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 2010 - 2011

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 2011 (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 $17,720 billion

Some interesting comparisons can be made when looking at estimates for the world's top eight defence budgets for 2010 (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 2011.

UK DEFENCE EXPENDITURE

\the UK Government plans to spend the following amounts on defence.

Outline plans for later years are as follows:

2010 - 2011 - £32.9 billion (current and capital)
2011 - 2012 - £33.7 billion (current and capital)
2012 - 2013 - 34.4 billion (current and capital)

For comparison purposes defence expenditure is often expressed as a percentage of GDP. Expenditure in FY 2011-2012 represented about 2.2% 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 2011 is £713 billion.

Major spending departments include:

Department for Work and Pensions		£129.3 billion
Department of Health		£123.8 billion
Department for Children, Schools and Families		£93.3 billion
Welfare		£111.7 billion
Transport		£22.4 billion

DEFENCE BUDGETS - NATO COMPARISON (2010 FIGURES)

The nations of the North Atlantic Treaty Organisation (NATO) spent some US$969 billion on defence during 2010.

It is probably worth noting that Canada and the European members of NATO spent approximately US$258 billion, while the US spent some US$712 billion. Collectively, Canada and the European members of NATO spent approximately 36% 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.

An interesting comparison is made by the total national defence budget divided by the total number of full time personnel in all three services. 2010 figures for the top fsix world defence spending nations are as follows:‑

Nation

2010
Defence Budget (US$)

Total Service Personnel

Cost per Serviceman

USA

$712 billion

1,155,000

$457,887

UK

$57.4 billion

177,000

$323,198

Japan

$52.8 billion

245,000

$215,510

Germany

$35 billion

250,000

$140,000

UK DEFENCE BUDGET - TOP LEVEL BUDGETS FY 2010 - 2011

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 2010-2011 (Departmental Expenditure Limits)