Defence Expenditure (NATO Target) Bill — House of Commons, 2015-10-23
Topic: Defense
Philip Martin Dunne (Conservative, Centre-right): I am delighted to welcome the hon. Gentleman’s intervention, and I am sure his Front-Bench colleague, the hon. Member for York Central will be as pleased to see him here supporting her. I am amused by his reference to what President Reagan said. In answer to his question, I should say that we are already delivering. It is important that we should deliver in a transparent way and I shall come during my concluding remarks to highlight the visibility of the 2% commitment to NATO and how it is assessed The defence budget, alongside other departmental budgets, is already approved by Parliament through the estimates process. I was highlighting some of Parliament’s other means of scrutinising defence spending and the proportion of Government revenues spent on defence. The Treasury is content that the estimates process is sufficient for setting in-year budgets. It is our strong view that the Government must safeguard their ability to retain financial flexibility to set forward budgets in line with the policy priorities of the day. The Bill would reduce the financial flexibility available to any Government of the day to set forward budgets in line with policy priorities Hon. Members are expecting me to conclude my opening observations. I will cite a quotation from a bit earlier than President Reagan’s. Winston Churchill said: "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." I shall take a few moments to respond to questions posed by my hon. Friend the Member for Aldershot about definitions. The definitions that we have used to meet our NATO spending commitment are not ours, but NATO’s. From time to time, like all member states, we make updates to ensure that we categorise defence spending fully in accordance with NATO’s guidelines. That is important, not least because it helps NATO compare like for like across the alliance I have touched on two aspects from the summer Budget that will help us meet those targets. The Chancellor announced two increases in defence budgets for the coming years of this Parliament. First, there was the 0.5% real- terms increase each year, and secondly, the opportunity to bid into a new joint security fund, alongside security agencies, that would reach £1.5 billion in 2019-20. My hon. Friend asked how much of that the MOD could secure to include within the 2% calculation. I am afraid that I cannot give him the answer today, but I can tell him that, as I said in reply to an intervention, the profiling and allocation of the fund are decisions for the SDSR so we will know before too long. However, we will be able to include within the definition the share of the fund secured by defence in our submission to NATO, although we cannot tell what the proportion will be until we know what is in the fund.[Official Report, 29 October 2015, Vol. 601, c. 1MC.] Our 2015-16 NATO return included some categories of expenditure that we had not included in previous returns. I should like to address that issue, which goes to the heart of a concern behind the debate today. One of the items was MOD-generated income. I should like to explain what that is. The defence budget, £34.6 billion this year, is provided by the Exchequer to the Department; it is our core budget. In addition to that, the Department has for many years generated income that has not previously been declared to NATO although it is entirely legitimate to declare it because it is extra money spent on defence I draw my hon. Friend’s attention to the MOD’s annual report and accounts; I am sure he is one of the few Members to read it avidly each year. I happen to have the accounts for the year 2014-15 in front of me. In that year, the MOD generated just over £1.3 billion of its own income, as is clearly shown on page 143, table 6 of the report. That includes, for example, receipts from renting housing out to military personnel. Those living in married quarters pay for that benefit and we use the cash that comes into our coffers to spend on defence outputs. I am sure my hon. Friend would agree that it is legitimate to include that money in our returns to NATO.