Defence spending and the future
152. The effort to improve NATO's capabilitieswhether
through the ACT, the NRF, the PCC or through any of the Alliance's
various capability initiatives of the past decademust be
underpinned by adequate defence expenditure. NATO itself has no
capacity for financing major procurement projects and its ability
to generate improvements in capabilities rests on the preparedness
of each member state to commit sufficient resources to defence.
One of the most longstanding complaints of the United States has
been the failure of European members of the Alliance to commit
153. Recent defence expenditure statistics reveal
the extent to which European nations lag behind the United States.
As tables 2 and 3 show, in 2006, whereas the United States spent
some 3.8% of its GDP on defence, European nations spent an average
of just 1.74%.
Moreover, there had been a steady decline in European defence
spending as a percentage of GDP over the past decade.
Table 2: Defence Spending in NATO, by country,
in 2006 as a percentage of GDP
Source: House of Commons Library
Table 3: Average European NATO defence expenditures
(excluding US) as percentage of GDP, 1997-2006
Source: IISS Military Balance 2008
154. Similarly, the total US defence budget dwarfs
those of the European members of NATO. In 2006, the US defence
budget totalled $617 billion. The next highest NATO spenders were
the UK on $53.1 billion and France on $44.25 billion.
Indeed, in 2006, the US defence budget represented 75% of the
combined defence budgets of all NATO member states. Table 2 reveals
the gap in defence spending between the US and Europe.
155. In a speech on NATO and the European Security
and Defence Policy (ESDP), the Secretary of State for Defence
stated that "the real problem that European defence faces
is insufficient and inadequate military capability".
He agreed with comments by President Sarkozy that "European
security cannot rest on the shoulders of 3-4 countries".
The only solution was to spend more, but at present "most
European nations spend too little on defence". A further
problem was that those countries "spend too little of those
inadequate budgets on acquiring the modern capability that NATO
and the EU need". Efforts to improve capabilities were "futile
if nations do not step up to the plate and commit the necessary
Mr Browne declared that, in the final analysis:
unless Europeans spend more on defence, and more
of their defence budgets on capability, both NATO and the EU will
be hamstrung. For Europe to have more capability its members must
spend morequite a lot more.
156. At the Riga Summit, in November 2006, the NATO
Allies reaffirmed their commitment to investment in improving
capabilities. The CPG issued at Riga declared that:
The development of capabilities will not be possible
without the commitment of sufficient resources
investment in key capabilities will require nations to consider
re-prioritisation, and the more effective use of resources, including
through pooling and other forms of bilateral and multilateral
157. The prospects for an increase in European defence
spending, however, are not encouraging, particularly in the short-term.
During our visits to European NATO capitals we heard repeatedly
that the chances of increases in national defence budgets were
extremely unlikely. Likewise, in evidence to us Charles Grant
stated that "it is almost inconceivable that defence budgets
will go up".
He recommended that the NATO Allies consider new mechanisms for
pooling defence assets, since "pooling saves money".
Indeed, Mr Grant argued that "we could save a lot of money
if we collaborated and built common organisations".
If European NATO nations do not increase their defence expenditure
the ability of NATO to meet its declared capability ambitions
will be in jeopardy.
158. The implications of the gap in defence spending
between the United States and Europe are significant. In evidence
to us, Dr Robin Niblett noted that for over a decade the United
States had been spending "high amounts of money on very sophisticated
technologies and the ability to fight in ways that are fundamentally
different to the way the EU nations can fight".
Dr Niblet argued that, over time, this would have a direct impact
on the interoperability of US and European forces and their ability
to act alongside each other. He warned that the gap would ensure
that the difficulties of interoperability, revealed during the
1991 Gulf War, would be "widened and exacerbated even further
into the future".
The danger that disparities in defence expenditure might lead
to US and European forces becoming unable to operate together
was also highlighted by Dr Johnathan Eyal:
If you look at European defence research expenditure,
which of course is dwarfed by the Americans, within that research
budget about 80 per cent is dominated by spending by Britain and
France. The rest is almost no activity at all. The result of it
is not simply that we have less equipment but very often that
our equipment becomes incompatible with that of the Americans
simply are incapable of digesting or deploying the kind of technology
which the Americans have. It is not merely volume; it is also
how it is spent".
