58
MINUTES OF EVIDENCE TAKEN BEFORE THE EXPENDITURE COMMITTEE
11 February, 1975.]
[Continued.
7. Rosyth is of similar size, employing 4,400 industrials and nearly 1,500 non- industrials and undertakes, as its primary task, the refit of Polaris submarines.
8. The small Yard at Gibraltar employs about 1,400 personnel. It has a programme of Frigate and Minesweeper refits, and provides support facilities to the garrison and visiting Fleet Units.
Effect of the Defence Review
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10. *
9. *
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Use of Spare Capacity
11. It is Government policy that spare capacity arising from the Defence Review shall be put to other productive use. As the Secretary of State indicated in his statement to the House on 3 December 1974, it is intended to concentrate naval refitting and repair work in the Dockyards. This may include refits of Royal Fleet Auxiliaries most of which are at present placed to contract. The bulk of R.F.A. refits will however continue to be placed with civil shipyards, until the end of 1975/76 and probably until the end of 1976/77. Decisions on their allocation thereafter will have to take account of employment considerations, and the priority and economics of using capacity for R.F.A. refits in relation to its use for other purposes. There are other prospective demands for the use of capacity released from warship refitting. Decisions on its allocation have still to be made, having regard to Defence interests and the implications for employment elsewhere.
12. * * Requirement may also arise for assistance in the production of
equipment for the offshore oil programme to supplement the capacity available else- where. The Dockyards are ready to make their contribution to this vital national task. A special unit has been set up at CED's headquarters to deal with this and other repayment work quickly and effectively.
Conclusion
13. * * * Good use will be made of such spare capacity as may arise. Certainly all the Dockyards will be needed for the foreseeable future. In deciding how to use spare capacity preference will be given to taking on work which best matches the skills and resources available in the Dockyards, and national needs.
ANNEX E
EFFECTS OF REDUCING THE DEFENCE BUDGET BY £1,000 MILLION PER ANNUM Impact on the Defence Budget
1. In March 1974 the Defence Budget for the year 1974/75 stood at about £3,600 million in 1974 prices. A reduction of £1,000 million on the 1974/75 total would have reduced the defence budget by between a quarter and a third to some £2,600 million per annum. But it must be stressed that no public expenditure programme can suddenly be reduced by this order of magnitude from current totals without the gravest disruptive consequences, as well as substantial offsetting costs.
The defence budget is no exception.
2. The reason for this-quite apart from the military, political and industrial implications is that inevitably a high proportion of all public expenditure pro- grammes are committed several years ahead. This is particularly so of defence. First. manpower, which cannot be discharged overnight, accounts for just under half of the budget. Secondly, because of the long lead times involved in research, develop- ment and production, some 80 per cent. of equipment expenditure is effectively committed up to four years ahead, either on projects in development, on which large sums have already been spent, or on the production, maintenance and support of existing weapons systems. An early reduction of the defence budget by a quarter to a third could only be achieved by cutting manpower and cancelling equipment pro- jects to an extent which would involve substantial offsets to the savings to be achieved. Redundancy payments for Servicemen and civilians discharged would run into several hundred millions of pounds. Nugatory expenditure on current equipment projects and cancellation charges on contracts broken would also be substantial, although no accurate estimate can be made in a hypothetical situation.
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