§ Mr. Banksasked the Chancellor of the Exchequer if he will make a statement about the application of cash limits policy to the defence programme.
§ Mr. BiffenThe Government are committed to maintain the discipline of cash limits, which they regard as essential to the firm and effective control of public expenditure. When the defence cash limits for 1980–81 were set it was agreed that they would be reviewed in the course of the year to take account of the Armed Forces' pay award and of other developments. We have now completed that review. Subject to parliamentary approval the defence cash limits for 1980–81 will be increased by £203 million to £10,492 million. Additional provision will be sought by means of Winter Supplementary Estimates.
This increase provides for the full additional cost of the Armed Forces pay award (£54 million), and a further addition of £200 million which has been determined in the light of current international considerations and the priority attached to the defence programme. It also includes two minor adjustments between defence and other cash limits: a transfer of £2 million to the Foreign and Commonwealth Office for additional military training assistance, and the reinstatement of £1 million which will not now be required by the Central Office of Information on behalf of the MOD. In accordance with normal practice a deduction of £50 million has been made in respect of the overspending against the defence cash limits in 1979–80, reducing the net increase to £203 million.
Economic circumstances have caused defence spending in the first quarter of 1980–81 to run ahead of the trend expected on the basis of experience in previous years. My right hon. Friend the Secretary of State for Defence is taking the necessary measures to keep 415W within the new cash limit, which will be a firm ceiling for the year.