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Of 2% GDP, Mistakes and Procurement Thoughts By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.

It is unusual that the UK Ministry of Defence should be quite as hostile as it was yesterday refuting claims from the highly respected International Institute for Strategic Studies (IISS) think-tank that UK defence expenditure last year fell below the politically sensitive 2% of GDP NATO commitment target and which at the 2014 NATO summit in Wales all 28 members agreed to work toward. IISS said that only Greece and Estonia met the target and that the UK was slightly below these two countries at 1.98%. Responding, the UK MoD claimed that the IISS “figures are wrong and that our [the UK] defence budget is the biggest in Europe, the second largest in NATO and [that] is growing each year as we invest £178bn in new equipment”’.

So who is right in this rather unusual spat and why does it matter? The answer is that they are probably both right – IISS in its calculation based on the actual spending data that it had and the MOD because however much we might disagree that MOD pensions, spending on cyber security and expanding GCHQ at Cheltenham should come within what the MOD terms as spending on defence, everything that is included by the MOD as defence is well within NATO guidelines and rules.

To be fair, IISS defended the UK per se reminding that the ‘UK remained the only European state in the world’s top five defence spenders in 2016’. Today, at a NATO meeting of defence ministers which will also be the first that US Secretary of Defense, General James Mattis will attend we can expect both he and his UK defence counterpart, Sir Michael Fallon, to be heard calling on all NATO partners that do not do this already to increase spending on defence to over and above the minimum 2% of GDP. I note too, not surprisingly, that support for the UK Government came from NATO Secretary General, General Jens Stoltenberg yesterday as he apparently refuted the IISS claim and went on to say that his own figures showed that between them, Europe and Canada had increased their defence expenditure by 3.8% above inflation in 2016. To that my answer is that while several smaller NATO member countries, Canada and the UK had all technically increased spending on defence last year the jury is still sifting evidence to conclude whether Germany, France, Italy and Spain increased or decreased spending on defence last year.

Whether the MOD figure of our spending 2.1% GDP on defence is right or wrong, the central issue is that we need to be spending more – much more. In the year 2000 we spent 2.6% of GDP on defence, in 1990 we spent 3.8% of GDP on defence; in 1980 we spent 4.7%. I am not suggesting that we need to go back to the heights of ‘’cold war’ spending but given the circumstances we find ourselves in, given the level of increased threat, given the desire of Government to see Britain’s standing in the world at least maintained and given the specific weakness of our armed forces today particularly the Royal Navy in respect of personnel and capacity – not withstanding that some of the problems it faces today are self-inflicted meaning bad decisions taken in the past – we must increase spending defence.

Neither do I ignore the need to spend more on the Royal Air Force particularly in respect of training ability and across the various trades. The Royal Navy may be seriously short of sailors and engineers but the RAF is short of training capacity, of engineers and other very important skills as well.

We must move away from the idea that defence spending has to be done on a shoestring to a real strategy designed on foreign policy design and intention, homeland defence and security, defence of our overseas territories and assets together with the ability to play a full role in NATO alongside our allies. WE must ensure that have sufficient air and maritime capacity available at all times and remember too that it is the Royal Navy’s role to protect our trading routes as well as playing a vital role in policing the seas and carrying out the humanitarian role when required just as it is the role of the Royal Air Force to ensure that we can fully undertake the military air power role in all its many aspects and that it has sufficient capacity to do this.

Since I was a boy back in the mid 1950’s spending on health has risen from under 3% of GDP to almost 8% today. Similarly, spending on Overseas Development Aid has doubled to 0.7% while spending on welfare has risen from 4.5% of GDP to 12% today. For the record, spending on education has risen from 2.8% of GDP in 1955 to just over 5% today and to remind, during that same period (1955/6) spending on defence has gone from 7.1% of GDP then to the claimed 2.1% today. We are not getting something right here are – I rest my case accordingly.

