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NATO: Member State Spending

Volume 778: debated on Wednesday 1 February 2017

Question for Short Debate

Asked by

To ask Her Majesty’s Government what progress they have made in discussions with other NATO countries about ensuring that all member states commit to spending two per cent of GDP on defence.

My Lords, in the two weeks since he was sworn in as the 45th President of the United States, Donald Trump has been in the news every day. An anxious world has sometimes been stunned by his words, whether spoken or tweeted in the middle of the night. But I recall the words of another United States President, who said:

“To be prepared for war is one of the most effectual means of preserving peace”.

Those words were spoken by America’s first President, George Washington, in the very first State of the Union Address in 1790. I am not suggesting that a conflict is looming, but I echo Washington in saying that to keep the peace, we must be always be prepared for conflict. Do I believe that Britain is prepared for a sudden and unexpected conflict? Sadly, my answer is that I have serious doubts, and I am not alone in that, as I will show in my remarks.

As I stand at the Dispatch Box this evening, one word comes to mind about the Government’s commitment to the NATO 2% spend: disappointed. I am disappointed that our Government are playing fast and loose with defence spending. The Government continue to say that we have the fifth largest defence budget in the world and that we are one of five nations out of 28 NATO members committed to the 2% target. However, in the SDSR 2015, a new creative accounting was orchestrated by the Government so that they could reach that 2%. Professor Malcolm Chalmers, the deputy director at RUSI, told the Defence Select Committee that the Government had included £820 million on war pensions, £400 million on UN peacekeeping and £200 million on pensions paid to retired civil servants. The committee concluded that this “redefinition”, as it described it, of defence expenditure undermined the credibility of the Government’s assertion that the 2% represents a significant increase in defence spending. The Government responded by saying that all they were doing was capturing all spending contributing to our defence in the 2%. I am certainly interested to see whether the Minister will explain how paying pensions to civil servants contributes to Britain’s defence.

On these Benches we welcomed the Government’s commitment to spending 2% of GDP on defence. However, how can we persuade other member states to reach that 2% target if we are using creative accounting to reach that goal ourselves? Let us not forget that 2% is the minimum spend, not the maximum. It must concern all of us that the other 23 members of NATO are in no rush to increase their defence budgets when we see Russia spending $90 billion and China spending $150 billion on modernising their forces. Russia has placed a number of nuclear-capable missiles in Kaliningrad, on the border of Lithuania and Poland. That is but one measure of the challenge that we and NATO face.

I have been encouraged by the comments attributed to US Defence Secretary James Mattis, who has reassured our Defence Secretary of the United States’s “unshakable commitment to NATO”. I was more encouraged when, following her meeting with President Trump, our Prime Minister spoke of his unshakable commitment to NATO, although I would like to have heard the man himself say it. I remember candidate Trump’s comments about NATO in the election campaign. He said then:

“We have many NATO members that aren’t paying their bills … Many NATO nations are not making payments, are not making what they’re supposed to make”.

The new President has been busy signing executive orders almost every day since he walked into the White House. I hope we will not wake up one morning to see that he has tweeted in the middle of the night his intention to sign an executive order reducing American support for NATO.

Our NATO partners have to wake up to the fact that the Americans may well do things differently under this President and must take seriously his challenge about their GDP spend on defence. NATO is the bulwark of our defence and the United States plays the leading role. At the start of January, NATO began deploying 4,000 troops to the Baltic states. Britain, rightly, in support, committed 800 personnel to Estonia, four Typhoon aircraft in Romania and 150 personnel to Poland. A resurgent Russia is testing our resolve to deter and defend. Only last week, the Royal Navy was tasked with escorting the Russian aircraft carrier and its support group through the channel. We are also having to monitor increasing numbers of Russian submarines in the waters around the UK, and we do so without any marine patrol aircraft. In addition, we are seeing more and more Russian military aircraft flying dangerously close to our airspace. There is much more we have to do and my concern is that the Government, driven by a passion for an austerity policy which has failed miserably, are not sufficiently engaged to meet these challenges, and nor will they ever do so without increased defence spending, at least to a genuine minimum spend of 2% of GDP.

No one put it better than my noble friend Lord Robertson of Port Ellen, who said in a speech in 2015 that,

“the 2% only makes sense if it is spent on the right things—deployable troops, precision weapons, logistics and specialist people”.

He was quite right on that. When he opened the defence debate in this House on 12 January, he warned that we were sleepwalking into a potential calamity. Like my noble friend, I worry about our ability to meet the unforeseen.

