we maintain air dominance and strike in non-permissive environments? How can we develop our counter-electronic warfare capabilities? And how can we utilise quantum technologies to circumvent our reliance on space-based navigation systems?

During the visit of the US Defence Secretary, Ash Carter, earlier this month, the Defence Secretary announced that we will invest more than £70 million during the next five years to transform our approach to defence innovation, ensuring that we are open to the widest range of innovative ideas. Innovation will be another strand that will course through the SDSR.

Reverting to the matter of the 2% commitment, which I am sure hon. Members are keen to move on to, this is not just about bolstering our capability. A further reason that it matters is that it is about strengthening NATO. We must ensure that the greatest defensive alliance the world has ever known remains able to counter the multiple and concurrent threats that we face, whether in the form of state aggression, global terror or international piracy. The alliance derives its strength from its commitment to collective defence.

Hon. Members have touched on the question of contributions from members of the alliance. Only five countries are expected to spend 2% on defence this year. They are the United Kingdom, the United States, Estonia, Greece and—this year for the first time—Poland. Nineteen of the 28 members do not spend 1.5%, and four of the members do not even spend 1% of their GDP on defence. This emboldens our enemies and weakens our allies. We should not forget that NATO was founded 66 years ago on the basis that all members would pay their way.

This matter has been raised by many hon. Members, and this might be a suitable moment for me to reflect on the contributions that have been made to the debate. The opening speech from my hon. Friend the Member for Aldershot was outstandingly concise for a debate of this nature. I wholeheartedly agree with his exposition of the threat that we face and with his descriptions of our position in NATO, the leadership role we need to maintain and the example we need to set. I have already paid tribute to the profile that he gives to defence in the Chamber and outside this place. It is very welcome, and I am particularly pleased to have this opportunity to have this debate today, thanks to his efforts.

We have heard contributions from a number of hon. Friends, all bar one of whom spoke from this side of the House. It is a pleasure to welcome my right hon. Friend the Member for New Forest East (Dr Lewis) to his chairmanship of the Defence Select Committee. His speech was disappointing in that it was uncharacteristically brief. He was, however, characteristically clear in his support for defence, which we all appreciate, particularly in his present role. We look forward to his persistent and challenging chairmanship of the Committee. On the topic of today’s debate, I am not sure that he would find any figure acceptable as a floor for defence spending. I am sure, however, that he will support the Government’s commitment to maintaining defence spending and that he will welcome the fact that it is a growing figure, in excess of 2%. I am sure that he will also welcome our commitment to maintaining our continuous at-sea deterrence, a subject on which he is probably the greatest living expert in this House, and that he will support the replacement of our strategic deterrent during the course of this Parliament.

My hon. and gallant Friend the Member for Beckenham (Bob Stewart) identified the fact that most of our major European allies have reduced their spending on defence and now rely even more on the United States. The passion that he brings to any topic of debate, but particularly to defence matters, has become well known since he joined us just over five years ago. That passion was evident again today in his powerful speech, in which he appealed for the costs of the defence of the realm to be enshrined in law.

My hon. Friend the Member for Romford (Andrew Rosindell) spoke knowledgably of the threats that we face. He was concerned that we would not make the commitment to 2% this year, but I can assure him that we will do so. I will give the House details of the calculations involved in a moment. He is one of the leading champions of our overseas territories, and he was right to highlight the role of the armed forces in providing security to those territories, an undertaking to which this Government are fully committed.

[Bob Stewart]

Cyprus is not an overseas territory, but the sovereign base areas in that country are part of the United Kingdom. People have now started to arrive in those areas by ship. May I tempt my hon. Friend to tell the House what the Ministry of Defence and the Foreign and Commonwealth Office are going to do about that? Are we perhaps going to put more ship capability out there? The ship that is now at RAF Akrotiri is old and very tired.

[Mr Dunne]

I thank my hon. Friend for giving me the opportunity to explain what we know thus far about the arrival by boat yesterday of migrants on the shore of RAF Akrotiri. I understand that 114 migrants arrived and have been accommodated overnight within the sovereign air base, where military personnel have provided them with food, water and bedding. There are 67 men, 19 women and 28 children, and they are being assessed by medical personnel. I am sure everyone will welcome the fact that they have already been found to be fit and well. We are grateful to the Republic of Cyprus for agreeing to process all asylum claims through its system. That process began yesterday morning and will be continued as rapidly as possible. Further details will be provided when appropriate. The nationalities of those in the group will be confirmed only as they are processed by Republic of Cyprus officials, but we believe them to be a mix of Syrian, Palestinian and Lebanese nationals.

