§ Mr. Denzil Daviesasked the Secretary of State for Defence if he will set out the basis on which inflation is calculated for the purpose of determining whether the United Kingdom is fulfilling its commitment to the North Atlantic Treaty Organisation to increase defence expenditure by 3 per cent. in real terms.
§ Mr. BlakerPast inflation is measured by a defence specific deflator. This reflects the pay and price movements and mix of manpower, goods and services in the defence budget. The pay and price movements used to calculate the deflator are obtained from a variety of sources. These include direct data on unit prices; price movements agreed when applying variation of price clauses on contracts; known changes in wage and salary rates and appropriate industry-related indices where direct data are either not available or not applicable.