Health, Education and the Police, all saw significant increases to their funding in Gordon Brown's Budget statement. It was no surprise that Defence was nowhere to be seen on the list of beneficiaries from the Chancellor's largesse. Opinion polls had made it clear that their was little political advantage to be gained from helping the hard pressed military with more money. The planned budget of £Bn 21.3 in 2000/01 and £Bn 21.4 in 2001/02 is a shade down on the expected outturn of £Bn 21.6 for the current year. There are three questions that arise from this disciplined approach to defence spending. Are the current strains in the defence budget critical or merely the usual in-year problems? How will the MOD manage its cash corset? What are the implications for commitments, capabilities and operations?
There are strains on the defence budget every year as costs, both of manpower and equipment, rise faster than inflation. When the budget appears not to be rising at all, this will inevitably mean that some difficult decisions are required. Currently, there are three additional factors which will cause greater pain: Kosovo, SDR and political initiatives. The lessons of Kosovo will require new spending on such things as stocks of precision bombs, and the procurement of all weather precision weapons. Replacement of insecure ground and air communications will have become much more urgent. The Strategic Defence Review of 1998 is still in the process of implementation. There are a number of radical pieces of restructuring which inherently carried risk in terms of timings and costs. The major move to a tri-service defence logistics organisation will undoubtedly have long term running cost benefits. However, it is a very complex process, and slippages will be costly. Indications are that this is beginning to cause additional budgetary problems. Conversely, while the anticipated efficiency savings were expected to be difficult, they are currently being achieved. There have been no lack of political initiatives to add to the troubles of defence planners. The offer, by Robin Cook, of 10,000 troops towards a UN rapid reaction force would be expensive if anyone at the MOD took it seriously. It will be more difficult to ignore the call for contributions to the new 60,000 man force for the EU, which was led by Tony Blair at Helsinki in December. There will be difficult decisions to take if the US reduces it presence in the Balkans, particularly if the Northern Ireland situation deteriorates at the same time.
To manage these difficulties, the MOD will adopt its usual approach of looking for savings measures to offset overspends and new requirements In one respect, its flexibility is now theoretically reduced with the separation of the equipment capital budget from the in-year running costs. However, if push comes to shove, there will doubtless be some movement between the two. We have already seen deferment of major equipment decisions, and some media spinning ahead of a decision to buy or lease fewer C17s than promised in the SDR. There will be great hopes that the major study into training, led by Vice Admiral Band, will find major savings. The stories about the army moving to the cheaper North from expensive Aldershot are indicative of the way thinking may go. Smart procurement may find it falls foul of the usual programme delay problems.
Will these difficulties affect our military capability? The strain of too many commitments and too few people is evident wherever one looks in the armed forces today. There are clear worries at senior levels that the many prolonged operational deployments are taking their toll, particularly in terms of retention of good people. Although recruiting in the army is better than it has been, outflow of experienced people continues across the Services. While defence may not be a high priority among focus groups at the moment, it will become a key political issue should British forces fail in a highly visible mission at some future date.