This is part of an individual contribution to the Government’s current Strategic Defence Review
The current Strategic Defence Review has a thankless task: with existing international conflicts and tensions threatening to degenerate into all-out war and unprecedented budget restraints at home, now is perhaps not the best time to be holding a review of our depleted armed forces.
Some statistics highlight the problem: At the time of the Falklands War, we spent 5.2% of our Gross Domestic Product on our military. Today, thanks to four decades of cuts in military spending by politicians of both Labour and Conservative parties in their quest for what was described at the time as “the peace dividend”, defence expenditure is now only 2.3% of GDP. This is despite the fact that the World today seems even less secure than it was in 1982.
It seems to be accepted that much of our military is dangerously depleted. It is a sobering thought that, while we wring our hands over how long it will take us to achieve 2.5% of GDP on defence spending, Poland is currently spending 4% of GDP and Ukraine 37%. One of the unenviable tasks for the Review is to find a way of clawing back some of the aforementioned peace dividend.
It doesn’t help that the National Debt has just exceeded 100% of Annual GDP, reflecting the fact that we have been spending beyond our means for decades. I believe that the public know this and, indeed, were expecting to pay more taxes to pay back the estimated £310-£410 billion expended on COVID. Instead the blandishments of Conservative and Labour manifestos last summer prevented an open and honest debate about public spending and instead contained promises not to increase mainstream taxes that are now well-nigh impossible to break.
Moreover, while we try to shore up our fortifications, we must also somehow invest heavily in offering all the peoples of the World hope for the future by mapping a well-publicised pathway towards a peaceful alternative to what we currently endure, a goal everyone can aspire to and work towards. At the moment, this simply does not exist. We must start with a narrative which is known to, and supported by, the British public.
We need defence for the same reason we need a police force – it provides protection against the darker side of human nature. However, while there will always be human depravity, there are measures that can be taken to contain crime and reduce the level of enforcement necessary. The rule of fair law, freedom of thought and action, and equality of opportunity and the right to participate in government are arguably all factors which minimize domestic criminal activity and constitute what is known as “liberal democracy”.
Aside from domestic benefits, liberal democracy has advantages on an international scale inasmuch as free nations tend not to let disagreements with each other degenerate into war and are able to co-operate with each other because their systems of government and aspirations of their peoples are similar. So it makes defence sense that as many as possible enjoy the benefits of liberal democracy.
Unfortunately, the latest Economist Democracy Index indicates that barely 8% of the World’s population enjoys the freedoms we Brits take for granted and so it follows that the World needs a global body to champion defence of liberal democracy. I believe the answer lies in a re-vamped globalised NATO, currently the most successful defence alliance in the World, whose Treaty Preamble already commits it “to safeguard the freedom, common heritage and civilisation of their peoples, founded on the principles of democracy, individual liberty and the rule of law”.
There are some flies in the ointment: NATO is currently too Eurocentric; some members’ liberal democracies leave much to be desired; several members are not spending 2% of their GDP on defence; above all, NATO’s over-reliance on the USA’s resources is testing Washington’s patience. NATO needs to be more useful to America, with an expanded membership to include nations like Japan, South Korea and Australia. A change of name would be needed to herald NATO’s new global status. Perhaps we should go for G.O.L.D., a Global Organisation of Liberal Democracies.
Our World is changing at bewildering speed as hundreds of millions of people in a host of developing nations demand a standard of living that we take for granted. If we Brits are to survive, let alone prosper, we must make common cause with those nations who think as we do, while bringing into the fold other nations whose people aspire to our values and freedoms.
* David Green is a lifelong liberal and the publisher of the Supervote Website .
17 Comments
I think this an excellent and critical time to be conducting a strategic defence review, and we should be doing so at a faster pace than the current 12-ish month timetable. The points about how the defence budget has been cut over the years are well made, but in the absence of the public and political will to accept the hardships an immediate return to 5% GDP would imply, the alternative is a genuinely realistic and ruthless adjustment of priorities.
We cannot, on the current and likely future budget, be a ‘global power’. If the choice is between boosting homeland defence to an adequate level, or maintaining a vestigial expeditionary capability to ‘project power’, homeland defence must win. That means making choices that will be deeply unpopular in some quarters to free up funding to ensure that we have more defence capacity and capability in the 2-3 year time frame.
And if we are to lose our expeditionary capability, then a global network of alliances beyond Europe and the North Atlantic becomes all the more important.
David Green,
It was very disappointing to read in your article the neo-liberal ideas that running a deficit is always a bad thing ‘spending beyond our means for decades’ and of the need to ‘pay back’ the billions ‘expended on COVID’.