General Stoltenberg’s comments about European NATO member states’ defence spending contributions ‘more generally’ have also raised eyebrows amongst some of his senior colleagues and not all agree that member states are getting the message. Closer to home and having suggested above that both IISS and the UK MoD are right in respect of this debate the reality is that it is a waste of time arguing anything other than the underlying debate that we are just not spending enough on defence.

No one here argues that defence should be anything other than affordable and that MOD and industry provider alike must always work hard to ensure that we get value for money. Neither deep down will any of us argue that defence today is paying for a very large number of mistakes made by those charged with its responsibility in the decades that follow the 1980’s. Rather than waste time talking about 2% the reality of what we should really be talking about is how and who is responsible for allowing Royal Navy capability to today be nothing short of crisis point, why four crucially important Type 22 warships were decommissioned so prematurely, why the two new aircraft carriers that are so crucial to fill the ‘Carrier Strike’ gap using STOVL aircraft were allowed to grow from an originally agreed 40,000 tons that was based on USS Wasp class carrier to the 65,000 ton ships that we will soon have and who was responsible for this?

For what it is worth in respect of reminding and in numbers of ship, in 1975 the Royal Navy had 60 Frigates, 10 Destroyers, 2 Cruisers, 3 aircraft carriers and 2 Assault Ships/Helicopter Landing vessels. It also had 43 what are now called Mine countermeasure vessels together with 14 patrol ships. Today the Royal Navy has just 13 Frigates, 6 Destroyers, 22 patrol vessels, 15 mine countermeasure vessels and 3 assault ships/helicopter landing platforms. Yes, within five years the Royal Navy will have (or is planned to have) both Queen Elizabeth class aircraft carriers in service and the Service also has significant submarine power today including SSBN’s, Astute and Trafalgar class submarines that are far more powerful than the submarines that it had back in the 1950 before the Polaris submarines arrived. I am sure you get the point though – there is insufficient capacity available to do the job.

While I disagreed with many aspects of the Sunday Times 5th February article ‘Billions wasted on Trophy Kit” there were several aspects within it that I could neither deny nor disagree. As I said in my own piece following my reading of the Sunday Times piece, some of what was said was extremely unhelpful, wrong and damaging but at the same time, it was a wake-up call to those empowered to run defence that many of the decisions they have made in the past were flawed and that today we or should I say UK defence, is paying a heavy price accordingly.

There are of course many aspects of defence that I am concerned and I include some that I would dare not even talk about. There is much that I would like to say but cannot – partly because these are the mistakes of history and partly because it is not my place to be judge, jury and executioner. Such views if I was to express them more loudly would reflect previous bad decisions by past governments and of how decisions related to defence procurement and operations had been allowed to become ‘decisions based on politics as opposed to real defence requirement’. I could write a book on the subject. Government of course is alone in being the primary participant in respect of blame as there are those formally in the military in senior positions that must also culpable or at least share some of the blame for where we find ourselves in defence today.

I find it hard to say that the system of UK defence procurement is broken today but that is what I really mean. And why is that? Not because of how it is operationally structured to ensure value for money but in how the whole process of defence decisions are made and in how we fund them.

I will finish by contesting that the UK Government must also realise that we cannot allow any further weakness of sovereign capability in defence. I can hardly argue that designing, developing and building defence equipment here in the UK is sometimes more expensive than buying off-the-shelf but I would argue in part that this is primarily due to small orders, interference in design to the point that the product is no longer exportable because it has been allowed to become too big maybe and unaffordable or that continual push back has increased the overall cost. Even so, we must enhance rather than weaken our design and development capability and we must encourage as opposed to discourage the ability to take on the degree of risk that this will inevitably involve. That includes scaling up as opposed to scaling down the government owned DSTL (Defence Science & Technology Laboratory) and putting more into the Defence Growth Partnership along with enhancing our ability to sell defence equipment abroad – the MOD Export Support Group and Department for International Trade Defence and Security Organisation.

CHW (London 15th February 2017)

Howard Wheeldon FRAeS

Wheeldon Strategic Advisory Ltd,

M: +44 7710 779785

Skype: chwheeldon




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