I think that all the more having read the report from the Centre for Historical Analysis and Conflict Research. Based at Sandhurst, the centre examines past and current operations, carries out analyses and research, and acts as the Army’s think tank. The participants, some of the Army’s brightest minds and all serving officers and soldiers, are encouraged to speak out of turn to help inform our approach to requirement setting and procurement and to influence the perception of the Army. The report said that we may not be facing an immediate military threat but that there are several scenarios in which our allies may face a threat and we may need to engage. It asked the question: is the British Army ready if we become engaged in a war that we did not foresee? The soldier-scholars concluded:

“If one merely sees preparedness through net manpower and kinetic force capacity, the answer might be a simple ‘no’: the British Army is at its smallest and has faced years of budget cuts”.

I make no criticism of the Army, but I am critical of the way the Government have starved our Armed Forces of investment. We can have the latest equipment at our disposal but, if we do not have the manpower, how do the Government expect our Armed Forces to defend the liberties that we uphold?

I am proud of the fact that during the 13 years of the Labour Government, we spent an average of 2.5% of GDP on defence. This excluded the cost of conflicts in Iraq and Afghanistan, where expenditure was met from the Treasury reserve and not the defence budget.

In a recent Written Question, my noble friend Lord West of Spithead asked the Government whether there had been any consideration of reviewing the decision made by the previous Chancellor on funding for the new Dreadnought nuclear submarines. He and I agree that the funds should come from the contingency controlled by the Treasury and not from an overstretched defence budget. The Minister responded by saying that the funding of the new submarines—around £31 billion—would remain part of the defence budget. This is disappointing, and yet another example of the way in which this Government are stretching a limited defence budget and, at the same time, shamelessly massaging the figures to give the impression of meeting the 2% spend of GDP on defence.

Britain and the United States must be at one, doing everything possible to persuade our NATO partners to meet the 2% pledge they made in 2014. If Britain is to join the US in taking a moral lead, we can do so only if we spend a genuine 2% of GDP on defence.

My Lords, I am sure we are all grateful to the noble Lord for having instigated this debate. I congratulate him on that and would like to follow on from some of the points that he has helpfully made. It is timely that we should have this debate so soon after the change in the Administration in the United States. Quite frankly, there has not been too much to cheer President Trump for over the past few weeks. However, we must begin by expressing a sense of relief that during the Prime Minister’s visit to Washington, he managed to bring himself to say that he has 100% support for NATO. That is most welcome and a relief. We must especially commend him for again raising the way in which some NATO states, especially in the European sector, remain freeloaders in supporting NATO.

As the noble Lord said, it was only two years ago, in 2014, that all the NATO countries solemnly got together at the Welsh summit and committed themselves to spending 2% of GDP on defence. Following on from what the noble Lord said about the UK spending 2%, according to the statistics in the most helpful Library briefing pack, current UK spending on defence is 2.1%. When the Minister replies, will he say whether the Government believe that this is the correct figure? If it is, surely it kills all the arguments of those who say that in justifying 2% we are loading various other costs on to the defence budget. The costs to which the noble Lord referred—pensions is one—are easily absorbed in the excess over 2% which the UK is now spending.

Where have we got to two years after the Welsh summit? I find it quite extraordinary that four European states are still spending less than 1% of GDP on defence. For many years I have been a delegate to the NATO Parliamentary Assembly. I was very recently vice-president and I am currently chairman of one of the committees and a member of the standing committee and the bureau. For years it has been thought rather bad form and bad manners to draw attention to those states that do not shape up. The time has come to put the record straight. Let us put it on the record now. According to the statistics in the Library’s briefing, Slovenia is still spending 0.94%, Spain 0.91%, Belgium, if you please, 0.85%, and Luxembourg, one of the richest countries in Europe, 0.44%—less than half of 1%.

The noble Lord referred to the background we face, with Russia rattling its sabre on NATO’s eastern frontier. Following the outrageous transgressions of Russia in recent years in Georgia, South Ossetia, Abkhazia, Crimea and Ukraine and, as the noble Lord said specifically, in placing highly offensive weapons in the Kaliningrad part of Russia next to the Baltic states, it is worth pointing out that NATO is responding to the situation, which reflects the urgency that NATO clearly feels. We are in the process of deploying battalion-sized battle groups to three Baltic states and Poland—the United States leading the one to Poland, Canada to Latvia, Germany to Lithuania, and the United Kingdom to Estonia. The battle groups will be in place in order to ensure that any offensive action by the Russians in any of those states in taking on the battle groups will be a clear transgression of Article 5 of the NATO treaty.

