Deficit-Conscious Government to Trim Britain’s Defense Budget by 1.5 Percent

by Dan Darling, International Military Markets Analyst,  Forecast International.

The surprising triumph of the Conservative Party in the British elections last May certainly did not herald a new dawn for defense in any definitive sense. Instead, heading down the stretch of the election season it was becoming ever more apparent that regardless of which party emerged triumphant, a reckoning over defense spending loomed.

With the center-right Conservatives now able to rule without the need of a coalition partner – as they did during Prime Minister David Cameron’s first term with the Liberal Democrats as junior party, they are free to set the terms of the agenda going forward. Atop the Cameron government’s list appears to be continued deficit-cutting, as exemplified by a broad round of expenditure cuts totaling GBP3 billion ($4.61 billion) announced by Chancellor of the Exchequer George Osborne to Parliament on June 4.

Included in that GBP3 billion total is a Ministry of Defence requirement to reduce its GBP34 billion ($52 billion) budget by GBP500 million ($768 million), or roughly 1.5 percent. While areas such as health, education and international aid remain ring-fenced and therefore absolved from the cuts as per the government’s approach, the remaining departments will be required to implement their savings during the current fiscal year (2015-2016). The announcement comes as a bit of a surprise, as departmental cuts were expected to be undertaken in the next fiscal year (beginning on April 1, 2016).

How the required efficiency drive will affect defense in the near term remains a matter of speculation, though the MoD insists that the new budgetary agreement will not hamper current operations, manpower levels, or the baseline budget itself. This may indeed be true, but there are indications that disruptions in equipment funding are in the offing. The timeworn MoD practice of delaying modernization programs and/or subjecting them to equipment cuts – otherwise known as “salami slicing” – thus appears to be the preferred option going forward.

The other question raised by the 1.5 percent cut in spending is whether the 2015-2016 budget will end up meeting the NATO minimum requirement that each member allocate 2 percent of annual GDP toward defense spending. Though that largely symbolic figure is met by only a handful of the Alliance’s 28 members, Britain has long stood as one of the funding exemplars. That example was already under threat prior to the fresh cuts, with local media reports claiming the government had sought ways in which to fudge its defense spending level to NATO through measures such as moving pension funding into the core budget figure.

There are also indications that another wave of requisite defense budget reductions will follow in the upcoming three-year comprehensive spending plan, expected to be released by the government later in the year. If such cuts materialize, the fiction of a 2-percent-of-GDP funding level will be harder for the Cameron government to sell to allies concerned over far-reaching impacts to the force readiness and operational scope of the British armed forces.

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