Guns vs. Butter: The UK's Spending Dilemma

What’s it to be, warfare or welfare, social or military spending, guns or butter? Hermann Göring coined that phrase calling for re-armament, “Guns will make us powerful, butter will only make us fat.” In her “Britain awake” speech, Margaret Thatcher in 1976 warned that the Soviets “put guns before butter, while we put just about everything before guns” – though defence spending fell as a proportion of GDP in her time, and faster as the cold war ended. But that peace dividend needs repaying now we are back in cold (and quite hot) war with Russia, only with the US no longer reliable, nor even a friend.

The present day “guns v butter” has morphed into a warfare/welfare zero-sum. How dispiriting that Al Carns repeated it on resigning last week as armed forces minister. “There is an argument around welfare,” Carns says. “I am a firm believer that it’s about hands up, not a hand out. But we need to help the people who need the most help within the nation but also get the balance right across defence.” Why the juxtaposition? This ex-colonel of the marines would “take the country by the scruff of its neck and make it great again” – soldier talk that makes Westminster go weak at the knees.

But “there is an argument” about defence, too, as the public accounts committee repeatedly criticises wild overspending and delays. The National Audit Office again refused to fully verify Ministry of Defence accounts last year. The £6bn Ajax armoured vehicle was eight years late, and faulty, Dreadnought-class submarines are 10 years late, while two white elephant aircraft carriers, costing twice their original price, are too vulnerable to sail. Aukus and Gcap are further mightily expensive projects: the word is that Dan Jarvis, the new defence secretary, may axe some of them. Carns says the next war will be won by “the country whose 19-year-olds can code, whose factories can build drones in weeks not years, and whose grid stays on when someone tries to switch it off”.

John Healey’s shock resignation as defence secretary over spending badly dents not just Labour but the country, despite a steep budget rise. Britain is not a laggard in Nato: countries near the Russian border spend most, while we are roughly level with Germany, a bit ahead of France and further ahead of Canada, Italy and Spain. All need to spend more as the alliance’s biggest contributor, the US, dials back, but how much should the UK punch above its weight?

Wise ministers should have no truck with talk of a welfare/warfare switch. That’s Tory policy. Here’s James Cartlidge, shadow defence secretary: “Our brave armed forces are crying out for resources. But the PM is more interested in doling out benefits.” How big an axe to benefits? “Only the Conservatives will cut welfare spending by £23bn and get Britain working again,” is their pitch.

Some hearts may have sunk at a misleading headline in the Times on Friday. “Andy Burnham: I’ll cut welfare bill to fund defence,” it read, but the interview said nothing of the sort. More for defence is needed, Burnham said, with “maximum social return” in the number of apprenticeships and support for British industry. But cuts in welfare would come only from getting young people into work, and doing “things that will reduce the benefits bill” by investing in employment support – exactly as Alan Milburn prescribes.

The right uses benefits as a bottomless lucky dip: its “out-of-control welfare” trope is now taken as a near-universal truth, even by the usually irreproachable BBC Verify, which recently stated: “Defence spending has fallen as welfare spending has risen.” Ruth Curtice, chief executive of the Resolution Foundation, challenges this. “It didn’t look quite right to me so we took a closer look.” She finds fundamental errors in charts showing Department for Work and Pensions (DWP) spending soaring, but which overlook that introducing universal credit meant the DWP taking over vast tax-credit spending previously paid by HMRC. They also let child disability allowances appear as adult payments. When corrected, she says, “non-pensioner welfare is now about the level of the mid-90s”.

Here’s the kicker: why pick on non-pensioner welfare anyway, Curtice asks? Pensions are where the welfare budget skyrockets. Like the Institute for Fiscal Studies, the Resolution Foundation just produced a devastating critique entitled What a ratchet! Why it’s time to stop being polite about the triple lock. The state pension ratchets up at twice the rate of unemployment benefits, and pensioners have seen three times as much living standards growth as non-pensioners in the last 20 years. Reformers want to keep its rise equal with average earnings: had it done that, the Office for Budget Responsibility estimates it would cost £12.6bn less by 2029.

But when the right talks the warfare/welfare switch, you hear no whisper about the lock. The grey vote petrifies all parties, though they all know the triple lock is the obvious escalator in the DWP budget. The right distracts with talk of lavish disability benefits and wastrel families: it would restore the two-child benefits limit, impoverishing more than 400,000 children. Pensioners are half as likely as children to be poor.

As for the defence comparison, why? These issues are quite unconnected. Spending on working-age benefits was lower than on defence in the mid-1980s – but defence spending dropped with the fall of the Wall. The benefit bill is projected at 4.3% of GDP by the end of the decade in an older, sicker society, while defence is promised to be 3% by the 2030s. Cash is hard to screw from any department, but UK benefits are the lowest among OECD countries at £98 a week for universal credit, and 9% lower in real terms than in 2010. There should have been a defence levy to match the pledge: some suggest low-interest patriotic defence bonds, with inheritance tax relief to attract older investors. But end any talk of taking from those with least.