I have already referred to the member states who spend less than 1% of GDP on defence, but, there are 14 who are still spending less than 1.5%. The figures on page 5 of the Library briefing are extraordinarily helpful. They include rich countries which should not be in this position. I have already referred to Belgium and Luxembourg in the under 1% group, but those in the under 1.5% group include rich countries such as Denmark, Germany, Italy and the Netherlands.

One might ask what they are doing to put defence spending closer to their solemn commitments. This makes dismal reading. Looking again at the statistics the Library has produced, in the last year Belgium has decreased its spending by 5.3%, Croatia by 8.8% and Poland, surprisingly, by 7.8%. It is a dismal picture—it is a disgrace, quite frankly—given the antics of Mr Putin as we see them. I hope the Government will tell us of the positive and timely steps they are taking to name and shame, as I have tried to do tonight in the House, and that they will use every effort to persuade these countries in the strongest terms to come to the figure they all solemnly agreed two years ago at the Welsh summit.

My Lords, it is a great pleasure to follow the noble Lord, Lord Jopling, with all his experience of NATO and the NATO Parliamentary Assembly, and to agree with every single word that he said. It is also always a great pleasure to follow my noble friend Lord Touhig, who often reminds the House in debates of this nature that NATO was founded in many ways by a Labour Government and that over all the decades since then, whenever there has been a Labour Government there has been absolute support for NATO—as indeed there has been from every Conservative Government that we have had since the war as well.

My noble friend quite rightly reminded us that we live in troubled, turbulent and dangerous times, that the threat from Russia is a real one in many respects, and that these points were made a few weeks ago in a debate in this House led by my noble friend Lord Robertson. He also reminded us that the election of Mr Trump as the President of the United States of America has set us all thinking. I am no fan of President Trump but he quite rightly said that NATO members in Europe, as the noble Lord, Lord Jopling, mentioned, are not pulling their weight in providing the necessary resources for the organisation.

Noble Lords will know that defence spending in NATO fell considerably during last year to this year and that the United States pays 70% of NATO’s spending. You can understand President Trump’s feelings when only the United States, ourselves, Poland, Estonia and Greece—unlikely countries some of them—met the 2% target set down in Newport in 2014 when NATO visited Wales. The noble Lord, Lord Jopling, quite rightly referred to some of the culprits in this regard—Spain, Canada, France, Belgium, Germany and others. In November last year the Secretary-General of NATO, Jens Stoltenberg, said that if all NATO countries were to meet the 2% target then tens of billions of pounds would be added to the NATO budget for its use.

It is interesting that we are speaking at a time when by now, I assume, the Brexit vote on triggering Article 50 has gone through the other place because that will have an effect on our relationship as a NATO member with non-EU allies. Eighty per cent of NATO spending when we leave the European Union will be the responsibility of non-EU countries, including ourselves. Moreover, three out of the four NATO battle groups in Poland and the Baltic states are currently from non-EU members.

I do not agree, as I have read somewhere, that our leaving the European Union means that we will no longer hold the position of second-in-command in NATO. I think that that is fanciful in terms of the importance of our Armed Forces. However, Brexit will affect spending in the Ministry of Defence, not least because of the fall in the value of the pound and the effect that will have on procurement. Defence cuts over the years will undoubtedly affect our capability as a leading NATO member. I also agree with my noble friend that 2% of GDP should be a minimum, not a target, and that more should be spent.

I want now to spend a few moments on the point made by my noble friend and others with regard to the legitimacy of the 2% figure, something that was touched on a few weeks ago and to which the Minister referred in his speech winding up that debate; no doubt he will do so again today. I reiterate: included in that figure of 2% is £820 million for war pensions, £400 million for UN peacekeeping missions, £200 million for Ministry of Defence civilian pensions, one-off spends that are unable to be carried over, and so on. I welcome the extra £5.7 billion that the Government have put into defence and of course I welcome the new joint security fund, but we have to be honest both with ourselves and with the country—the figures which now make up the 2% spend are very different from what they used to be. My noble friend referred to the House of Commons Defence Select Committee, which has argued that 2% does not mean that we are adequately resourced. It also noted,

“that the NATO minimum would not have been fulfilled if UK accounting practices had not been modified”—

this is what the Minister will tell us later—

“albeit in ways permitted by NATO guidelines”.

