Commitments and realities
One clear indication of the Government's spending plans for the Armed Forces is whether they meet the NATO target of spending 2% of GDP on defence. While it is a non-binding target, the UK pushed hard for the Declaration at the 2014 NATO Wales Summit to include a pledge for all allies to move towards spending 2% of GDP on defence within a decade.The Declaration specifically said those who already spend a minimum of 2% will "aim to continue to do so."
Spending 2% of GDP on defence has not troubled the UK in the past. However, current projections suggest the UK will fall narrowly short of the 2% threshold in 2015/16. To meet the target, the UK would have to increase the defence budget by more than £2bn in 2015/16, and find further increases of nearly £1bn per year thereafter.
There have been calls by some to make the 2% commitment binding in law, akin to the commitment to spend 0.7% of gross national income on international aid. A Bill was introduced in the House of Commons in the 2014/15 session to mandate that the UK Government meets the NATO target, but this did not make progress. In March 2015, the Commons agreed a motion that defence spending should be set to a minimum of 2% of GDP.
Chart 1: Projected defence spending
On current trends, defence spending is likely to fall below the NATO 2% target in the next Parliament. Projected defence spending to 2020 under selected assumptions, % GDP
The capability gap
That 2% is an arbitrary figure is acknowledged: it does not represent any type of critical threshold or 'tipping point' in terms of defence capabilities. But further cuts to the defence budget, on top of those already made in the last Parliament, will have a significant impact on the Armed Forces and will reinvigorate the debate about the gap between the UK's military capability and its strategic ambitions.
Former senior Generals at home and current senior Generals abroad have warned of a growing 'capability gap' if the NATO target is missed. Even if cuts were to continue at the same pace as in the 2010 Parliament, it is likely that the UK would still maintain its position among the world's largest defence spenders.
The next Strategic Defence and Security Review (SDSR)
The next SDSR, due to be conducted early in the new Parliament, will determine the future shape of the Armed Forces. It sets out the Defence Planning Assumptions and the Military Tasks: essentially, what the Government may ask the Armed Forces to undertake.
Theoretically an SDSR should provide a Government with the opportunity to take a deep and profound study of what the Armed Forces need to meet the challenges assessed to face the UK. However it is widely accepted that the last SDSR, in 2010, was driven by budget considerations and became what Sir Nick Harvey, a Defence Minister at the time of the SDSR, recently described as a "quick and dirty review."
The previous Government made a commitment that the defence equipment budget would rise by 1% year on year in real terms for the period of the spending review following the election. On the basis of such a rise, the Ministry of Defence has laid out a £163bn ten-year equipment plan out to 2024.
However, there was no equivalent commitment to real-terms increases in the rest of the defence budget a study by defence economist Malcolm Chalmers for RUSI into the MOD's possible budget in the new Parliament laid out an optimistic scenario and a pessimistic scenario. He concluded that in either scenario "the result will be a remarkably sharp reduction in the footprint of defence in UK society over a decade."
Questions for the new Parliament
- What will the new Government decide to spend on defence over the course of the next Parliament?
- Will that radically alter the Future Force 2020 structure unveiled in the 2010 SDSR?
- How will NATO allies react if a member which has so forcefully pushed others to commit to the 2% target fails itself to do so?
- And will the UK have to take a more ruthless assessment of how, where and when it uses its Armed Forces?
The new Parliament will also have the opportunity to assess, in 2017, reforms made to the Ministry of Defence's defence equipment procurement arm, Defence, Equipment and Support (DE&S). The previous Government's attempts to reform DE&S into a Government-owned, Contractor-operated (GoCo) entity collapsed in late 2013. DE&S was instead converted into a bespoke trading entity, with freedoms from and flexibilities over civil service pay rules.
A three-year transformation programme will end in 2017. If the new Government and industry have the appetite to once again to attempt to convert DE&S into a GoCo, the legislation exists in the Defence Reform Act 2014.
- Conservatives: will hold a National Security Strategy review and a SDSR in 2015
- Greens: implement a policy of defensive defence which threatens no one but makes clear that attacks will be resisted
- Labour: conduct a SDSR in first year of government including a debate on security and defence challenges
- Liberal democrats: SDSR straight after the election
- SNP: (…) support greater transparency in UK defence spending, with a full breakdown of spending by nation and region in the UK
- UKIP: increase defence spending to 2% of GDP
- General Sir Peter Wall, former head of the Army, 8 September 2014: "[further cuts] will really affect our capabilities to an irresponsible extent".
- General Sir Nicholas Carter, current head of the Army, 5 November 2014: "As far as I am concerned, looking forward, the size of the British Army is adequate for what the Government currently require of it."
- General Raymond Odierno, chief of staff, US Army, 2 March 2015: "I would be lying to you if I did not say that I am very concerned about the [proportion of] GDP investment in [the military] in the UK."
- Sir Malcolm Rifkind, 12 March 2015: "If we continue to make cuts in our defence budget of the kind that are being contemplated, we shall find that we are making a profound and irreversible change not just to our defence capability, but the ability of the United Kingdom to conduct a global foreign policy with authority, conviction and credibility. That, in essence, is the fundamental choice that we are being asked to contemplate."