(DEFENCE AND EXTERNAL AFFAIRS SUB-COMMITTEE)
21 January, 1975.]
21
[Continued.
Manpower Reductions
3. On the predicted manpower consequences of the Review some elucidation is called for because of certain ambiguities and misunderstandings in the Evidence which were left unresolved when attention turned to other matters. Initial confusion arose over failure to distinguish clearly the three categories of persons who owe their jobs more or less directly to the national defence effort. These are:
(a) Service personnel in this category the December proposals envisage a reduction of 35,000-though how this falls as between personnel serving in the United Kingdom and troops overseas has not been disclosed.
(b) MoD (and related Departments') Civilians: the proposals foreshadow a
cut of 30,000 here, divided equally between
(i) UK civilians-to fall by 15,000;
(ii) Locally engaged civilians overseas-to fall by 15,000.
(c) Employees on defence contracts in UK industry: the tentative assessment is that some 10,000 such workers will be “released" in the period to 1978–79, because of the adjusted equipment programmes.
Some further difficulties arose when I then introduced the notion of "secondary civil employment" which emerges-in both the UK economy and "host" economies overseas--because the employment (and income) stemming directly from defence spending prompts further employment (and income) generation. This indirect defence-related employment occurs, for example, in the retail and service trades in localities where there are major military installations. No estimates have been produced concerning the likely effects of the Defence Review proposals on such secondary, or indirect, civil employment. But case studies of individual defence installations and their impact on local economies suggest that the value of the relevant local employment "multiplier" is probably around 1-25. Thus it may be taken as a rule of thumb that the loss of 4 direct defence jobs-in categories (a) and (b) above in the UK-results in the further loss of 1 indirect job. (Total defence-related employment, in this sense, equals 1·25 times direct employment.)
4. In answering Mr. Conlan (Qs. 27 and 28) I tried to make these distinctions, but failed to do so clearly. The examination moved on before I could retrieve the situation. Having now had the opportunity to look over Mr. Conlan's questions, and my rather opaque replies, I would like the Sub-Committee to note that what I would have liked to establish is:
Q. 27. Studies have been done on military installations in the UK which highlight the phenomenon of indirect or secondary civil employment effects. Relating this work in any precise way to the consequences of the present proposals is, however, somewhat difficult. The main problem is the fact that the impact of the 35,000 Service personnel reduction and the 30,000 MoD civilians reduction will not fall wholly on the domestic economy or evenly within it. What can be said is that the one indirect job per four direct jobs" rule of thumb will probably apply. Thus, if the 65,000 were direct defence employees in the UK, the associated indirect employment would be of the order of another 15,000-actually 16,250 (cf. the final sentence of my answer).
Q. 28. Defence contractors' employees are a different matter: in particular it is necessary to consider the repercussions of reductions on sub-contractors and other suppliers as well as secondary local employment effects. There is no doubt, however, that if those whom it is envisaged will be released from employment in defence industry in the next 3-4 years were to be heavily concentrated in the less prosperous regions that might indeed pose serious adjustment problems for particular localities.
*
Aberdeen.
21 February, 1975.