4
MINUTES OF EVIDENCE TAKEN BEFORE THE EXPENDITURE COMMITTEE
21 January, 1975.]
[Continued.
10. In the same way the formal adoption of the technique of costing a number of alternative programme levels is to be welcomed. For all practical purposes the £2,000 million (at 1964 prices) ceiling for 1969-70 was fixed at the very start of the post-1964 review. In the latest exercise it looks as though Ministers were able to "assess the balance ", in the Chancellor's phrase, by weighing several alternative reductions in the inherited programme against the diminution of defence capability which each entailed. Whatever one's view of the eventual choice among these options the approach is to be preferred to the setting of an arbitrary budget level of what we can afford' followed by a working out of its security implications. What is less clear is whether the broader economic con- sequences of the alternatives (as opposed to budgetary effect) were fully worked out before the final choice was made. It would appear not, or not in any detail. Yet, if an important reason for undertaking a review of this sort is to release resources needed for improving the balance of payments, for productive invest- ment and economic growth especially in the short to medium term where economic difficulties appear most acute, it is difficult to see how rational choices can be made without fuller analysis than the Ministry of Defence seems to do. There are obviously conflicts here or 'trade-off' problems-for what is economically beneficial in the shorter-run may impair the ability to develop a coherent programme for the longer term. My point is that I am not convinced that in the scrutiny of options these were even exposed. And it is certainly hard to see how the proposals outlined in December will make a marked impact on either the balance of payments prospect or the generation of export-led growth.
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11. Finally on procedure, the decision to make a long statement of provisional conclusions before consulting with allies, and to provide an opportunity for domestic debate before proposals are finalized, is a new departure in defence budgeting so far as I am aware. It is to be welcomed, for reasons which I have discussed elsewhere.10 But for really worthwhile discussion and argument to be possible the Government needs to be rather more explicit about the (albeit provisional) details of its proposals than the Secretary of State for Defence was in his statement of 3rd December. Moreover the baseline needs to be properly understood. In relation to the present review, Parliament, Press and public are at a grave disadvantage in this respect for
(a) no revisions of the Cmnd. 5519 Public Expenditure programmes (to 1977-
78) have been issued.
(b) the 1974 Public Expenditure White Paper giving figures to 1978-79 had
not appeared at the time of writing.
(c) no Statement on the Defence Estimates appeared in 1974 so that such details as the functional analysis of expenditure and manpower for 1974-75 (original or revised plans) have simply not been published.
The Government is to be congratulated for telling us in what direction it is proposing to go in defence: but we need to know more about the route and more about exactly where we are starting from to judge its intentions. The remarks on the December proposals in the remaining paragraphs of this note should be read with this in mind.
The December Proposals: Defence Priorities
12. It is difficult to discuss the conclusions of the review without a summary of the Government's proposals. In his statement of 3rd December, 1974 the Secretary of State for Defence gave an outline only. More emerged in the Debate a fortnight later and several MPs elicited valuable additional detail by Questions put down for Written Answer immediately before the recess. Froin this material I have compiled the Summary which accompanies this paper (See Annex). The essential facts are arranged to permit a more systematic appreciation of the pro- posals than is possible from the individual sources-all of which are, of course, in the Official Report.