For a while, it looked as though the MOD might be singled out as the only department to suffer a reduction in budget in the great CSR bonanza. The traditional series of inspired leaks about equipment and manpower problems in the armed forces had had their usual negative effect on the Treasury and other Departments. The NAO report on the continuing costly mismanagement of equipment procurement by the MOD gave extra ammunition to its enemies. Yet there is a genuine problem with personnel retention in some key capability areas; and every indication that morale in combat units continues on a downward path. The high profile march of General Sir Charles Guthrie across the road to Downing Street, to deal directly with the Prime Minister, was just what the troops needed. He was widely reported as making it clear to Tony Blair that the Defence Budget needed to be increased. Of course, as we now know from the Prime Minister's leaked minute, he was preaching to the converted. What did this great alliance of Prime Minister and Chief of Defence Staff achieve in the battle of the budget? The defence budget has been given an exciting 0.3% real increase each year for the next 3 years. Assuming that the economy prospers as forecast, this will mean that Defence will continue to take a smaller and smaller share of GDP.
A rise in real terms, however small, is obviously more welcome to the armed forces than the cuts that have been implemented every year since 1987. Yet this will not solve the problems. To an extent, the severity of the problem has been recognised by the objectives which have been set in the CSR. Manning requirements for the Royal Navy and the RAF are not to be met until 2004. Yet in evidence earlier in the year to the Defence Committee, the RAF made it clear that it could not solve its fast jet pilot shortage within three years whatever the resource assumptions . For the Army, the target set is to meet 97% of the manpower requirement by 2004. That equates to a continuing shortfall of 3000 soldiers at a time when overstretch is the greatest concern of army leadership. In the convoluted world of objectives, we have also a target to "Ensure that by 2005 a minimum of 90 per cent of rapidly available military units are at required states of readiness." Presumably this means that 10% of our rapid reaction forces will be neither rapid nor reactive.
The big problem for the political and military leadership in the MOD is that defence costs rise far faster than normal inflation. Equipment costs have risen at many times the RPI, and smart procurement will at best only slightly change this. The bleeding of manpower will mean that labour costs will also rise, and the CSR acknowledges the importance of funding people programmes. The tiny increase in defence spending will be swallowed up quickly by the thousands of cost rises that occur every year in the defence programme. Like all its predecessors, the Strategic Defence Review will prove unaffordable and something will have to give. It may be Eurofighter deliveries (either in number or in timing), or it may be the ambitious aircraft carrier plans. Either way, the main hope for the UK continuing to deliver real military capability must be in deepening its co-operation with its European allies, who all have similar problems.