Thank you for giving me the opportunity to contribute to the debate, Mr Speaker. Let me also pay tribute to Sir Edward Leigh and Dr Lewis for their efforts in securing the debate, and for their persistent scrutiny of the Government on defence matters, which has been of long-standing note in the House.
It is interesting to follow Douglas Ross, whose constituency is the home of the Royal Air Force in Scotland—although, sadly, it has been much diminished since only a few years ago, when Kinloss was home to the RAF’s fleet of marine patrol aircraft. That yawning capability gap is just one of the many litanies of defence cuts that we have seen in the past few years, so I do not entirely agree with the hon. Gentleman’s glowing review of the trajectory of British defence capability in recent years. That speech aside, however, I have been struck by the consistent level of shock and dismay expressed about the extent of the reduction in Britain’s defence capabilities.
It is an established fact that there has been a steady decline in defence spending as a percentage of GDP. It has fallen from 2.4% in 2011 to 1.9% in 2016. Not only has it declined every year under the present Government, but it is lower than it was in any year under the last Labour Government, which rather puts paid to the mythology about Labour’s defence record. Those figures, however—damning as they are of the Government’s real commitment—belie the true criticality of the situation. A recently published letter from former defence chiefs described the 2% target as “an accounting deception”, and added:
“Most analysts…agree core defence expenditure for hard military power is well below 2%.”
As has already been pointed out today, the inclusion of pension liabilities and other elements that were previously excluded from core defence spending suggests that what we are truly spending is much less than 2%. I welcome the commitment by the Secretary of State to making the 2% a floor rather than a target, and I hope that we can reboot our spending to increase the percentage substantially in the longer term.
I intend to stick to some essential points to which I hope the Minister will respond. Not only is defence spending well below the 2% minimum target, but its effective purchasing power is being eroded year on year. The defence inflation rate is running well above the national rate. In 2015-16 the defence inflation rate was 3.9%, the highest rate since 2010, while the national GDP deflator was just 0.8%. We only know that because the Ministry of Defence calculates the figures in conjunction with the Treasury, but, as the defence analyst Francis Tusa recently noted, the MOD and the Treasury stopped calculating them last year, so the visibility of the real purchasing power of defence has now been lost. We must recover that visibility as a matter of urgency, because it is the only way in which we can really scrutinise the trajectory of defence purchasing power. I hope that the Secretary of State will commit himself to discussions with the Treasury about the reinstatement of the calculation, because it is vital for us to have the information in order to plan ahead.
In recent months the Army has been cut by a fifth, wages have been frozen for a sustained period, and—as we heard from the hon. Member for Gainsborough—no Royal Navy ships were on patrol in international waters over Christmas, which is shocking and unheard of in recent history. All that can be attributed to the funding gap of £21 billion in the equipment programme, which shows how underfunded that programme is, and reveals the gap in defence spending overall.
I referred earlier to the relentless decline in defence spending in recent years. It peaked at £45 billion in real terms in 2009-10, the last year of the Labour Government. Although it has been suggested today that there is currently a £10 billion gap, I calculate that if the trajectory of an average of, say, 1.7% had been maintained rather than cut, we would have seen real-terms spending of £53 billion by 2020 rather than the £37 billion that has been projected. According to my calculation, the real funding gap is £16 billion rather than £10 billion. Members may feel free to correct me, but I believe that if we extrapolate the trend of defence spending before the cuts started in 2010, we see substantially more defence spending. Perhaps that shows just how critical the situation is, and demonstrates the reality of the root cause of the cuts.
The present position is both absurd and depressing. We know what the solutions are, and addressing them is a matter of political will. The key themes of the debate have concerned the chronic underfunding of defence, and the failure to recognise the uniqueness of defence industrial capability and understand how we can get the most out of it. The hon. Member for Gainsborough asked whether we were getting the bang for our buck that we ought to be getting, and what capability we received per pound in comparison with our peer countries around the world. That is a critical question, and I think that we, as a country, should investigate it. How can we secure maximum capability? I suggest that we can largely blame the way in which defence is financed.
When I was in the shipbuilding industry, we designed and built complex warships such as Type 26 frigates. We were massively constrained by the arbitrary limits placed on capital expenditure. Like many other Members, I take issue with that. When a programme of that kind is being commissioned—possibly the most complex and the largest-scale defence equipment programme, indeed the largest-scale engineering programme, undertaken anywhere in the world—the imposing of arbitrary annual limits on spending is ridiculous. We ought to finance such programmes in the same way as we finance other critical national infrastructure programmes, such as HS2, Crossrail and the Olympic games.