T h e circulation of this paper has been strictj

I t is issued for the personal use of .-:

T O P S E C R E T Copy N o .

C[66

I l t h F e b r u a i

CABINET

DEFENCE BS^jpNh^BJTUEE E C ^ E ^ M U C T U L J E

Memorandum b y t h e S e c r e t a r y o f S t a t e f c r D e f e n c e

The d e f e n c e r e v i e w a imed a t r e d u c i n g d e f e n c e e x p e n d i t u r e i n

1 9 6 9 / 7 0 f r o m a b o u t £ 2 , 4 0 0 m i l l i o n a t 1964 p r i c e s , w h i c h w o u l d h a v e

b e e n t h e c o s t o f t h e programme we i n h e r i t e d f r o m t h e p r e v i o u s

A d m i n i s t r a t i o n , t o £ 2 , 0 0 0 m i l l i o n . I t a l s o a imed a t r e d u c i n g t h e

f o r e i g n e x c h a n g e c o s t o f d e f e n c e , , On 5 t h A u g u s t l a s t y e a r I t o l d

t h e House t h a t we h a d managed t o r e d u c e t h e f o r e c a s t t o t a l t o a b o u t

£ 2 , 1 8 0 m i l l i o n . I now s u b m i t p r o p o s a l s f o r t a l c i n g t h e r e v i e w a s

f a r a s i t c a n b e t a k e n a t p r e s e n t ,

2 The D e f e n c e and O v e r s e a P o l i c y Commit tee h a v e r e v i e w e d a l l a

o v e r s e a s d e f e n c e commitments and h a v e a g r e e d t h a t we s h o u l d make

some c h a n g e s w h i c h would e n a b l e t h e c o s t o f t h e f o r c e s t o b e

r e d u c e d . A d e t a i l e d s t a t e m e n t o f t h e r e s u l t i n g f o r c e s t r u c t u r e ,

t h e a s s u m p t i o n s on w h i c h i t i s b a s e d and i t s c o s t i s c o n t a i n e d i n

Annex A . The m a i n a s s u m p t i o n s o n c o m m i t m e n t s a r e ­

( i ) o u r commitments t o NATO i n Germany w i l l c o n t i n u e a s

a t p r e s e n t p l a n n e d b u t w i t h some r e d u c t i o n I n t h e

p r o v i s i o n o f s t r i k e a i r c r a f t ;

( i i ) i t w i l l b e p o s s i b l e t o agx-ee w i t h t h e U n i t e d S t a t e s a

s u f f i c i e n t l y f i r m b a s i s f o r j o i n t a c t i o n i n L i b y a t o

l i m i t o u r commitment t o t h e p r o v i s i o n o f a s e c u r e

p o i n t o f e n t r y ;

( i i i ) i n t h e M i d d l e E a s t we s h a l l h a v e no o b l i g a t i o n s t o

Aden o r t h e S o u t h A r a b i a n F e d e r a t i o n a f t e r Aden

b e c o m e s i n d e p e n d e n t in. 1 9 ^ 8 , and t h e commitment t o

a s s i s t Kuwai t w i l l b e l i m i t e d t o t h e p r o v i s i o n o f

a i r s u p p o r t u n l e s s t h e R u l e r g i v e s u s t i m e t o move

l a n d f o r c e s f r o m t h e U n i t e d Kingdom o r t h e F a r E a s t

t o K u w a i t ;

- 1 -

TQP S E C R E T

( i v ) i n t h e I n d o / P a c i f i c a r e a we s h a l l p r o v i d e a v i s i b l e

m i l i t a r y p r e s e n c e o f s e a , l a n d and a i r f o r c e s b a s e d

on A u s t r a l i a .

The d e f e n c e r e v i e w h a s t h r o u g h o u t b e e n b a s e d on t h e a s s u m p t i o n t h a t

t h e c o n f r o n t a t i o n o f M a l a y s i a b y I n d o n e s i a w i l l h a v e e n d e d b e f o r e

1 9 6 9 / 7 0 .

3 , The f o r c e s t r u c t u r e d e s c r i b e d i n Annex A w o u l d c o n t a i n f i x e d

wing a i r c r a f t c a r r i e r s u n t i l 1975? b u t no new c a r r i e r s , w o u l d b e b u i l t .

