SECRET
SERET
III.
RESOURCES FOR DEFENCE
31. The foregoing analysis of the military and political situation
explains why, after 30 years of peace in Western Europe, and 25 years
since the creation of the Alliance checked Russian expansionism,
we still maintain a major defence effort. But this has also been a
period of protracted economic difficulties for the UK, during which
the country has become increasingly conscious of the better economic
performance and rising social standards of our neighbours across
the Channel. Given the prospect of a further long haul ahead for the
Alliance, the time has come for a reappraisal of our contribution to
it.
32. Throughout the late 50s and the 60s the French and Germans
achieved a growth-rate of at least 5% a year, while ours was under
3%. Over a period of years this kind of difference in the annual
increment to output makes a dramatic cumulative difference to the
resources available to governments for allocation to public
programmes and personal living standards.
While our national income
rose by half in this period, those of France and Germany doubled.
Our GNP 18 now below that of France and significantly below
Germany's although higher than Italy's. (1) The last OECD forecasts
in 1972 predicted a continuation of this divergence in growth
rates. That was before the oil crisis; but preliminary work which
we have carried out suggests that this will have a broadly similar
impact on each of the four countries concerned. On this basis,
from the mid-508 to the mid-80s we shall have moved from a position
of comparative affluence to relative poverty.
Note 1.
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On the purchasing power parity basis (see footnote 2 on page 16) our GNP in 1973 was about 5% below France's and about 20% below Germany's, while our defence expenditure was higher by about 10% and 5% respectively.
SESFORET