Defence spending squeeze

If David Cameron does not want to be made a hypocrite for criticising those NATO countries spending less than 2% of GDP on defence, the Treasury must find more money for the MoD. He may lose the general election in May, of course, which might afford an excuse, but he will need to act if he wins.

Thanks to Malcolm Chalmers, RUSI Research Director, we have a little more data to be going on with. In his briefing paper, ‘Mind the Gap: The MoD’s Emerging Budgetary Challenge’, he projects, having studied the known spending plans of all three major political parties, that defence spending will fall to 1.85% of GDP in 2016/17, equating to £36 billion.

Notwithstanding any reservations we might have with arbitrary targets, this represents as clear an indication as we are likely to get that the Armed Forces are going to come under severe strain in the years ahead unless the government changes its priorities.

If we thought for a moment that the falling percentage might only be a consequence of increasing GDP – not of falling spending – we are mistaken. He predicts real-terms reductions of 10% over four years. This, he admits, is the pessimistic projection, but it is where we are heading if things don’t change.

Whatever your view on the importance of defence spending, this represents a real diminution in defence capability. And this at a time when the world looks as dangerous as ever. We do not need to list the threats: they are self-evident.

Part of the problem is a reluctance to add defence to the list of protected areas of government spending: International Development; Health; Schools, for example. It is a truism, but it is worth saying: the more we protect some areas of spending, the more we have to look at cuts in other areas.

The report says we must add something in the region of £5.9 billion to the defence budget if we are to maintain defence spending at 2% of GDP. It also says this is ‘not plausible’.

That seems like a generous word: ‘Plausible’. If it is taken to mean an increase in the budget is unlikely, an increase would indeed seem ‘not plausible’.

But if ‘plausible’ is used to mean what is reasonable, it is reasonable to expect the government to shift spending to defence from elsewhere. After all, the government already spends more than £700 billion a year. It’s always and everywhere a matter of priorities. If a government wants to find the money, it can: it’s simply a matter of not spending money on something else.

Politics may yet intervene. Pressure from the Commons, the Lords, the Defence Select Committee and, of course, the Opposition sniffing an opportunity, might force the government (of whatever colour) to find the money, even if, as the briefing paper suggests, it would have ‘to be found from increased taxation and/or borrowing’.

But perhaps the government has no intention of spending more on defence. There are, as the strategists give every impression of believing, no votes in defence. Though if the Conservative Party wants to retain its core vote, it might think twice about undermining yet another area of national life it’s core supporters think important. If the Conservative Party is not for strong defence, what is if for?

If the MoD is left with no option than to absorb real spending reductions, what are the options?

Personnel? Well, the personnel budget has already taken a hit. We know 20,000 soldiers are in the process of being cut, leaving the strength of the Regular Army at 82,000. The briefing paper goes further: we have reduced the numbers of service and civilian personnel by 17% and 28% respectively.

There are murmurings that the personnel budget will again be targeted, perhaps reducing the Regular Army by another 20,000. Perhaps this is little more than contingency planning, never to be implemented, but we cannot be sure. Politicians have a way of leaking stories to the media to see how they ‘play’ with the public. If the grumblings are manageable, then crack on—no votes in defence.

But it will be harder this time around to cut troop numbers further. You can squeeze only so much water from a sponge.

That leaves the equipment budget. Can savings be made here? Perhaps. The Defence Equipment Plan 2014 refers to a budget of £163 billion (for both procurement of new and maintenance of old) over the next ten years. While it might be difficult to make savings on some big-ticket items, not least a submarine replacement for Trident, there could be scope to cut in other areas.

Whatever happens, the MoD is in for a torrid time. It will either have to argue for more money, or it will have to find things to cut. Not an enviable task, even though there are no votes in defence.