The committee went on to say:

“We believe that this ‘redefinition’ of defence expenditure undermines, to some extent, the credibility of the Government’s assertion that the 2% figure represents a significant increase in defence expenditure”.

I have had a look at the Government’s response to the 28 recommendations made by the Select Committee and I have to say that it is a model of obfuscation. It really does not answer the points and totally ignores the fact that, if you are now putting into that 2% sums of money that were not included before and which have no direct impact at all on how an army, navy and air force operate, because those sums are mainly going on pensions, of course it means in effect that we are now putting in less than we used to before the 2% figure was arrived at. RUSI has said that under the old system it would in fact amount to 1.97%, not 2.1%, so it is effectively a reduction in what used to be counted towards that 2%. I am not saying that NATO disregards these things because it does not, but it is what we as a country and as a Government have been doing over the last years that matters most. My plea is for honesty in these things and not some rather spurious reasoning.

Despite all that, I do not doubt the Government’s commitment to NATO because it is the bedrock of our defence, of Europe’s defence, and indeed of the world’s defence. There is a need for the Government and all of us to exercise our influence on the other members of NATO to meet that 2% target but we have to be in such a position that, in arguing that other countries should meet the target, we are responsible about what goes into the 2%.

My noble friend and others have mentioned the US President, but I shall come back to him. Today in the House of Commons the Prime Minister was asked two questions about NATO, two questions about defence spending and two questions about the President of the United States and his commitment. She said that she had received assurances from the President that he was now in favour of NATO, even though he called it “obsolete” during the course of his election campaign. While I agree that NATO members must come up to the mark with regard to their NATO spend, I think that it is stretching it a bit in terms of what he said. All I could make out during the President’s press conference with the Prime Minister was, frankly, no more than a grunt and a nod because he said nothing. What the Prime Minister or perhaps the British ambassador must now do is press the point that the President should come out and say something about NATO which indicates that he is in favour of it. A second-hand account of what he said and the sight of a nod simply do not come up to the mark.

This is an extremely important debate being held late in the evening. The Minister knows that the Labour Party supports him and his Government in these matters. It is therefore important that when he and his colleagues in the Ministry of Defence are in the international forums, they should indicate to our fellow members of NATO that they simply have to come up to the mark.

My Lords, I am delighted to take part in this debate and I congratulate my noble friend Lord Touhig on calling it. I am also delighted to follow my old friend the noble Lord, Lord Jopling, and my noble friend Lord Murphy because they have shown their deep commitment to issues of defence over the years, as I hope I have as well. Looking back, I realise that it is now 37 years since I was on the Front Bench in the other place responsible for defence, and over that time I have seen many changes. I want to reflect on some of them this evening and perhaps give some indication of the dangers we might face in the immediate future. But I certainly agree with the basic point that since it was formed, NATO has been the cornerstone of our defence spending and activity. Indeed, without NATO it would have been very difficult for us to do many of our defence activities.

As I say, we have seen many changes over the years. The noble Lord, Lord Jopling, and I remember clearly the Cold War. Being on the NATO PA during those years, I well recall the horror and the difficulties of trying at least to engage with the Russians, although we as parliamentarians were able to achieve some success in ways that were not always easy for Governments. I thought that was very helpful.

The amazing thing is that the cornerstone of NATO is Article 5, which sets out the right of a nation to assistance if its sovereignty is under attack. It is worth reflecting for a moment on the fact that the first time Article 5 was used was in circumstances completely contrary to those for which it had been envisaged. It was used after 9/11. The most powerful country in the world was the recipient of that assurance from the rest of NATO. But the uncanny thing is that NATO was designed to counter enemy action by other states, but it was not a state that forced the invocation of Article 5, it was a terrorist attack. That change means we need another dimension to the way we look at our defence efforts.

I will reflect again on the work of the noble Lord, Lord Jopling, who did so much in NATO. With the collapse of communism, the emancipation of the countries of eastern Europe and the symbolic fall of the Berlin Wall, things changed and perhaps we relaxed a little too much. Perhaps we ought to have been examining the role and the nature of NATO because the demands being made of it had changed. It is interesting that when these nations gained their independence, the very first thing most of them did was to bear in mind the remit we often mention in this House, which is that the first duty of any state is to protect its citizens. So what did they do? They all ran to NATO. Indeed, before they got into NATO, most were accepted as members of the NATO Parliamentary Assembly. The noble Lord, Lord Jopling, and I had a bipartisan approach to that across both Governments and both sets of parliamentarians. We led the way and paved opinion in that respect. That was a very worthwhile job for parliamentarians to do. It is interesting that those nations applied to NATO; they did not initially apply to the European Union. I will come back to that a little later.

