§ Mr. Michael McNair-Wilsonasked the Chancellor of the Exchequer if he will make a statement about the 1981–82 Defence cash limits.
§ Mr. BrittanWhen the Defence cash limits for 1981–82 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 other developments. We have now completed that review. Subject to parliamentary approval, the Defence cash limits for 1981–82 will be increased by £319 million to £11,854,204,000.
This increase provides for the full additional cost of the Armed Forces pay award—£82 million—and a further addition of £300 million which has been determined in the light of the priority attached to the Defence programme. It also includes some minor adjustments of just less than £1 million overall. In accordance with normal practice, a deduction of £64 million has been made in respect of the overspending against the Defence cash limits in 1980–81, reducing the net increase to £319 million.
In addition to the changes to the Defence cash limits, the net borrowing requirement of the Royal ordnance factories has increased by £43 million because of the loss of Iranian orders and a general reduction in the level of sales, and a technical addition of £23 million has been agreed in respect of some 1980–81 payments for Service pensions that were not booked to account in that year owing to industrial action.
Additional provision for the cash limit increase and the Service pensions payments will be sought by means of spring Supplementary Estimates. The gross increases to the cash limits and the ROF borrowing requirement will be charged to the Contingency Reserve, and will not therefore add to planned spending totals.