THE FINANCES OF DEFENCE

"You need three things to win a war,

money, money and more money".

Trivulzio (1441-1518)

SUMMARY
UK DEFENCE EXPENDITURE

DEFENCE BUDGETS - NATO COMPARISON

UK DEFENCE BUDGET - TOP LEVEL BUDGETS FY 2007 - 2008

EQUIPMENT EXPENDITURE

SUMMARY

In general terms defence is related to money, and a nation's ability to pay for its defence is linked to its GDP (Gross Domestic Product) as measured by the sum of all economic activity within a country. Estimates for the world's top seven GDP rankings for 2008 (in billions of US$) and the latest year for which accurate (International Monetary Fund) figures are available are as follows:

Note: As an economic grouping the European Union has the largest GDP at $18,394 billion

Some interesting comparisons can be made when looking at estimates for the world's top eight defence budgets for 2008 (in billions of US$ (and the latest year for which accurate figures are available) are as follows:
 

The figures in the above listing are figures derived from US$ exchange rates at end December 2008.
 

UK DEFENCE EXPENDITURE

In the 2008-2009 Financial Year (FY) the UK Government planned to spend £34.1 billion (Resource DEL) on defence.

Outline plans for later years are as follows:

2009-2010 - £35.4 billion
2010-2011 - £36.9 billion

For comparison purposes defence expenditure is often expressed as a percentage of GDP. Expenditure in FY 2008-09 represented about 2.3% of GDP having fallen from around 2.5% of GDP in FY 2001-02. In 1985 UK defence expenditure represented 5.2% of GDP.

The estimated total UK government expenditure for FY 2009 is £620.5 billion.

Major spending departments include:

Department for Work and Pensions		£106 billion
Department of Health		£111 billion
Department for Children, Schools and Families		£80.7 billion
HM Revenue and Customs		£32.6 billion
Transport		£19.9 billion

DEFENCE BUDGETS - NATO COMPARISON  (2008 FIGURES)

The nations of the North Atlantic Treaty Organisation (NATO) spent some US$940 billion on defence during 2008.

It is probably worth noting that Canada and the European members of NATO spent approximately US$245 billion, while the US spent some US$695 billion. Collectively, Canada and the European members of NATO spent approximately 35% of the US total.

For ease of conversions from national currencies, amounts are shown in US$.
 

Note: (1) Iceland has no military expenditure although it remains a member of NATO.
(2) On 1 April 2009 Albania and Croatia were admitted into the NATO alliance.

An interesting comparison is made by the total national defence budget divided by the total number of full time personnel in all three services. 2008 figures for the top five world defence spending nations are as follows:‑

Nation

2008
Defence Budget (US$)

Total Service Personnel

Cost per Serviceman

USA

$695 billion

1,499,000

$463,642

UK

$54 billion

187,000

$291,891

Japan

$41 billion

240,000

$183,333

Germany

$35 billion

245,000

$142,857

UK DEFENCE BUDGET - TOP LEVEL BUDGETS FY 2007 - 2008

Under the early 1990s ‘New Management Strategy’ the UK defence budget was allocated to a series of ‘Top Level Budget Holders’ each of whom were allocated a budget with which to run their departments. The money allocated to these Top Level Budgets (TLBs) constitutes the building bricks upon which the whole of the defence budget is based.

Top Level Budgets Financial Year 2007-2008 (Departmental Expenditure Limits)