I cannot give my hon. Friend any specific information on what naval intervention took place. I do not believe that the operations of HMS Richmond or HMS Enterprise were affected by the arrival of those people in Cyprus, but I will confirm that to him in writing.

[Bob Stewart]

There is a very small patrol vessel at the mole at RAF Akrotiri, but it does not go out very often and it has a very small crew.

[Mr Dunne]

I am grateful to my hon. Friend for informing the House of those facts, based on his deep experience of our capabilities.

My hon. Friend the Member for Eddisbury (Antoinette Sandbach) is already proving to be a doughty champion for Cheshire, my neighbouring county. I am always pleased to see people standing up for Cheshire. She has also given tremendous support to the armed forces since arriving in the House. I applaud her for that and support her efforts. She drew attention to the contribution that defence makes to the prosperity of the nation, which I touched on earlier. She is absolutely right about the skills that defence is able to provide to our people. We are the largest employer of young people coming out of college or school into an engineering trade. We are also the largest provider of apprenticeship programmes in the country and the largest provider of skilled employees back into the civilian workforce, once military careers come to an end. We therefore play an enormous role, which needs to be more widely acknowledged, in helping to upskill our nation.

My hon. Friend the Member for North West Norfolk (Mr Bellingham) explained the significance to defence of RAF Marham in Norfolk, as the home of the Tornado squadron, including 31 Squadron, with which, as we discovered, his father served. RAF Marham will become the home of the squadron for the new F-25B joint strike fighter, Lightning II, when it is stood up. He spoke powerfully of the role of international development aid as a pump primer for trade to help recipient countries to emerge into self-sufficiency.

I would like to dwell for a moment on the mutually supportive role that humanitarian aid spending can play to help to keep this country and its citizens secure. With the present conflicts in the middle and near east, the United Kingdom is able to use the aid budget, through DFID, to provide vital humanitarian assistance. As hon. Friends are aware, refugees from the Syrian civil war have received £1.1 billion from the United Kingdom. We are the largest donor outside of the US to those suffering from this appalling civil war, and in Yemen we are the fourth largest donor, which is not quite so well known, following the US and regional donors. We have pledged £75 million to humanitarian relief stemming from the civil war in that country. There is therefore a vital role for us to play as a nation, and the pledge to contribute 0.7% of GNI—which I will come to later and which is used to help refugees in those places—helps us as a nation to remain more secure, so in my mind there is a clear linkage between these two pledges.

My hon. Friend the Member for Gainsborough spoke movingly of the role of defence in our midst, especially in his county of Lincolnshire. RAF Scampton is of course the home of the Red Arrows, who play such a vital role in promoting the air force and will, I believe, play a part in welcoming the Prime Minister of India on his visit, which will be exciting to watch. Lincolnshire is also, as he told us, home to RAF Coningsby, one of the three operating bases for combat jets across the UK, and RAF Waddington, the operating base for our ISTAR—information, surveillance, target acquisition and reconnaissance—assets, or at least it will be again, once its runway has been resurfaced, which is under way at the moment.

As a former Chairman of the Public Accounts Committee, my hon. Friend spoke knowledgeably about the risks to good government of ring-fencing, as we have discussed. He also raised the problem of target setting, with the attendant risk of skewing procurement, not least given the challenges, which I am grateful to him for acknowledging, that exist in managing such a significant procurement programme as we have in defence.

It was good to welcome my hon. Friend the Member for Congleton (Fiona Bruce) to a defence debate. She acknowledged that she is not an habitual attender, unlike many of the other colleagues who have participated in the debate, and it was refreshing to hear a different approach. She emphasised how the military can and does support humanitarian efforts, often on a cross-government basis, to help other nations in distress. She referenced Sierra Leone and Nepal—I will have something else to say about Sierra Leone in a few minutes. I would like to draw her attention to the role that the military was able to play in bringing relief to the people of the Bahamas earlier this month, when a just-under hurricane strength storm ripped across the islands, causing mudslides and wreaking havoc. As it happens, I was the Minister on duty on the day and was able to authorise the Royal Fleet Auxiliary vessel Lyme Bay to go to the assistance of the people of the Bahamas. It was there for a few days and provided invaluable help to the people of those islands.