The UK has had a national debt since 1692 and the way to decrease it as a share of GDP is to have an economic growth rate above the percentage of the deficit to the national debt. From this graph (https://en.wikipedia.org/wiki/United_Kingdom_national_debt#/media/File:UK_debt_as_GDP_percent.png) you can see that 100% of GDP is lower than the debt was between 1783 and 1853 and between 1923 and 1958. It can also be seen that national debt percentage to GDP generally fell from 1951 to 1993 and again, what looks like, between 2000 and 2007.
(I remember sometimes watching the quiz show ‘Going for Gold’ hosted by Henry Kelly.)
I don’t think those who voted for us and the Labour Party ‘were expecting to pay more taxes to pay back the estimated £310-£410 billion expended on COVID’. Hopefully, they expected taxes to go up generally, but not the ones Labour said wouldn’t go up, to pay for better public services.
@ David Green,
“It doesn’t help that the National Debt has just exceeded 100% of Annual GDP, reflecting the fact that we have been spending beyond our means for decades”
Would you say that someone who had an after tax income of £40k and who had a debt of £40k on his house purchase which was worth ten times that had been “spending beyond their means”?
What is your advice to young people? Never get into debt to buy a house? Always rent to keep your debt levels down?
Appreciate this article David.. I suppose every generation could say it but I think the evidence would bear out that the world seems especially unstable now – probably more than at any time since the fall of the Berlin Wall. Authoritarians (and their populist cheerleaders) are on the rise, and we should be taking the tilt very seriously. Perhaps the Global Organisation you seek here could be realised incrementally through supporting new or enhancing existing regional alliances of democracies around the world, and considering ways in which we can deepen solidarity inspired by the NATO model.
@ Michael BG,
It would have been better to have put up taxes to ‘pay for’ the Covid spending rather than put up interest rates. Socially, this placed a disproportionate burden on young people who ended up paying a lot more for their accommodation in both rents and mortgage costs. Economically, it put more money into the economy due to the higher interest bill for Govt. The higher interest costs also encouraged everyone to save more , which did slow down spending, but also put up the National Debt. If we are saving more, someone ie Govt has to be borrowing more.
Of course you and I might be OK with this but many obviously aren’t!
The higher taxes wouldn’t have been to ‘pay for’ in the accepted sense, they would have been to quell inflationary pressures in the economy. The burden would then have been more equitably shared by everyone.
Those who are very much in love with the EU might want to ask themselves why France is being forced, by the economic hawks there ( if this isn’t being unfair to actual hawks!), into an austerity budget when inflation there is only 1.1%!
https://billmitchell.org/blog/?p=62044
Thank you David. A body representing liberal democracies seems like a potential power for good. Agreeing somewhat with Peter Martin, I am more concern that Government has washed its hands of responsibility for inflation by dumping the problem on the BoE. The Bank influences only one of many factors that affect inflation and Taxation is a powerful one.
The news that CPI inflation has fallen to 1.7% is welcome. The tax take was running at 33.1% in 2019-20 and has been rising since. It is expected to rise to 37.7% by 2027-28, probably more after the next budget.The budget deficit for 2023-24 was running at £120 billion, equivalent to 4.4% of GDP The budget deficit: a short guide
“The deficit is forecast to fall to more typical levels in the years after 2023/24, on the back of a recovering economy and net tax rises and spending cuts announced since March 2021.” However, this may not be the case for 2024-25.
“The current budget deficit is the difference between government’s day-to-day spending and its revenues, or more formally its current spending and current receipts. Unlike the overall budget deficit, the current budget deficit doesn’t include investment spending and therefore is said to measure the degree to which taxpayers meet the cost of paying for the services provided to them.
The current budget deficit was £49 billion in 2023/24, equivalent to 1.8% of GDP. In 2023/24, government’s net debt interest spending was £102 billion, which is equivalent to 3.8% of GDP or 8.4% of government spending.
Borrowing of £120 billion is equivalent to around £1,780 per head of the UK’s population”.
It is this current budget deficit that Libem policy seeks to address with borrowing targeted at much needed investment spending.including invetment in necessary military Kit. Running a primary surplus before interest costs coupled with real rates of ecnomic growth would see Public sector net debt as a % of GDP gradually reduce over time Effects of the economy on public sector net debt, UK
@ Joe,
“….including investment in necessary military Kit.”
So does this mean that a shell which explodes on impact is still classed as ‘good’ investment spending? But spending on a teacher’s salary which might have some greater long term economic benefits is classed as ‘bad’ current spending?
“necessary military kit” has absolutely no real net benefit to humanity – but it does stop bad actors taking your stuff away from you. We hope, anyway. Not an investment, unless you count the notional avoided loss as a benefit.