The Army w o u l d b e r e d u c e d t o 1 7 6 , 0 0 0 and t h e Gurkhas d i s b a n d e d .

F o r t h e k o y a l A i r F o r c e 50 3? l l l A J s w o u l d be b o u g h t and t h e P 1127

p r o v i d e d .

4 . Annex A shows t h a t t h i s f o r c e s t r u c t u r e w o u l d r e q u i r e a d e f e n o e

b u d g e t o f £ 2 , 0 6 0 m i l l i o n i n 1969 /70 a t 1964 p r i c e s . The f o r e i g n

e x c h a n g e c o s t i n 1 9 6 9 / 7 0 w o u l d amount t o about £195 m i l l i o n f o r

s t a t i o n i n g f o r c e s o v e r s e a s and a b o u t £ 8 0 m i l l i o n f o r t h e p u r c h a s e o f

e q u i p m e n t , a t o t a l o f £275 m i l l i o n compared w i t h £355 m i l l i o n on ,

p r e s e n t p l a n s , w i t h o u t t a k i n g a c c o u n t o f any a r r a n g e m e n t s w i t h t h e

German Government t o o f f s e t o u r f o r e i g n e x c h a n g e c o s t s i n Germany

o r w i t h t h e A m e r i c a n Government t o o f f s e t t h e c o s t o f t h e F 111A

p u r c h a s e . A l l t h e s e f i g u r e s assume t h a t t h e r e v i s e d d e p l o y m e n t

w i l l b e i n f u l l e f f e c t b y 1 s t A p r i l 1 9 ^ 9 , I n f a c t , h o w e v e r , t h e

u n c e r t a i n t y a b o u t when c o n f r o n t a t i o n b y I n d o n e s i a w i l l e n d , t h e

p h y s i c a l d i f f i c u l t i e s o f r e d e p l o y m e n t and r e o r g a n i s a t i o n , a d d e d t o

o t h e r p o s s i b l e d e l a y s b e f o r e t h e r e v i s e d p a t t e r n o f c o m m i t m e n t s c a n

b e p u t i n t o e f f e c t , may w e l l make t h i s a s s u m p t i o n u n r e a l i s t i c , I t

i s n o t p o s s i b l e t o e s t i m a t e t h e amount o f t r a n s i t i o n a l e x p e n d i t u r e

i n v o l v e d .

5 , Annex A a l s o shows t h a t i n t h e y e a r s a f t e r I969 /7O t h e r e w o u l d

b e a s m a l l i n c r e a s e i n t h e s i z e o f t h e d e f e n c e b u d g e t , W h a t e v e r

we d e c i d e a b o u t 1 9 6 9 / 7 0 i t i s i m p o r t a n t t h a t t h e M i n i s t r y o f D e f e n c e

s h o u l d b e a b l e t o p l a n on t h e a s s u m p t i o n t h a t i f i t p r o v e s t o b e

n e c e s s a r y some s m a l l i n c r e a s e i n l a t e r y e a r s w i l l be p e r m i t t e d ,

p e r h a p s r e l a t e d t o t h e r a t e o f g r o w t h o f t h e G-ross N a t i o n a l P r o d u c t .

6 , I h a v e c o n s i d e r e d what f u r t h e r e c o n o m i e s m i g h t b e made i n

o r d e r t o e l i m i n a t e t h e gap o f £60 m i l l i o n b e t w e e n t h e e s t i m a t e d

c o s t o f t h e d e f e n c e programme i n I 9 6 9 / 7 O and t h e t a r g e t o f

£ 2 , 0 0 0 m i l l i o n . T h i s d i f f e r e n c e i s i n f a c t a c c o u n t e d f o r b y

t h e c o n t i n g e n c y a l l o w a n c e w h i c h we h a v e added t o t h e c a l c u l a t e d c o s t

o f t h e programme t o c o v e r u n e x p e c t e d r e q u i r e m e n t s and i n c r e a s e s i n

c o s t s o t h e r t h a n t h o s e due t o r i s e s i n p a y and t h e p r i o e l e v e l ,

when we h a v e t h e r e s u l t s o f t h e 1966 Long Term C o s t i n g i n June i t

may b e p o s s i b l e t o make some f u r t h e r r e d u c t i o n i n t h i s c o n t i n g e n c y

a l l o w a n c e ,

7 , The o n l y way o f a c h i e v i n g s u b s t a n t i a l f u r t h e r s a v i n g s w i t h o u t

g r a v e d a n g e r o f f a i l i n g t o m e e t t h e c o m m i t m e n t s now e n v i s a g e d w o u l d

b e t o c a n c e l t h e P 1 1 2 7 , T h i s w o u l d s a v e £35 m i l l i o n ' i n 1969 /70*

t h o u g h i t w o u l d i n c r e a s e f o r e i g n e x c h a n g e c o s t s b y £ 5 m i l l i o n .