My hon. Friend the Member for Torbay (Kevin Foster) started by enlightening the House about his formative—may I say existential?—relationship with the Royal Navy. He welcomed our plans to develop new capabilities for our armed forces, but cautioned us on the importance of avoiding waste and poor decision making in improving our procurement processes. As he has an interest in this, I hope he will take the opportunity to look at what we are doing in our equipment plan, which was published yesterday, and will appreciate what the National Audit Office said—which was little short of praise—for the progress made thus far. We are acutely aware that we cannot rest on our laurels. It is important to continue to bear down on inefficiency.

[Kevin Foster]

I thank the Minister for his comments. He will be pleased to know that the Public Accounts Committee, of which I am a member, regularly considers these issues. We discussed military flying training recently and have also looked at the forward review and we were pleased to see many of the changes being made.

[Mr Dunne]

I am grateful for that further endorsement of the progress being made.

Having congratulated the hon. Member for York Central on taking up her now post, I should also take this opportunity to welcome her remarks. For most of what she said, I found we had very little issue between us. It was a particular pleasure to hear her endorsement of the 2% NATO pledge. That is extremely welcome and clears up one of the apparent inconsistencies that have been flying around the media, in connection with a potential lack of support from the Leader of the Opposition for NATO. It is very welcome to hear that that is not the case, and I am sure the whole House will agree that that clarification was useful.

Having referenced the contributions made by hon. Members in general, let me turn to some of the specifics, in particular some of the calculations. Much of the talk in this debate has been about one half of the calculation of 2%. There has been hardly any reference to the denominator, in this case gross domestic product. Members are aware that in this country, thankfully, GDP has been growing faster than in any other G7 nation over the last two years. That is to be welcomed. Of course, each year that GDP grows, more challenges are placed on defence and Government spending as a whole if our spending is not able to grow at the same pace. From a purely arithmetic point of view, it becomes harder for defence to achieve a minimum threshold expressed as a percentage unless we are able to grow in tandem. Under present plans, we are likely to grow, but not at quite such a pace.

There are also changes from time to time in the way GDP is calculated. One important such change took place only last year. That was the result of the European system of national and regular accounts—ESA 2010, as it is known—which gives guidance on standardising public finance accounts across the European Union. Major differences to the way GDP is calculated include ESA 2010 counting weapons expenditure and R and D spend as capital spend, as well as including non-profit organisations that serve households and—this is a particularly big one that affected the UK—the proceeds from what used to be called the black economy, but is now, I gather, called the underground economy, such as illegal activities, including prostitution and drug dealing. When we add the apparent proceeds from prostitution and drug dealing to GDP, it makes achieving the target that much more difficult, with of course no cash consequence whatever.

We adopted the new accounting methods to bring the country into line with other EU members. This initially added £43 billion to the UK GDP, following the re-evaluation—the equivalent of a 3.6% average increase in GDP, which was subsequently revised upwards, to 4.1%. Those changes will make the difficult task of meeting the NATO guideline of spending 2% of GDP on defence even more of a challenge, and the impact of the change in the GDP denominator has been estimated as a 0.09%—so almost 1%—reduction in the defence calculation for zero cash effect.

Article 3 of NATO’s founding charter states:

“In order more effectively to achieve the objectives of this Treaty, the Parties, separately and jointly, by means of continuous and effective self-help and mutual aid, will maintain and develop their individual and collective capacity to resist armed attack”.

Like any insurance policy, defence only pays out when you pay in. Some hon. Members mentioned the contribution that the United States makes financially to the NATO alliance and the increasing dependence that we have on it. We cannot expect US taxpayers to go on picking up the security cheque so that nations on the European side of the Atlantic can prioritise social welfare spending when the threats are on our doorstep, especially at a time when the US is under increasing pressure to meet its own debt reduction targets and is pivoting to face new threats in the Asia Pacific region. Moreover, the combined wealth of the non-US allies, measured in GDP, exceeds that of the United States.

