Dr Julian Lewis: I pay tribute to the hon. Member for Gedling (Vernon Coaker). Not for the first time, he has given great service to the cause of Defence. He was an outstandingly good Shadow Defence Secretary, and as long as there are people like him in the ranks of the Labour Party the prospects for a bipartisan approach to Defence remain excellent. I must extend that praise to all 11 Members from the four parties represented on the Defence Committee, every one of whom is strongly committed to the Defence of this country.

Until recent years, little attention was paid to a possible threat from post-Communist Russia, because for a long time after 9/11 counter-insurgency campaigns in third world countries were thought to be the principal role of the Armed Forces. However, we are now spending just £0.4 billion on operations of that type out of an annual Defence budget of about £36 billion. According to the 2015 SDSR, that budget should by 2020 fund 82,000 soldiers, more than 30,000 sailors and marines, and almost 32,000 RAF personnel, plus another 35,000 reservists. To these must be added some 41,000 civilians, many of whom, like those who serve in the Royal Fleet Auxiliary, are service personnel in all but name. Finally, there are Special Forces, as well as new units that have been created to deal with cyber-security and counter-propaganda. Then there is all the equipment, which currently comprises over 4,000 Army vehicles, including tanks and artillery; about 75 Royal Navy ships and submarines, including the nuclear deterrent; and over 1,000 fixed-wing and rotary aircraft. As a portent of things to come, the Services also operate a mixture of large and small surveillance drones and 10 unmanned hunter-killer aerial attack vehicles.

All in all, we still have a fairly full spectrum of military capability, and in absolute terms – as I am sure we would all accept – £36 billion a year is a considerable sum. Set in historical perspective, however, that level of Defence investment falls far below the efforts that we have traditionally made when confronted by danger internationally.

The Defence Committee published a report on Defence expenditure in April 2016. Entitled, Shifting the Goalposts?, it attracted attention for highlighting the inclusion of costly items such as war pensions and MOD civilian pensions at a time when Prime Minister Cameron and Chancellor Osborne were scrambling to meet the 2% of GDP benchmark which, as we know, was set by NATO as a minimum – not as a target – for all its members. The Government were entitled to include such items in their 2% calculations, but they had never chosen to do so previously. It was therefore clear that by resorting to a form of creative accountancy, we were no longer strictly comparing like with like in overall expenditure terms.

Our report was especially revealing in its tables and graphs, which were well researched by Committee staff. They showed UK Defence expenditure as a percentage of GDP, year by year, from the mid-1950s to the present day, and compared those data with the corresponding ​figures for spending on Welfare, Education and Health. We found that in 1963 we spent similar sums – about 6% of GDP – on both Welfare and Defence. Now we spend six times on Welfare what we spend on Defence. In the mid-1980s, the last time we faced a simultaneous threat from an assertive Soviet Union, as it then was, and a major terrorist threat in Northern Ireland, we spent similar sums – about 5% of GDP – on Education, on Health, and on Defence. Now we spend two and half times on Education, and nearly four times on Health, what we spend on Defence.

At the height of the east-west confrontation, in every year from 1981 until 1987, we spent between 4.3% and 5.1% of GDP on Defence. Between the fall of the Berlin Wall in 1989 and the failure of the Moscow coup in 1991, the Cold War came to an end. Consequently, and predictably, a reduction in Defence expenditure followed. That was known as the 'peace dividend' yet – this is the key point – even after it had been taken, and even as late as the financial year 1995-96, we were still spending not 2% of GDP, which is the NATO minimum, but fully 3% of GDP on Defence. That was without the accounting adjustments that have been used to scrape over the 2% line in the past few years.

To sum up, from 1988 when the Cold War began to evaporate, until 2014 when we pulled back from Afghanistan, Defence spending almost halved as a proportion of GDP. Now that we face a newly assertive Russia and a global terrorist threat, the decision to set 3% of GDP as our Defence expenditure target can no longer be delayed.

Toby Perkins: I have also looked at the statistics mentioned by the right hon. Gentleman, and he is absolutely right about the creative accounting. Even taking that into account, it seems impossible to reach the conclusion that we have ever spent as little as we currently spend on Defence in comparison with our GDP.

Dr Lewis: That is absolutely right. It is a measure of how far downwards our expectations were managed during the reductions in percentage GDP spent on Defence under the Blair Government and the Cameron coalition Government, that it was regarded as a cause for triumph and congratulation when it was finally confirmed that we would not be dropping expenditure below 2%. The matter had never been questioned at all prior to that period.

