SDSR
2015 – Issues, analysis and recommendations going towards the review
Budget
About that 2%
Army
Royal Air Force
Royal Navy
It was a surprise when the Chancellor committed to keeping defence spending at 2% of GDP for the lenght of this parliament. It should not have been a surprise, since the promise to stick to this NATO target is ancient, made to close allies and reaffirmed very loudly at the NATO summit in Cardiff last year. But it has been. For a long time, the UK has appeared to be on a steep slide to decline which would bring the defence budget well under the 2% mark, also due to the (very welcome) growth of GDP.
Now we have the relief of a 2% promise. It is obvious that it beats the alternative, which was falling even lower, but there is no reason for particular cheering: even before we learn how genuine the committment is, we must remember that all we have obtained is the setting (at least for now) of a limit to the decline which goes on and on from decades.
In percentual terms, defence spending will effectively fall further, compared to this year (where it amounted to some 2.1% of GDP) and will have fallen rather dramatically from the 2.4% it was in 2010.
The importance ot the 2% figure is merely in being a "rock-bottom" (as long as it holds) under which spending will not go. It is a limit put to decline, nothing more.
Moreover, we will have to keep our eyes very, very widely open to catch the devil in the detail. Financial tricks have a part in making up that 2% figure: expenditure which used not to be counted against the GDP target for defence has already been included, and more gimmicks might well be on the way. That's part of why it is wise to keep expectations down, and be realistic in how much we cheer.
It is really a case of "well, it could have been SO much worse", more than anything else.
Suspect has immediately flared about the new £1.5bn Joint Security Fund for investment in military and intelligence agencies, but Mark Urban reports that it does not seem it will be part of the defence budget, thankfully. Still, the financial aspect of the 2% figure will have to be watched closely.
Since the
2% announcement was made, we have had official confirmations that new voices of
expenditure have been added to the “Defence” figure. These additions are
approved by NATO and technically legit, but in the UK they were counted
separately from defence proper until last year, and their inclusion inevitably
warps the numbers. Specifically:
As with other NATO allies, from time to time we update our approach to ensure we are categorising defence spending fully in accordance with NATO guidelines, seeking to capture all spending contributing to delivering the defence of the United Kingdom. Our 2011-12 NATO return was £36.6 billion. This included the Ministry of Defence budget, the cost of operations, and the Armed Forces Pension Scheme but did not reflect all UK defence spending. Our 2015-16 NATO return of £39 billion also included Ministry of Defence-generated income which directly funds defence activity, elements of the Government's cyber security spending, parts of the Conflict, Stability and Security Fund relating to peacekeeping, war pensions and pension payments to retired MOD civil servants.
Lets be clear once more: to even achieve 2% without gimmicks, it would still mean decline in percentual terms. We are forced to take the 2% as a good news only because the alternative was even worse, and by far. Further reducing the beneficial effect of the “2%” is the inclusion of voices of expenditure previously counted separately. The Treasury will include absolutely every penny it can, according to NATO’s own definition of “defence spending”.
In summary, the pressure on the forces' budget is not going away, but only being somewhat contained, and expecting miracles will only result in disappointment and tears.
Another factor to guard against is the request for more "efficiency savings". There are margins to achieve real efficiency in MOD operations, and a few changes, reductions and adjustments in this sense are actually pretty obvious. But they are unlikely to generate the kind of savings the Chancellor is probably seeking, so that "efficiency" might well include more stealth cuts. Training, logistics and personnel costs are obvious areas where underwater measures can happen without it being too evident to the general public. But stealth cuts in these areas could be very damaging, no matter how well hidden they might be.
Even equipment programmes are at risk. Despite it being an area which has received particular assurances, the simple fact remains that we don't know what the famous equipment programme is about. We have rough indications about the amount of money assigned to macro-areas (aircraft, helicopters, ships, submarines, armored vehicles) but little to no detail about the programmes that are going to be funded, and less than ever any indication about how many vehicles or aircraft or other bits of kit will be purchased.
Warrior CSP numbers are not specified. We only have hints and guesses: the recent order for 515 CTA 40mm guns is split 245 - 245 - 25, in which 245 guns go to SCOUT SV, 245 to Warrior CSP and 25 to test, trials and development. 245 is thus to be assumed as the number of Warrior IFVs being upgraded. In addition, some 135 Warrior in artillery observation, recovery and repair variants are expected.
The number of turreted IFVs (245) appears absolutely insufficient for the 6 planned armored infantry battalions.
ABSV, the much needed programme for a "new" (actually likely to be just more Warriors adapted in new support variants) vehicle to use as replacement for the ancient FV432 series, is struggling to get off the ground and is described as an "aspiration" of the Army. This is very depressing, and a step back from earlier hopes to achieve initial gate this year.
Challenger 2 LEP, also seems to have been pushed to the right at least one year, even after having been dumbed down to a very modest "indispensable only" electronics modernization.
Apache CSP, the target is know as being 50 helicopters, but there is no written, public commitment to that number, leaving risks on the way.
F-35B final purchased number: it is unlikely that the SDSR will provide the final number. Main Gate 5 (bulk purchase) is planned for 2017, and the government might well wait until then before providing any indication of what, if anything, will come after the initial 48. The expectation is for an eventual purchase of between 70 and 96 (the latter being a programmatic number which surfaced briefly at the time of the switch to F-35C). But, again, it is little more than a guessed aspiration.
And so on. Every single programme which hasn't a contract signed yet, including Type 26, is completely wrapped up in uncertainty. We won't really know, in many cases, if there are cuts, because we are not being told what the requirement and planning numbers are.
There is ample margin to mess up the numbers and apply stealth cuts.
The one good bit of news in the budget announcement is a commitment to increase defence spending in real terms, year on year, by a 0.5% margin above inflation (this being around 1%).
Originally, the MOD was asked to plan for Future Force 2020 on the basis of a flat in real terms (translated, adjusted for that 1% annual inflation, and nothing more) budget, with a 1% annual boost to equipment spending only.
A defence budget-wide 0.5% boost above inflation should be helpful.
Do not expect miracles, though, as defence inflation is estimated at above 2%, with how costs for major programmes evolve year on year.
It is a budget for survival, not a budget for reconstruction.
In my opinion, considering the many caveats and risks still on the way, what we can hope for is a "steady as she goes" SDSR, with no dramatic cuts, but with some adjustments still. The government will be able to stick to its promise of maintaining current manpower figures (both regular and reserve) and Future Force 2020 is likely to be confirmed in more or less the same shape.
A few good news might arrive: after yesterday's announcement, we can be a little more hopeful regarding a purchase of P-8 Poseidon aircraft for maritime patrol duties.
Even then, though, the much needed entry into service of Poseidon will come with the loss of Sentinel and Shadow R1, which are on a time-limited life out to 2018. If we are lucky, by around 2019 they will be going out... but the Poseidon will be coming in. Hopefully. That would limit / offset the loss of overland ISTAR, as well as reintroduce much needed at-sea ISTAR.
