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By Dominic Nicholls, Defence and Security Correspondent

Telegraph Online – 16 July 2019

Britain's Defence spending has fallen below two per cent and the MoD is using pension contributions to mask its true figure, an MPs report has said.  A Special Report by the Defence Select Committee, using figures covering the last four years, claims that the real level of Defence spending has been below the figure agreed by NATO members for some time.

Although the Government says it spends 2.1 per cent of GDP on Defence, the new figures suggest Britain first dipped below two per cent in 2014/15 and has not recovered since. The MPs claim that the MoD only met the two per cent benchmark by adjusting what was counted as being part of Defence expenditure, such as £1 billion in war pensions and MoD civilian pensions, in 2016. The new accounting method also allowed for British Defence expenditure to be officially increased if troops were deployed overseas in greater numbers than anticipated. The Treasury has allocated around £500 million annually for such an eventuality.

The Government accepts it included new sources of spending in the figures three years ago, but that this was in line with NATO guidelines and was not a Whitehall decision. The figures in the Special Report had not included these new provisions in order to compare current spending with levels before the policy change.  

Speaking in a Commons debate on Defence spending on Tuesday, Julian Lewis, Chair of the Defence Select Committee, asked if spending 1.8 per cent was credible against an

"adversarial Russia and the revival of a terrorist threat from Islamist terrorists".

He said he had written to both Conservative Party leadership contenders seeking assurances that the MoD would be adequately supported were they to win the contest. Replying on July 2, Boris Johnson had written:

"I can give you an absolute commitment to fund defence fully. I believe military spending should be dictated by the threats we face and it is clear that these threats have multiplied in both scale and complexity in recent years. I guarantee of course that we will exceed the minimum two per cent NATO spending target and the defence budget will continue to grow at a minimum of 0.5 per cent annually."

In response Mark Francois, a member of the Select Committee and former Minister of Defence, said

"I think in the nicest possible way we should bank that and endeavour to hold him to it, if and when he becomes our Prime Minister".

In Jeremy Hunt's reply he pledged to increase the Defence budget to 2.5 per cent of GDP over five years.

"I have argued that additional funds will need to be made available for new capabilities, not just plugging gaps in existing plans,"

he wrote.

"Were I to become Prime Minister I would consider the path of further increases in spending once the 2.5 per cent had been achieved."

Mark Lancaster, the Minister for the Armed Forces said that Britain was one of very few NATO members that meets both of the alliance's core spending guidelines: two per cent of GDP on Defence with 20 per cent of that spend on major equipment and associated research and development. It was:

"vitally important that the UK maintains our position as a leading player on the world stage. The international situation is darkening, the rules-based order which has kept peace for so long is under constant pressure, and the external threats which confront us are increasingly coming from multiple directions,"

he said.

"Malign cyber and proxy warfare are rapidly changing the face of conflict [and] the nation's approach to future spending decisions must reflect these new realities."