The Times:
Spy funds help Britain meet Nato cash pledge
Britain will meet a Nato promise to spend 2 per cent of national income on defence this parliament only by adding the budgets of MI5, MI6 and GCHQ into the mix for the first time, an authoritative study reveals today.
The Royal United Services Institute (Rusi) worked out that the proportion of money spent on defence would have fallen to 1.85 per cent of gross domestic product by the end of the decade without the inclusion of spy agency funds when calculating the Nato figure......... Professor Malcolm Chalmers, director of research and policy at Rusi and author of the report, set out how Britain had expanded a range of items included in the Nato formula to ensure it remains one of only five member states due to meet the 2 per cent target this year.
The 28-nation alliance has a list of criteria that countries are allowed to include when calculating defence expenditure, but until now the Ministry of Defence had not added war pensions, civil servant pensions, money charged from rent of MoD property and cash spent on United Nations peace-keeping missions. The inclusion of these items — legitimate under Nato rules — inflated Britain’s defence spending total by £2.8 billion, Mr Chalmers said.
Even if the government continued to include these new sources of funds each year, by 2020 or 2021 it would again fall to below the 2 per cent threshold, he said. This is because the chancellor only committed to increasing the core defence budget — the real benchmark for what a country spends on its armed forces — by 0.5 per cent each year at a time when the economy is forecast to grow annually at 2.4 per cent. The almost five-fold difference in growth rate will create a shortfall of £2.7 billion in 2019-2020 and £3.5 billion the following year when calculating defence spending as a proportion of 2 per cent of GDP, according to Mr Chalmers.
The intelligence fund, which covers the costs of MI5, MI6 and GCHQ, is set to total about £2.2 billion in the year to March 2021. A joint security fund that has been created by Mr Osborne is due to total £1.5 billion that same year. These two pots of cash would be enough to close the gap to the end of parliament, the Rusi report said..........