Non-US allies together spend less than half of what the United States spends on defence, and the gap between defence spending in the United States compared to Canada and European members combined has increased since 9/11. Today, the volume of US defence expenditure effectively represents 73% of the defence spending of the alliance as a whole. So there is an over-reliance by the alliance as a whole on the United States for the provision of essential capabilities, especially when it comes to intelligence, surveillance and reconnaissance; air-to-air refuelling; ballistic missile defence; and airborne electronic warfare.

As it always has done in the past, the UK is once more taking the lead in turning NATO around. That is why we have committed to the readiness action plan. That is why we are playing a significant role in NATO assurance measures, protecting Baltic skies from Russian aggression and joining the transatlantic capability enhancement and training initiative, alongside the US and—yes—Germany, to offer reassurance to our allies and help to build regional capacity and capability. That is also why we are also a framework nation for the Very High Readiness Joint Task Force (Land) Brigade and are committed to providing it with thousands of troops a year. In fact, the Spearhead Force, as it will be known —a rather more useful short name than the usual military acronym—is currently being put through its paces in Exercise Trident Juncture before it goes operational next year. The UK is committing some 2,800 personnel including an Army Brigade Headquarters and Battlegroup, three Royal Navy warships and aircraft, including Typhoon fighter jets and helicopters, to those manoeuvres.

Above all, our leadership in NATO is illustrated by the fact that we are prepared to put our money where our mouth is. We have a budget of £35 billion, the second largest defence expenditure in the alliance. We are one of those five nations projected to spend 2% of GDP on defence in 2015, and the Chancellor has made the commitment to spend 2% of GDP on defence for every year of this decade. Make no mistake: our allies appreciate our efforts. It has been suggested in this debate that unless the Bill proceeds we will suffer opprobrium from some of our main NATO allies. I am afraid that hon. Members are misguided, because our principal allies in NATO have expressed on several occasions their pleasure that we are taking that lead. Let us not forget that President Obama was first on the phone to the Prime Minister after the Chancellor had made that major spending announcement.

[Dr Julian Lewis]

I am sure that we all believe the Government entirely when they say that they will stick to the 2% up to the next general election, but can the Minister not see that passing this Bill would make it much harder for any Government of any complexion after the next general election to resile from the minimum spend because the legislation would have to be repealed first? While he is making an excellent case for all the good things that Britain does in NATO, can he assure the House that that case will not take him another hour and 15 minutes to outline, because it would be a terrible shame if we ran out of time before we had an opportunity to see whether the House wants the Bill to go into Committee?

[Mr Dunne]

My hon. Friend will be relieved to hear that, as someone once said, I am beginning to come to the end of my preliminary remarks.

I was just alerting the House to the confidence that the United States has in the measures that we have announced. I found that out for myself when I visited Washington in July, as the first Defence Minister to do so after the confirmation of our 2% commitment. I met Deputy Secretary Bob Work, who was effusive in his praise of the United Kingdom and the way we are showing such strong leadership within NATO and among its allies. When Defence Secretary Ash Carter was here at Lancaster House just two weeks ago, he pointed out that our Secretary of State was the first counterpart he had hosted in the Pentagon since his appointment, and added that

“that was only fitting given the special relationship our nations share. Simply put the United States have no closer allies and friend than the United Kingdom.”

Our actions have drawn wider praise, not least from the NATO Secretary-General who commended us for a

“Great example of leadership within the Alliance”.

But this is not just about what we spend: it is about what we spend the money on. When nations fail to spend more than 20% of their defence funding on new technologies, they run the risk of equipment obsolescence and growing capability and interoperability gaps, as well as a weakening of Europe’s defence industrial and technological base.

So at the 2014 summit in Wales, NATO leaders agreed that allies currently spending less than 20% of their annual defence on major equipment will aim to increase this annual investment within a decade. Here, too, we are showing others the way. I am pleased to say that the UK is one of only seven nations expected to meet this guideline by 2015, along with the US, France, Luxembourg—interestingly—Norway, Turkey and Poland. We are one of only three members meeting both targets alongside the US and, for the first time, Poland.

