§ Mr. Powell
(by Private Notice) asked the Secretary of State for Defence if he will make a statement on his cuts in expenditure on the defences forces?
§ The Secretary of State for Defence (Mr. Denis Healey)
May I congratulate the right hon. Member for Wolverhampton, South-West (Mr. Powell) on his new post and hope that he will hold it longer than his predecessors in the shadow Cabinet? I must say that three shadow Defence Secretaries in a year beats even the record that the party opposite set when in office.
I am grateful for this opportunity to expand on the information given to the House yesterday by my hon. Friend the Under-Secretary of State for Defence for the Royal Air Force in a debate attended by only six hon. Members opposite and no right hon. Gentleman from the Opposition shadow Cabinet.
As the House knows, our object is to reduce defence expenditure in 1969–70 from about £2,400 million at 1964 prices, which would have been the cost of the programme which we inherited from the previous Administration, to £2,000 million at the same price level—that is to say, a reduction of about £400 million in real terms.
At the present stage of the Defence Review we have managed to reduce the forecast figure to about £2,180 million. In other words, we are more than half way to our target. Of this reduction of £220 million, £150 million is derived from decisions which have been announced in this House since the beginning of the year.
One hundred and fifteen million pounds comes from the changes in the R.A.F. aircraft procurement programme which were debated at length in the spring—that is to say, £75 million as a direct result of the substitution of the Phantom, the C130, the F111A, the Kestrel and the Comet for the P1154, the HS681, the TSR2 and the OR357—the previously planned Shackleton replacement—and £40 million, which is probably an underestimate, from the fact that we shall not now have to buy an interim generation of aircraft to fill the gap in our predecessor's slipping programme.
1883 Then there is a £15 million saving in the year in question as a result of cancelling the fifth Polaris submarine and £20 million as a result of the Army Reserve reorganisation which I announced in the House last week. The remaining £70 million—the difference between £220 million and £150 million—is derived entirely from administrative decisions none of which raises a major issue of policy. First, we shall be able to reduce expenditure on the naval Phantom aircraft in 1969–70 by arrangements to include them within the American credit terms. For working purposes we are at present assuming that we shall take up all the American aircraft options and the figure of £2,180 million provides for them. I should point out that we have not, of course, yet taken a decision to take up the option.
Secondly, we have assessed the probable value of the rationalisation and organisation savings to be effected by 1969–70 at £15 million. This is entirely a question of internal management and a large number of comparatively minor savings—for example, the saving on the integration of motor transport, airfield construction and intelligence, all of which I have already announced to the House.
Finally, rephasing and minor changes in the programme between the summer of 1964 and the present day—the sort of thing that happens in any year, except that this time there has been a far greater emphasis on applying realistic judgment to production forecasts—have reduced the figure for 1969–70 by a net £35 million.
§ Mr. Powell
While thanking the right hon. Gentleman for his partially kindly reference to me, might I ask him two questions? The first is whether there was, therefore, any significant new information in the statement which he made to a Press conference yesterday and, if there was not, whether he would confirm that this was merely a window-dressing operation for the benefit of dissident back-benchers. The second is whether he can say what is the effect upon our total commitments in terms of foreign exchange in the defence field of the decisions he has taken since he assumed office.
§ Mr. Healey
Let me assure the right hon. Gentleman that my sentiments towards him are totally friendly, but not quite so friendly towards the party to which he belongs, or its record.
Yesterday, I gave the Press hardly any information which was not readily available and which hon. Members opposite would have known if they had done their homework. But I felt it necessary to give a progress report on what has already been happening and to pull together the facts given to the House, in particular, to correct some faults and misleading impressions caused by speculation in the Press and elsewhere about the results of the Defence Review. I did not follow the precedent set by my predecessors in giving the conference off the record and I will place the text in the Library. I only wish that my predecessors had taken the same line on these conferences.
I know that there is a feeling that it would have been better if I had made a statement in the House, but I have made three statements in the last fortnight and I think that I would have been abusing procedure if I had chosen a statement after Question Time to give a progress report. All Ministers in the Government are making a great deal of progress all the time and I do not think that there would be much time for other business if we reported our progress every time occasion arose. I am glad that the right hon. Gentleman, as a Front Bencher, has himself dropped the complaint that had been made in the newspapers that this statement should have been made in Parliament.
None of the cuts that we have made so far in any way reduces our ability to fulfil our international commitments. Indeed, many of the changes, particularly those concerning the Territorial Army and aircraft, increase our ability very substantially.
§ Mr. Powell
The right hon. Gentleman may have misheard my second question. Perhaps I may put it again. I asked about the effect upon our total commitments in terms of foreign exchange which has come about as a result of the steps which the right hon. Gentleman has taken.