I am not going to debate whether the 2% is 2.1% or 2.08%, because that has been raised. I think it is above 2%. I accept that it is within the NATO rules, but the basic point my noble friend Lord Murphy made was that it is not as much as it had been previously. That is the key point to bear in mind.

Having made that point, I will develop one or two things. For five years I was the shadow Secretary of State for Defence. In that time I repositioned the Labour Party, with the help of colleagues. As my noble friends have said, Labour Governments have always been loyal to the defence of this country, because it is our country just as it is every other citizen’s country. Therefore, one of my basic desires was to develop as far as possible—it was not always possible—a bipartisan approach to defence. I do not see anything wrong with that. If we are talking about an issue as fundamental as defence, of course we have to criticise and hold whichever Government to account, but there is no reason why we should not be working together for the common good and safety of the British people.

It is a question not only of the money spent, but often of attitude. I believe that the British Armed Forces are second to none in the world. They are absolutely brilliant. I have seen them in action—I mean in action—all over the world. The one thing that taught me was that this was because of not only the training and skill of the Armed Forces, but the equipment. In some areas of action I felt that not many countries did not have the equipment we had to do the job. The Americans are excluded from that; we did not have the variety they had.

When one then looks at the figures, it is mind-boggling that after Brexit, at current spending, 80% of NATO’s budget will be provided by non-European Union members. Surely the Europeans cannot let that continue. Although we saw times 15 or 20 years ago when there were moves for Europe to develop its own defence, a number of us had to fight quite hard—Governments of both parties were on the same side on this—to argue that we could not forsake NATO. NATO was still the bedrock. The situation I just described reinforces the point made by everyone who has spoken in the debate so far: we must get the European Union countries to increase their contribution to at least 2%.

I end with a point on change. We are talking about not only hardware or armed forces when we talk about security. The lesson of Article 5 and 9/11 is that we have to fight Daesh and terrorist groups wherever they are. That means there is also a challenge for things such as cyberwarfare and intelligence. I approve of the Government’s £1.6 billion joint security fund. That is the right way to do it. It probably has to be integrated more into the defence budget as time goes on, but that might happen. My key point is we need to work together. We have to be prepared for changes, especially after Brexit.

My Lords, I am grateful to the noble Lord, Lord Touhig, for introducing his QSD. I remind the House of my technical interest. While I agree with some of his points, I am a little disappointed with his approach. He complains about creative accounting, but so far as I can see, the United Kingdom’s 2% is totally compliant with the NATO guidelines. Furthermore, noble Lords should note that gendarmeries, carabinieri or forces of that type can also be included in the 2% figure, provided they are realistically deployable. We have no such forces. The term “realistically deployable” is very elastic. I would be very surprised if other EU states are not taking advantage of it.

From what the noble Lord told the House, I hope we can look forward to a commitment on his party’s part in its next election manifesto to increasing defence expenditure—my noble friend the Minister and my party would then have to match that commitment—while maintaining a continuous at-sea nuclear deterrent.

The honest answer to the noble Lord’s Question is “not very much progress”, because other NATO states are quite happy to have Article 5 protection without having to pay for it. I am sure that my noble friend will have a positive reply to the QSD. UK Ministers and officials will of course constantly pressurise other EU states to increase their defence expenditure, but they are sovereign states. The UK itself cannot be faulted. Despite economic challenges the UK still meets the 2% target—yes, I know with a little bit of creative accounting—and the 0.7% of GDP target on international aid: a proud record indeed. Of course, it is not just hard power, but soft power. We do both.

In case any noble Lords think that I am a sycophantic Back-Bencher, I gently point out to my noble friend that 2% of GDP is not enough in the current circumstances. Secondly, I remind him that, as we have said, the United States is spending 3.5% of GDP on defence. I suspect that that is a bit too much, but noble Lords can see why the United States is getting a bit fed up with our EU partners not pulling their weight.

It is a question not just of what percentage of GDP we spend on defence—of course, percentage of GDP is the only sensible comparable measure. The UK has been very careful to have a balanced capability. We spend on the right things. There is no point having a row of shiny platforms when the equipment is not sustainable, you cannot move it to where it is needed, or you have no ISTAR capability to determine where the enemy is. We are not perfect in this regard—noble Lords have mentioned maritime patrol aircraft, but that was capability management: the threat has increased slightly, so we have decided to bring back a maritime patrol aircraft capability—but overall, we have a very good record of capability management and having a balanced capability.