As part of our spending on equipment, we are also determined to help NATO meet some of its capability shortfalls. NATO summit members agreed to do that last year when they signed up to the defence planning package. That effectively committed allies to enhancing and reinforcing training and exercises; bolstering their command and control, including for demanding air operations; augmenting their intelligence, surveillance, and reconnaissance; strengthening their cyber-defence; and improving the robustness and readiness of our land forces for both collective defence and crisis response.

There is a third reason why our 2% commitment matters, and it is essentially a corollary of my first two points. Our spending guideline is a vital sign of our intent and a clear message to our adversaries. They need to know that we are determined to stand up to aggression wherever we find it, and our allies need to know that we will stand alongside them, while our armed forces need the confidence to know that they have our wholehearted support and fully funded backing. We will continue providing them with the high-tech kit they need to tackle the dangers to come.

In other words, we need no reminding of the importance of 2%, any more than we need a law to remind us to protect our country and our people. Britain has always historically spent above 2% of GDP on defence. It is something that comes naturally: it is ingrained in our psyche. That was why, when we saw the danger, we acted and committed to that spend until the end of this Parliament, despite the predictions of the doubters. That is why a Bill like this is ultimately unnecessary. Why do we seek to spend precious parliamentary time on passing legislation that, in effect, is unnecessary, taking up Members’ time in order to commit to something that in practice we already do and will continue to do? We should not forget that Parliament already has the ability to hold the Government of the day to account on defence spending.

[Mr Gordon Marsden (Blackpool South) (Lab)]

The hon. Gentleman is making a very substantial speech; I thought it would be in support of his colleagues, although it now seems otherwise. Far be it from me, a novice in these matters, to intrude on the debate, but does the Minister not recall President Reagan’s famous words when asked whether he trusted the Soviets? He said that he trusted the Soviets, but that he worked on the principle of “trust but verify”.

[Mr Dunne]

I am delighted to welcome the hon. Gentleman’s intervention, and I am sure his Front-Bench colleague, the hon. Member for York Central will be as pleased to see him here supporting her. I am amused by his reference to what President Reagan said. In answer to his question, I should say that we are already delivering. It is important that we should deliver in a transparent way and I shall come during my concluding remarks to highlight the visibility of the 2% commitment to NATO and how it is assessed.

The defence budget, alongside other departmental budgets, is already approved by Parliament through the estimates process. I was highlighting some of Parliament’s other means of scrutinising defence spending and the proportion of Government revenues spent on defence. The Treasury is content that the estimates process is sufficient for setting in-year budgets. It is our strong view that the Government must safeguard their ability to retain financial flexibility to set forward budgets in line with the policy priorities of the day. The Bill would reduce the financial flexibility available to any Government of the day to set forward budgets in line with policy priorities.

Hon. Members are expecting me to conclude my opening observations. I will cite a quotation from a bit earlier than President Reagan’s. Winston Churchill said:

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

I shall take a few moments to respond to questions posed by my hon. Friend the Member for Aldershot about definitions. The definitions that we have used to meet our NATO spending commitment are not ours, but NATO’s. From time to time, like all member states, we make updates to ensure that we categorise defence spending fully in accordance with NATO’s guidelines. That is important, not least because it helps NATO compare like for like across the alliance.

I have touched on two aspects from the summer Budget that will help us meet those targets. The Chancellor announced two increases in defence budgets for the coming years of this Parliament. First, there was the 0.5% real- terms increase each year, and secondly, the opportunity to bid into a new joint security fund, alongside security agencies, that would reach £1.5 billion in 2019-20. My hon. Friend asked how much of that the MOD could secure to include within the 2% calculation. I am afraid that I cannot give him the answer today, but I can tell him that, as I said in reply to an intervention, the profiling and allocation of the fund are decisions for the SDSR so we will know before too long. However, we will be able to include within the definition the share of the fund secured by defence in our submission to NATO, although we cannot tell what the proportion will be until we know what is in the fund.[Official Report, 29 October 2015, Vol. 601, c. 1MC.]

Our 2015-16 NATO return included some categories of expenditure that we had not included in previous returns. I should like to address that issue, which goes to the heart of a concern behind the debate today. One of the items was MOD-generated income. I should like to explain what that is. The defence budget, £34.6 billion this year, is provided by the Exchequer to the Department; it is our core budget. In addition to that, the Department has for many years generated income that has not previously been declared to NATO although it is entirely legitimate to declare it because it is extra money spent on defence.

