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Chapter 1: What recent warning did Lord Robertson give about UK security?
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Welcome back, Chris Mason. Hello.
Hello. Are you rested after your Easter break? I think I'm supposed to say I'm recharged and ready to go. No, but I am, actually. I had a nice break. It was all good. And, you know, the winter election campaigns and all of that, there's no shortage of news about.
Well, your first gig, I noticed, was the Scottish leaders debate on Sunday night.
Yeah, Paisley Town Hall on Sunday evening. Fascinating six-way debate. There's another one to come in Wales that will be six-way as well in a couple of weeks' time. And all the debates going on in England, too. So, yeah, you can't beat election campaigns. And, yes, there's more than one this time.
And you're also back to another old chestnut, which is a row about defence spending.
Yeah. And, you know, one that we're familiar with, aren't we? Because there's a wider conversation going on and has been for some time at Westminster amongst plenty of political parties around, you know, how do we have a societal conversation about the prospect of increasing defence spending and then with what trade-offs, with what trade-offs for taxes, with what trade-offs for other spending.
That's been going on for a while, not least because of the context of the Ukraine war and then sharpened, I think, in the...
context of the conflict in iran because of the economic consequences it has in the short to medium term that we'll come on to discuss but then the questions that it raises again and have been raised again uh today uh by lord robertson the former labor defense secretary the former secretary general of nato saying that he thinks the government is complacent so and
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Chapter 2: How is the Iran war affecting the UK's economic stability?
We're joined by Ben Chu, who's Policy and Analysis Correspondent at BBC Verify. Hello, Ben. Hello, Adam. I always just thought of you as Ben from BBC Verify. I didn't realise there were so many... Well, you can call me whatever you like. Policy Analysis is pretty good. And also Helen Miller, who's Director of the Institute for Fiscal Studies is here. Hello again, Helen. Hello. Right.
Chris, before we dig into the details of the argument around defence spending, why is everyone talking about it today, Tuesday, the 14th of April?
Because Lord Robertson, George Robertson, former Labour Defence Secretary a couple of decades back and former Secretary General of NATO. In fact, he was NATO Secretary General at the time of 9-11.
So he was the Secretary General at the one time that NATO has triggered Article 5, that central element of NATO that if one member is attacked, it's an acceptance that it is an attack on all and they come to the defence of the individual. country that it has attacked, which, of course, was America in 2001. He is giving a lecture.
Now, as we record it just on 6.30 on Tuesday evening, he is giving a lecture very shortly. So we haven't yet heard it, but we are aware of the key things he is saying. And he is saying in this lecture that the Iran war is a rude wake-up call. He says the UK is underprepared, underinsured, and we are under attack now.
He says national security and safety is in peril and he accuses political leaders of corrosive complacency. And the more recent backstory to this is that he was in the thick of a review done for the government, completed last summer, about our defence. He's kept his powder dry publicly since then.
The government promised off the back of that review that it would come forward with a defence investment plan by the autumn of last year. That's not yet seen the light of day. Prime Minister says it's on his desk. Government says it's going to come soon. It soon can be quite an elastic concept in politics.
And he's decided, Lord Robertson, clearly that he's sufficiently frustrated that he wants to sort of break cover, talk publicly, set out his concerns. And that's what he's doing in this speech. The government's making an argument, as it has for some time, that it's putting up.
uh defense uh spending um but then you know here we go into the context yes of the war in Iran at the moment the wider context around Western security war in Ukraine Etc um and then how this government and indeed its successors uh wrestle with the geopolitical landscape and the pressures that that puts on them to increase defense spending at what cost to other things
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Chapter 3: What are the implications of increasing defense spending?
post-Cold War, in some sense cutting it relative to the size of the economy, while welfare and health were increasing, we're now at a historically unusual position of trying to increase health, you know, welfare spending and ramping up defence. We've never done that before. So it's also that broader context here of things are different in the broader world.
We are trying to have a bigger welfare state, a bigger health spending, older population, and now we're trying to increase defence. And that's very unusual.
And sort of the equation George Robertson appears to be making in this speech, and certainly he's quoted in the Financial Times this morning as making this equation, is that you have to cut welfare spending so that you can put defence spending up. Is that a fair way of looking at the balance?
I think it's true to say you have to find a way to pay for welfare spending. As Ben said, there are sufficiently big sums here. This isn't the money you find in the back of the sofa. If you really want to meaningfully increase defence spending on a permanent basis, not just for the next year, you've got to fund it. Now, you've either got to fund it by higher taxes. That would be significant.
