Daniel Korski

Will the defence budget rise, fall or stay constant post-2015?

As British helicopters pound away at Libyan targets, another battle is being waged inside the Ministry of Defence’s fortress-like building. The fight is over the post-2015 budget, and it is an arduous one.

After the uniform-creasing settlement the MoD got in the Spending Review last year, the Prime Minister said in the House of Commons on 19th Oct 2010 that while the precise budgets beyond 2015 would be agreed in future reviews, his “own strong view” was that the MoD would see “year-on-year real-term growth in the defence budget in the years beyond 2015.”

So far so good — the MoD budget may have to fall now, in line with other departments, but at least it will increase post-2015. Or will it? First of all, given the costs associated with the equipment programme, real-term growth could still mean cuts. In addition, two other pieces of information now in the public domain suggest that the MoD is heading for a decrease in spending.
 
First, as Pete has observed, the Office of Budget Responsibility report on Fiscal Responsibility has assumed that spending on defence will be “constant as a share of GDP after 2015-16.” The OBR makes a number of assumptions, which will be changed as the government changes its views. But it is nonetheless interesting to note that the OBR has reason to believe that defence spending will remain the same percentage of GDP after 2015.

Even more noteworthy is a recent NAO report into armoured vehicles. The NAO looked at the impact of the Strategic Defence and Security Review on the defence equipment programme post-2015 and seemed to conclude that cuts in the period 2014-2020 for armoured vehicles would stand at £2.014

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