I draw my hon. Friend’s attention to the MOD’s annual report and accounts; I am sure he is one of the few Members to read it avidly each year. I happen to have the accounts for the year 2014-15 in front of me. In that year, the MOD generated just over £1.3 billion of its own income, as is clearly shown on page 143, table 6 of the report. That includes, for example, receipts from renting housing out to military personnel. Those living in married quarters pay for that benefit and we use the cash that comes into our coffers to spend on defence outputs. I am sure my hon. Friend would agree that it is legitimate to include that money in our returns to NATO.

[Sir Gerald Howarth]

I am grateful to my hon. Friend for his reference to the MOD’s accounts. He kindly suggested that I might understand those accounts, but I have yet to meet anybody who can, save for Mr James Elder—the only man I know who does. They are the most opaque documents imaginable.

I say with respect to my hon. Friend that the point is that we now classify a number of items as defence expenditure that hitherto we have not. It just happens that, lo and behold, including those items means we meet the 2%. Without them we do not. My hon. Friend owes it to the House to explain why those items have suddenly been included when previously they were not. It might help if he told us when the formula was last changed in that way.

[Mr Dunne]

I have sympathy with my hon. Friend’s comment about the accounts, which are just short of 200 pages long. But there are some helpful guideposts through them—including the photographs, which take up a number of pages; they include an excellent picture of the Red Arrows, which, were he here, my hon. Friend the Member for Gainsborough would surely applaud.

The short answer is that when scrubbing the numbers, as is done from time to time in making declarations, the Department realised that there was a significant gap of billions of pounds between what we spend on defence and what NATO said we spent on defence. We wanted to ensure that we got it right. An exercise was done ahead of this year’s submission to NATO on how much genuine cash was paid by the MOD for defence purposes— it is not the same as the amount of money we receive from the Treasury for spending. It is therefore entirely legitimate for us to take the opportunity to take that into account.

Another example from the income category is the £50 million paid by entitled personnel for food. I am sure my hon. Friend has had the opportunity to visit many messes, particularly in the RAF bases he has visited, and that he has enjoyed the food, for which some payment must be made. I suspect that he has often been the guest of the base commander and that he has not personally had to contribute to the MOD’s coffers, but personnel routinely contribute. That is hard cash that comes into the Department and is spent. It is entirely appropriate to include income we have generated, which for this year amounted in total to £1.3 billion.

We included other categories of expenditure this year when we did the exercise, one of which is Government cyber-security spending. We decided to include spending on some aspects of our cyber-security in the NATO calculation this year because the MOD is taking a more central role in providing cyber-defence and co-ordinating that work across Government Departments. Another category is those elements of the conflict stability and security fund relating to peacekeeping activities undertaken by the MOD. In 2015-16, that is estimated to be £400 million. That money is spent by Defence and is therefore eligible. We have also included the costs of defence pensions, because NATO recognises that that is permissible expenditure and other nations include it. That includes the cost of MOD civil servants’ pensions—such pensions are part of other nations’ calculations. Those are all legitimate expenses and are not a sleight of hand, as has been alleged.

In the same vein, I should like to address hon. Members’ concerns that there is a measure of double-counting in the figures for defence and international aid. Just as NATO sets the guidelines for defence spending, so the OECD sets the guidelines for our official development assistance. We adhere to both sets of guidelines. There is a modest measure of overlap between the two, but that is to be expected. As I will go on to explain in my concluding remarks, defence and development are two sides of the same coin.

The second element of my hon. Friend’s Bill is his desire to

“make provision for verification that NATO’s criteria for defence expenditure are met in calculating the UK’s performance against this target”.

I would argue that that, too, is unnecessary.

[Mr Peter Bone (Wellingborough) (Con)]

I have not heard most of the Minister’s speech because it has gone on for more than 1 hour and 20 minutes, but the thrust of it is that the Bill is a waste of time because what it proposes is already happening, and we do not want to take up valuable parliamentary time. If we do not want to take up valuable parliamentary time, why is he still wittering on?