Everything has a Brexit dimension nowadays. According to a calculation done on my behalf by the Library, without the UK, the EU 27 will spend only 1.18% of GDP on defence. The noble Lord, Lord Clark, put it slightly differently by saying that 80% of NATO defence expenditure would be from outside the EU. Clearly, the US will not tolerate this for ever.

As a nation, we should be proud of what we do to keep ourselves, our partners and our friends around the world safe and secure. I hope that my noble friend the Minister will have a robust reply.

My Lords, this debate takes place at a time of considerable instability in the world, but it is easy to forget that, apart from the horrors of Syria and aspects of the Middle East and Ukraine, the world is far more peaceful than it has ever been. The danger is one of complacency. I would not accuse the noble Earl who has just sat down of being a sycophantic Back-Bencher—I will leave him to decide that—but I am just a bit worried about complacency.

I raised two years ago the rapid rise in Russian defence spending—I think that at that time it was 10%. I was concerned that such an increase indicated why Russia was thinking of developing its potential. We have seriously underestimated President Putin’s intentions, particularly in Syria and to a considerable extent in Ukraine and elsewhere, as well as—and totally unexpected by me—in the world of cyber warfare. Those are serious threats to the stability of the world. One then has an unknown entity in the form of President Trump and an unknown situation in relation to Europe and Brexit. So instability should be our watchword. If instability exists—this goes back to something my noble friend Lord Touhig said in his excellent introduction—we should be mindful of the statement that if you want peace, you should prepare for war. We should perhaps bear that in mind, too, in relation to defence spending, because 2% is probably too low in the present circumstances. I know of all the economic difficulties, but if we want peace—which I think we all do—we must recognise that until human beings have better ways of keeping peace, this is probably the best way of doing it.

There is another point which is profoundly important. My noble friend Lord Touhig referred to pensions, particularly civilian pensions, and contributions to United Nations peacekeeping and so on being included in the defence budget. The noble Lord, Lord Jopling, read out the excellent and helpful list that is available from the Library of the expenditure of other countries on defence. The issue is not just one of creative accountancy, as the noble Earl, Lord Attlee, said; it is also that if we are claiming that we can include those things in our defence expenditure then so also can those countries that the noble Lord, Lord Jopling, read out. If we think of how little some of them are paying and if they have the same practice, it would be very useful for the House to know—I am sure that the Minister will not be able to answer right now—what the accountancy procedure is in those various countries. If they are including things such as pensions and contributions to United Nations peacekeeping, the position is even more serious than I thought.

My Lords, that was exactly my point about gendarmeries and the carabinieri. I put it very clumsily, but it was exactly that point.

I accept that clarification; it is very helpful. I must admit that I am more concerned in a way about things such as pensions, particularly civilian pensions. What on earth are we doing including those in defence spending? If I was in Luxembourg right now, I would be thinking very hard about our accountancy system. I say to the Minister and to my own Front Bench that we should ask all NATO members to spell out what is included in that defence spending. I would not expect to see pensions and contributions to United Nations peace- keeping. We should take quite a hard line on that because, if we did, the figures would look much worse, but at least we could address the matter more seriously.

It might be helpful to have what the noble Lord suggests, but also let us point out that if defence spending is 2.21%, which the Library says it is—that same figure appeared in the Times only a few weeks back—it is worth roughly £4 billion, which is a massive amount of spending on top of the 2%.

I understand and accept that point, which the noble Lord made very clear in his contribution, but I simply say that if we have a system where we include such things as defence expenditure, first, it opens the door to other countries which are paying in very little to do exactly the same—if they are not already doing it—and, secondly, it does not really help to say, “Well, because we’re spending a bit more, it covers that up”. Covering it up is not the answer. We are here to hold Governments to account, as I am sure the Minister will know. The aim is not to have accountancy of this type. That is where the Government have to answer.

I want to conclude on a wider point which is entirely political. We have talked about the potential threat from Russia, terrorism and other issues. What we do not look at in this current debate about Brexit is how Europe will change. We are so focused on the changes that the United Kingdom has to make, but we need also to focus on what will happen in the European Union, which cannot stay the same as it is now unless it is to have more problems of the type it has had with Brexit. There is discontent in Europe for a variety of reasons—they are not all the same as those here, but many are similar.

