On 14 November 2000, the UK Defence Secretary addressed the Institute for Public Policy Research on the subject of Making European Defence Stronger. Geoff Hoon's speech was delivered before the European Union's (military) Capability Commitment Conference 20-21 November 2000 and the Nice European Council the following month. Reviewing European defence expenditure, Mr Hoon carried forward the theme of his predecessor Lord Robertson, the Secretary General of NATO, that defence budgets were no longer decreasing and that some were now increasing. Unlike the Secretary General, Mr Hoon gave three examples of recently increased defence budgets: Finland, Luxembourg and the UK.

Unfortunately, independent scrutiny does not support his aspirations for Finland and Luxembourg. And why did Mr Hoon have to rely on Luxembourg, that has an annual defence budget of about $110m, to make his case? Quoting his own country, Mr Hoon said the UK had "recently announced the first planned real terms increase in the defence budget for over a decade". What the UK Chancellor of the Exchequer actually announced last year was a planned increase in the defence budget that matched the year-on-year forecast inflation rate of 2.5 per cent. At the time of the statement, defence expenditure plans in 1990/00 real terms were published as: 2000/01-£22,500m; 2001/02-£22,500m; 2002/03-£22,500m and 2003/04-£22,700m (a possible real terms increase of 0.9 per cent in three years' time).

Returning from the conference, Mr Hoon told the House of Commons on 22 November 2000 that in 2001: "...defence spending will rise in real terms in 11 of the 16 European states of NATO." A week later, in a House of Commons written answer, Mr Hoon wrote that in 2001 "...defence spending will rise in real terms in 11 of the European Union member states." For both statements to be correct, and note the use of "real terms", the countries must be Belgium, Denmark, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Spain, Portugal and the UK. In talking nonsense, Mr Hoon did not nominate the 11 countries and nor did he quote any figures. Perhaps he'd been told that 11 European colleagues were asking for increases in their 2001 budgets.Throughout 2000, senior politicians have been making extravagant claims about the European Union's ability "to undertake crisis management operations" by 2003. Such concepts have great appeal to some ministers whose rhetoric often has failed to address the question of how the new capabilities are to be funded. The political climate has thus forced some politicians to convince themselves that their grandiose schemes are affordable and to make statements, never with figures, that smack of creative accounting.

Against this background, an independent organisation, Defence Research & Analysis, (DR&A) examined recent defence budgets of 24 European countries: those EU members both in and out of NATO, six EU candidates and three other European NATO members. The following summary is based on DR&A's research.
A comparison of NATO countries' defence budgets in 1996 and 2000 showed the US share rose from 60.8 to 66.6 per cent, while the western European contribution fell from 36.4 to 30.5 per cent. Compared with 1996 defence budgets, those for 2000 show a western European decline of 22.0 per cent; an overall NATO decline of 7.1 per cent, but a US increase of 1.7 per cent.

The 1996 to 2000 five-year record of defence budget change for the 24 countries examined by DR&A is shown in Table 1. Particular note should be made of the performance by France (-32.6 per cent) and Germany (-32.9 per cent), given that they see themselves as the driving force in matters European. Table 1, in the right-hand column, also shows DR&A's defence budget forecasts for the 24 countries. By definition such forecasts are subjective but they were based on considerable research into a wide variety of (unclassified) sources. The forecasts indicate an overall bottoming-out of defence budget cuts but little chance of returning to 1996 levels for the foreseeable future.

The 2000 defence budgets of the 24 countries in Table 1 totalled $156,000m, with three countries accounting for about 60 per cent. In military expenditure terms France (20 per cent), Germany (16 per cent) and the UK (24 per cent) have to be the source of defence capital, with Italy ( eight per cent) leading the remainder.

France, Germany and the UK are pivotal to the creation of a European rapid reaction force but have considerable political baggage. France and Germany see themselves as the driving force in Europe but France is not a full member of NATO. While France is converting to a professional armed forces, Germany is not and will not. Germany's expenditure on defence is low and is set to stay that way. To complicate matters further, the UK is not party to European monetary union and has yet to prove itself genuinely European. The UK is also tied to the US for defence and security matters.

A way for European nations to stabilise defence expenditure would be for every country in an alliance to spend a set percentage of gross domestic product (GDP). In the past, NATO set the figure at three per cent but few members achieved or maintained this commitment. Table 2 lists the 34 countries that are EU and/or NATO members plus those that aspire to join either or both organisations, showing the percentage of GDP each spent on defence in 1999.

The EU mean was 1.9 per cent GDP whereas the NATO mean was 2.2 per cent, a figure new members are expected to achieve. As the EU flexes its defence muscles, perhaps it should insist that every member commits at least the NATO mean. If Germany alone were to pull its weight in this respect, the change would be palpable. It is of note that the UK is heading down towards defence expenditure of 2.2 per cent GDP: the 1987 figure was 4.6 per cent, with a decrease every year to 2.6 per cent in 1999 (Table 2) and a published planned target of 2.4 per cent in 2001. There can be statistical nonsense when defence expenditure is expressed in GDP terms (Cyprus in Table 2), but the calculation is widely accepted and one upon which most countries can agree. In order to pay for the required capabilities, the EU also could introduce a second criterion: that at least a third of defence budgets should be allocated to R&D and equipment procurement.

While the Nice European Council endorsed the grand plan for European defence and security aspirations, it falls to the next presidency to devil out the detail. Doubtless Swedish defence experts will have some interesting comments to make about paying for EU capabilities when their presidency concludes at the end of June 2001.

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