Liaison Committee Chairman (Dr Sarah Wollaston): We are going to move on to another area – Defence expenditure. We will start with Dr Julian Lewis. For those following from outside the room, there is now a graph on our website that Dr Lewis is going to refer to.

Q122 Dr Julian Lewis: Thank you for coming this afternoon, Prime Minister. We are constantly told that Defence is the ‘first duty’ of Government, and you personally have a strong record of securing the renewal of the nuclear deterrent, at one end of the military spectrum, and investing major resources against cyber, hybrid and terrorist threats, at the other.  However, the Defence Committee and the Public Accounts Committee have identified a ‘black hole’ in the Defence equipment budget, which, unless it is filled, puts at risk the conventional Armed Forces in the following way. If that black hole is not filled, we could lose 11,000 soldiers, 1,000 to 2,000 Royal Marines, one or both amphibious assault ships, several frigates, several dozen helicopters and about 80 armoured vehicles.

If Defence is indeed the first duty of Government, why is it possible to find an extra £20 billion a year for the Health Service, and not even one-tenth of that amount needed to fill a black hole in the Defence equipment budget that puts the future of our conventional Armed Forces at risk?

The Prime Minister: As you will know, we have agreed that we will spend around £180 billion on Defence equipment and support over the next 10 years. That enables us to have a joint force for maritime task group, centred on the Queen Elizabeth-class aircraft carrier with the F-35 Lightning combat aircraft; a land division with three brigades, including a new strike force; an air group of combat, transport and surveillance aircraft; and a Special Forces task group. 

We also continue to develop and invest in new conventional capabilities, as I am sure you will know. The F-35 Lightnings are now flying out of RAF Marham in the UK. We continue to prepare to receive nine new Boeing P-8 maritime patrol aircraft. The first of our eight new Type 26 frigates – HMS Glasgow – is undergoing construction. As you know, the manufacture of the new Dreadnought-class nuclear armed submarine is under way. The Army is accepting the £4.5 billion Ajax family of armoured vehicles. There is the ongoing development of a new mechanised infantry vehicle. There is a significant commitment by this Government to Defence equipment and support over the next 10 years.

Q123 Dr Lewis: The problem is that the equipment project is not affordable without an injection of further cash. I have let you have a couple of tables and, if you wouldn’t mind, I would like you to look at the one that shows what has happened to Defence as a proportion of GDP.  You didn’t mention the much-trumpeted fact that we are standing fast by the 2% of GDP NATO minimum commitment; but, in reality, the last time we were in a confrontational situation with Russia, coupled with a major terrorist threat, was in the 1980s.

If you look at the graph on the other side of that sheet of paper, you will see that in that period in the 1980s, we were spending roughly the same amount on Defence, Education and Health. That was not 2% of GDP, but always between 4.5% and 5% of GDP.  Now we still spend about 4.5% to 5% of GDP on Education, but we spend 8% of GDP on Health: so, we are spending four times as much on Health as we spend on Defence, and we cannot afford the Defence equipment programme. Why cannot more money be found for the first duty of Government, when £20 billion is being found for the NHS, which already has a multiple budget in comparison with the Defence budget?

The Prime Minister: As you know – you’re right, I didn’t reference the 2% of GDP – we are committed to increasing the Defence budget every year by 0.5% above inflation, so extra money is being put into Defence; but I would say there is a need, and this is where the Modernising Defence programme comes in, to ensure that the money we are spending on Defence is being spent as effectively as possible, and is being spent in the areas of the capabilities that we need. I continue to believe that it is important.

You have referenced the spending on the National Health Service; I believe that is important. I believe that as we see the changes that are taking place, and the increased pressures that come from aspects such as demographics in relation to the Health Service, that it is important that we have made that commitment to the Health Service. 

We have made commitments to Defence and in the Modernising Defence Programme we are looking at both ensuring that money is being spent as well as it can be, and asking the question about what capabilities are needed for the future. 

Q124 Dr Lewis: It is a fact that we have already had one serious round of defence cuts, in the 2010-15 Government, and it was only after that that we got anywhere near coming down to the 2% bare minimum. The sort of arguments you are giving me today are the ones that I have heard time and again from previous Defence Secretaries in office, including Sir Michael Fallon.  Sir Michael Fallon is now freed from the constraints of office and he is saying, quite clearly, that we need to be spending 2.5% of GDP by the end of this Parliament, if we are not going to be sucked into this black hole in the Defence equipment budget.

In reality, if you look at the figures, traditionally we always spent a much greater proportion of GDP on Defence than on these other areas, in terms of the increases that they are receiving compared with ours. The increase you are talking about will take us up from, say, 2.18% of GDP to 2.19% of GDP; but, unless we get up to about 2.5% of GDP, we will have these major equipment and personnel cuts. You do not want that to happen, surely?

The Prime Minister: What I want to ensure is that we have the Defence capabilities – the Armed Forces – that are what we require in order to meet the threats that we are dealing with. We are a leading Defence nation; we will continue to be a leading Defence nation. And the Modernising Defence Programme is precisely about looking, as I say, at the question of what capabilities we need to deal with the threats that we face, alongside making sure that the Ministry of Defence is a Department that is spending its money as effectively as it can and should be. 

Q125 Dr Lewis: Finally from me, if you would kindly look at the other table that you have there and the column for the 1980s, which, as I say, was the last time we were confronted by an assertive if not aggressive Russia, you can see there that in the first half of the 1980s we were spending just over 5% and in the second half of the 1980s just over 4.5% of our GDP on Defence. Our NATO European allies were spending significantly less – just over 3.5% and just over 3% – in each of those periods.  The United States, by contrast, was spending significantly more – nearly 6% in the first half of the 1980s and over 6% of their much larger GDP in the second half of the 1980s.

So, will you accept that it has always been the case that we have significantly outspent our European NATO allies, and that that is one of the reasons why the Americans have been prepared to put so much extra in to defend Europe from threats from the East – because we have done more than our fair share, and shouldn’t we continue to do so? 

The Prime Minister: We are currently one of the few member states sitting around the NATO table, as you will know, that meets the 2% commitment for the GDP spend on Defence and that also meets the 20% commitment – that 20% of that budget be spent on equipment. We have been working alongside the United States, as I did last week, to ensure that other countries sitting around that table actually meet their commitments and recognise the importance of meeting those commitments in the future. I think the United States also looks at the capabilities that we are able to bring to the table in terms of Defence capabilities and we obviously have an important relationship with them, but we also have an important role to play in the defence of Europe.