Defence Expenditure (NATO Target) Bill

Debate between Philip Dunne and Gordon Marsden

Friday 23rd October 2015 Commons Chamber

[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.