ESTIMATES DAY: DEFENCE EXPENDITURE – 26 February 2018
Dr Julian Lewis: I might be a touch over-optimistic, but I get the impression that a sea change is going on, at least in this Chamber. It was only in 2016 that we first started to debate whether 2% of gross domestic product was a sufficient investment for this country to make in defence in peacetime. At that time, it seemed fairly outlandish to suggest that we ought to be talking about 3% of GDP or even more. It is not outlandish to suggest that now. Of course, that is partly because of the shift in the strategic situation, which my right hon. Friend the Member for Rayleigh and Wickford (Mark Francois) outlined so comprehensively a few moments ago, but it is also partly because of the efforts of colleagues on the Government and Opposition Benches – I pay tribute to my old friend, my hon. Friend the Member for Gainsborough (Sir Edward Leigh), for doing this today – to bring this subject forward time and again to impress on the House and the country that we are simply not investing enough in defence.
My right hon. Friend the Member for Rayleigh and Wickford referred to “pinstriped warriors” in the civil service. I do not wish to point any fingers in any particular directions, but when the National Security Adviser appeared before the Joint Committee on the National Security Strategy on 18 December and was asked whether it would be possible for him to recommend that the defence budget ought to be increased, given the fact that the security capability review that he had been conducting was supposed to be fiscally neutral, it worried me that he responded:
“When I said that the 2015 review was fiscally neutral, it was fiscally neutral within a growing envelope.”
In other words, he meant that there were certain absolute increases in the sums being spent. At a later stage, having tried to lump together the defence budget with all other moneys spent on security of one form or another to give a global figure of £56 billion, he went on to say:
“If we concluded that the total set of capabilities, optimised across that £56 billion, was insufficient to meet the threats, of course we would say that to Ministers. That is not a conclusion I expect to reach, but of course I always have the freedom to give Ministers candid advice.”
I am rather worried if our top security professionals do not feel even a twinge of doubt about the level of priority that we are giving to defence. When sometimes people stress the point, which is not without merit, that when we talk about spending 2% or 3% of GDP we are talking about inputs, not outputs in terms of capability, I say to them that of course it is true that we could spend a huge amount of money on defence, but if we spent it on all the wrong things, it would not do us a lot of good. Conversely, though, if we are simply not spending enough on defence, nothing that we can do will give us the outputs we need.
Mr Kevan Jones: I hear what the right hon. Gentleman says about civil servants, but the decision to cut the defence budget by 16% between 2010 and 2015 was not a civil servant’s invention. It was the political decision of the Chancellor of the Exchequer and the Government at the time.
Dr Lewis: Yes, and I will come to the issue of how we can use the percentage of GDP to track what has been happening to defence in a moment. I hope that the hon. Gentleman—a former Defence Minister in the Labour Government, of course, and a very good one – will try to be non-partisan about this for the simple reason that successive Governments are responsible for what has happened.
What actually took place was, as has already been hinted at, something that has been going on over a very long period. Colleagues on both sides of the House have heard me recite this so often that I am afraid they might do that terrible thing and join in, singing the song with me. But I will just run through it again. In 1963, the falling graph of defence expenditure as a proportion of GDP crossed over with the rising graph of expenditure on welfare at 6%. So we were spending the same on welfare and defence – 6% – in 1963. In the mid-1980s, as we have heard, we regularly spent between 4.5% and 5% of GDP on defence, and that was the period when we last had an assertive Russia combined with a major terrorist threat – the threat in Northern Ireland. We were spending at that time roughly the same amount on education and health. Nowadays we spend six times on welfare what we spend on defence, we spend four times on health what we spend on defence, and we spend two and a half times on education what we spend on defence.
We have to ask what we mean when we say that defence is the first duty of Government. If it is the first duty of Government, it is a duty that is more important than any other duty, because if we fail to discharge it everything else is put in jeopardy.
Toby Perkins: I partly take the right hon. Gentleman’s point, if he is looking back to 1963 and the role of successive Governments from then to now. But it is also true that there was a substantial cut in defence spending in 2010-11, which bears no relationship to what happened in the previous 13 years. If defence spending had carried on increasing in real terms from 2009-10 to the present, £10 billion more would be being spent on defence than is spent under this Government. That is a substantial change from this Government to the previous one.
Dr Lewis: I will not defend what happened in 2010. I was a shadow Defence Minister for slightly longer than the duration of the second world war in the years up to 2010, and I was told retrospectively that the reason I never became a real Defence Minister was that it was known that I would not go along with what they were planning to do. So I am not inclined to lay down my life for the Cameron-Lib Dem coalition of those years. I did not do it then, and I will not do it now.
