Defence expenditure

[sharpend]

Thought for today: Defence spending, as a percentage of GDP, has fallen from 7.5% in 1955, a period of relative peace, to 2% today. During this period, Welfare, as a percentage of GDP, has risen from less than 5% to over 12%. Source: House of commons HC494

[Sandy Parts]

We know there is a problem.
The solution lies in the hands of those elected by the people.
There are way more people affected by the latter figure (Welfare) than the former (Defence).
and so it will continue... :(

[Heathrow Harry]

Well the mid '50's did have Russia on the doorstep, we were building the H bomb, buying THREE types of strategic of bombers, running a load of carriers, still had an Empire which we were fighting in and also had loads of National Service personnel to train and feed

Not surprising it was expensive

Comparing it to Welfare is a bit of a red herring - unless you are willing to go back to the standards of care and medicine of the mid-50's as well

Also remember tax rates then were twice what they are now

Undoubtedly we need to spend more on defence right now - but unless and until people are willing to pay more tax it's tough to do if you want to be elected

[Frostchamber]

"There are way more people affected by the latter figure (Welfare) than the former (Defence)"

Hmm. True as long as we stay lucky. It's a bit like 1. Buggered if I'm forking out £12 a month for phone insurance 2. Drop phone in toilet.

Thing is, the prospect of things going down the toilet, one way or another, currently look somewhat higher than they did...

[MSOCS]

Yes. Very though provoking. Today we live in the safest time recorded by history. Conflict, especially major conflict is at its lowest. That's not to say it won't remain that peaceful, but today, diplomatic relations between countries and liberal institutionalism have created a relative "peace" never seen before.

So, why spend more if there are "no votes in Defence"? Adequately configured Armed Forces are vital but that must be driven by a not-overly-ambitious Defence Policy. Cut the fat out of costly, slow procurement and that 2% may go further than you think!!

[Harley Quinn]

Yes. Very though provoking. Today we live in the safest time recorded by history. Conflict, especially major conflict is at its lowest. That's not to say it won't remain that peaceful, but today, diplomatic relations between countries and liberal institutionalism have created a relative "peace" never seen before.

So, why spend more if there are "no votes in Defence"? Adequately configured Armed Forces are vital but that must be driven by a not-overly-ambitious Defence Policy. Cut the fat out of costly, slow procurement and that 2% may go further than you think!!

Interestingly the doomsday clock http://thebulletin.org is closer to midnight than it has been for many years

[ShotOne]

1955 " a period of relative peace..." Seriously? Relative to what? We faced the might of the all-conquering Red Army, massively outnumbering us conventionally, nuclear armed to boot. Ditto for the two minutes to midnight nonsense. How, by any rational yardstick can we be reckoned in as much danger as during the Cuban crisis??

[riff_raff]

1955 " a period of relative peace..." Seriously? Relative to what? We faced the might of the all-conquering Red Army, massively outnumbering us conventionally, nuclear armed to boot. Ditto for the two minutes to midnight nonsense. How, by any rational yardstick can we be reckoned in as much danger as during the Cuban crisis??

Great point. Why don't people realize that the closest the world came to all-out nuclear war was during the Cuban Missile Crisis.

[wiggy]

Great point. Why don't people realize that the closest the world came to all-out nuclear war was during the Cuban Missile Crisis.

Agreed, been having this argument ever since that bleeding doomsday "clock" got moved a few weeks back. Apparently global warming and cyber terrorism is a much bigger and immediate threat to life and limb than the nuke threat is, or ever was............yeah.....right........

[staircase]

Even the 2% is suspect, if as I suspect, all the cold war warrior pensions are included in the sum.

Welfare given the standards of the 1950’s would, as suggested above, been cheaper, but so was military equipment. A Hunter was pushing the boundary at the time, but was still a basic bit of kit.

Then there is MoD. Just one very minor example. Why do the AEF’s drive cadets around in bone domes, parachutes, and L/Js with pilots wearing expensive gear when the local flying club do it in shirt sleeves?

There was also (very) full employment in the 50’s. That stopped with Mrs. T and her ‘reforms’ (and please don’t thread creep as to whether they were necessary or not) but to effectively use the North Sea Oil revenues as benefits to keep over 3,000,000 unemployed seems to have been a waste. I offer Norway’s sovereign fund as an alternative.

As for tax and the requirement to pay it. Globalisation and the ability of large multi- nationals to look upon tax as optional extra, hits the Treasury estimates. It also means the likes of us have to make up the shortfall in personal taxation. Although 6 billion on a fire HQ system that did not work, 6 billion on an NHS computer system that did not work, 5 billion on a totally botched NHS reorganisation that Mr. Hunt is still trying to sort out, makes one reluctant to pay more than necessary.

