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300m in 1978-79 and £4500m in 1983-84. The cost in foreign
exchange (stationing costs) is currently estimated to be about £320m.
The pattern of expenditure has been altered by the cuts in expenditure
for the current year imposed in December and March, amounting to over
£260m. If the reduced first year of the Costing is left out of account,
the pattern is more regular and assumes a rate of increase in real
terms in defence expenditure of between 1 and 2 per cent a year which
1 8 necessary to maintain existing forces manned and equipped at about
the present level. LTC 74 provides the starting point for the Defence
Review.
38.
On the most severe option, ie a reduction to 4% of GNP by 1978-79,
a saving of £1440m would be made in the LTC total for that year.
This
saving would permit resources amounting to around 2% of GNP to be
diverted to alternative uses. Manpower would be released both from
the Forces themselves and the industries which serve them. A resource
switch of this size granting us in effect up to an extra year's
growth would make a sizeable contribution to the aim (see paragraph
33 above) of diverting a substantial proportion of the annual growth
in our GNP over the next 5 years to investment and the balance of
payments. Alternatively it would case the problems of maintaining
adequate growth in private consumption and in the priority areas of
public expenditure.
39. However a certain amount of time is needed for the effective
redeployment of resources. A redeployment of the magnitude discussed
above by 1978-79 would cause major problems of transition for
particular industries and areas which would detract from the economic
advantages. The option of a reduction to the same percentage of GNP
over a longer period, ie 4% by 1983-84, would yield savings on the
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