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Mark Leftly: The pressure is on all parties when it comes to defence spending Mark Leftly: The pressure is on all parties when it comes to defence spending
(about 9 hours later)
We are led to believe that the main parties’ election manifestos will finally be released next week. About time, given they had a five-year heads-up.We are led to believe that the main parties’ election manifestos will finally be released next week. About time, given they had a five-year heads-up.
There will be explicit pledges, some of which we already know: the Tories will woo the City with the promise of balancing the books by 2018; Labour will stoke its core base in abolishing the bedroom tax; and – remembering that they’re leaking votes to the Greens – the Liberal Democrats plan to introduce a Zero Carbon Bill to “end Britain’s adverse impact on climate change for good by 2050”.There will be explicit pledges, some of which we already know: the Tories will woo the City with the promise of balancing the books by 2018; Labour will stoke its core base in abolishing the bedroom tax; and – remembering that they’re leaking votes to the Greens – the Liberal Democrats plan to introduce a Zero Carbon Bill to “end Britain’s adverse impact on climate change for good by 2050”.
As ever, though, it will be important to examine the vague wording of seemingly simple sentences. Remember 1997, when the Old Lady of Threadneedle Street was granted independence almost as soon as Gordon Brown entered Number 11?As ever, though, it will be important to examine the vague wording of seemingly simple sentences. Remember 1997, when the Old Lady of Threadneedle Street was granted independence almost as soon as Gordon Brown entered Number 11?
Do a quick Google search. A BBC report from the time states that “the City was taken by surprise” by the move to make the Bank of England responsible for hitting the Government’s inflation target; interest rate decisions were previously taken by the Chancellor of the Exchequer.Do a quick Google search. A BBC report from the time states that “the City was taken by surprise” by the move to make the Bank of England responsible for hitting the Government’s inflation target; interest rate decisions were previously taken by the Chancellor of the Exchequer.
Yet the Labour manifesto gave the party licence to do as it pleased without being easily accused of breaking a specific pledge: “We will reform the Bank of England to ensure that decision-making on monetary policy is more effective, open, accountable and free from short-term political manipulation.”Yet the Labour manifesto gave the party licence to do as it pleased without being easily accused of breaking a specific pledge: “We will reform the Bank of England to ensure that decision-making on monetary policy is more effective, open, accountable and free from short-term political manipulation.”
Next week, the one to watch for is defence spending. As much as Conservative backbenchers would love its leadership to do so, there surely won’t be a pledge to maintain defence spending at a minimum 2 per cent of national income, the goal for every member of Nato.Next week, the one to watch for is defence spending. As much as Conservative backbenchers would love its leadership to do so, there surely won’t be a pledge to maintain defence spending at a minimum 2 per cent of national income, the goal for every member of Nato.
Certainly, Labour will be wrong-footed if that happens; a senior Lib Dem privately admits that the party will have to have an urgent re-think should either of the other main national parties take a risk and promise to hit that target.Certainly, Labour will be wrong-footed if that happens; a senior Lib Dem privately admits that the party will have to have an urgent re-think should either of the other main national parties take a risk and promise to hit that target.
In short, no party wants to make a spending pledge over the Ministry of Defence when people have suffered through spending cuts and are increasingly sceptical of the use of British force overseas. Over a decade, the MoD has allocated nearly £160bn to equip the military, at a time when politicians are boasting of increasing the mental health budget by only a few hundred million.In short, no party wants to make a spending pledge over the Ministry of Defence when people have suffered through spending cuts and are increasingly sceptical of the use of British force overseas. Over a decade, the MoD has allocated nearly £160bn to equip the military, at a time when politicians are boasting of increasing the mental health budget by only a few hundred million.
Yet none of these parties wants to be seen as weak on defence – although there are plenty of Lib Dem and Labour activists who would happily adopt the CND-like line taken by the SNP. Ministry of Defence building in London Yet none of these parties wants to be seen as weak on defence – although there are plenty of Lib Dem and Labour activists who would happily adopt the CND-like line taken by the SNP.
So there will be vague pledges along the lines of “ensuring that Great Britain retains a strong voice overseas” or “protects friends and neighbours under threat”.So there will be vague pledges along the lines of “ensuring that Great Britain retains a strong voice overseas” or “protects friends and neighbours under threat”.
