Defence - Forward Thinking, Progressive for all

Last updated: 7th September 2016

David Lloyd George:  “Don’t be afraid to take a big step if one is indicated. You can’t cross a chasm in two small jumps”.

Why Defence Spending Matters

Defence spending is a necessary public service to provide protection for the UK citizens. It is often described as the first duty of the Government. In 2015 it amounted to £36.5 billion equivalent to 4.9% of total Government spending.

Defence Spending, 2010-11 to 2014-15 (£ Million)

defence expenditure

Source:  HM Treasury

The UK currently spends 2.2% of its GDP on defence, against an average for Nato nations of 1.5%. The UK is the sixth highest spender on defence in the world after the USA, China, Russia, Saudi Arabia and France. Under the NATO condition there is the opportunity to reduce spending to 2% of GDP. Britain, France and the USA are the only countries even meeting that 2% target (even after recent reductions). Existing plans will reduce spending in the UK to below 2%. The NATO target is non-binding for all members.

The UK is a major defence spender compared with other European countries:

International Benchmarks of Public Spending on Defence, 2014 (% of GDP and % of Total Government Spend)

defence spending in UK and Europe

Source:  Eurostat

The UK downward trend in expenditure is in line with the direction throughout Europe, but the UK spending remains much higher than average:

UK Defence Spending Compared With NATO Average, 1993-2014 (% of GDP)

Defence spending in UK and NATO

Source:  Sipri

Placing a 2% cap with existing plans the military think tank, the Royal United Services Institute (Rusi), looked at what would happen if the UK met NATO’s target through to 2020. It estimated: “Over the next five years (2016-17 to 2020-21), it would require an additional £25 billion to be allocated to defence on top of the amount the MoD is now assuming for planning purposes. If the 2% commitment was further extended, through to 2025-26, it would cost an additional £74 billion.” Of course, those figures depend on the growth in the economy.

In 2015 UK defence spending was spent as follows:

Breakdown of Defence Spending, 2014-15 (£ billion)

Defence spending segmentation

Source:  HM Treasury

It is possible to place this breakdown in an international context:

International Breakdown of Defence Spending, 2014 (% of Total Public Spending)

defence spending segmentation in Europe

Source:  Eurostat

The UK is a strong spender on military defence in an EU context.

An alternative breakdown of UK spending identifies that it was broken down as follows in 2014:

  • Staff costs £10.9 billion (32%)
  • Existing equipment £7.5 billion (22%)
  • Equipment purchasing £6.2 billion (18%)
  • Other £9.2 billion (27%)

Of the Ministry of Defence budget, 40% is spent on maintaining existing and buying new equipment. Slightly more than 30% is spent on personnel. The rest is spent on a mixture of infrastructure, pensions, consultancy fees and consumable inventory.

The current equipment plan, assuming an inflation plus 1% annual increase, outlines a spend of £80.5 billion in the next parliament. Much of this is impossible to cut back: about 70% of the £15.3 billion equipment spend for 2015/16, is already subject to contract. There is some flexibility for cost overruns of about £11.2 billion on individual projects. There is also a centrally-held contingency of £4.7 billion and an unallocated spend of £8.7 billion. However, there is little scope for other projects.

The Ministry of Defence is already working to cut its spending and its bureaucracy, so personnel spending is the most vulnerable to cuts. Personnel represents a budget of £8.8 billion. The RAF and Royal Navy have already warned they barely have the people they need.

Staff at the RAF and Royal Navy have already been cut to what the forces report to be the bare minimum. The army has seen its permanent fighting force cut from 102,000 to 82,000 by 2018, while the number of reserves will rise from 15,000. Further cuts to 60,000 are reportedly possible given the strategic direction of defence. Any further cuts would have severe implications for the UK’s defence capability. Current spending trends are relying increasingly on equipment such as planes and ships rather than personnel.

During 2016 a decision will be made on the Trident nuclear missiles and the Vanguard submarines from which they are launched. It will be the single biggest project in this Government at an estimated lifetime cost of £80 billion. A cheaper alternative is to have less than four submarines, but this would mean no permanent at-sea nuclear deterrent. Given the emphasis of defence has moved away from nuclear deterrents towards terrorism issues, there is clearly a case for the Ministry of Defence to evaluate other approaches.

The new Type-26 frigates are expected to be the workhorses of the Royal Navy. They are due to replace the 13 Type-23 frigates and will perform a huge number of roles. While 13 new ships were planned, a first order of only eight was made in 2014. At £350 million each, the combined forces need to evaluate if the further five frigates represent the best use of finances.

Current major issues for defence include the violence in eastern Ukraine, which is a threat to that country’s sovereignty in defiance of international law. The UK is also involved in the wider US-led coalition trying to curb the spread of Daesh, the terror network that controls parts of Syria and Iraq. Forward Thinking will not use the term ‘IS’ since this includes an abbreviation for Islam. The principles of Daesh have nothing in common with the beliefs of any religion. Both of these issues are international, and not the sole responsibility of the UK. Any defence policy needs to be seen in an international context and must include threats of all types including cyber attack.

Forward Thinking Defence Policies

The role of Government is to decide the finances available for each public service including defence. The role of the service (in this case the forces) is to decide on the best use of those finances to provide the necessary services without political influence. There is no case for Government delegating undertaking the defence to the forces but then deciding how to spend the defence budget. No politician can have the necessary expertise on such issues even if they were retired from being in charge of the combined forces. The nature of threats is subject to constant change. So whether the UK has a nuclear deterrent or not is a decision the defence services must make. Equally manning levels and other equipment decisions need to be made by the defence forces and not by politicians. The forces that are charged with defending the UK, cannot undergo the threat to life that this can involve without having determined the equipment and manpower they need.

The combined services need to evaluate and decide the best use of resources under several budget scenarios. It should undertake a defence and security review to identify the needs of the security of the country mindful of the ever-changing threats. Such a review should then be updated each year.

It should not be the Government that decides on individual projects. Before analysing front-line costs, estate costs should be assessed (included in the other costs of £9.2 billion). The Ministry of Defence owns 240,000 hectares of land for training purposes. This may well all be necessary, but levying a Land Value Tax will ensure this is examined prudently by the Forces.

As with all forward department budgets that need to be protected, a cap in line with GDP is the only sensible measure. The UK has to keep spending to 2% of GDP under the non-binding NATO agreement. Public services must understand that GDP can go down as well as up. The rest of the country has to work under these conditions and public services equally have to respond to the ability to pay for them.

The UK has a role to play in forging a stronger coalition of forces within NATO. There is a need to explore opportunities for sharing manpower and equipment, but such decisions must come from the forces.

According to NATO guidelines, member countries should spend at least 2% of their GDP on defence. Yet currently only six countries within NATO spent that much in 2014: Estonia, France, Turkey, Greece the USA and the UK. It is unacceptable the remaining 21 members of NATO fall short (and some are a long way short) of their commitment. Diplomatic efforts need to concentrate on achieving this. At minimum there needs to be a deeper European defence cooperation. A more international focus on the entire defence issue could then be explored. This could include a far broader sharing of manpower and equipment than is currently undertaken. If all NATO members were pressed to fulfil their commitments, (such as making it binding), then there is clear scope for the UK to keep spending to the 2% of GDP level.

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