(DEFENCE AND EXTERNAL AFFAIRS SUB-COMMITTEE)
21 January, 1975.]
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[Continued.
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6. How did the Government conduct the review according to these guidelines? From various sources, including Press accounts which bear signs of having been written after unattributable briefings, the following picture emerges. In parallel with the routine Departmental operations linked to the Public Expenditure Survey the Ministry of Defence examined several options for defence programmes to 1983-84, among them programmes involving savings' (against the inherited pro- gramme) of up to £1,000 million in the later years of the review period. The low savings' programmes, we may take it, went little beyond the reduction of non- NATO commitments and capabilities. The high savings' options however, must have envisaged eating into the capacity to fulfil Alliance roles--first in the Mediter- ranean and southern flank, then perhaps on the northern flank and for reinforcement generally and, finally, on the Central Front and for defence of the UK base. Each, no doubt, took credit' for reductions in support spending commensurate with the cut in front-line forces envisaged. The major procurement programmes seem to have been looked at in this context and in their own right.
Critique of this Approach
7. The Sub-Committee will take expert military advice on whether priority for NATO tasks and the Central Front and 'northern waters' in particular-repre- sented a sensible guideline for handling the essential defence needs side of the assessment of 'balance'. I am convinced in my own mind that it did; and in particular that, given the hope of some agreement on the mutual reduction of forces in Central Europe (which some of us have not abandoned, however unpromising the signs), to insulate force levels there to avoid undermining these negotiations makes good sense.
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8. In contrast UK defence spending as a proportion of GNP compared with that of our major European allies was not a very sensible criterion for gauging the necessary reduction in the proportion, in my view. It is not just that definitions of defence expenditure differ among states, as do modes of calculating the propor- tion: the UK proportion has been higher than that of France and Germany in recent years even when allowance is made for these differences. More important is the fact that the proportion is an inadequate measure of the burden of a national defence effort, because it does not always reflect the real resource costs of military expenditures. West Germany's proportion, for example, stood at 4-7 per cent. for 1973 (Defence Expenditure, NATO definition as a percentage of GNP at factor cost); but, according to the projections of its Force Structure Commission, 6.2 per cent. of the country's GNP would have had to be spent on the Bundeswehr had it been a professional force-which is a fairer reflection of burden' since it is the payment of conscripts at less than market rates' that accounts for the largest source of discrepancy between money costs and real resources costs in defence budgets. But my objection is even more fundamental than this. Equating burdens per se is not a satisfactory basis for reshaping a defence programme in principle. Had the Government proposed substantial increases in defence spending -to keep up with the Germans' at their 6.2 per cent.-I would have regarded this as equally inappropriate given the economic circumstances and the strength of other claims on resources. In sum, there were good reasons for 'reducing the proportion' implied by the defence programme for 1975-84: but to get the figure to correspond with someone else's level was not one of them.
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9. Regarding procedures one has only circumstantial evidence of how it was done'. But the choice of the full 10-year time-span of the Ministry of Defence's Long Term Costings for the review was a commendable innovation compared with previous reappraisals. The Government has framed proposals for the short- term against a medium-term perspective. It is not, therefore, open to the kind of criticism that was prompted by the several piecemeal adjustments made to the 1974-75 budget. Grand reshaping of this kind does have its dangers, however. There is a tendency to believe that 'stability' can be established once and for all. The experience of 1964-68 counsels caution on this: the first defence review" of that period soon became the 'continuing defence review'.