159. Although the debate about spending focuses predominantly
on the chasm that exists between US and European defence expenditure,
there is also a less heralded but equally significant spending
gap between the European nations themselves. As Dr Niblett told
us, "the disparity within the EU on defence spending is as
dramatic as the disparity between some of the top spenders within
the EU and the United States".
160. However, it is not only a question of how much
money is spent by nations on defence; it is also a question of
how those nations choose to spend their money and in what they
choose to invest. The MoD told us that "institutional investment
must be reprioritised in line with current and emerging requirements
rather than continuing to spend money maintaining out-of-date
and less relevant capabilities".
161. We asked the witnesses to our inquiry whether
NATO's informal defence expenditure target of 2% GDP for each
member of the Alliance should be binding. Overwhelmingly, our
witnesses argued that, desirable or not, binding targets would
simply not prove feasible. Professor Cox stated, "I do not
think there is any chance at all" of implementing binding
targets on defence. There had been huge debates in the 1970s about
Alliance burden-sharing, but "they did not go anywhere".
General Deverell asked since "NATO [is] the sum of national
who is going to make it binding? It is rather like
turkeys voting for Christmas".
Those who want the flexibility not to spend 2%...are
going to find it very difficult to get themselves to vote for
something they do not want to do, so I do not understand how it
can be made binding unless you have some form of majority voting
which, of course, under consensus one does not.
162. Noting that NATO's target for each nation of
spending 2% of GDP on defence was an informal one, Dr Webber argued
that "there is no binding limit and attempts to use guidelines
within NATO have generally failed
they only generate resentment".
He maintained that:
With an alliance of 26 Member States with hugely
divergent economies, histories and military capabilities, you
cannot impose matters of that sort and you must allow allies within
NATO, if they share membership with the EU, to contribute to defence
and security in more creative ways than assuming that what matters
is [the] headline spend in [the] defence budget.
163. Dr Mark Webber also argued that the gap in defence
spending between the United States and Europe was not all that
it appeared. He maintained that the disparity had been "exaggerated
by the way the figures are calculated".
In terms of defence budgets, he acknowledged that the differences
in spending appeared vast. However, Dr Webber maintained that
"if you look at the overall spend on security issues",
whilst the US was still "way out in front", the EU member
states spent money on things like humanitarian aid and assistance
which, though "technically not defence expenditure",
nevertheless "clearly feeds into the issue of security".
In that case, the disparity became "less clear".
164. Professor Cox argued that, ultimately, the debate
over burden-sharing and defence expenditure was not a new discussion.
It had been going on for decades within NATO and was likely to
do so for the foreseeable future. According to Professor Cox,
the future of NATO was not at stake due to the disparities in
defence expenditure between American and Europe, however it was
measured. The Alliance would endure despite those disparities.
However, he suggested that the gap in spending was linked to the
issue of the leadership of NATO and the influence of member states
upon the direction of Alliance policy. He posed the question,
"if the United States is the one putting most money into
this Alliance and most lives on the line
does that not also
give it legitimate leadership of this Alliance?"
165. The ability of the NATO Alliance to deliver
real and lasting improvements in military capabilities depends
on the willingness of Allies to commit sufficient resources. There
can be no greater demonstration of political will in NATO, or
the lack of it, than the amount of money each member of the Alliance
is willing to spend on defence. There exists a clear, persistent
and growing gap in defence expenditure between the European members
of NATO and the United States and there seems little prospect
of this being reversed.
166. Despite a longstanding commitment by all
members of the NATO Alliance to spend a minimum of 2% of their
GDP on defence, only six out of the 24 European members of NATO
actually achieve that target. But defence spending is not simply
about quantity; it is about what the money is spent on. We believe
that in addition to the 2% target the Alliance should establish
detailed capability targets, and timeframes, against which the
performance of Allies could be measured.
167. If the European members of the Alliance want
to be taken seriously, if they want the United States to remain
engaged in, and committed to, NATO, and if they want greater influence
in the overall direction of Alliance policy, they must commit
the necessary resources and improve their capabilities. We are
concerned that an Alliance with such large, and growing, discrepancies
in defence expenditure will not be sustainable in the long term.