Bloomberg News

U.K. Risks NATO Pledge If Defense Budget Cut, Panel Says

March 06, 2013

Chancellor of the Exchequer George Osborne risks breaching a NATO agreement to keep U.K. defense spending at 2 percent of gross domestic product if he cuts the Ministry of Defence budget, a panel of lawmakers said.

Parliament’s cross-party Defense Committee said the current military spending level of 2.6 percent of GDP would be at risk if Osborne insists on greater cuts to the military as part of a further 10 billion pounds ($15 billion) of savings across the government.

“We believe that it is vital that defense spending remains at more than 2 percent of GDP in line with the U.K.’s NATO commitment,” the panel said in its report published in London today. “We recommend that the MoD and the Treasury ensure that defense spending does not fall below 2 percent of GDP in the next spending review.”

Defense Secretary Philip Hammond is in the midst of a fight to protect his department’s budget after 2015, saying the number of military personnel will have to be cut if Osborne forces spending reductions. Today’s report demonstrated that the U.K.’s long-standing international commitments may also be at risk.

Prime Minister David Cameron has pledged to protect the defense-equipment budget, which will go up by 1 percent in real terms from 2015. He has not given any such promise for the rest of military expenditure. The equipment budget accounts for about 45 percent of defense spending.

Spending Plans

Figures published by the House of Commons show that in the fiscal year ending in March 2015, 2 percent of GDP would amount to 33.8 billion pounds. In that year the U.K. will be spending 33.9 billion pounds on defense, a figure that doesn’t include operations in Afghanistan.

Cabinet ministers are in discussions with Osborne, who will present his annual budget to Parliament on March 20, about their departmental spending for 2015-16. Home Secretary Theresa May, a Conservative like Hammond, is resisting cuts to her budget, while Business Secretary Vince Cable, a Liberal Democrat, says he believes taxes should rise to tackle Britain’s record debt.

“This is a stark warning for the government,” the opposition Labour Party’s defense spokesman, Jim Murphy, said in an e-mailed statement. “As the budget approaches and a Cabinet row over further defense cuts deepens, the country will want real reassurances that international commitments will be met.”

Hammond blames the previous Labour administration for leaving the defense budget with a black hole.

“For the first time in a generation, we have a balanced budget and fully funded equipment plan to make sure our armed forces get the equipment they need,” he said in an e-mailed statement in response to the panel’s report today.

To contact the reporter on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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