But there is the inconsistency of the British, who have always wanted Scandinavian levels of health care and benefits, with American levels of taxation and government spending.

Hey ho, don’t we all wish we knew the answers?

[peter we]

Look on the bright side, we are leaving the EU.

[pr00ne]

peter wee

Which will tank our economy, depress exports and substantially reduce GDP, thus reducing Defence expenditure even further, great thinking...

[Pontius Navigator]

peter wee

Which will tank our economy, depress exports and substantially reduce GDP, thus reducing Defence expenditure even further, great thinking...
Economist now? Or is it optimist hoping to be proven correct?

[Melchett01]

Economist now? Or is it optimist hoping to be proven correct?

Nobody knows, and anybody who says / thinks they do are deluding themselves. You can present the theory for the case either way, as both sides have done since the referendum began, and both sides have produced more heat and noise than light. The 'dismal scientists' will keep churning out theories as woolly as a bad Int brief, the bankers will keep trying to either instil fear to get a better break from the government whilst lining up domestic firms for takeovers by foreign firms seeking to capitalise on the pound and the lawyers and consultants will keep raking the fees in from the whole sorry mess. And that is about the only thing anyone can say with any certainty. Defence spending will go whichever way the government of the day wants to take it at the time, and politically it just isn't important enough to them.

[Finningley Boy]

peter wee

Which will tank our economy, depress exports and substantially reduce GDP, thus reducing Defence expenditure even further, great thinking...

pr00ne,

You'll excuse me I'm sure, if I make the presumption that you lean to the left. That is politically rather than physically, but when did the left take to the idea of embracing the common market?

I do recall the Labour Party announcing at the 1980 Party Conference, among all the stuff about unilateral disarmament etc, that they would pull the UK out of the common market. They weren't fixing to precede this with a referendum either. One thing you can say for David Cameron and the Tories generally, is they do, at least on this occasion, manage to standby their word!

What was it that Gordon Brown promised again????

FB:)

[peter we]

£6 billion hit to the UK's defense budget caused by the exchange rate fall - it doesn't need an economic degree to see that.

[Lima Juliet]

Peter

£6 billion hit to the UK's defense budget caused by the exchange rate fall - it doesn't need an economic degree to see that.

I suspect you may have been too simplistic with your analyis and would be true:

1. Only if you consider that the whole of the £35Bn UK Defence Budget is spent in $US - it isn't. Whilst the loss of ~25US Cents to the Pound is a big loss the fall of the €uro of ~10 Cents is as lot less by percentage.

2. Only if you consider that the defence budget is spent entirely on equipment - it isn't. ~31% is spent on wages and ~24% is spent on property and infrastructure neither of which should be affected by the £:$ rates.

Personally, if the rates don't recover (which they most likely will) then we are looking at £3Bn at the very worst. Not insignificant, but not as bad as pointed out.

LJ

[Heathrow Harry]

http://www.pprune.org/military-aviation/590213-uk-mod-exchange-rate-hole.html

[Lima Juliet]

Thanks for the link HH. I did follow that and there was an awful lot of doom and gloom. Have a look at this graph:

https://www.poundsterlinglive.com/images/graphs/history-pound-dollar-1975-2016.png

At $1.26 the Pound is lower, but not statiscally hugely lower looking at the fluctuations. Having a weak Pound is better for exports and for years our balance has been poor between importing and exporting - so much so that we have become over reliant on the banking and financial sector. Some say the fall in the value of the Pound is exactly what we need (unless of course you are a UK investor or banker!). Even the great Mark Carney has admitted that he got the financial and growth predictions of Brexit wrong. Of course the Remainers will jump on the "I told you so" bus as soon as there is a disaster (like Jamie Oliver and him having to close some of his restaurants that seemed to be doing badly before Brexit - I think his food is overpriced and boring so that is probably the real reason). If I recall correctly the Pound was hovering around $1.40 to $1.45 at least 6 months before Brexit fever hit the UK - so the drop to $1.26 is hardly earth shattering (unless you believe the tripe served up on our media feeds).

I do think there are savings to be made within our own defence budgets that could soak some of this up. Firstly, we need to get DIO and the infra budget under control - the crazy prices we are paying for building and manintenance work is totally unaffordable (I estimate at least 40% could be saved by devolving the budgets back to Stations). Also we need to revisit the way that we sell our 'family silver' for next to nothing to a developers/builders who then doubles to triples what they pay for it and then charge us again top price to build us a 'new build' on our ever dwindling estate. The proposed sell off of Henlow and Halton is a good example. We'll be lucky to get £80M combined for both but the rebuild of RAFCAM, Recruit Trg Sqn and Airmans Command Sqn plus supporting buildings (like SLAM and extra SFA) and roads/paths is likely to come closer to £500M - where are we going to find a spare £1/2Bn?? Look at some of the ridiculous procurment decisions we make, to modify the L85 (SA-80) to A3 standard for the remaining 7 years of its life is going to cost nearly 2/3rds the cost of buying new weapons from Heckler and Koch (who are doing the A3 mod program anyway!). I could go on.