Having said that, it is all part of a bigger trend, and I come back to my projection of the situation. At the end of the cold war, as we have heard, we took the peace dividend. We had the reductions, which were reasonable under the circumstances. But in 1995-96 – the middle of the 1990s and several years after we had taken the peace dividend reductions—we were not spending barely 2% of GDP on defence as we do now, but we were spending fully 3% of GDP on defence. From then on it was downhill all the way –
John Spellar: Will the right hon. Gentleman give way?
Dr Lewis: I will give way to my good friend the deputy Chairman of the Committee in a moment.
I can remember Tony Blair on HMS Albion in 2007, looking back on his 10 years as Prime Minister and saying,
“Well, I think we can say that we have kept defence spending roughly constant at 2.5% of GDP if the cost of operations in Afghanistan and Iraq are included.”
But in fact the cost of operations should not have been included, because they are meant to be met from the Treasury reserve. The real figure over the Blair decade came down to 2.1% or 2.2% of GDP.
John Spellar: It is clear from the figures provided by the Library that while in most years there was an actual increase in defence expenditure during the years of that Labour Government, since 2010 it has been -1.4%, -1.4%, -4%, -3.3%, -2.4% and -2.9%, and in 2016-17 it did actually go into the positive, +1.4%. My friend should be clear that there was a step-change when the Cameron Government came in that led to year-on-year cuts, and our armed forces are feeling the effect of that.
Dr Lewis: What I am looking for today is agreement across the House that we recognise that we should not be having almost theological debates about whether we are just above or just below the 2% minimum guideline that NATO prescribes to its member states for defence expenditure, but that we have to get back to the level – at the very least – of what we considered appropriate for so long, right up until the mid-1990s, when the Labour Government came in, which was 3% of GDP.
Mr Kevan Jones: Will the right hon. Gentleman give way?
Dr Lewis: I will give way one more time, but I want to concentrate on the bigger picture, because frankly neither of the parties has much to be proud about on defence expenditure since the mid-1990s.
Mr Jones: The facts do not bear out what the right hon. Gentleman is saying. According to the Library, the last time defence expenditure was 3% was 1993-94. After that, there was a 7% decrease in 1995, a 1% decrease in 1996 and a 5.7% increase the following year. The Labour Government came in, following the Treasury rules laid down by the previous Government, and in 1998 increased defence spending by 5.8%. The idea that the last Labour Government were following a trend that had been set is just not the case.
Dr Lewis: It depends whether the hon. Gentleman is talking about absolute figures or percentages of GDP spent on defence. In 2016, the Defence Committee produced a unanimous report called Shifting the Goalposts? Defence Expenditure and the 2% Pledge. We had the Committee staff use all available sourcing to draw up a definitive table of what had been spent on defence by Britain as a proportion of GDP over the past 50 years. The figures for the period we are talking about are: 1990-91, 3.8%; 1991-92, 3.8%; 1992-1993, 3.7%; 1993-94, 3.5%; 1994-95, 3.3%; and 1995-96, 3%. It then dips below 3% in 1996-97 to 2.7%, and thereafter it is down and down, with little blips here and there, until it is hovering around 2.5% because the cost of operations were included.
The point about all this is that we should not be arguing about who did the most damage. We should be agreeing about what we need in the future. If we are hearing a chorus of voices from the Labour Benches – it is music to my ears – saying that we have not been spending enough on defence and we need to be spending more, that is what we should be saying loud and clear to those people who seem to be perfectly content to spend the existing inadequate sums.
I do not wish to prolong my contribution, but I do wish to speak briefly about the equipment plan that was alluded to in some detail by my hon. Friend the Member for Gainsborough. The equipment plan of 2016 is for £178 billion over 10 years. That includes a small number – nine, which some would say was too small a number – of new P-8A maritime patrol aircraft, replacing a capability that was quite wrongly dispensed with after 2010. We are also supposed to be replacing 13 Type 23 frigates and supplying mechanised infantry vehicles out of this budget, and we are of course engaged in resurrecting carrier strike capability – another capacity that was temporarily lost after 2010.
The first report of the Defence Committee in the new Parliament was entitled, Gambling on ‘Efficiency’: Defence Acquisition and Procurement. The word “efficiency” was in inverted commas because we believe that the affordability of the scheme is predicated on an estimate of £7.3 billion of theoretical efficiency savings that are to be made in addition to some £7.1 billion that was previously announced. As we have heard, the National Audit Office thinks that the equipment programme is at greater risk than at any time since reporting was introduced in 2012. The truth of the matter is that we encounter black holes everywhere we look in defence. This brings me to my concluding point.
