CC,
Here you go. Rather than engaging with the problem now, this shameless accounting fudge will only allow further dilution. In a few years, it'll give the state more scope to trim the budget - at a time when (particularly at the moment) we should be spending, if anything, more.
Voxpop, if the military pension has always been by prerogative instrument, does this mean that now changes? I assume that the FT writer has got the terminology slightly wrong, it isn't 'just' the war pension being bumped to defence.
David Cameron has asked ministers to investigate if the intelligence agencies budget can be counted as “defence spending”, as Downing Street eyes creative accountancy to head off US criticism of military spending.
Amid anxiety in Washington that Britain’s defence budget will soon fall below Nato’s target of 2 per cent of gross domestic product, Mr Cameron has asked whether he can boost it without actually spending more money. Oliver Letwin, head of policy at Number 10, has been asked to consider what kinds of spending can be categorised by Nato as “defence” expenditure in order to keep the UK close to the 2 per cent target, one government figure said.
“If we need to get to 2 per cent of GDP, there is a question of whether you can increase overall spending by counting funding of the intelligence agencies as defence spending,” he said.
A second government figure confirmed that officials were looking closely at what Nato classifies as defence spending to see if different member states include different elements to meet their target. The future of Britain’s shrinking war chest has burst into the open as a politically sensitive issue despite efforts by politicians to avoid becoming embroiled in yet another awkward budgetary issue before May’s general election.
US officials — including army head Ray Odierno — have been unrelenting in their criticism of the sliding UK’s defence budget. The US sees the Nato target as symbolically critical: Britain is the only large European Nato power to meet its commitment to the alliance.
Sir Nick Harvey, a former Liberal Democrat defence minister, said he was told to expect “all kinds of dodgy weaving and creative accounting” when Britain’s defence spending is expected to dip below the 2 per cent target next year.
Ministry of Defence officials have already managed to boost the amount included in Nato calculations significantly this year. The ministry is to add war pensions, worth slightly more than £800m annually, to its Nato submission for 2015-16. This means UK spending will just meet the 2 per cent commitment this year.
UK defence expenditure could also be officially increased if troops are called on to be deployed overseas in greater numbers than anticipated. The Treasury has about £500m allocated for such an eventuality. Britain’s three intelligence agencies — GCHQ, MI5 and MI6 — are jointly funded from the single intelligence account, with the precise breakdown of spending classified.
In 2013-14 the SIA was allocated just over £1.9bn. It is likely to be one of the few national security budget lines protected in the next parliament. Nato pointed out that the alliance’s agreed definition of defence spending could only be amended by a consensus of all 28 members but there appears to be plenty of scope for flexibility in its interpretation.
GCHQ, for example, works very closely with the British military. The UK’s mission in Afghanistan, part of a Nato-led operation, involved the use of tonnes of GCHQ equipment. The UK’s contribution to the anti-Isis coalition is also heavily dependent on the agency.
Other Nato nations have also bent the alliance’s rules on calculating their expenditures. France only stopped including the gendarmerie in its defence metrics in 2009. Countries such as Greece, Nato critics say, flatter their statistics with massive pension commitments.
Sending large numbers of troops on UN peacekeeping missions — something the UK has not done for years — has also become a useful accounting wheeze for some nations: troops on deployment are paid for by the UN, allowing Nato nations in effect to double-count the numbers when it comes to costs.
The US has been critical of Britain’s defence spending plans: none of the main parties has promised to maintain the 2 per cent of GDP spending into the next parliament.
Samantha Power, the US ambassador to the UN, appealed on Tuesday to European governments to spend more. Conservative MPs will press home that argument in a Commons debate on Thursday. Mr Cameron has said the UK meets the Nato target and presided over an alliance summit in Wales last year where he persuaded other leaders to commit to spending 2 per cent of GDP on defence.
The prime minister hinted at his thinking on Tuesday in an interview on LBC radio. Asked about prominent figures raising concerns over defence spending, Mr Cameron said: “I have responsibility to make sure we make the right decisions about defence and other security spending. I look at these things in the round, so I am also concerned about the budget for MI5, the Secret Intelligence Service, GCHQ, counter-terrorism policing. To me all of these things are part of our national defence.”
Michael Fallon, defence secretary, will come under pressure to reaffirm Britain’s commitment to the 2 per cent of GDP target on Wednesday when he holds his first meeting with Ash Carter, his US counterpart, in Washington.