T h e r e i s no o t h e r p r o j e c t w h i c h c o u l d b e g i v e n up w i t h o u t a s e r i o u s

r i s k t h a t commitments c o u l d n o t b e m e t ,

8 , The a s s u m p t i o n s a b o u t c o m m i t m e n t s on w h i c h t h e c o s t i n g i s b a s e d

may w e l l p r o v e t o b e u n r e a l i s t i c . T h i s i s p a r t i c u l a r l y t r u e o f

t h e a s s u m p t i o n s a b o u t t h e e n d i n g o f c o n f r o n t a t i o n and t h e r e d e p l o y ­

ment o f f o r c e s i n A u s t r a l i a , My d i s c u s s i o n s i n Canberra showed

t h a t , i f we h a v e t o l e a v e S i n g a p o r e and M a l a y s i a b y 1 9 6 9 / 7 0 , t h e r e

i s no p o s s i b i l i t y o f r e d e p l o y i n g f o r c e s o f t h e s i z e p r o p o s e d i n

A u s t r a l i a b y t h e n ; m o r e o v e r , e v e n i f r e d e p l o y m e n t w e r e o n l y p o s t ­

p o n e d , i t i s u n l i k e l y t h a t t h e A u s t r a l i a n Government would a g r e e

t h a t l a n d f o r c e s o f t h e s i z e p r o p o s e d s h o u l d b e b a s e d i n A u s t r a l i a ,

I t f o l l o w s , t h e r e f o r e , t h a t o n c e we l e a v e S i n g a p o r e and M a l a y s i a , we

s h o u l d b e a b l e t o a c h i e v e some f u r t h e r s a v i n g s i n f o r e i g n e x c h a n g e

a n d , i f t h e t o t a l s i z e o f t h e f o r c e s c a n b e r e d u c e d , i n b u d g e t a r y

e x p e n d i t u r e a l s o . However we a r e c o m m i t t e d t o r e m a i n i n g i n

S i n g a p o r e and M a l a y s i a a s l o n g a s p o s s i b l e . We c a n n o t b a s e d e c i s i o n s

o n e x p e n d i t u r e t h e r e , and p a r t i c u l a r l y w o r k s e x p e n d i t u r e , on an

a s s u m p t i o n t h a t t h e f o r c e s w i l l h a v e b e e n w i t h d r a w n b y a p a r t i c u l a r

d a t e . We c a n o n l y as sume t h a t , u n t i l c o n f r o n t a t i o n e n d s , t h e f o r c e s

t h e r e c a n n o t b e s u b s t a n t i a l l y r e d u c e d , ,

9 . T h e r e a r e a l s o o t h e r p o s s i b i l i t i e s o f c h a n g e s i n commitments

w h i c h m i g h t y i e l d f u r t h e r s a v i n g s i n due c o u r s e . They i n c l u d e t h e

e n d i n g o f t h e r e s i d u a l commitment t o t h e R u l e r o f Kuwai t and some

r e d u c t i o n i n o u r f o r c e s i n BAOR e i t h e r a s a r e s u l t o f a r e v i s e d

NATO s t r a t e g y o r b e c a u s e t h e F e d e r a l German Government f a i l s t o

o f f s e t t h e f o r e i g n e x c h a n g e c o s t s *

- 3 ­

1 0 , I f we can a g r e e t h a t t h e P 1127 s h o u l d h e c a n c e l l e d i t s h o u l d

n o t h e d i f f i c u l t t o c l o s e t h e r e m a i n i n g gap o f £ 2 5 m i l l i o n . I f

t h e P 1127 c o n t i n u e s some f u r t h e r m a j o r s a v i n g s o n commitments may

vre l l h e n e c e s s a r y . I n e i t h e r c a s e , h o w e v e r , i t w o u l d h e u n w i s e

t o a t t e m p t t o d e c i d e now w h i c h o f t h e s e v e r a l ways i n w h i c h t h e gap

m i g h t h e c l o s e d s h o u l d h e a d o p t e d .