So if you want to find an extra 15 billion, you're looking at one or two percentage points on the rate of VAT, for example. or you cut other spending. Now, you could cut welfare, which could mean benefits for working-age people, pensioners. It could mean the broader healthcare system. You wouldn't have to look there. But importantly, we spend so much money on health and welfare.
If you don't want to touch those areas and you want to cut elsewhere, then you've really got to go pretty big cuts to find that money. So we really do have choices. We don't have to do anything in a sense. But the scale of the numbers here is such that we shouldn't think there's an easy way through this.
You have to make some real prioritisation about how much you're going to raise and where you're going to put it.
And just to put some numbers on that welfare point, because we were asked to look into it for Verify today, and looking purely at the working age welfare bill, so not including the state pension, which I think is probably a more relevant comparator to the point that George Robertson, Lord Robertson, was making.
In the mid-1980s, the government was spending more on defence than working age welfare. And as of today, it's spending more on working age welfare than defence. About just under 4% of GDP, and that's projected to go up to 4.3%. So you're comparing that with 2.3%, 2.5% of GDP. So that gives you a sense of the amount of resources which are going to these two areas.
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Chapter 4: What criticisms did Lord Robertson make about the current government?
I'll give you some homework. Yeah, yeah. I'll take one home. Look, stepping back, we had a big spending review last year where the government set out its spending envelopes for the different departments. And there'll be another one next year to do more forward-looking.
I mean, my memory of this is that at the time where the strategic defence review was put out, I think it was around 2.5% was expectation. We thought we were going to live within that. Now, obviously, things changed. The Middle East has happened. There'll be calls for higher defence spending. And there'll always be some calls for actually now the budget isn't sufficient. Can we top it up in year?
Then there'll be the next time round do we top it up permanently? Another set of decisions that are really important obviously is what do you spend it on? Even once you've got a certain amount of money there will be arguments about how much do you put it into new homes for soldiers to make them happy versus drones versus something else.
And people will think there are underspends on some of those bits relative to others depending on what they think the need is. So there's a kind of an overall budgeting issue and then there's how much do you need for different areas.
Ben, are there other bits of the defence spending equation that you've been looking at today?
Well, at the risk of pre-empting Helen's homework, we were asked to look into the 28 billion pound figure. It's not an official figure that the government's put out. It's something that was briefed out to, I think it was the Times initially, but it's been bouncing around ever since.
And it seems to be the cumulative over four years gap between what the government has given the military and what it's been asked to deliver. So it's not really comparable to the figures that we've been talking about. And of course, to get to the 3%, that would be on top of anything that would be done to fill these gaps that have been identified by the forces.
But I think it is worth making the point about defence procurement because the Treasury also has to think about value for money if it is going to spend more on the military rather than just meeting these targets which have been chosen for perhaps good reasons.
And we were looking today at Verify into the National Audit Office, which is the government's official independent spending watchdog, into the MOD, the Ministry of Defence, last year. And actually, it was quite concerning on that value-for-money front. It said that, obviously, the MOD has... lots of big spending, capital infrastructure spending projects.
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Chapter 5: What are the current statistics regarding UK defense spending?
Yes. Helen, Chris mentioned the IMF, the International Monetary Fund. There's all these big meetings in Washington they have every spring with all the central bankers and the finance ministers. Rachel Reeves is there. And the big thing that happened today was they published their World Economic Outlook, which is their projection for the world economy in the next couple of years.
And it looks like the UK came out of that particularly badly because lots of countries had their growth rates cut as a result of the conflict with Iran.
Yeah. I mean, there's a few things worth saying. One is that nobody is surprised that growth forecasts are being cut this year. I mean, the war basically means we are poorer and therefore we will grow less strongly this year. So that isn't a surprise. The other thing worth saying is that there is just a huge amount of uncertainty here. These are forecasts. We shouldn't over-calibrate.
Nobody knows what it's going to look like and how exactly the UK will do compared to others. It will depend on all sorts of things beyond our crystal balls. So we shouldn't over-calibrate to any given number. But yes, it looks like, at least on the IMF projections, the UK is doing worse. I think there will be a whole bunch of different reasons for that. We're a big energy importer.
We are very reliant on that. Very reliant on gas. Gas prices are higher. Inflation was already pretty high in the UK relative to some other countries. There was already some concerns it was a bit sticky. You know, this is going to push up more on inflation. So there's a whole bunch of things going on there.