One of my concerns in this context was brought out by Mr Tusk’s comments on Mr Trump. He said that we should now see the United States as one of the risks faced by Europe. That is a dangerously unwise statement to make, but where it is true is that there is a problem about the relationship now between the European Union, the United Kingdom and the United States. We need to think that through in other areas. My strong view is that we need a settlement where Britain comes out of the European Union—I do not think that there is any going back on that in the near future; some people may disagree—but it does not come out of Europe. We must recognise that we need, and Europe needs, a very close relationship—indeed, a special relationship—between the EU and the UK. One way to do that—and it is not discussed in the present debate about Brexit—is via our expertise and our contribution in defence and international relations. Europe needs that as much as we do. In the current situation, we need to do more than just step up to the plate; we need to take a lead on defence and international relations in a way that not only reassures Europe that we are not walking away from it but helps cement what will have to become a special relationship between the European Union and the United Kingdom.

For all those reasons—and I recognise the economic priorities around—we need to increase the spending, not to get back to Cold War proportions but to recognise the threat from President Putin and the threats in the rest of world. I would also make a special plea for paying a bit more attention to how all the nations within NATO account for the money they provide. It is not sufficient to say that it is all right to use it for pensions and United Nations peacekeeping. If we allow that philosophy to go any further, let us not be surprised if other countries use it, too. That is a seriously bad idea for all of us.

My Lords, I congratulate the noble Lord, Lord Touhig, on his Question and on highlighting the importance to the alliance of all member states meeting the NATO target to spend at least 2% of their GDP on defence. I am grateful to all noble Lords who spoke this evening.

The alliance remains the world’s most powerful defensive organisation. For 68 years it has kept the UK and our allies safe. Today, it plays a critical role in deterring Russian aggression, strengthening Iraqi institutions, training local troops to stop Daesh and helping Afghanistan rebuild its security structure, to name but the most important of its current tasks. However, as a number of noble Lords today stressed, in today’s world of growing dangers, NATO is becoming more important than ever. It is worth mentioning what the new US Defense Secretary, James Mattis, said at his confirmation hearing:

“If we did not have NATO today, we would have to create it”.

The trouble is that in recent decades we have seen a marked decline in defence spending. Today, the UK remains one of only five nations to meet the 2% target. The best estimate for 2016 is in fact 2.21%, as my noble friend Lord Jopling pointed out. I also take the opportunity to remind noble Lords that the budget will increase by 0.5% in real terms each year of the Parliament. However, five countries in the alliance invest less than 1%. That approach is no longer sustainable. In the face of multiple and diverse threats, NATO must become adaptable by design: that is, transparent, flexible and able to take tough decisions swiftly. In turn, that requires us to spend more, more consistently and more efficiently. That is why from the Wales summit in 2014 through to the Warsaw summit in 2016 and beyond, the UK, alongside our US counterparts, has led efforts to encourage nations to put their money where their mouths are.

So, on the noble Lord’s Question, what progress have we made? Here I depart slightly from my noble friend Lord Attlee, with great respect to him, because the answer is quite a significant amount. Thanks to the defence investment pledge signed by NATO nations in Cardiff, we not only halted NATO’s decline in defence spending but reversed it. In addition to the five allies who meet the alliance target, a further 20 increased their defence spending and seven others plan to reach the 2% target by 2024. At the same time, we should not forget that overall spending is not the only metric we use to measure NATO progress. Three other factors are worth mentioning.

First, we have also seen 10 nations increase the proportion of their investment dedicated to new capability. The noble Lord, Lord Clark, was absolutely right to highlight how critical that is. At a time when our adversaries are making exponential advances in fifth-generation airframe technology and advanced communications, NATO must dedicate itself to developing vital disruptive capabilities, from cyber to space, and from autonomy to big data, to avoid obsolescence and keep ahead of the curve.

Secondly, NATO is becoming far more agile in being able to deploy its forces when the call comes, whether that is Daesh terror in the south or Russian aggression in the east. Since the Wales summit, NATO set up a very high readiness joint task force, the VJTF, to respond in short order to a full range of security challenges from crisis management to collective defence. We have also seen NATO planes policing Baltic and Black Sea skies and we established an enhanced forward presence in eastern Europe. That is currently in train. I am proud that the UK takes a leading role in all these areas. We are leading on the VJTF, we are sending our Typhoons to safeguard Romanian and Polish airspace, and we are deploying around 800 troops to Estonia, alongside around 200 troops from France and Denmark. We are also deploying a reconnaissance squadron to Poland of approximately 150 personnel, who will come under US command.

