10. What recent progress he has made on balancing the defence budget. (150737)

17. What recent progress he has made on balancing the defence budget. (150744)

I announced to the House last May that we had eliminated the black hole in the finances of the Ministry of Defence that we inherited from the Labour party, and had brought the Defence budget into balance. Since then, on the one hand, we have been required to make further budget reductions in 2013-14 and 2014-15 of £1.2 billion in total as a result of the Chancellor’s announcements at autumn statement 2012 and Budget 2013; on the other hand, we have made further savings through efficiency and renegotiation of contracts and have been granted exceptional levels of end-year flexibility by the Treasury to carry forward 100% of our 2012-13 underspend, including unneeded contingency provisions, into 2013-14 and 2014-15. In consequence, we are confident that we can absorb the budget reductions announced without any significant impact on core defence output in those years.

Ministers frequently say that they have a defence review and then budget according to the security needs of the country, so I am a little confused as to why No. 10 and the Treasury say that there will be defence cuts post 2015. Is it because the Government’s priority is Treasury accountants, rather than the security needs of this country?

The Government have announced that there will be a spending review—spending review ’13 —which will set the budgets for non-ring-fenced Departments, including Defence, for 2015-16. There has been an announcement confirming that the equipment programme will be protected in the defence budget, with a real-terms increase of 1% per annum between 2015-16 and 2020-21.

Ministers have pledged an annual real-terms 1% increase in defence equipment spending post 2015, but in what year, under current plans, does the Secretary of State forecast the whole defence budget rising in real terms?

I am not going to pre-empt the outcome of SR 13; nor am I going to conduct the spending review in public. My Department is engaged in analysis with the Treasury and the Cabinet Office, in search of genuine efficiency savings. Where we can find such savings, for example in the equipment support programme, the Ministry of Defence will willingly do its bit to contribute to fiscal consolidation. I will, as you would expect, Mr Speaker, argue vigorously for the resources that Defence needs to deliver Future Force 2020 in accordance with the strategic defence and security review 2010.

A few weeks ago, the Prime Minister told the House that he continued to hold the “strong view” that the overall defence budget should rise in real terms from 2015 onwards. When will that prime ministerial wish become Government policy?

I can confidently predict that the Prime Minister will be involved and will be a key player in the end game of the SR 13 discussion.

Does my right hon. Friend realise that he struck a chord with many in the House of Commons when he recently expressed reservations about the possibility of further cuts in the defence budget? Does he agree with me that it is not the immediate availability of capability that is important but the resilience that our armed forces possess in the event that the United Kingdom found itself engaged in a protracted engagement? Is he satisfied that all three services possess that resilience?

My right hon. and learned Friend is of course correct: it is resilience, both in the sense of an ability to sustain an enduring operation, and in the sense of an ability to regenerate capability and force levels should the global security situation change, which is crucial. One can always have more resilience, and one would always like more reserve, but I am confident that the stance or posture that we set out in SDSR 2010 will enable us to deliver appropriate levels of national security in 2020.

Does the Secretary of State realise that if he wants a defence manufacturing sector to remain in our country—I have David Brown Gear Systems, an important defence contractor, in my constituency—and if he wants it to survive and thrive as a sector, it is absolutely vital that we have procurement over a long period to enable the necessary investment? Is he aware that there is uncertainty in the industry about these defence cuts?

Of course, cuts in defence budgets, not only in the UK but in the United States and, in fact, in nearly all developed countries, have presented huge challenges to defence industries. At the same time, many of their traditional export customers have developed their own defence manufacturing and even design and development capabilities. We are trying to work with the defence industry to give it greater visibility of our forward intentions, and to work with it to design greater export ability into its projects.

I congratulate my right hon. Friend unreservedly on his success in the herculean task of balancing the defence budget, but does he agree that if we are to keep that budget balanced, one of the things that has to change is the status of Defence Equipment and Support? Can he share with the House any clear indication of when he will announce his intentions in respect of that organisation?

My hon. Friend is right. [Interruption.] The right hon. Member for East Renfrewshire (Mr Murphy) correctly guesses that the announcement will be made shortly; “in the spring” and “before the summer recess” also spring to mind. My hon. Friend is right that if we are to deal effectively, and in a way that protects the best interests of the taxpayer, with large corporate entities which are able to scour the world for the top talent, we must be able to match them man for man across the negotiating table.