§ 48. Mr. Frank Allaunasked the Secretary of State for Defence, in view of the fact that the proportion of the gross national product spent on military defence, including military defence not included in the formal defence budget, rose from 6.82 per cent. in 1964–65 to 6.97 per cent. in 1967–68, if he will now take steps to reduce expenditure on arms.
§ 57. Mr. Sheldonasked the Secretary of State for Defence what steps he is taking to reduce defence expenditure which has risen from 6.7 per cent. of gross national product in 1965–66 to 7 per cent. of gross national product in 1967–68.
§ Mr. HealeyThe reason for the apparent increase in the proportion of gross national product represented by "military defence" is that "military defence" includes not only expenditure98W for which I am not responsible but also expenditure which is not a charge on the Exchequer in the year concerned—for example the progress payments on the purchase of United States military aircraft, which are financed by borrowing from the Ex-Im Bank. The Exchequer bears the cost only when interest payments are made and the loans repaid. These payments are then included in the Defence budget, but deducted in calculating "military defence" expenditure.
Since 1964–65 the Defence Budget as a proportion of GNP shows a decline from 6½ per cent. to about 6 per cent. in the current year. Substantial further reductions are planned, as was made clear in the Supplementary Statement on Defence Policy 1968, despite the fact that the Defence budget in these years will contain the cost of repaying the loan for United States aircraft.