The real culprits must be some combination of defence inflation and inefficiency. As I understand it, defence spending in real terms (ie AFTER allowing for inflation) is not that much less than it was in 1991. In 2010 it was about the same and has dipped slightly since.
Yet the difference in what that money buys is eyewatering - eg 7 combat sqns down from around 30; 19 frigates and destroyers down from around 50; 7 non-SSBN submarines down from around 25; and around 160,000 total personnel down from around 306,000.
You pays your money and you gets a lot less (what you do get is more capable, unit for unit, but then again it can't be in two or more places at once).