Recommendat ions

1 1 , I i n v i t e my c o l l e a g u e s ­

a , t o d e c i d e w h e t h e r t h e P 1127 s h o u l d h e c a n c e l l e d ;

h , t o a g r e e t h a t we s h o u l d n o t a t t e m p t t o d e c i d e f o r t h e

t h e p r e s e n t how t h e r e m a i n i n g gap b e t w e e n t h e c o s t

o f t h e d e f e n c e programme i n 1969 /70 and t h e t a r g e t

s h o u l d h e c l o s e d .

D 0 H .

M i n i s t r y - o f D e f e n c e , S W , l , a

1 1 t h F e b r u a r y , 1 9 6 6 ,

- 4 ­

ANNEX A

THE.. EEVISED FORCE,3TOUGTURE

Assumptions on Commitments

The revised, force structure has been costed on the following assumptions about overseas commitments

a. Berlin - Our tripartite commitment in Berlin will continue0

"b- Ojermajry - Our commitments to NATO in Germany will continue as at present planned. While we shall be able to rely on the use of the forces in Germany for reinforcement in real emergency, we should not rely on using, them for such purposes any more than at present.

c. Cajcibb^jin ­ V/e shall withdraw our forces from the Caribbean, except for a company in' British- Honduras and a frigate which will be in the Caribbean part of the time, to meet internal security commitments in our remaining dexoendenc ies.

d. S^ojith^Ajblantic and S^oul^Afrijga ­ We shall make arrangements with "the" South African authorities to retain the use of facilities under the Simonstown Agreement without having to maintain a naval presence there, exce-pt an ice patrol vessel in the Falkland Islands and in the Antarctic,

e. Gibjialtjijg ­ We shall maintain a garrison, airfield and other facilities, but there may be minor savings on naval facilities. The dockyard will continue to operate.

f. MsdiJ erran ean ­ There will be no naval force ("or maritime patrol aircraft) permanently in the Mediterranean and our maritime commitment to NATO will be renegotiated. We shall continue to retain a commitment to provide nuclear support for CENTO.

So Mjilta ­ Malta will be reduced to a staging post with an RAF reconnaissance squadron.

h. Li/bjya ­ V/e shall secure a point of entry only by stationing one infantry company, an armoured car squadron and a stockpile of one squadronTs -worth of tanks in the El Adem/Tobruk area. RAF El Adem will be retained as a staging post but with minimum facilities only.

2

j. Qll!£vjL - Akrotiri will "be retained as a Sovereign Base Area (SBA) from which we shall provide nuclear support for CENTO. On the assumption that this commitment is to continue after the CANBEARAS phase out, it will he met "by V-bombers stationed at Akrotiri. V/e shall have no obligations to Libya which require forces or facilities in the Dhekelia SBA.

k * Aden - After Independence in 1 9 6 8 , we shall have no obligations to, or defence facilities or forces in, Aden or the South Arabian Federation.

1 . Persian Gulf - Our obligations to the other Persian Gulf States will continue and our commitment to come to the assistance of Kuwait will he renegotiated so that it is limited to the provision of air support, unless the Ruler gives us adequate time to move in the land forces from the United Kingdom or Par East to Kuwait. The force ,structure in this area should include a second battalion, and additional capital expenditure should not exceed £ 1Om.

m " Hong Kong - We shall continue to provide a garrison of 6 f major units with a few coastal minesweepers, hut no aircraft. It is assumed that the Hong Kong Government will increase their present defence contribution from £ 1 .5m to £ 5 . 5 n u

n. Indo/Pacific Area - We shall provide a visible military presence based on Australia, including naval and amphibious forces, with 7"? Army major units (including RM Commandos) and appropriate RAP aircraft for strike, maritime and Army support roles., Our forces will he unaccompanied. The Gurkhas will he disbanded.

