'We need answers on defence spending'

21 June 2012

Shadow defence minister Kevan Jones calls for clarity over the government's claims that it has balanced the defence budget

Last month the Defence Secretary Philip Hammond told the House of Commons that he had brought the MoD budget back in to the black. He reiterated this at Defence Questions and it is now the stock ministerial response to any criticism of the government's defence programme, whether over redundancies, capability gaps or financial waste. Unless we get hard evidence soon, however, it will remain impossible to support these claims.

Philip Hammond has told the House that his claim to have balanced the budget last month "related to the whole budget, not simply the equipment plan". A cursory glance over his 14th May statement shows that his claims refer only to the 45 per cent of the budget that is spent on equipment and equipment support, however, ignoring the 55 per cent that is spent predominately on personnel.

This 'spending other than on equipment and equipment support' will 'remain flat in real terms from 2014-15'. Limited investment in the equipment budget, therefore, is coming at the expense of investment in personnel who are already suffering under the government's cuts to allowances and pensions.

The 'balanced budget' is reliant on a 1 per cent real terms year-on-year increase post-2015, but this applies to less than half of the government's annual defence expenditure. The 1 per cent rise is indeed only an 'assumption' and by no means guaranteed. Given the government's failure to stimulate economic growth, its self-made double dip recession and the Eurozone's precipitous position, you have to ask whether any 'assumption' made today is reliable and worth the paper it is written on.

Then consider 'Defence Inflation', whereby the cost of spending on defence equipment or personnel rises at a higher rate than 'civilian inflation' due to the specialist nature of MoD work and contracts. Professor David Kirkpatrick of RUSI, for example, estimates that defence inflation usually runs at around 3 per cent higher than GDP deflator. 'Flat in real terms' when talking about defence spending therefore amounts to a potential substantive cut.

You have to ask whether the ministerial triumphalism routinely on show is appropriate given the substance of the government's claims relate to less than half of the overall MoD budget, is not guaranteed and presents further potential pain for the personnel on whom our defences rely.

All of this shows how important it is for the country to have a detailed breakdown of the MoD's figures. The Defence Secretary has promised that a National Audit Office report would be published, but cannot tell us when. Pledges of transparency remain shrouded in mystery. One thing is clear: such bold statements will have to be backed by facts if they are to win trust and confidence.

With another wave of redundancies recently announced, armed forces personnel and their families at the very least deserve from the government is openness.

Added to this, neither Philip Hammond nor his Ministers have substantiated their claim that they inherited a '£38bn black hole' from Labour. This is of course now folklore, repeated by journalists and is used at every turn to justify government decisions, but the Defence Select Committee, the National Audit Office, the Public Accounts Committee and Professor Malcolm Chalmers have all described this as unverifiable. It is used to excuse deep cuts, but until the government publishes how it arrived at this figure we cannot consider it credible.

The Defence Secretary needs to answer the following questions:
• As the 1 per cent rise is an 'assumption' does this mean it could be revised between now and 2015?
• What rate of inflation was used to calculate the 1 per cent real terms annual increase between 2015 and 2020 in the equipment budget?
• When exactly will the NAO publish its assessment of the MoD budget and will there be a Parliamentary debate on the topic?
• Does the higher rate of 'defence inflation' mean there will be a real terms cut in the 55 per cent of the MoD budget that is spent on personnel and labour costs?
• Is the 1 per cent increase in equipment spending only possible because of the overall reduction in the budget allocated to personnel?

Until we have answers the Defence Secretary's claims will instil cynicism where confidence is needed. Even Conservative MP and Chair of the Defence Select Committee James Arbuthnot has been keen to pressure Hammond into publishing the details quickly in order to allay the scepticism with which he has so far been greeted.

After a rushed Strategic Defence and Security Review, selling the Harrier fleet below market value, the costly and humiliating u-turn on aircraft carriers and with the morale of the armed forces personnel plummeting, ministers must provide answers if they want their claims to be taken seriously.