By Lucy Phillips
12 February 2010
Following a government green paper, defence professionals are coming to terms with inevitable budget cuts and are asking where they would hit least hard. Lucy Phillips reports
Last week’s green paper on UK defence policy confirmed what many had been expecting. As the largest ‘unprotected’ spending department, the Ministry of Defence would inevitably be hit hard by the coming squeeze on the public finances. But tough, and emotive, decisions remain over where budget cuts will fall, decisions that are made even harder by an existing multimillion-pound black hole.
The green paper, Adaptability and partnership: issues for a strategic defence review, met a mixed response. Sceptics labelled it a waste of time at this stage of the parliamentary calendar, while others claimed it was setting the scene for a long-awaited overhaul of the sector after the general election. All, however, noted the absence of any specific figures.
Economists have warned that defence will bear the brunt of the spending protection given to health and education. Defence Secretary Bob Ainsworth is quite clear: ‘As we approach the next defence review, we must also confront the fact that despite our continued investment in defence, we face challenging financial pressures: rising fuel and utility costs, increases in pay and pensions, and cost growth on major equipment projects.’
The Conservatives have likewise committed to a ‘ruthless and unsentimental’ review of defence spending immediately after the election, with shadow defence secretary Liam Fox pledging ‘a step change, not tinkering’ to policy.
The Institute for Fiscal Studies’ Green Budget, published on February 3, confirmed the dismal picture for defence. From 2011/12 to 2013/14, if Treasury protection for health, education and overseas development continues, defence could face budget cuts of 23.8% (or £47.4bn), and if the ring-fencing is stopped, cumulative cuts of 18.7%, (or £37.2bn). Even if the MoD were required only to make the latter incisions, ‘it would have to do something to the scale of no longer employing the army’, IFS research economist Rowena Crawford said.
This gloomy outlook is compounded by concerns over procurement commitments. A government-commissioned independent review of defence acquisition by businessman and former ministerial adviser Bernard Gray, published in the autumn, put the cost overrun of approved projects at £35bn.
The National Audit Office’s latest estimates put the MoD’s current shortfall at as much as £36bn, blaming a ‘save now, pay later’ approach. The NAO’s December report concluded that, as a substantial increase in funding is unlikely, ‘closing the gap will require bold action as part of the strategic defence review’.
The impending defence cuts have come under fire from the UK National Defence Association, a campaign group that says the armed forces have been chronically under-funded and over-stretched.
Board member and retired air commodore Andrew Lambert tells Public Finance the UK should ‘prepare for everything’, and the prospect of another conflict cannot be dismissed. ‘It’s not like a health insurance policy where you decide what sort of illnesses you want to insure against... We can’t afford to go cheap and there is no such thing as a cheap victory,’ he warns.
Lambert calls for the defence budget to be maintained at current levels despite spending constraints. Failure to do so could have dreadful consequences for national security, UK independence and ultimately civilian lives, he warns. ‘[The government] found extra money for health and schools, we have underfunded defence for years and years and we have now got to rock bottom... If we removed £1bn from health would it make that much difference? If we removed this from defence we end up losing a lot of capability.’
According to unions, defence cuts are already resulting in armed forces personnel carrying out civilian staff jobs at the MoD. With 23,000 posts lost in the past four years, a spokesman from the civil service union PCS tells PF: ‘There is obviously a danger that if they cut further it will damage the front line.’ But he also admits that ‘there is scope to save money in the MoD’, through scaling back major projects and better procurement, without losing further jobs.
The PCS and other unions are calling for the multibillion-pound replacement of the Trident nuclear weapons programme to be cut back. But the government rules this out in the green paper and the Tories have also backed its renewal.
The defence think-tank the Royal United Services Institute says a much more likely scenario would be for the UK to pull back on its involvement with the principally US-funded ‘joint strike fighter’ programme, the replacement of a wide range of ageing attacking aircraft. Professor Malcolm Chalmers, a fellow in British security policy at RUSI, tells PF that there are no UK government contractual arrangements to buy aircraft beyond the development phase, making the programme more vulnerable to cuts than Trident.
For Chalmers, who is a former Foreign Office special adviser, cuts to the defence budget are manageable as long as they are well planned, but this is looking less and less likely. With a proper plan in place, one that focuses on reducing troop numbers, aircraft and major vessels in favour of more efficient operations with allies, the UK could manage budget reductions while maintaining its role as ‘second to none in European capabilities’, he says.
But if the MoD is asked to make very sharp reductions in the next couple of years ‘we won’t be able to cut lower priority areas and we will just have to cut the contracts we can get out of’. He adds: ‘If we go down that route the impact on defence capability will be disproportionate to the financial savings.’
Chalmers says the main problem for all parties is that ‘it’s just not possible to make the tough decisions that will be needed on defence policy until after the election, and a government is clear on the financial context under which defence will have to operate’.
The Institute for Public Policy Research is calling for whoever forms the next government to conduct a strategic security review, incorporating unconventional and emerging threats such as climate change and energy shortages, rather than a purely defence-based one.
Alex Glennie, a research fellow at the centre-Left think-tank, says that future policy should be based on increasing co-operation with international allies rather than ‘trying to provide everything’. She says while budget cuts were inevitable it was ‘strange’ to commit to Trident ahead of a strategic review, adding that the government was ‘afraid of looking like it’s flip flopping on the issue’ after pushing for the programme for so long.
She says spending on conflict prevention, rather than reaction, would be a major way of making savings.
The government’s green paper has created a platform for critical decisions over what can or should be cut from defence spending. Judgements are being intensified by the ongoing conflict and rising death toll in Afghanistan.
Whether operations can be changed to mitigate the severity of the cuts they face is another matter.
