TNAG-0476-FCO40-541-Strength-of-garrison-in-Hong-Kong-1974 — Page 25

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III.

RESOURCES FOR DEFENCE

31. The foregoing analysis of the military and political situation

explains why, after 30 years of peace in Western Europe, and 25 years

since the creation of the Alliance checked Russian expansionism,

we still maintain a major defence effort. But this has also been a

period of protracted economic difficulties for the UK, during which

the country has become increasingly conscious of the better economic

performance and rising social standards of our neighbours across

the Channel. Given the prospect of a further long haul ahead for the

Alliance, the time has come for a reappraisal of our contribution to

it.

32. Throughout the late 50s and the 60s the French and Germans

achieved a growth-rate of at least 5% a year, while ours was under

3%. Over a period of years this kind of difference in the annual

increment to output makes a dramatic cumulative difference to the

resources available to governments for allocation to public

programmes and personal living standards.

While our national income

rose by half in this period, those of France and Germany doubled.

Our GNP 18 now below that of France and significantly below

Germany's although higher than Italy's. (1) The last OECD forecasts

in 1972 predicted a continuation of this divergence in growth

rates. That was before the oil crisis; but preliminary work which

we have carried out suggests that this will have a broadly similar

impact on each of the four countries concerned. On this basis,

from the mid-508 to the mid-80s we shall have moved from a position

of comparative affluence to relative poverty.

Note 1.

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On the purchasing power parity basis (see footnote 2 on page 16) our GNP in 1973 was about 5% below France's and about 20% below Germany's, while our defence expenditure was higher by about 10% and 5% respectively.

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