In the nineties the public got used to declining defence expenditure. Then in 1998 we had the SDR, which was an intellectually honest attempt to do a proper review. At the time I was on the National Defence Industries Council. My conclusion is that the result was a pattern of expenditure designed to fund certain assumptions about what the armed forces were going to do in the future. But for the Treasury to give it a good housekeeping stamp of approval it had to fit a certain line, which called for a cut of between Â£1 to Â£2bn a year. Part of the problem today, which has been compounded over 12 years, is that we have never caught up with that slight dip at the beginning. In retrospect, the treatment of the reserves was wrong, we cut them drastically yet we can see how much we depend on them today. I was very much involved with the partial privatisation of the Defence Evaluation and Research Agency (now QinetiQ). Technology and DERA were not supposed to be part of the SDR. Defence Secretary George Robertson told us it was much too complicated to do now, they would do it later. At the last minute, he shamefacedly told us that No.10 had instructed him to do a Public-Private Partnership and the proceeds would be put into the defence budget to fill a gap around the year 2001-02. You only have to read the National Audit Office report to understand how this privatisation was mishandled. At the time the Americans were dead against it and the minister who advocated the American perspective to No. 10 was removed from his job not long after. People claimed that the Americans said it was okay. They have said so since, but that was not true at the time.
Geoff Hoon updated the SDR in 2002, emphasising expeditionary warfare. He identified the need for a Carrier Strike Force but there was no more money. I contend that a cumulative deficit has built up over the last 12 years since the SDR of at least Â£10bn. But it is probably more like Â£20bn, which explains the horror stories we have heard about forcesâ€™ housing, medical care, lack of training, cancellation of training exercises, lack of equipment on training exercises, low pay and dodgy equipment. There was a time when every person who went to Afghanistan had to spend pounds of his own money on personal kit â€“ he doesnâ€™t now because the kit is better but at one time, that is what it took.