Mark Francois: I thank my right hon. Friend for giving way, and it is a pleasure to serve under his stout chairmanship of the Defence Committee – [Interruption.] I mean stout in personality terms.

In some ways, the situation is even more challenging than the one my right hon. Friend lays out. He has rightly given the figures in terms of GDP, but in recent years – as we heard in testimony from the Permanent Under Secretary – in almost every Strategic Defence and Security Review and Comprehensive Spending Review, the MOD has had to sign up to additional sets of efficiency savings, now totalling some £30 billion over time. Not only does the MOD have a constricted budget, it has had to find those efficiency savings as well, which makes the situation even more challenging.

Dr Lewis: My right hon. Friend speaks with great experience as a former Armed Forces Minister, and he made a considerable input to our recent report, Gambling on ‘Efficiency’: Defence Acquisition and Procurement, by making that very point.

Quite rightly, the hon. Member for Gedling [Vernon Coaker] emphasised the current process involving the National Security Capability Review, and he focused on the question of fiscal neutrality, which the National Security Adviser says he has been told to observe. When I challenged the National Security Adviser with that on 18 December, when he appeared before the Joint Committee on the National Security Strategy, he said,

“Well, it’s not as if the Defence budget isn’t growing; it is fiscal neutrality within a growing budget.”

He then did something else, which is indicative of a worrying trend: he lumped together the £36 billion that we are spending avowedly on Defence with all the other money that we spend on everything else related to security, and he started talking about a £56 billion budget. That lumping together of money for security and intelligence services, counter-terrorism and even the relevant aspects of policing with the Defence budget, is a form of sleight of hand that causes me concern. That is what I wish to address in the second half of my remarks.

We have a real problem in this country because the tried and tested system for strategic decision-making has broken down. In my years as a research student, my area of study was the way that Britain planned towards the end of the Second World War, and the early period after it, for what form of strategy we would need to deal with future threats. I was struck by the fact that there was a huge argument between 1944 and 1946 between clever officials in the Foreign Office who wanted to make the Anglo-Soviet Alliance of 1942 the cornerstone of our post-war foreign policy, and the Chiefs of Staff who wanted to prepare their assessments of what Britain might have to face militarily on alternative assumptions that that alliance might well continue – in which case all would be well – but that it might break down. There was a tremendous stand-off until 1946, when finally the Iron Curtain had descended and it became clear that the Chiefs of Staff, who had looked at the Anglo-Soviet alliance in theoretical terms and said, “Well it could work, but it might not”, had been right to be cautious, and the Foreign Office staff, who wanted to put all their eggs in the basket of being able to continue the wartime alliance into peacetime, had been wrong. I was very struck by the systematic way in which the strategic arguments were hammered out, and at the centre of it all was the Chiefs of Staff Committee.

The Chiefs of Staff Committee, as we all know, is made up of the heads of each of the three Services. The shocking thing that I have to say to the House today is that one can now become Chief of Staff of any of the three Armed Services – one can become head of the Royal Navy, or head of the Army, or head of the Royal Air Force – and yet have no direct input into the strategic planning process. This is all part of the lumping together of military strategic planning with national security strategies that are vague and amorphous and, above all, primarily in the hands of civil servants.

If the civil servants themselves were steeped, as they used to be, in the subject matter of their Departments, that would be less of a problem than it is today. But some years ago, it was decided that those in the senior ​levels of the Civil Service – which are, of course, peopled by very clever and able individuals; that is not in dispute – should be able to hop from one Department to another. One might be at a senior level in one Department and then go for the top job in another, including, for example, the Ministry of Defence. What we have is a combination where formerly specialist civil servants have become generalists and the professional military advisers – the Chiefs of Staff – have become more like business managers serving as chief executives with an allocated budget to administer to their Services. All their thoughts about strategy get fed through just one single individual – the Chief of the Defence Staff – who then has to represent all their views on the National Security Council. It is this melding together, this mishmash, of the military, the security and the civilian roles that is undermining what we need, which is a clear-headed and systematic approach to the strategic challenges facing this country.

James Gray: My right hon. Friend is making an extremely important point about the whole structure of decision-making within the Cabinet Office and the Ministry of Defence. Does he agree that he has not yet mentioned a very important element in that, namely Ministers? He has not yet discussed Ministers’ role in considering the strategy of the nation. Is it not particularly interesting that when Sir Mark Sedwill appeared before the Joint Committee on the National Security Strategy the other day, he let us know that the review that is currently being undertaken by his Department was commissioned during the General Election campaign, when presumably Ministers had their minds on something else? I would be interested to know exactly who it was who commissioned the strategy at that particular time.