[Mr Dunne]

I am sorry that my hon. Friend regards my speech as a wittering one. He has a remarkably impressive credential in the House. His son is a serving officer—a pilot in the Chinook fleet—whom I had the privilege to meet on a base. I discovered that his father is my hon. Friend, which I had not previously appreciated. He takes a great interest in defence. I am sorry he was unable to be in the Chamber for the earlier parts of my speech with other hon. Members, but he will enjoy listening to me describe the Government’s commitment to defence as I continue my remarks on the subject of the verification of NATO figures.

We submit financial data to NATO annually in the form of a detailed, classified financial return. Our NATO returns are independently reviewed and verified by NATO staff, and are peer-reviewed by NATO allies during the defence planning process. That provides independent testing and impartial scrutiny of the UK’s plans, and builds confidence among allies that we will do as we say. It is entirely right that NATO and not the UK decides the definitions of defence expenditure. That is the only way to ensure consistency and build relationships across the alliance. Significantly, even if further verification is put in place, any such findings will be irrelevant, because NATO determines what can be counted as defence spending.

I accept that that is not to say that more cannot be done. I remind the House of the defence pledge from which I have quoted. At the NATO summit in Wales, we agreed not only to review national progress annually, but that the scrutiny would come from the very top—from the Heads of Government—at all future summits.

My hon. Friend’s suggestion of independent UK verification would merely add yet another administrative step to the process, an example of the creeping red tape that bogs down Departments in the very bureaucracy that he and most other hon. Members on our side of the House are keen to see eliminated. My hon. Friend the Member for Gainsborough, as a former Chairman of the Public Accounts Committee, is right to be concerned that enshrining the pledge in legislation would add to the burden of red tape that the Government are seeking to avoid.

Let me turn briefly and almost finally to the question of international aid. It is now becoming far harder to argue that aid does not matter. Globalisation has meant that instability in one part of the world has direct repercussions for us over here, whether in terms of terrorism, mass migration or disease. Whereas defence is essentially reactive, development is proactive. By investing early on, we can avoid counting the cost further down the line, stabilising countries and avoiding the future commitment of our troops.

My hon. Friend the Member for Congleton highlighted our leading work on Ebola in west Africa, which is an excellent example. We have funded laboratories in Sierra Leone to speed up the time taken to diagnose the disease and to help to stop its spread across the country. We have supported 700 Ebola treatment beds that provide direct medical care for up to 8,800 patients over six months and we are working with communities on new burial practices. Thanks to the pioneering work of the Defence Science and Technology Laboratory, in conjunction with the BBI Group, great British brains developed a rapid Ebola test to aid identification in the field and potentially help minimise the spread of the Ebola virus. I know that my hon. Friend the Member for south-west Wiltshire, who is unfortunately not in his place but was making interventions earlier, is a doughty champion for the work of the DSTL in his constituency.

[Sir Gerald Howarth]

May I correct my hon. Friend the Minister? I think that he means my hon. Friend the Member for Salisbury (John Glen).

[Mr Dunne]

I am most grateful. My hon. Friend the Member for Salisbury (John Glen) hosted a visit I paid to DSTL where I met some of the people who had invented the tests that identified Ebola from simple blood samples and were able to rule out up to 20 other diseases with a simple blood test. It was a remarkably efficient and impressive innovation that the military has brought about to the benefit of the civilian population.

The test uses the latest lateral flow technology. We have had some long words already in this debate, and I am now going to use another. The technology is known as lateral flow immunochromatographic assays, to give it its full title, and allows local health teams to complete a test at the bedside without the need for high-tech paraphernalia and yet still get a result within 20 minutes. Aid has not only helped a country tackle a major emergency that put stability at risk but prevented an epidemic from becoming a pandemic that would have threatened our own security.

The MOD has a vital role to play in supporting humanitarian efforts. The cost of conflict stability and security fund programme activities led by the MOD and security and humanitarian operations that are partly refunded from the DFID budget contribute properly to both the ODA and NATO guidelines. That is why the MOD has typically been funding directly up to £5 million only of ODA-eligible activity each year, including disaster relief training and international capacity building. I, for one, support the international definitions of ODA-eligible spending but we need to consider them. I know that the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Bournemouth East (Mr Ellwood), who is sitting on the Front Bench, has been doing that to ensure that they accurately reflect the role of Government today. The guidelines were drawn up nearly 50 years ago and it is appropriate that they should be reviewed from time to time, because there might well be other areas in which it is entirely permissible and appropriate for other Departments’ spending to be included in the effort.