Assumptions on Equipment

2 . The following equipment assumptions have been taken to form the basis of a revised force structure related to these commitments

a. The new carrier CVAO 1 will not he built. The present carrier force will continue until 1 9 7 5 . 5 5 PHANTOMS will he bought for the Royal Navy, those remaining when the carrier force is phased out ( 3 h ) being handed over to the RAF. The carrier strike component will he reduced so there will he only a total buy of 96 BUCCANEER 2 s , 5 2 of which will he available for the RAP in 1 9 7 5 .

b. A total of 5 0 P 1 1 1 A aircraft will he purchased..

3

c. The P 1 1 2 7 will continue with PGB.

d. The Type 82 destroyer will he provided.

e. The LANCE weapons system will "be provided for BAQRc

f. There will be naval reprovision, above that in existing plans, fors­

(i) escort cruisers to succeed the TIGER class;

(ii) the short-range anti-ship missile.

Force Structure

Royal Navy

3 c The carrier force would remain in being -until 1 9 7 5 ? reducing from four to three ships in 1 9 7 1 * The abandonment of carriers would make it necessary to continue with a programme of ships to follow the converted TIGERS in the m i d - 1 9 7 0 s 0 These ships would reprovide the ASW capability and the fleet command facilities which would otherwise be lost with the carrierso The strength of the destroyer and frigate fleet would be reduced by nearly 2 0 % . In detail, the changes in fighting units are, for 1 9 6 9 / 7 0

Unit Current Plan New Plan Reductj

Carriers h h -Commando/Assault Ships k k -Cruisers 3 3 -GM Destroyers (COUNTYS) 8 8 -Other Destroyer/Frigates 8 6 7 0 16

Submarines 3 6 3 3 3 . Mine-Count ermeasures 7 2 U5 2 7

Vessels 213 167

(a) reducing to 3 in 1971 and nil in 1 9 7 6 ,

Army

ho One of the assumptions upon which the force structure is based is that it will be possible to agree with the United States a sufficiently firm basis for joint action in Libya for us to limit our commitment to the provision of a secure point of entry.

k

5 . The reduction in the total of the Army's fightingunits would he k%, or i1$ including the Gurkhas. At the moment there is the greatest difficulty in meeting the requirement for battalions to go on unaccompanied emergency tours overseas. This is having a had effect on re-engagement and is causing other difficulties. Under the new proposals, five battalions will have to be stationed permanently overseas on planned unaccompanied tours apart from any additional battalions required for emergencies. If the infantry is to maintain itself upto strength under these circumstances, it is essential that a good sized pool of battalions is maintained in the UK to support unaccompanied battalions overseas, and the Army in the UK has been tailored to meet this requirement. In detail the reductions in units would he of the following order, subject to detailed study later:

Current Plan New Plan Reduction

Infantry Battalions 61 6 0 1 (2%) Gurkha Units 9 i ( a ) Nil 9 i ( 1 0 0 $ ) RAC Regiments 2 3 i 21 f 1 f , (7fo) RA Regiments 31.f f (2%) RE Regiments 16 1 3 1 24r (15%)

Total 1 h 2 1 2 7 15 ( 1 1 $ )

Reduction in other SupportinSupportingg ArmArmss and Services would he approximately 5%

Note (a) Includes 8 Gurkha battalions, 1 Gurkha Engineer Regiment, 1 Parachute Company,

Royal Air ' Force"

6. The Royal Air Force front line would be reduced by1969 / 7 0 from the present planned force of 8U5 to 810. The main features of the new force structure would he

a * Transjport;:fo.rce,s. There would be no reduction in -capability because the requirement to move the Strategic Reserve remains unaltered and indeed increased reliance is to he placed on the principle of overseas reinforcement. In addition to the front line of U£ C 1 3 0 s to replace the HASTINGS and the BFVERLEY, nine C 1 3 0 s have been included to offset shortcomings in the BELFAST; the total C 1 3 0 buy would he 66.

"b- Air."Defence. The global fighter force would be reduced by "2h aircraft to a front line of 9 6 by1 9 7 5 and to a front line of 8 h by 1 9 7 6 , as V LIGHTNINGS are replaced gradually by PHANTOMS released by the build-up of the JAGUAR force.