It’s notable that the previous government failed to account for the deterioration in infrastructure on its watch as negative investment – potholes, sewage, raac concrete, crumbling schools, hospitals etc etc
Peter Martin,
I suspect the answer to your question that would be given by the Ukrainan government (and quite probably many other European members of Nato as to what are their current budget priorities) is quite lekely to be sufficient stocks of 155mm artlellery shells over smaller class sizes, while the threat of continued Russian aggression remains at elevated levels.
Jenny,
investment in ships, tanks, aircraft, drones and munitions are absolutely necessary for any government intent on preserving the terrirorial integrity of the state it governs. For the UK, as a permanent member of the UN security council, it has an additional global responsibility for ensuring international peace and security.
The council has broad powers to decide what measures are to be taken in situations involving “threats to the peace, breaches of the peace, or acts of aggression.” In such situations, the council may take action, including the use of armed force “to maintain or restore international peace and security.” This was the legal basis for UN armed action in Korea in 1950 during the Korean War and the use of coalition forces in Iraq and Kuwait in 1991 and Libya in 2011.
Unfortunately, we have not yet got to a point in humam civilisation where the old Roman dictum “Si vis pacem, para bellum” no longer applies in International relations; but we live in hope that one day the military powers will come to realise that climate change is the existential threat for all of us.
@ Joe Bourke,
You misunderstand the point of my question. I’m not suggesting that spending on military kit is always unnecessary. Sometimes it is. I do accept that. I am suggesting that ‘necessary’ is a better descriptor of types of spending than either current or investment.
It clearly makes no sense to suggest that spending on a missile which is used once is good investment spending but spending on the wages/salaries of soldiers and those who have taught them to read and understand the instructions on how to fire the missile is bad current spending.
Peter Martin,
Interest rates were not increased during Covid, they were increased (December 2021) once inflation had started to increase (August and October 2021). I suggested during Covid that the government should have tried to get people with surplus income to lend it to the government and that the government restrict how fast this money would be paid back once the Covid emergency was over so there would be no increase in inflation above 2%.
I wonder how much of military kit is termed investment or current spending. A cannon is investment but the shells if fired during the year (say for target practice) should be current spending.
@ Michael BG,
The government is a currency issuer so there was no need to either raise taxes or increase interest rates before or during the Covid spending. It was necessary to do one or the other afterwards as the money spent into the economy by government started to be respent.
Your suggestion wouldn’t have had any effect on inflation. Money lent to the government by the relatively wealthy would have had no effect on levels of total spending. Neither would it have has any effect on the supply side of the problem. If people aren’t going to work they aren’t going to be producing as much. That’s going to have an effect on prices sooner or later.
Meryn King has been quite critiacal of the slow reponse of the BofE in raising interest rates when inflation began to take hold in 2020 and 2021 Collective amnesia on money supply hit BoE inflation response
“The Bank of England’s failure to forestall the post-pandemic surge in inflation was the result of collective amnesia in the economics profession about the role of money supply”.
“…when prices began to rise in 2020 and 2021, there had been “no dissenting voices to challenge the view that inflation was transitory” among policymakers on either side of the Atlantic..the BoE had “tarnished” its record by keeping interest rates low even when it became apparent that price pressures were intensifying.”
“Inflation rose to a peak of 11.1 per cent in late 2022, King said, because policymakers had ignored the likely impact of a “very substantial” monetary and fiscal expansion boosting demand, even as lockdown curbs restricted supply — a mistake made by other central banks and academics.”
“Too much money chasing too few goods is and always has been a recipe for inflation,” he said, calling it “foolish” for central banks to rely on forecasting models that ignored the role of money entirely”.
“The academic economics profession has essentially jettisoned the idea that one might ask what the growth of broad money [a measure of the amount of money circulating in the economy] was telling us,” King said, adding that this consensus had “led to the problems we are now too familiar with”.
@ Joe,
I might be slightly more inclined with Mervyn King if he had at least said taxes and interest rates. He obviously knows that inflation can rise if ” fiscal expansion {is} boosting demand” otherwise he wouldn’t have said it. So why does he have a problem in saying that the Govt should have played its part by tightening up fiscal policy?
If he is saying the inflation had a fiscal cause why such an emphasis on a monetary remedy?
Neither does he mention the impact of rising energy prices. It doesn’t matter a jot whether the Govt is monetarist or Keynesian in its thinking. If the prices of gas and oil rise we are going to see all other prices rise too. Neither raising taxes nor interest rates will change that. We just have to wait until these energy induced price rises drop out of the calculation.