October 29, 2009 | Commentary on National Security and Defense

Armed Forces May Count the Cost of Cutbacks on Defense

The publication of Bernard Gray's much-leaked report on defence procurement gives all the parties a vital chance to commit to spending plans and sensible reforms that will protect the future of Britain's armed forces.

It is reinforced by Gordon Brown's latest U-turn - this time over his cost-cutting plans to suspend routine training for the Territorial Army. He has now had to reverse the decision after the intervention of John Reid, the former Defence Secretary.

Yet the £20m cost of this is just a tiny fraction of the overall defence budget.

The basic thesis of Gray's report is undeniably true: defence procurement in Britain does not work well. It is too slow to deliver equipment that costs too much.

This is not a particularly British problem. It hurts the US and many other countries too. But that does not mean the UK can afford to ignore it.

Gray argues that the cost of the MoD's planned purchases are unrealistic. By 2038/39, the MoD reckons its present plans - including Britain's nuclear deterrent - will have cost £235bn. Yet Britain spends a bit less than £6bn per year on procurement. The gap between costs and spending seems astronomical.

But it is not that bad. Even a small gap looks big when multiplied by 30 years. The gap amounts to a bit over £55bn, the difference between the cost of the plans and what Britain spends per year over the next 30 years. And £55bn is only an extra £2bn per year.

Of course, it is not that simple. Costs will escalate more than the MoD allows. The forces will want to order more equipment down the road. And a yearly average is misleading: projects cost more at their peak than they do when they're starting up.

But the failure to pay attention goes deeper than that. When Tony Blair came into No 10, Britain spent about 2.9 per cent of its GDP on defence. Now it spends about 2.2 per cent.

If Britain still spent 2.9 per cent on defence, the MoD's budget in 2006-07 would have been £6bn higher.

Not all that money would be spent on procurement. But even if only a quarter of it went towards equipment, it would all but erase the shortfall. Britain's procurement plans are unaffordable for the simple reason that Labour funded its spending boom by cutting corners on defence. But it is worse than that. In the world of procurement, few things are more expensive than putting off until tomorrow what you previously decided you want to buy today.

The painful saga of Britain's new aircraft carriers illustrates this all too well. The 1998 Strategic Defence Review - lead author, Bernard Gray - made the case for the carriers.

Eleven years later, they are still on the drawing board, and the year on year delay is adding about a billion pounds annually to their cost.

If you add the direct effect of the Blair/Brown budget cuts to the indirect but real effect the resulting delays had on costs, you find that the procurement crisis is artificial. It is the result not of uncontrolled spending, but of too well controlled budgets.

That does not mean that Britain's procurement process is efficient.

Many of Gray's most telling criticisms revolve around his attacks on the competence of the MoD as a procurer.

Another reason the government buys defence equipment is a simple one: jobs for the boys. Or, rather, jobs for the marginal constituencies.

All democratic governments do this, and it is as grubby a practice as it is inevitable. But Britain, by making "buying British" an explicit part of its Defence Industrial Strategy, has guaranteed that it will prefer to buy in small, expensive lots.

International collaborations with large producers like the US are not simple to manage, of course, but if saving money is the goal, they must be part of the way forward. In any event, the budget of the Armed Forces should not suffer if ministers make the political decision to buy in the most expensive way possible.

Politicians need to start by asking a basic question. That question is not whether the MoD's equipment is affordable. It is whether the equipment is adequate to Britain's needs. If it is, then it should be funded. If it is not, then it should be cut.

If Ministers cannot agree on the need to spend £20m on training for Territorial Army reservists, can they take the bigger decisions?

The last thing Britain needs is to back into further cuts on the argument that, in this risky world, its defences cannot afford even the reduced circumstances to which they have been brought by the Labour Government.

Ted Bromund is a senior research fellow in The Margaret Thatcher Centre for Freedom at the Washington-based Heritage Foundation.

About the Author

Theodore R. Bromund, Ph.D. Senior Research Fellow in Anglo-American Relations
The Margaret Thatcher Center for Freedom

First Appeared in Yorkshire Post