§ Mr. Healey
I am sorry that I misheard the right hon. Gentleman. There is no effect on our total commitments, in terms 1885 of foreign exchange, from the changes in policy which I have announced so far. I have made it very clear to the House on many occasions in the past, and at the briefing which I gave to the Press yesterday, that reductions in overseas exchange expenditure must depend on withdrawing individuals from service overseas. There is no other way of achieving them, except by reaching agreement with other countries to bear part of the burden of our presence in their territories. As the House knows, my right hon. Friend the Chief Secretary has had outstanding success in increasing the readiness of the West German Government to contribute in this respect in the last few months.
§ Mr. Frank Allaun
Does what the Secretary of State now say mean that to make more substantial cuts it will be necessary to cut not merely our hardware, but our commitments overseas? Will he press for this among his Cabinet colleagues?
§ Mr. Healey
It may be possible to make some further substantial savings without affecting our commitments overseas by applying the doctrine of "value for money" more stringently still to the equipment used by our forces, but I readily confess that to bridge the remaining nearly £200 million gap to the target will require redeployment of our forces and a smaller total of manpower in the Services.
§ Mr. Hugh Fraser
I am sure that the whole House is very grateful for this statement, but I must confess that until I have seen it in detail I can ask just one question. It is not clear what sums within the figures are being made available, if any, for the procurement of a tactical strike reconnaissance aircraft for the Royal Air Force. May I have the right hon. Gentleman's assurance that there is to be no final decision about the Territorial Army until the House has had a chance of debating the quite new principles which come out in the right hon. Gentleman's statement?
§ Mr. Healey
On those two questions, the costings figures which I have given to the House include provision for the replacement of the TSR2 as a Canberra replacement by the same number of F111As. However, as I have said, we have not yet decided, as a Government, whether we shall replace the Canberra 1886 by the F111A or some other aircraft. We still have another five months before we are required to take up the first small option of F111As.
On the subject of the Territorial Army, as the right hon. Gentleman knows, we plan to publish a White Paper on our proposals for reorganising the Reserve Army, probably in November, and the House will have an opportunity, I imagine, to debate that before the Bill itself is discussed. No final decision can be taken, of course, until the Bill is approved by Parliament.
§ Mr. Atkinson
Is my right hon. Friend aware that the Government's policy is to increase the gross national product by 25 per cent. before 1970 and that if that policy is achieved the figures for defence which he has announced as representing a cut would still represent 7 per cent. of the gross national product by 1969–70? Is he further aware that it is the opinion of many eminent economists in this country that unless we cut the defence budget to 4½ per cent. of the gross national product, we cannot possibly succeed in carrying out our social programmes?
§ Mr. Healey
I cannot agree with my hon. Friend on either of those issues. I think that there will be general agreement among able economists who know the facts that to reach the target which we have set ourselves would reduce the percentage of the gross national product spent on defence from 7 per cent. to under 6 per cent. in 1969–70. Many countries manage to support very progressive welfare systems and still spend 6 per cent. of their gross national product on their security.
§ Sir Richard Glyn
Has the right hon. Gentleman considered the possibility of making savings in foreign exchange by reducing the number of troops overseas? Would he agree that, if troops overseas were brought back, that would mean an enormous increase in expenditure in this country on barracks and married quarters, and that the only way in which a total saving can be made is by dismissing those men and reducing the size of the Forces?
§ Mr. Rowland
As in different alliances in different parts of the world we share certain responsibilities with the United States, has the American Government in 1887 any way been consulted about the defence cuts already proposed or pending?
§ Mr. Healey
I hope that the Government will be in a position to discuss with allied and all Governments with which we have commitments the broad outline of our thinking some time in the autumn, and of course foremost among the Governments we shall then consult will be the United States, our major ally.
§ Mr. Lubbock
May I ask the right hon. Gentleman three questions? [HON. MEMBERS: "Oh."] Three short questions. Is there any truth in the accounts of the increasing cost of the Spey engine in the Phantom programme? Secondly, is he giving active consideration to ordering a Spey-engined Mirage IV in place of the F111A, which would result in substantial savings in foreign exchange because of the higher British content? Finally, will he consider immediate cuts in capital expenditure on overseas bases, such as Aden, to help the measures of the Chancellor of the Exchequer?
§ Mr. Healey
I will do my best to meet the hon. Gentleman's advice to the Prime Minister. The Minister for the R.A.F. gave details of the Spey-Phantom two days ago, as the hon. Gentleman should have known. There has been a disturbing increase in the research, development and production costs of the Spey engine for the Phantom in recent months and we are keeping this problem under very close and continuous review.
On the Mirage IV, we are looking at all possible aircraft as a possible replacement for the Canberra, but I think that the hon. Gentleman will know that the Mirage IV is being designed as a high-level nuclear bomber and what we are looking for as a Canberra replacement is a low-level bomber capable of delivering conventional weapons with great accuracy. A very large increase in development would be required to give the Mirage IV that type of capability.
§ Mr. Healey
I dare say that it is not the hon. Gentleman's information, but mine is a great deal better than his. Let me point out to him that if we buy the F111A, it is quite possible that the Spey may be put into it.