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REAL TERM DEFENCE BUDGET INCREASES IN BUDGET?

17 Mar 04. In his Budget Speech the Chancellor said that, while “full announcements will be made in the Spending Review in July”, he could confirm that he proposed “real terms increases in Defence spending”.
Budget 2004 (the ‘Red Book’, released on Budget Day) confirmed annual Defence expenditure, in Resource Accounting terms, as:-£M (rounded)
2003/04 Estimate
2004/05 Plan
2005/06 Plan
Resource budget
32,300
31,600
32,500
Capital budget
6,400
6,300
6,900
Total Defence
38,700
37,900
39,400

Chart 1.1 in the ‘Red Book’ shows that the £37,900m for 2004/05 in Resource Accounting terms equates to £27,000m in “near cash” terms. The Chancellor’s Budget Day projections for the economy are based on forecasts for increases in Gross Domestic Product (GDP) and in inflation. GDP is expected to rise by 3.0-3.5% in 2004; 3.0-3.5% in 2005 and 2.5-3.0% in 2006. Inflation is expected to increase by 1.75% in 2004, 2.0% in 2005 and 2.0% in 2006. Comment: Spending Review 2004 in July will confirm spending plans for 2005/06, as announced in Spending Review 2002, and set new spending plans for 2006/07 and 2007/08. The Chancellor’s promised increases for Defence will not be known until July 2004.
An indication of the Chancellor’s priorities is given by the percentage of Total Managed Expenditure (TME) allocated to the four largest spending Departments:-

% TME
2003/04 Estimate
2004/05 Plan
2005/06 Plan
Social Security
27.3
27.0

26.2
Health
14.3
14.7
15.2
Education
12.9
13.0
13.1
Defence
8.4
7.8
7.6

‘Budget 2004’ is available from TSO and from The Parliamentary Bookshop (Tel: 020-7219 3890), as HC 301, for £45:00. Post-conflict (economic) support for Iraq is mentioned on page 127, but otherwise there is little of interest to the Defence community in the ‘Red Book’.(Source: DNA DEFENCE NEWS ANALYSIS, Issue 04/13, 22 Mar 04).

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