THE EXPENDITURE COMMITTEE
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Paper', revalued to 1974 Survey prices, but with substantial additions for reassessment of the cost of the previously planned defence programme, and for additional items, especially for 1977-78 where the earlier figure was provisional. For that year the total added was £167 million, mainly for reassessment. Even for 1976-77, however, where in 1973 the figure was said to be firm, a total of £134.4 million was added in arriving at LTC 742. We conclude that, if it is found necessary to adjust the defence budget from year- to-year by such substantial amounts, albeit representing relatively small per- centages, then the projections over the review period to 1983-84 must be somewhat provisional; it follows that the actual savings resulting from the review could vary considerably from the amounts estimated.
37. Overall, the planned financial effect of the review proposals is to allow a 4 per cent. increase between 1974-75 (£3,560 million) and 1975-76 (£3,700 million), and a 2.7 per cent. increase from 1975-76 to 1976-77 (£3,800 million), levelling out for the seven years thereafter at a total figure about 6.7 per cent. above the 1974-75 level3. The 1974 programme of long-term costings (LTC 74) would have required increases, ranging from over 12 per cent. in 1975-76 to about 25 per cent. by 1983-84, over the 1974-75 rate of spending. These figures show why, in the present economic situation, as Mr. Greenwood suggested, it was essential to make reductions in the LTC 74 programme. If the Ministry had sought to maintain that programme there can be little doubt that much greater damage would have been inflicted by the inevitable short-term cuts than will result from the defence review.
38. The Ministry gave some indication of the likely effects had it been decided to make much more swingeing cuts, of the order of £1,000 million a year, from the present level of defence spending. They stated that it would be difficult to judge the number of personnel affected because a cut of this magnitude would necessitate an entirely new defence structure. However, they indicated that it would be likely to mean reductions of some 150,000 Servicemen, 100,000 directly employed civilians and perhaps 100,000 in the defence industries. At this level, the United Kingdom would be unable to make a significant contribution to NATO strategy, and large-scale redun- dancies would be unavoidable (Q.193, 221).
DISCUSSIONS WITHIN NATO AND WITH OTHER ALLIES
39. The Ministry stated that while Britain's NATO allies had under- stood the reasons for the review, they had expressed some concern and had requested reconsideration of some of the proposals. We appreciate that although it was hoped that the allies would understand the underlying economic necessity of the review and the priority given to NATO com- mitments, it was to be expected that the reductions in the number of units, changes in deployment and the loss of capabilities proposed in the review would be poorly received. Cuts resulting from reduced commitments outside the NATO area may also have some adverse effect on strengths within it due to the double-earmarking of forces. On the discussions outside NATO, the Ministry stated that our partners had generally accepted the proposals but that there would be discussions about the timing of their implementation.
1 Cmnd. 5519.
2 Evidence page 54.
3 Evidence page 32, para. 46.
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