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BBC News Online – 21 April 2016

A government pledge to spend 2% of GDP on defence is only being met through accounting changes, MPs have claimed. Chancellor George Osborne last year said the UK would continue to meet the target, set by NATO for member nations. But the cross-party Defence Committee said that including what is spent on intelligence gathering and war pensions could be seen as "creative accounting".

Labour said that amounted to "fiddling the books" but the Ministry of Defence said it was all within NATO guidelines. The UK has met the 2% target consistently over the past decade, one of the few NATO members to do so, although spending on defence as a share of GDP has steadily fallen over the past 30 years.

The government is facing claims that it had to include measures such as intelligence gathering and war pensions – which were not previously counted as defence spending – in order to make the figures add up. The cross-party committee warned that this "redefinition" to some degree undermined the government's claims that the 2% figure represented a significant increase in defence spending.

"We note that the NATO minimum would not have been fulfilled if UK accounting practices had not been modified, albeit in ways permitted by NATO guidelines,"

it said.

"The only way that the Ministry of Defence can refute claims of 'creative accounting' is to outline, clearly and unambiguously, what the new inclusions are, how much they constitute, and from which department each was previously funded."


By Jonathan Beale, Defence Correspondent, BBC News

Last year with much fanfare – and after strong pressure from the US – the government announced it would continue to meet NATO's target of spending 2% of the nation's wealth on defence. While this report stops short of accusing the government of fiddling the books to meet that goal, it does say ministers are open to the charge of creative accounting.

The MPs say deciphering the MoD's accounts has not been easy. But they confirm that items previously not defined as defence spending – such as war pensions and some intelligence gathering – are now being included to achieve the 2% pledge. The Defence Committee says the government needs to be clear about what counts as defence spending and also how it will continue meeting the goal in the coming years.

The committee also called on ministers to explain how they would continue to meet the 2% target up to 2020 given the pressures from public sector pay and fact that this year's total included a number of one-off items which would not be repeated in future years.

"We remain to be convinced that the current financial settlement is sufficient to rectify the decline of defence as a national priority,"

it said.

"The government must be clear that 2% is a minimum – not a target – and be prepared to increase defence expenditure further in order to reflect the increasing threats faced by both the UK and our allies."

Speaking on BBC Radio 4's Today programme, committee chairman Julian Lewis said the government should have "flagged" that it was including categories of expenditure not previously counted - saying it was

"trying to amass every last little bit ... in order to scrape over the 2% threshold".

Labour has seized on the committee's report, accusing the government of sharp practice.

"After the crippling cuts to the armed forces imposed by the Tories throughout the last parliament, we were promised that 2015 would mark a turning point,"

said shadow defence secretary Emily Thornberry.

"Instead, it's increasingly clear that the 2% commitment is being delivered not through increases in frontline defence spending but by fiddling the books. Time and again on defence, the Tories are shown to be all rhetoric and no reality, and it is our armed forces who are paying the price."

But the Ministry of Defence said this was "nonsense" and the UK's military would enjoy a big increase in resources over the next four years.

"When defence spending will increase by £5bn over this parliament, it is nonsense to suggest there is no new funding,"

a spokesman said.

"Our plans will deliver more ships, more planes, more troops at readiness, better equipment for special forces, and more on cyber to help keep Britain safe."