Dr Lewis: My hon. Friend is absolutely right, and he made a very useful contribution to the questioning of Mark Sedwill on 18 December. The reason I have not really mentioned Ministers is that, frankly, Ministers do not seem to be having much of a role in this, either. What I did not say, because I did not want to dwell too long on it, is that the stand-off between the Chiefs of Staff and the Foreign Office in 1944 was finally resolved when it went all the way up to Churchill, who finally gave the Chiefs of Staff permission to continue doing the contingency planning for a possibly hostile Soviet Union that they wanted to do, and that the Foreign Office did not want them to do. The reality here is that there has been a loss of focus. There is no proper machinery, other than this rather woolly concept of a National Security Council, served by a secretariat, run effectively by the Cabinet Office.

In conclusion, what I really want to say is this. Constitutionally, we know what is right. That was confirmed when we spoke to the former Secretary of State for Defence in the Defence Committee and he was attended by a senior MOD official. We asked him,

“Is it still the case that the Chiefs of Staff – the heads of the armed forces – retain the right to go directly to No. 10 if they think the danger to the country is such that they have to make direct representations?”

The answer was: Yes, it is. But what is the point of their having that right if they are not actually allowed to do the job of planning the strategies and doing what they used to do as a Committee – serving as the military advisers to the Government? As my hon. Friend the Member for North Wiltshire (James Gray) says, ultimately, the Government always ​have the right to accept or reject such military advice as they get from the Service chiefs, but the Service chiefs ought to be in a position to give that advice.

The Parliamentary Under-Secretary of State for Defence (Mr Tobias Ellwood): My right hon. Friend is coming to his peroration, and I want to go back to his initial point, if I may try your patience, Madam Deputy Speaker. The important point, which was also raised by the hon. Member for Gedling (Vernon Coaker), was the comparison between Defence, Education and Health spending going back a couple of decades. Of course we have had the Cold War demise, but I would recommend that hon. Members read the Prime Minister’s speech at the Guildhall in November, which talks about the new threats that are coming round. I pose the question: as we try and passionately make the case for the necessary funding for our Armed Forces, would it be easier for that case to be made if the passion and enthusiasm for our Armed Forces on the doorstep, as we campaign for general elections and so on, was comparable with that for Health and Education? I pose that question because I think there is a role for all of us to play in confirming what status our Armed Forces should have in future.

Dr Lewis: I am grateful to the Minister for making that point in that way, and nobody could be doing more than he is, within the constraints of his office, to make the case. We all know that.

The reality is that Defence is always difficult to get funded in peacetime because it is analogous to paying the premiums on an insurance policy, and people are always reluctant to pay the premiums, although they are very glad to have paid them when the time comes to call in the policy because something adverse has occurred.

John Spellar: I thank my right hon. Friend the Chairman of the Committee for giving way, but surely this is the role of Ministers. It is the role of the Prime Minister, the Chancellor and the Secretary of State for Defence to be providing that leadership, setting out that strategic vision, and therefore the reason for that expenditure. That is where the leadership has to come from.

Dr Lewis: I agree, but I think it is something more important than that. They must have a proper strategic planning machine at their service; otherwise, they are just a bunch of individuals giving their personal opinions.

It may suit civil servants to sideline the military professionals – to reduce the uniformed contribution to strategic planning to the input of one individual, the Chief of the Defence Staff. It may suit them, too, to sideline the Ministry of Defence and reduce its contribution to a single strand of a so-called National Security Strategy, but it does not suit the national interest to have inadequate specialist military pushback against politicians with poor strategic grasp and a political bee in their bonnet. That is how disastrous own goals, like the Libya fiasco, come to be inflicted upon us, despite the warnings of the then Chief of the Defence Staff against overthrowing the Libyan regime.

A single military adviser, no matter how capable, cannot have the same impact as the combined contribution of a Joint Committee of the heads of the Armed Forces. So it is not enough just to set ourselves a 3% target for Defence expenditure, as indeed we must; it is vital also to ​recognise that our tried and tested machinery for making military strategy has been vitiated and largely dismantled. The Chiefs of Staff must once again be more than budget managers, stuck on the sidelines while politicians and officials call the shots and, as often as not, call the shots incorrectly.