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  • How Not to Cut Spending: More Defense Cuts in Britain Loom

    Not so quietly, a new conventional wisdom has taken hold in Britain: defense spending must be cut. Last month, the Economist, in writing about “the end of the New Labour orthodoxy on public spending” – the orthodoxy being that the public sector “should consume an ever-increasing share of national wealth” – stated in passing that only the Liberal Democrats had grasped the need to axe major programs, like Britain’s Trident nuclear deterrent.

    This month, David Halpern, former Chief Analyst in Tony Blair’s Strategy Unit, writes in Prospect magazine that, instead of spending less on “obesity, climate change or social exclusion,” British ministers should “use tough decisions as a way of expressing their values—by switching cash out of fighter planes into stimulating our fledgling electric car industry, for example.”

    Now, there is something to be said for the idea that Britain should acquire no more Eurofighters. It’s an expensive plane that serves no clear purpose and that Britain is only buying because of the penalties for cancellation it unwisely wrote into the contract. And there is even more to be said for the idea that the British state is in need of slimming down. Just yesterday, the OECD reported that British debt was likely to climb to 90% of GDP, and that reducing the size of this mountain of obligations was “the main task of policymakers for years to come.”

    But the idea that the budget should be balanced on the back of Britain’s armed forces is, frankly, nuts. First of all, it simply won’t work. Britain spends just over 2% of its GDP on defense. Next year’s deficit will be 14% of GDP. Even if the armed forces went out of business entirely, this would make only a very modest contribution to reducing the deficit. The British state puts most of its money where every other Western democracy does: into the welfare state and various entitlement programs. No spending cuts that evade that reality can hope to be effective.

    But, second, Britain’s defenses have already been cut. Repeatedly. In 1998, Labour stated, officially, that “The so-called ‘peace dividend’ from the ending of the Cold War has already been taken.” It then reduced defense spending from 2.9% of GDP in 1997 to 2.3% in 2007. In inflation-adjusted pounds, spending declined from 1996 through 2004. From 1997 through 2007, defense spending fell from 15% of the total to 11%. In real terms, it grew five times slower than health, six times slower than child social care, and twice as slowly as the police.

    There is no denying that, as Halpern notes, quite a few of Britain’s defense procurement projects have been poorly managed, a failing they have in common with the rest of the bloated British state. They bear the additional burden of serving as an inefficient industrial program, and as a way to send signals to various European partners who are far more interested in defense as social welfare than in defense as a serious national obligation.

    But the idea that the British state would be better at making electric cars than aircraft carriers beggars belief. Cars, because they have to be sold to consumers who have a choice in the matter, are actually exceptionally difficult to make. Of course, Britain’s not the only country to suffer from the delusion that the government can do it better than the private sector. And that’s another reason why the new British conventional wisdom is so dangerous: the U.S. appears to share it to the full.

    Posted in Ongoing Priorities [slideshow_deploy]

    One Response to How Not to Cut Spending: More Defense Cuts in Britain Loom

    1. Pingback: » Financial News Update - 06/30/09 NoisyRoom.net: “Extremism in the defense of liberty is no vice. Moderation in the face of tyranny is no virtue.” Barry Goldwater

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