The Ministry of Defence’s budget has been “raided” for far too long and needs to grow, defence secretary Ben Wallace has said.
Wallace said the government should now consider reversing some of this decline due to the increased threats the UK is facing, which include the war in Ukraine.
The defence secretary expressed his preference for "real money" rather than efficiency savings, which he labelled a "sort of fantasy”, in an interview with Sky News.
Departments are having to scale back on spending due to the surge in inflation over the last two years which has devalued their budgets.
The MoD’s funding was not protected from inflation, which is currently 10.1%, in November’s Autumn Statement. Chancellor Jeremy Hunt committed to protect the increases in departmental budgets in cash terms for two years, and then grow resource spending at 1% a year in real terms in the three following years. Capital spending will be frozen in cash terms 2025.
Hunt said this would mean departments will have to make efficiencies in the next two years to deal with inflationary pressures. Chief Treasury secretary John Glen and Cabinet Office minister Jeremy Quin have been tasked with running a new review to drive those “efficiencies”.
The MoD was aiming to make £15.5bn in efficiency savings over the next ten years as part of its equipment plan prior to this review. But Wallace suggested these savings, which involve cutting spending without reducing services, were no more than a “fantasy” in his interview yesterday.
He said when Boris Johnson and Rishi Sunak, then prime minister and chancellor, gave defence a £16bn budget boost back in 2020, “it was the first real turning of the corner with real money rather than fantasy efficiency savings and things like that, the things that were supposedly the way they used to fund that sort of increase”.
The increase has allowed the MoD “to genuinely start modernising our armed forces, which has been desperately needed” after years of being “raided”, Wallace said.
Since the end of the Cold War there has been “a consistent, effectively raiding of the defence budget over time”, Wallace said. The MoD’s budget has fallen from 4.2% of GDP to 1.9% of GDP from 1991 to 2018 and is now 2.2%.
“Maybe a peace dividend was appropriate straight after the Cold War,” Wallace said. “We had huge armies in Europe. The Cold War finished and it was right that the taxpayer who'd invested in defence got a return on that.
"The problem is that has continued for far too many decades as the threat has increased. And I've been very open that the threat has increased. And just like other parts of government, when demand threat increases, we should reconsider how much we fund it.”
‘An uphill battle with the Treasury’
Wallace said he would use the growing threat on the world stage as ammunition to try to get more funding in negotiations with the Treasury but this would be a challenging to achieve.
“It’s always an uphill battle with the Treasury, no matter what department you’re in,” he said.
“It’s the right thing that a secretary of state will argue for an increase to meet their priorities and, of course, between now and the budget I’ve got lots of time and lots of meetings with the chancellor to make sure that we try and come to a deal on it,” he said.
According to reports, Wallace is looking for between £8bn and 11bn from the Treasury. However, the minister refused to discuss what figure he is seeking.
The Treasury is “reluctant to hand over more money to the MoD, given the department’s recent history of wasteful spending”, according to The Times. Asked about this, Wallace said the Treasury “might make the point that we waste money” in negotiations.
In 2021, the Public Accounts Committee said the MoD’s system for buying military equipment was “broken” and wasting billions of pounds.
"Historically, the MoD has bought into equipment that I think hasn't necessarily delivered," Wallace admitted, but he pointed the blame at his predecessors.
“I’m fixing projects that were commissioned as far back as the Labour government,” he said. "You can’t hold the sins of my forefathers against me. I’m determined to make sure we change those practices.”
Wallace picked the troubled £5.5bn Ajax armoured vehicle programme, which was initially commissioned in March 2010 but has been delayed multiple times and beset by safety issues, as an example. He said he thinks the programme is now “back on track” after the vehicle passed a first set of trials.
He added that the MoD has delivered a balanced budget for two years running under his watch and is "heading towards three".
“That’s the first time I think almost since the war that we’ve managed to get those results consistently,” he claimed.