5

G * Tactical Strike/Rec onna is sance . The present force of 150""CANBS?dlAS would start to be phased out of service in 1 9 6 8 / 6 9 . Their replacement would be confined to 3 6 front"lines1 m A s (from the buy of 50-) ' , supplemented by 9 6 front line V-bombers retained in a tactical role until the introduction of the Anglo/French variable geometry strike aircraft.

d. Ground Attack. The planned buys of 1 4 8 RAF PHANTOMS and 1 1 0 P 1 1 2 7 to give front lines of 8 4 and 6 0 respectively would be unchanged, but the JAGUAR would progressively replace the PHANTOM in this role from 1 9 7 3 (see b. above); provision is made for a second stage development of the P 1 1 2 7 .

e - Maritime Tasks. The SHACKLFTON Mk . 2 force would be replaced by 3 0 HS. 801 s (from a buy of 3 8 ) ; only 18 SHACKLETON M k . 3 s would be retained in the front line instead of the 2 4 envisaged until recently. 3 6 front line PHANTOMS (making use of those made available by the RN) will be provided for maritime tasks after the withdrawal ; of the carriers. 3 6 front line ex-RN BUCCANEERS will also be provided for maritime tasks in 1975-77 until this role is taken over by the VG aircraft.

To provide a tactical reserve of personnel for overseas reinforcement, 2 , 0 0 0 extra men have been added to UK establishments.

Manpower

7 . The Service strength (adult male) of the Forces would be as follows in 1 9 6 9 / 7 0

Current Plan Revised Force Reduction Structure

RN 95 , 4 0 0 9 2 , 0 0 0 3 , 4 0 0

Army 1 8 1 , 1 3 0 1 7 6 , 0 0 0 5 , 1 3 0 (a) 1 2 1 , 6 7 0 1 1 9 , 9 9 0 1 , 6 8 0 (b)

Total (UK) 3 9 8 , 2 0 0 3 8 7 , 9 9 0 1 0 , 2 1 0

Other 2 4 , 5 6 0 1 0 , 4 0 0 1 U , 1 6 0

Total 1 + 2 2 , 7 6 0 3 9 8 , 3 9 0 2 ^ , 3 7 0

(a) All Gurkha' units (now planned to run down by 1 9 6 9 / 7 0 from about 14,000 to 10,000) will have been disbanded.. It has been assumed that the new Army Volunteer Reserve (establishment 50,800) will have taken the place of the existing Army Emergency Reserve and Territorial Army.

(b) There will in fact be a reduction in RAF strength overseas of 6,535, but this is offset by an increase in the UK of 4,855.

N\ ./8 ­

8 . Numbers of women and boys would be reduced as follows :-

Royal Navy 3 8 0

Army 1 , 5 6 7 Royal Air Force -

Total 1,9U7

There would be reductions in civilian numbers at home and overseas as follows

Royal Navy

Army

Royal Air Force

Total 3 9 5 3 0 - :

Works Fror^ramme

9o A comparison of the works programme on present plans and for the revised force structure offers savings of about £ 1 0 0 m between 1969/70 and 1975/76, A comparison for the first and last years is

£m (1965prices)

Present Plans Rgvisejl For;eg Structure

Sayings

1969/70 2 0 8 1 9 k Ik 1975/76 1 5 3 138 1 5

1 0 - For the purposes of this study it has been assumed that capital facilities in Australia will not have to be provided at UK expense. It has also been assumed, for costing purposes, that service in Australia will be unaccompanied and that, in general, units will change over once a year. The cost of the accommodation, storage and operational facilities required in Australia cannot be accurately estimated without detailed consultation with the Australian authorities. A rough estimate is that the provision of permanent accommodation for 2 2 , 0 0 0 military and civilian personnel, together with repair and storage facilities, airfield improvements, etc. would cost some £ 1 . 0 0 m . This would obviously be a long term programme spread over perhaps as much as ten years, depending on the capacity of the building industry in the chosen sites. For the first few years after the establishment of a base in Australia the majority of the facilities would have to be in temporary construction.