I think the bigger question that I think got a lot less attention today actually is that what's really going to matter for all of us, for our living standards, is not just what happens in the next year. Obviously, that's important. But actually, how permanent is this?
If actually the war ends and prices come down and actually in a year or two we're back kind of on track, it will be an annoying blip, we'll be a bit poorer, but we'll be okay. If this really is a permanently worse situation where prices are permanently higher, there's permanently more uncertainty. That's really bad news for us.
For example, is it like the global financial crisis of 2008 where you look back at the graphs and the gap between where Britain is now as a result of that and where Britain would have been if it hadn't happened? The gap is huge between the parallel universe and the current universe.
Absolutely. You know, big change in the growth rate. I mean, all growth rates are small in some sense. Changes for a year matter. But if you have them compounding over very many years, that's when you really start to look forward and think, hang on a minute, we're talking about how we can afford defence or health under the current projections.
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Chapter 6: How does welfare spending compare to defense spending in the UK?
There is uncertainty. I can foresee a set of things where actually the war ends quickly and we're not too bad. I still think we're not going back to where we were in January. I think there will be some damage that persists longer than this year. I also imagine if we're still here at Christmas with a war, then I'm going to be closer to that panic button.
I think what hasn't really probably sunk in is that we are poorer. The question is only how much poorer. So there's no world in which here we're not poor. I mean, we citizens, we people, we are having to pay more for what we import. That is bad for us. Now, it may go away, but we're not going to catch up, I don't think, and regain what we lost in this period. So I think it's bad news.
We should be sort of knowing we have to live within these means to some degree. Now, hopefully it won't be too bad. Hopefully it will be a bad year. We will recover. But I think my sense is that in the broader psyche, there isn't recognition that we are just... I mean, one way this, I think, comes out is in the discussion about should there be a support package?
Now, in some sense, the more temporary... For people's energy bills. For people's energy bills, yeah, or businesses' energy bills. The more temporary this is, actually, you think, so it's a temporary blip. We're going to help consumers and firms get through this. You borrow a bit of money, you help us get through it. Maybe you do that.
But the more permanent it is, it's just like, well, there's no borrowing that gets you out of that. You're just poor and you've got to live up to it. So I think that's the discussion where I'm not really seeing, I don't think. So not panicking yet, but this is definitely a serious situation.
So there is, Adam, there is one three-lettered acronymed organisation which says... this is pretty serious and we should really worry, which is the International Energy Agency. So the Fatih Birol, who was the head of that, said the world is facing its biggest energy shock in history, bigger than the 19... Since energy was invented. Well, pretty much.
So he's really sounding the warning about the implications of that. And to Helen's point, he is saying we need to take action now to reduce the amount of energy we use. So drive less, reduce speed limits, conserve energy, which is pushing against a lot of what people are asking for, some political parties are pushing for, which is subsidies to the costs of buying that energy.
So I think it's really interesting that, you know, the guy who is really at the coalface, so to speak... of the energy question, is recommending a particular form of policy. And a lot of political parties are saying the opposite.
And I think that speaks to perhaps, you know, maybe we do need to recalibrate a little bit in terms of how permanent this shock is going to be and the implications of that.
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Chapter 7: What challenges does the UK face in balancing defense and welfare budgets?
And let's see how long the consequences are. All of this in the swirl of the election campaigns going on ahead of the...
elections around great britain uh next month and you know we only have to rewind what a couple of months to the turn of this year where the government i think we've talked about this on newscast before but where the government was just beginning tentatively publicly to talk about how at least some but not all economic indicators were beginning to look perhaps a bit better now governments are always cautious about overdoing that because they don't want people sort of shouting back at the
You know, at the screen, at the phone, at the television, at the radio. Oh, come off it. That's not how it feels to me. But, you know, they were they they felt that there was just the beginnings of some things they could point to. And yet and along comes and along comes this.
So, yeah, not easy for them in the way that it's not easy for, you know, so many newscasters when you turn up at the petrol station to fill up the car or all of the other things.
uh economic consequences that we stare at at the moment i'm just thinking about that soundbite ministers were using for a bit at the turn turn of the year which is that we've turned the corner it turns out that we were reversing back around which so it was strictly accurate it's just not the right direction potentially discuss um chris good to catch up ben thanks for all your hard work today no problem thanks helen and helen thanks for coming in thank you very much
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