12 February 2010
Following a government green paper, defence professionals are coming to terms with inevitable budget cuts and are asking where they would hit least hard. Lucy Phillips reports
Last week’s green paper on UK defence policy confirmed what many had been expecting. As the largest ‘unprotected’ spending department, the Ministry of Defence would inevitably be hit hard by the coming squeeze on the public finances. But tough, and emotive, decisions remain over where budget cuts will fall, decisions that are made even harder by an existing multimillion-pound black hole.
The green paper, Adaptability and partnership: issues for a strategic defence review, met a mixed response. Sceptics labelled it a waste of time at this stage of the parliamentary calendar, while others claimed it was setting the scene for a long-awaited overhaul of the sector after the general election. All, however, noted the absence of any specific figures.
Economists have warned that defence will bear the brunt of the spending protection given to health and education. Defence Secretary Bob Ainsworth is quite clear: ‘As we approach the next defence review, we must also confront the fact that despite our continued investment in defence, we face challenging financial pressures: rising fuel and utility costs, increases in pay and pensions, and cost growth on major equipment projects.’
The Conservatives have likewise committed to a ‘ruthless and unsentimental’ review of defence spending immediately after the election, with shadow defence secretary Liam Fox pledging ‘a step change, not tinkering’ to policy.
The Institute for Fiscal Studies’ Green Budget, published on February 3, confirmed the dismal picture for defence. From 2011/12 to 2013/14, if Treasury protection for health, education and overseas development continues, defence could face budget cuts of 23.8% (or £47.4bn), and if the ring-fencing is stopped, cumulative cuts of 18.7%, (or £37.2bn). Even if the MoD were required only to make the latter incisions, ‘it would have to do something to the scale of no longer employing the army’, IFS research economist Rowena Crawford said.
This gloomy outlook is compounded by concerns over procurement commitments. A government-commissioned independent review of defence acquisition by businessman and former ministerial adviser Bernard Gray, published in the autumn, put the cost overrun of approved projects at £35bn.
The National Audit Office’s latest estimates put the MoD’s current shortfall at as much as £36bn, blaming a ‘save now, pay later’ approach. The NAO’s December report concluded that, as a substantial increase in funding is unlikely, ‘closing the gap will require bold action as part of the strategic defence review’.
The impending defence cuts have come under fire from the UK National Defence Association, a campaign group that says the armed forces have been chronically under-funded and over-stretched.
Board member and retired air commodore Andrew Lambert tells Public Finance the UK should ‘prepare for everything’, and the prospect of another conflict cannot be dismissed. ‘It’s not like a health insurance policy where you decide what sort of illnesses you want to insure against... We can’t afford to go cheap and there is no such thing as a cheap victory,’ he warns.
Lambert calls for the defence budget to be maintained at current levels despite spending constraints. Failure to do so could have dreadful consequences for national security, UK independence and ultimately civilian lives, he warns. ‘[The government] found extra money for health and schools, we have underfunded defence for years and years and we have now got to rock bottom... If we removed £1bn from health would it make that much difference? If we removed this from defence we end up losing a lot of capability.’
According to unions, defence cuts are already resulting in armed forces personnel carrying out civilian staff jobs at the MoD. With 23,000 posts lost in the past four years, a spokesman from the civil service union PCS tells PF: ‘There is obviously a danger that if they cut further it will damage the front line.’ But he also admits that ‘there is scope to save money in the MoD’, through scaling back major projects and better procurement, without losing further jobs.
The PCS and other unions are calling for the multibillion-pound replacement of the Trident nuclear weapons programme to be cut back. But the government rules this out in the green paper and the Tories have also backed its renewal.
The defence think-tank the Royal United Services Institute says a much more likely scenario would be for the UK to pull back on its involvement with the principally US-funded ‘joint strike fighter’ programme, the replacement of a wide range of ageing attacking aircraft. Professor Malcolm Chalmers, a fellow in British security policy at RUSI, tells PF that there are no UK government contractual arrangements to buy aircraft beyond the development phase, making the programme more vulnerable to cuts than Trident.
For Chalmers, who is a former Foreign Office special adviser, cuts to the defence budget are manageable as long as they are well planned, but this is looking less and less likely. With a proper plan in place, one that focuses on reducing troop numbers, aircraft and major vessels in favour of more efficient operations with allies, the UK could manage budget reductions while maintaining its role as ‘second to none in European capabilities’, he says.
But if the MoD is asked to make very sharp reductions in the next couple of years ‘we won’t be able to cut lower priority areas and we will just have to cut the contracts we can get out of’. He adds: ‘If we go down that route the impact on defence capability will be disproportionate to the financial savings.’
Chalmers says the main problem for all parties is that ‘it’s just not possible to make the tough decisions that will be needed on defence policy until after the election, and a government is clear on the financial context under which defence will have to operate’.
The Institute for Public Policy Research is calling for whoever forms the next government to conduct a strategic security review, incorporating unconventional and emerging threats such as climate change and energy shortages, rather than a purely defence-based one.
Alex Glennie, a research fellow at the centre-Left think-tank, says that future policy should be based on increasing co-operation with international allies rather than ‘trying to provide everything’. She says while budget cuts were inevitable it was ‘strange’ to commit to Trident ahead of a strategic review, adding that the government was ‘afraid of looking like it’s flip flopping on the issue’ after pushing for the programme for so long.
She says spending on conflict prevention, rather than reaction, would be a major way of making savings.
The government’s green paper has created a platform for critical decisions over what can or should be cut from defence spending. Judgements are being intensified by the ongoing conflict and rising death toll in Afghanistan.
Whether operations can be changed to mitigate the severity of the cuts they face is another matter.