/ i v h i r r i s t r v o f A v i a t i o n

7

M i n i s t r y o f A v i a t i o n . R & D P r o g r a m m e

1 1 . I t h a s h e e n a s s u m e d t h a t t h e r e w i l l h e n o d e v e l o p m e n t o f a n AM7 a i r c r a f t . I n a d d i t i o n t h e r e w i l l h e n o f u r t h e r d e v e l o p m e n t o f t h e BUCCANEER 2 a l t h o u g h p r o v i s i o n i s m a d e f o r f i t t i n g A J 1 6 8 t o t h e BUCCANEER 2 a n d P 1 1 1 A . T h e r e i s a l s o p r o v i s i o n f o r t h e d e v e l o p m e n t o f a s h o r t r a n g e s u r f a c e - t o - s u r f a c e s h i p - h o r n e w e a p o n . I t h a s h e e n a s s u m e d t h a t t h e r e d u c t i o n s i n t h e r e s e a r c h f i e l d r e c o m m e n d e d i n t h e P l o w d e n R e - p o r t w i l l a m o u n t t o £ 6 m p e r a n n u m . A l l o w i n g f o r v a r i a t i o n s a n d a d j u s t m e n t s i n t h e r e s t o f t h e MCA p r o g r a m m e s i n c e t h e 1 9 6 5 L o n g T e r m C o s t i n g i t i s e s t i m a t e d t h a t t h e e f f e c t o f t h e r e v i s e d p r o g r a m m e w o u l d h e t o r e d u c e MOA e x p e n d i t u r e i n 1 9 6 9 / 7 0 t o £199m.

Q t h e r ^ F x j o e i i d a t u r ^ e

1 2 . O t h e r e x p e n d i t u r e w i t h i n t h e D e f e n c e B u d g e t i s n o w f o r e c a s t a t £ 6 0 m ( 1 9 6 5 p r i c e s ) i n 1 9 6 9 / 7 0 a n d f r o m a b o u t ,S50ra t o £ 3 0m a y e a r i n t h e s u b s e q u e n t p e r i o d . S i n c e t h e s t r - a t e g i c n u c l e a r f o r c e p l a n s a n d p l a n s f o r n u c l e a r p r o p u l s i o n r e m a i n u n c h a n g e d and . c a p i t a l c h a r g e s i n c u r r e d i n t h e p a s t b y t h e A t o m i c E n e r g y A u t h o r i t y h a v e I t o h e r e p a i d , t h e r e i s l i t t l e s c o p e f o r m a n o e u v r e i n t h e f o r e c a s t s f o r f i s s i l e m a t e r i a l c o s t s w h i c h r a n g e f r o m £ 2 3 m i n 1 9 6 9 / 7 0 t o a c r e d i t o f £ h m i n 1 9 7 5 / 7 6 . AEA r e s e a r c h e x p e n d i t u r e ( c u r r e n t f o r e c a s t £ 6 . 5 m i n 1 9 6 9 / 7 0 ) w i l l d e p e n d o n s t r a t e g i c n u c l e a r p o l i c y f o r t h e 1 9 7 0 s a n d l a t e r ; a r e d u c t i o n t o £ 5 m a y e a r h a s h e e n a s s u m e d . F i n a l l y , t h e r e i s t h e M i n i s t r y o f D e f e n c e C e n t r a l V o t e , a l a r g e p a r t c f w h i c h c o v e r s i n t e r n a t i o n a l d e f e n c e o r g a n i s a t i o n s a n d NATO i n f r a s t r u c t u r e . A t p r e s e n t n o r e d u c t i o n s i n o u r NATO c o m m i t m e n t c a n h e f o r e s e e n a n d , s i n c e l a s t s u m m e r n o p r o v i s i o n w a s m a d e f o r s a t e l l i t e c o m m u n i c a t i o n s w h i c h now a p p e a r t o h e a d e f i n i t e r e q u i r e m e n t , t h e M i n i s t r y o f D e f e n c e C e n t r a l f o r e c a s t h a s b e e n i n c r e a s e d , b y .£3m a 3^ear t o a l l o w f o r t h e m .

D e f e n c e B u c l g e t

1 3 . The c o s t , a t 1 9 6 5 c o s t i n g s p r i c e s ( £ m ) , of t h e r e v i s e d f o r c e s t r u c t u r e i s e s t i m a t e d t o he a s f o l l o w s : ­

1 9 6 9 / 7 0 1 9 7 0 / 1 1 9 2 1 / 2 1 9 7 2 / 3 1 9 7 3 / 4 1 9 X ^ / 5 1 9 7 5 ^ Navy 5 3 8 5 4 6 5 8 9 5 7 7 5 5 8 558 528 Army 5 5 1 552 5 5 5 5 5 5 5 6 1 5 6 7 5 7 2