Gavin Robinson: I am grateful to the Chair of the Select Committee for the points he is making. We can starkly illustrate this issue. Training operations that had been committed for next year have been delayed, and we now hear that there are more. We also heard, very openly and honestly, at the Defence Committee last week not only that we going to have to cut mobile phone contracts and car hire contracts, but that – thinking about next year’s budget – £300 million has already been flexed into this year’s budget for a black hole in the Dreadnought class.
Dr Lewis: The hon. Gentleman is a stalwart of the Committee. I hope that he will develop that important point if he catches your eye presently, Mr Deputy Speaker. Obviously there has to be flexibility and a means of making adjustments when adjustments have to be made to very large sums during the course of an annual budget cycle. But we are talking about an overall shortfall that is so great that we are not going to get anywhere unless we recognise reality and accept that defence should not be so far down the national scale of priorities that it has far left behind those areas of high Government expenditure with which it used to bear straight comparison.
I mentioned previously the National Security Adviser and his security and capability review. The House will know something of the difficulties that the Defence Committee has had in getting the National Security Adviser to appear before it on the grounds – he says – that defence was only one out of 12 strands in that review. The new Secretary of State for Defence has now had some success in regaining control of that one strand for the MOD. Nevertheless, there is something to be said for a very in-depth interrogation of the people who are currently charged with the overall design of our defence and security policy.
At the present time, there is a degree of complacency by people who work in these Ministries. Then, as if by magic, the scales drop from their eyes the moment that they leave. Dare I say this in relation to our most recent former Secretary of State for Defence [Sir Michael Fallon]? Throughout his tenure he played a very straight bat, constantly talking up how much more money was being spent on defence. But within a very short time of leaving his position he made an excellent speech – I believe it was on 22 January this year – in which he said not only that he feels that we need to spend more on defence, but that we ought to be spending 2.5% of GDP on defence by the end of this Parliament.
In the further contributions to this debate, I look to some magic formula that will take hold of our Defence Ministers, civil servants, National Security Adviser and all the rest who seem to think that all is well with the world when, confronted with threats such as we face today, we are spending a fraction of what we used to spend in percentage terms of GDP, and who are saying, “Everything is fine and we are on course.” We are not on course. We need to change course, and the direction in which we have to go is towards a significant uplift to 3% of GDP to be spent on the defence of the United Kingdom.
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[The Parliamentary Under-Secretary of State for Defence (Mr Tobias Ellwood): ... We have only just completed the budget for 2017-18, and I should be clear that we have yet to embark on the annual spending round for next year. Perhaps this differs from other Departments because we have an opportunity to make a case for additional spending. We have the opportunity to make the case for a defence posture and to say what is appropriate for Britain. I cannot answer the hon. Gentleman’s point at the moment, but the purpose of this entire process is for us, hopefully with the House’s support, to make the case to the Treasury and to the Prime Minister. That is what the modernisation programme is all about.]
Dr Lewis: I fully understand the direction of my right hon. Friend’s argument and I realise that it has been a great success for him and the new Secretary of State to regain control of the process for the MOD. If, as a result of the MOD’s examinations, the minimum recommendations on what the country needs to be able to deter threats and defend itself successfully require a significant increase in the defence budget – frankly, that is the assumption that has underlain many of today’s speeches – can we rely on the whole ministerial team to stand together as one and say to the Prime Minister, “We simply must spend more on defence”? That is what is required.
[Mr Ellwood: My right hon. Friend hypothesises, but it is absolutely the case that we stand together to put forward a programme that will allow the defence posture that we believe the country absolutely deserves. It is not just about asking for more money, which is obviously simple to do, and we will be lining up with other Departments doing exactly the same thing; we should also recognise that there are efficiencies to be found in the MOD itself. Indeed, as outlined in the 2015 SDSR, we are realising £7 billion of efficiency savings and moving to a more commercial footing, seeking to sell more of our world-class military equipment.]
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[My belief, which I hope is echoed around the Chamber, is that it has always been in our nation’s DNA to step forward when other nations might hesitate and to help to shape the world around us. However, to continue todo so will require investment, so I end by repeating my thanks to the Treasury for its support. It has to endure all Departments seeking to increase their budgets. We often say that it is only with a strong economy that we can consider any increase in any budget, but I politely add that without a strong defence, a strong economy cannot be guaranteed.
Last week, the Secretary of State spoke of 2% of GDP being spent on defence as a floor, not a ceiling. The message has to be clear: if we want to continue to play an influential role on the international stage, with full-spectrum capability; if we want to provide the critical security that post-Brexit trade deals will demand; and if we want to remain a leading contributor in the fight against extremism in the middle east and elsewhere, we cannot continue to do all that on a defence budget of just 2% of GDP. Two per cent is just not enough. This is a question not just for the Government and parliamentarians, but for Britain: what status, role and responsibility do we aspire to have as we seek to trade more widely in a world that is becoming more dangerous?]