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Politics

COMMENT: What Will The Spending Review Mean For Defence?

The Chancellor, Sajid Javid, will soon set out the Government’s spending plans for the next year.

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Defence spending has been rising slightly, but steadily, for the last three years after falling for a decade (Picture: Crown Copyright).

By Forces News defence correspondent, James Hirst

On Wednesday 4 September, the Chancellor, Sajid Javid, is expected to set out the Government’s spending plans for the next year.

He is promising significant investment in hospitals, schools and policing.

However he is insisting it will not be a giveaway budget and that fiscal rules must still be met.

What will it mean for defence?

Everything is up for grabs, but the political reality is this is likely to be a 'steady as she goes' spending round for the Ministry of Defence (MOD).

Defence spending has been rising slightly, but steadily, for the last three years after falling for a decade.

In theory, it should continue on that track.

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In the race to become Prime Minister, Boris Johnson did not promise anything more for defence but his team did tell Forces News he was committed to the current defence spending plan.

A five-year spending plan for defence was drawn up in 2015, when George Osborne was chancellor, and unlike many other departments, the MOD already has a budget for 2020/21.

George Osborne also introduced a five-year 'double-lock' for defence spending, promising it would continue to meet the NATO commitment of at least 2% of national income and that it would rise by at least 0.5% a year above inflation.

In the race to become Prime Minister, Boris Johnson did not promise anything more for defence but his team did tell Forces News he was committed to the current defence spending plan.

This year’s defence budget is £38.8 billion, so for 2020/21 it should be closer to £40 billion.

But there are few technicalities to look out for.

Questions remain

The biggest problem in the defence budget is cost over-runs in the Dreadnought programme – the UK’s next generation of nuclear armed submarines.

Under Theresa May, close to £1 billion extra cash was injected into the defence budget just to cover the problems so far.

The question is, will more be required? And if so, will the Treasury provide it or just tell the MOD to work it out for itself?

Defence (and other Government departments) also got another ‘one-off’ payment in the last year, to cover the cost of increased public sector contributions. 

Those extra costs are ongoing, but the funding for it might not be repeated. If that is what happens all of a sudden, that is about £700m of the core defence budget that has to be allocated to pensions.

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This year’s Defence Budget is £38.8 billion, so for 2020/21 it should be a bit closer to £40 billion (Picture: Crown Copyright).

It would not break any of the Government’s commitments on defence spending, but it would feel a bit like a 1.7% budget cut for those trying to balance defence’s books and deliver modern military power.

But a health warning about whatever is announced - it is only a holding budget for another 12 months, and after that, all bets could be off.

There will be a full Government spending review next year, under pretty much any circumstance, and at that point the political commitment to the ‘double-lock’ could well be over.

One half of the lock, the NATO 2% commitment, does stand a good chance of surviving – all the main parties made the pledge in their 2017 election manifestos.

But even if that lock is still in place, the defence budget remains dependent on the performance of the economy and that very much depends on the result of - yes you guessed it, Brexit.

The Prime Minister's decision to temporarily suspend parliament and have a new Queen's Speech means the Chancellor is planning his spending.  Defence analysts Francis Tusa and Professor Michael Clarke discuss on BFBS’s defence analysis  Sitrep whether defence could lose out.

Listen HERE: Sitrep