I know that some Members remain concerned about the apparent disparity between our approach to defence and our approach to official development assistance, given that we have enshrined the 0.7% of gross national income commitment in law. But I believe that we are talking about a very different set of circumstances when considering whether to put my hon. Friend’s Bill into law. We have always met our 2% defence guideline and we have never needed the stimulus of legislative requirement to do so, yet the UK only met the 0.7% target for the first time two years ago. My hon. Friend the Member for Shipley (Philip Davies) made a brief intervention earlier—most unusually, he seemed to be present only for breakfast on this sitting Friday, although he is normally such an assiduous attender at our sittings on Fridays. He pointed out that the 0.7% international development target had been met prior to the legislation being concluded earlier this year. He is correct, but that was only after a very considerable increase in funding during the coalition Government, and throughout the 1980s and 1990s this spending was at about half the current level.

[Dr Julian Lewis]

I am grateful to the Minister for giving way, especially as I know how keen he is to get through the rest of his comments rapidly. However, I think his argument is the reverse of the truth. The difficulty with putting into law something that was a target that we had to strain to meet was the danger that having put it into law, we would end up having to make inappropriate expenditure in order to fulfil the commitment in law, whereas that does not apply to this objective. As there is and should never be any question of us dipping below the 2%, we will not have to distort our spending; we will just be giving the assurance that we need to give to the country and to our allies that we will never fall below the 2% minimum, and it is strange that there was ever any doubt that we would.

[Mr Dunne]

I do not think there was doubt that we would, other than in the minds of those who seek to find fault. We are not striving to achieve the number by fiddling the figures. I have gone through the re-assessment that we undertook to the spending that we are making, and we are meeting the commitment this year and for the rest of the Parliament.

[Dr Lewis]

I am very sorry that the Minister doubts the account that I gave him in my contribution to the debate earlier, when I said that by asking the Prime Minister whether we would always meet the 2% as long as he was in office, I was not casting doubt at all. I was expecting him freely and readily to say yes, of course we would, and he did not. That is why the doubt crept in.

[Mr Dunne]

It is not for me to intervene between the Chairman of the Select Committee and the Prime Minister in their interpretations of meeting 2% or not, so I will not be tempted to carry on this debate. I am anxious to reach the end of my remarks and I am nearly there.

In the case of the international development commitment, the legislation became a mechanism to ensure that ODA spending was as consistent as defence spending, so the legislation should not be considered as a precedent for other areas of spending. Other ring-fenced budgets, such as for health and education, are not enshrined in law. It is worth making the rather obvious point that NATO’s calculation of our 2% of GDP is a much more significant amount in cash terms, amounting to almost £40 billion, than is 0.7% of GNI, which is just under £14 billion, so the risk to our financial flexibility from enshrining the defence commitment in law is that much greater.

Tying a Government’s hands with regard to defence spending, currently the third largest departmental budget in Government, could have unforeseen negative consequences in the future. For example, what if, God forbid, we had another financial crisis and the Government of the day needed to re-order spending priorities? We cannot have national security without economic security, and GDP, as I explained in my earlier remarks, is a flexible friend. It is subject to periodic review and amendment, and only last year, as I discussed earlier, we had the amendment prompted by changes in international accounting rules by the EU.

I am sorry to say that there is only one pot of money. The Government need to make strategic decisions about each Department’s budget based on both medium and long-term issues, and based also on the circumstances at the time, not based on legislative rules.

Like my hon. Friend the Member for Aldershot, we strongly believe in the importance of the 2% guideline, but we cannot agree on the means to ensure that it continues. Britain has a long and proud tradition of spending what it needs to on defence. We have always done so, and we have committed to do so until the end of this Government’s life. We know what is right, and there is no further need to rubber-stamp our commitment. For those reasons, I have to say that for all his good intentions and noble purpose in proposing this Bill, if he were to press for a vote, the Government would not be able to support him. It would be far better instead to use our time to urge other nations to honour their pledges.