XTT.
OPPTON D
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SECRET
REDUCTIONS BY THE SERVICES AND THE PROCUREMENT EXECUTIVE
TO THE FIRST LEVEL OF DEFENCE EXPENDITURE
Measures to reach the First level
109. To reach the first level of expenditure of 41% of GNP by
1983/4 the Ministry of Defence would have to reduce the defence
budget by a total of 20% or £907m in that year compared with the
total in the 1974 Long Term Costings. This is an additional £150m
over and above the savings which could be achieved in 1983/4 at the
Critical level.
110. These figures of savings are based on the revised Treasury forecast
of GNP growth firmed up since the OPD (74) 3rd meeting (see paragraph 5 of
the Chairmans cover note), whose effect was to increase defence expend- iture at the First level by about £70m in 1978/9 and by some
£160m in 1983/4, and hence to reduce the savings to be made at the
First level by the same amounts. However, this revised forecast
was not available until after the Ministry of Defence had carried
out its detailed examination of the implications of reducing
capabilities to meet the First level of expenditure on the basis of
the earlier forecast. And there has been too little time to carry
out a new examination of reductions in capabilities to meet the
First level on the basis of the revised GNP forecast. As a result,
the measures set out below and the further elaboration of them in
Annex M represent an overstatement in detail of the cuts that would
have to be made to reach the revised First level of expenditure to
the extent of £70m in 1978/9 and of some £160m in 1983/4. These
parts of our Report will be revised when the Ministry of Defence has
completed a reassessment of reductions in capabilities to the revised
First level; this should be done within the next fortnight.
57 SECRET