Budget Small Print: Defence Spending Cut

Gordon Brown's showmanlike budget was hailed in some quarters as his passport to Number Ten. What nobody seems to have realised is that our likely next Prime Minister has cut defence spending for 2007/08 by over £800m in real terms. What he announced was an additional £400m. Is this deception forgivable? And does it matter that the man who might next send British forces into battle has cut their funding?

Brown's budget speeches have always been short on detail. Journalists and analysts are left to forage in the small print before they can assess his budgets properly. This time round, their scavenging has spilt gallons of newsprint on the Chancellor's customary sleight-of-hand: his income tax cut which isn't (especially if you're poor), his corporation tax cut which might not be (especially if you're a manufacturer), his increase in tax thresholds which is offset by increasing NIC earnings limits. But nobody has yet challenged this part of his address:

"We owe a huge debt of gratitude to our armed forces. And to support those who serve us with courage and distinction in Afghanistan, Iraq and in other demanding international commitments, I am allocating the Secretary for Defence an additional £400 million."

The actual figures for public spending are published in the Financial Statement and Budget Report, Section C. Table C13 (p. 293 of the FSBR, p. 25 of the .pdf) gives the following numbers for financial years 2005/06 (actual), 2006/07 (estimated) and 2007/08 (projected):

Resource Budget: £33.4bn, £33.7bn, £32.8bn
Capital Budget: £6.4bn, £7.1bn, £7.6bn

Adding these together gives total spending of £39.8bn, £40.8bn, £40.4bn. Add in the "additional £400m", given in the table as an "unallocated special reserve", and - not, I suspect, coincidentally - the figure for 2007/08 rises to £40.8bn. Exactly the same as for 2006/07.

Rather than an "additional £400m" for our country's defence, therefore, Brown has frozen spending for the forthcoming year. Assuming that inflation for 2007/08 averages 2%, which is the Bank of England's target (and also the Treasury's assumption for the period), this represents a cut in real terms of £816m.

To repeat: Brown announced an increase in defence spending of this year of £400m. In real terms, defence spending is actually set to fall this year by £816m.

I don't know how defence plays with the focus groups these days, but if I were David Cameron I would be bringing the Chancellor to task for this. It is outrageous enough that he is squeezing our armed forces while praising their courage to the rafters. But to do so while aspiring to take charge of those forces - well. That looks like the behaviour of a man who just doesn't understand the job.