So yes, the recent dip in the Pound is unwanted but it is not quite the end of the world and could easily be managed within allocated resources.

LJ

[peter we]

Ignoring all that what if?, hope, time travel and averages, the reality is the MoD has £3 billion less.

And we have not even announced Brexit, never mind actually left.

[Melchett01]

LJ,

Nice post (especially on some of the assumptions on selling real estate!), which I think, if I have read you correctly broadly concurs with my thinking that all sides are guilty of pushing their own point regardless of any link to the reality of the situation. It was once explained to me that rather than considering currency levels as an abstract concept, think of them as the share price of the nation. In that sense it becomes slightly less abstract and you can start to understand how in the long term much more of the future is in our own hands, so things really could go either way. Of course, that doesn't sell copy or lead to fat fees, so it won't ever become the prevailing line of thinking.

Of course, it could mean utter disaster, and if you are correct on the L85 upgrade and barring any urgent requirement (I'm not sighted to any of that stuff), that's the sort of bizarre decision making that will cost us in the long run.

[Lyneham Lad]

'Focus' article in today's Sunday Times:-
Billions wasted on trophy kit leave a big hole in the realm’s defences (http://www.thetimes.co.uk/article/billions-wasted-on-trophy-kit-leave-a-big-hole-in-the-realms-defences-l8ltz09sz?shareToken=7ea41d1d9570056aec2fc8a34e3698d7)

snip:-
Examples uncovered by The Sunday Times include: warships so noisy Russian submarines can hear them 100 miles away; a frigate that now costs so much we can only afford to buy just over half the number envisaged; aircraft carriers that cannot defend themselves against the latest generation of ballistic missiles; and light tanks that are too big to fit into transport aircraft.

So why do so many British defence *procurement projects go wrong?

[Heathrow Harry]

not much new in that "Sunday Times" report TBH that hasn't been thrashed to death on here for several years................

I wonder who set them up for that article - I'd look at the Treasury - time to "crack down on waste at the Mod" perchance?

[andytug]

During the same period, despite cuts and austerity, Government borrowing has doubled. This from the party of economic competence, allegedly.

[Biggus]

There was another thread on here a few days ago on the same basic topic:

http://www.pprune.org/military-aviation/590213-uk-mod-exchange-rate-hole.html

On it I asked what I thought was a fairly basic/obvious question:

..Some (most?) of these procurement programs, such as F-35/JSF, run over many years. Presumably we don't pay all the costs up front, but in a series of payments, so do not exchange rate fluctuations effect costs throughout the life of the program, and who is to say that the exchange rate might not be more beneficial in a year or so, saving us money?..

Someone was kind enough to reply saying that I was correct in my assertion.

The dollar/pound exchange rate could get much better from our point of view a short while from now - so alleviating the problem. :=

Of course, it could also get worse!! :{

Talk of £3-6 billion black holes are based on a snapshot using today's exchange rate.

[Just This Once...]

It's a one-way valve unfortunately. If you 'save' money on your project due to unusually favourable exchange rates you don't get to keep it - HM Treasury sucks it back. If your project takes a major hit at a contractual payment point then you either swallow the hit in some way or buy less - HM Treasury is unlikely to help.

HMG does not hedge money either, as a commercial company would, as that would be akin to insider dealing on the UK economy! Anyway, the Treasury does not lose if the exchange rate rises or falls as the MoD takes the hit.

[Heathrow Harry]

BBC reporting NO RN attack subs cyrrently on station due to maintenance overruns................

[Dryce]

BBC reporting NO RN attack subs cyrrently on station due to maintenance overruns................


That's what happens when you don't build any for the best part of a generation let numbers drop and then have a small population of old hulls trying overlap with a small population of new hulls likely to run into teething problems coming into service.

We no doubt have a number of attack boats which is at least two or three down on the sensible minimum.

And the population of experienced officers in the branch drops as well. Makes for a small community - and it just takes a few extra to make early departures and you lose critical mass there too.

[tucumseh]

So why do so many British defence *procurement projects go wrong? Why do infinitely more succeed? Why does MoD and Government never ask this question?


SA80 upgrade? So the replacement didn't hit its In Service Date (2015)?:}

[Heathrow Harry]

Any logical defence policy would build an Astute every other year until the new Trident boats start to build - sure they cost an arm and a leg but they'll be in service for a very long time