RAP 5 6 6 6 0 6 586 586 571 591 6 4 2

MPBW 1 9 4 1 9 3 185 166 1h9 1 4 2 138 MOA 1 9 9 183 1 9 0 1 9 0 1 9 0 1 9 0 1 9 0

AExi. 5 5 5 5 5 5 5 S p e c i a l

M a t e r i a l s 2 3 16 1k - 4 - 4 - 4 - 4

MOD 3 2 31 3 0 3 0 3 0 3 0 30 C e n t r a l

T o t a l 2 i 0 8 2132 2 1 5 4 2 1 0 5 2 0 6 0 2 0 7 9 2101

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8

It is usual to add to these figures a contingency allowance for cost growth and to cover unforeseen objects of expenditure in the later years. The assessment of a sensible contingency allowance is by nca means an exact science. The most reasonable assumption to take at this stage would appear to he en addition of £ 6 0 m in 1 9 6 9 / 7 0 rising hy £ 2 5 m a year to £210m in 1 9 7 5 / 7 6 . On this basis the forecast, at 1 9 6 5 costings prices (£m), would he best expressed as

1 9 6 9 / 7 0 1 9 7 0 / 1 1 9 7 1 / 2 1 9 7 2 / 5 1 9 7 3 / 4 19Jit/5j 1 9 7 5 / 6

+ 6 0 - f 8 5 +110 +13 5 +160 +185 +210

Total 2 1 6 8 2 2 1 7 2 2 6 4 2 2 h 0 2 2 2 0 2 2 6 4 2 3 1 1

1965 costings price levels were, hov/ever, almost exactly 5% ( £ 1 0 4 m on £ 2 0 0 0 m ) higher than Defence Review price levels ( 1 9 6 4 prices). At Defence Review prices (£m), the overall Defence Budget estimate is therefore:­

1 9 6 2 / 2 0 1 2 2 5 a 1 9 7 V 2 1 9 7 2 / 2 1 9 7 J A 1 9 2 4 / 5 . 1 9 7 5 / 6

2 0 6 0 2 1 0 6 2 1 5 1 2128 2 1 0 9 2 1 5 1 2 1 9 6

Foreign Exchange

1 4 . The latest forecast of foreign exchange costs in 1 9 6 9 / 7 0 which -would result from the stationing of Forces overseas under present plans is as follows (,£m 1 9 6 5 costings prices) :­

B/lediterranean Aden/ IndS/7 Hong Other Total T -. . p.G u l f P a c i f i c Konre

9 4 3 6 35 7 1 1 0 1 4 2 6 0

Deployment in accordance with the revised assumptions would reduce foreign exchange in 1 9 6 9 / 7 0 hy about £ 6 5 m , giving a total of ah out £195m- as follows %-

Germany Mediterranean Persian Indo/ Hong Other Tota: Gulf pa cijCic Kong

Tex.H.K RN 5 1 17 3 1 27 Army 6 2 3 3 " 11 7 3 89

RAF 11 8 3 11 - 2 3 5 sOther 21 3 8 3 2 7 4 4

(v/orks Central MOA)

Total 9 4 19 15 4 2 12 13 195

K including Aldahra

1 5 . Other defence foreign exchange expenditure, including the purchase of foreign military equipment, would on current plans he about £ 9 5 m net in 1 9 6 9 / 7 0 , and about £ 8 0 m net under the revised plans. Thus the total estimated foreign exchange costs in 1 9 6 9 / 7 0 are £ 3 5 5 m (current plans) and about £ 2 7 5 m (revised plans). Conclusion

1 6 . a. Without the addition of a contingency allowance, the cost of the revised force structure in 1 9 6 9 / 7 0 is about £ 2 0 0 0 m but with the addition of an . allowance of £ 6 o m , the cost is £ 6 0 m above the ceilinr

b, Local stationing costs (foreign currenay) would be reduced by £ o 5 m ih 1 9 6 9 / 7 0 , The corresponding reductions for other foreign exchange costs (largely for the purchase of foreign equipment) would, be £ 1 5 m .

c. It would not be possible to contain expenditure at the 1 9 6 9 / 7 0 level in subsequent years without further reductions in commitments or capabilities but expenditure could be contained within a rate of increase lower than the forecast rise in

: GNP.