That sort of language is vague enough for the Tories and Labour to make more military cuts when the Strategic Defence and Security Review, which will set the MoD’s expenditure from 2016, gets properly under way later this year.That sort of language is vague enough for the Tories and Labour to make more military cuts when the Strategic Defence and Security Review, which will set the MoD’s expenditure from 2016, gets properly under way later this year.
For the City, that means it’s time to pull cash out of the big defence stocks. These include BAE Systems, which has enjoyed a good run of trading from around 400p a share 12 months ago to as high as 545.5p last month, and Bournemouth-based Cobham, which designs all sorts of clever countermeasures that protect aircraft from radar and infrared missile targeting.For the City, that means it’s time to pull cash out of the big defence stocks. These include BAE Systems, which has enjoyed a good run of trading from around 400p a share 12 months ago to as high as 545.5p last month, and Bournemouth-based Cobham, which designs all sorts of clever countermeasures that protect aircraft from radar and infrared missile targeting.
That’s the short-term option. But towards the end of the next parliament, whether it is Tory or Labour-led, defence spending could be on the up again, making these stocks highly attractive. Despite concerns about the defence sector, BAE Systems has performed well That’s the short-term option. But towards the end of the next parliament, whether it is Tory or Labour-led, defence spending could be on the up again, making these stocks highly attractive.
If David Cameron remains prime minister, he will come under increasing pressure from his own MPs to commit to the Nato target as Britain’s finances improve. For example, last month a non-binding backbench business debate saw 37 of 40 MPs back a motion to commit to spending 2 per cent on defence.If David Cameron remains prime minister, he will come under increasing pressure from his own MPs to commit to the Nato target as Britain’s finances improve. For example, last month a non-binding backbench business debate saw 37 of 40 MPs back a motion to commit to spending 2 per cent on defence.
Whether the Tories are in government through the cobbled-together support of a handful of Democratic Unionist Party MPs and Lib Dems, or it holds a slender parliamentary majority, Mr Cameron’s backbenchers will wield considerable power. They will demand the Nato pledge is reaffirmed – and they will succeed, lest the PM wants to see his Government fall.Whether the Tories are in government through the cobbled-together support of a handful of Democratic Unionist Party MPs and Lib Dems, or it holds a slender parliamentary majority, Mr Cameron’s backbenchers will wield considerable power. They will demand the Nato pledge is reaffirmed – and they will succeed, lest the PM wants to see his Government fall.
As for Labour, Tony Blair’s intervention over the Tories’ promise of an EU in-out referendum was a reminder of just how much he changed the party’s views on defence. When he was PM between 1997 and 2007, defence spending was fairly stable at 2.5 per cent and, even in the wake of the hated Iraq War, you won’t find too many ambitious Labour MPs calling for the scrapping of the Trident nuclear deterrent.As for Labour, Tony Blair’s intervention over the Tories’ promise of an EU in-out referendum was a reminder of just how much he changed the party’s views on defence. When he was PM between 1997 and 2007, defence spending was fairly stable at 2.5 per cent and, even in the wake of the hated Iraq War, you won’t find too many ambitious Labour MPs calling for the scrapping of the Trident nuclear deterrent.
If Labour takes power, it will be on similarly shaky foundations as the Conservative scenario. With fears over militancy on the rise, Ed Miliband will surely also approve greater defence spending as UK finances improve, moving the party to the centre as the 2020 election draws closer. When Blair was PM between 1997 and 2007, defence spending was fairly stable at 2.5 per cent If Labour takes power, it will be on similarly shaky foundations as the Conservative scenario. With fears over militancy on the rise, Ed Miliband will surely also approve greater defence spending as UK finances improve, moving the party to the centre as the 2020 election draws closer.
In each instance, the prime minister will also shoulder increasing pressure from the Pentagon to raise military spending, should he want the PR benefit of maintaining the “special relationship”.In each instance, the prime minister will also shoulder increasing pressure from the Pentagon to raise military spending, should he want the PR benefit of maintaining the “special relationship”.
Defence stocks could take a pretty bad hit shortly after the election. But for the patient, the electoral and economic cycles could neatly combine to make the likes of BAE and Cobham juicy picks in three or four years’ time.Defence stocks could take a pretty bad hit shortly after the election. But for the patient, the electoral and economic cycles could neatly combine to make the likes of BAE and Cobham juicy picks in three or four years’ time.
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