Thirdly, we are seeing the alliance become more interoperable. One of the NATO alliance’s greatest achievements has been enabling multiple nations to communicate, plan and operate together. Yet there remains work to be done, especially when aligning the defence aspirations of the European Union and NATO. Rather than be distracted by the prospect of European armies or joint HQs, we encouraged our EU colleagues to build on progress already made on tackling migration, applying sanctions to Russia and strategic communications. The joint declaration at Warsaw was about making these two organisations complementary not contradictory, working together on countering hybrid threats, enhancing resilience, building defence capacity, cyber defence, maritime security, and exercises. Clearly, that declaration was a welcome step in the right direction.

The noble Lord, Lord Touhig, focused on the budget and in particular the 2%. He expressed his concern about creative accounting and, I was sorry to hear, accused the Government of shamelessly massaging the figures. I gently point out to him that the House of Commons Defence Committee disagreed with that view. It said that there had been no creative accounting. Indeed, the prime reason it said so is that NATO determines the definitions for categorising defence spending, not the Government. As with other NATO allies, the UK updates its approach to ensure that it categorises defence spending fully in accordance with NATO guidelines by capturing all spending contributing to the defence of the United Kingdom.

I take the point of the noble Lord, Lord Soley, on the necessity of comparing like with like. All NATO members are assessed using the same guidelines so it is right that we should complete our return along NATO’s metrics or we could not be compared accurately with our allies. Incidentally, only one NATO ally does not include pensions: Bulgaria.

Do the other NATO countries include things such as pensions to civilians as well as to military persons, and UN peacekeeping operations? Is that the Minister’s understanding?

That is indeed my understanding. We are clear that NATO wishes to quality-assure the figures that it receives so that it can compare like with like. We believe that the figures are broadly comparable as between the member states of NATO.

On another level, comparing like with like is a bit of a flawed approach. As I pointed out in the recent debate of the noble Lord, Lord Robertson, the nature of defence spending inevitably changes over time. In the past, for example, we reported significantly more operational spend, such as when we were involved heavily in operations in Afghanistan. Clearly, that type of spending has diminished considerably. At the same time, the noble Lord, Lord Murphy, questioned—he will forgive me if I got this wrong—the legitimacy of including new categories of spend in the analysis. Of course, he will recognise that new threats require new spending. We have not, historically, included any spend on cyber but we do now and it is right that we should. From time to time, like all NATO allies, we must ensure that we are capturing all appropriate spend.

The noble Lord, Lord Touhig, questioned whether the Army had the ability to wage war. It is important to say that the Army, in line with the strategic defence and security review of 2015, is ready and capable of deploying a potent, large scale, war-fighting force at divisional level providing there is sufficient notice.

The SDSR of 2015 took us a step forward because, along with a commitment to spend £178 billion on equipment and to increase the budget year by year, as I mentioned, it mandated a modernised war-fighting Army division that will be larger and able to use cutting- edge technology to harness all elements of Joint Force 2025. Altogether, it will be a significantly more potent force and I hope that the noble Lord, Lord Touhig, would not disagree with that vision.

In a darker, more dangerous world, NATO is more important than ever. Let me reassure the House that the UK has no intention of easing up in our drive to adapt the alliance. In our strategic defence and security review of 2015, this Government spelled out our plan to strengthen our involvement, and since the referendum vote we have seen our commitment to the alliance intensify. The noble Lord, Lord Soley, said that we should not allow ourselves to lapse into complacency. I entirely agree with that, but if the progress we have made in recent years is no excuse for complacency, it is considerable cause for encouragement. It shows that the will is there.

Even those sceptical of the new US Administration’s plans should have been reassured, I hope, by our Prime Minister who, during her recent press conference with President Trump in Washington, reiterated that the US was “100% behind NATO”. The Government have no doubt about that commitment. While we can reflect on what the President said during his campaign—remarks such as “NATO is obsolete”—surely what matters is what is being said and done now, which is a lot of joint work. We are working with all NATO allies, including the United States, to make sure that NATO is capable of dealing with the risks posed to us. We are encouraging all allies to meet those investment targets. In fact, we believe that President Trump’s election presents a unique opportunity to forge ahead with NATO reform. The allies now have a chance to invest in this vital organisation to make it more interoperable and expand its international role, showing that it makes a difference not simply to European but to global security.

For almost seven decades, NATO has been the bastion and the bulwark of our defence. By continuing to press our partners to modernise and adapt the alliance, in the face of the 21st century’s mounting demands, we will ensure that it continues to be the cornerstone of our defence for many years to come.

House adjourned at 8.12 pm.