TNAG-0540-FCO40-635-Strength-of-garrison-in-Hong-Kong-1975 — Page 101

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SECOND REPORT FROM

25 per cent. reduction in the number of locally entered civilians, the time may be ripe for a more critical review of Ministry of Defence civilian staffing in the United Kingdom.

EFFECTS OF the Review ON INDUSTRY AND EMPLOYMENT

34. The Ministry stated that their best forecast of the effects of the review on employment, allowing for improvements in productivity, was that a reduc- tion of some 10,000 (about 4 per cent.) in industrial manpower in the defence industries was likely over the next five years.1 Some companies could face particular problems. The Ministry did not expect any serious effect on employment in the Royal Ordnance Factories. In the case of the Royal Dockyards, they stated that an increasing proportion of capacity would be absorbed by nuclear submarines as more entered service but the reductions in previously planned numbers of surface ships should release some capacity mainly from 1977-78 onwards. Any work taken on to absorb released capacity was expected to be mainly naval, notably refits of Royal Fleet Auxiliaries (RFA) most of which are at present undertaken by commercial yards, but the effect on employment in commercial yards would be taken into account in deciding the allocation of RFA refits.

35. The Expenditure Committee in previous Sessions has recommended that the defence budget should include only defence costs. In 1972, and on other occasions, defence orders were accelerated, or decisions were taken to order items, primarily for employment rather than military reasons. As with the Nimrod aircraft ordered in 1972, this can result in the defence budget bearing substantial costs which are not fully justified on military grounds alone. The Ministry argued that the practice was not unreasonable since the Services enjoyed the benefit of the equipment, but this is not a full answer (Q.195). We believe that, in considering the defence budget, decisions should be taken so far as possible for military reasons; if employment or industrial considerations affect the issue to such an extent that, for good reasons, sub- stantial extra costs are incurred, then such extra costs should be identified when the Defence Estimates and Accounts are presented. This situation might arise if, for example, RFA refits are let to civil yards to maintain employment there, leaving spare capacity in the Royal Dockyards. We therefore suggest that if extra costs are incurred on the defence budget primarily in support of employment or other domestic policies, rather than for military reasons, the additional amount involved should be assessed and reported to the House.

FINANCIAL EFFECTS OF THE REVIEW

36. The Secretary of State explained that the defence review proposals would save about £4,700 million over the period up to the end of 1983-84 and that by that year the annual saving would be about £750 million. These savings are calculated by comparing the cost of the review proposals with the Ministry's Long Term Costings (LTC 74) as they stood early in 1974. The 1974 Public Expenditure White Paper' (published in January 1975) indicates that, for the early years of the review period, the LTC 74 forecasts re- present the projections appearing in the 1973 Public Expenditure White

1 Evidence page 31, para. 43.

2 Cmnd. 5879.