18 JANUARY 1957, Page 8

Why Defence Cuts are Necessary

By SIR EDWARD BOYLE-, MP rE cuts in defence expenditure which were announced on Wednesday represent only a small instalment of the cuts which have been demanded; and I think it is worth recalling, first of all, why they are being called •for so press- ingly at the present time. The fundamental point is that the defence programme seriously com- petes for the same resources which we also need for our export trade, and for productive invest- ment at home. We are devoting tho 'high a proportion of our most highly skilled man- power, and of the products of our engineering and electronic industries, to non-productive pur- poses.

Of course this is a problem which has con- fronted us ever since Mr. Attlee's Government embarked on a greatly expanded defence pro- gramme at the end of 1950. It was, indeed, in 'order to make room for this expanded programme that two consecutive Chancellors of the Ex- chequer—Mr. Gaitskell and Mr. Butler—intro- duced Budgets designed to hold down the level Of home investment. But the problem is a great deal more urgent today, for three reasons. First, in 1950, the seller's market in consumer goods —notably textiles—had not yet come to an end, whereas today Britain is tremendously dependent on the export of capital goods and the products of our metal-using industries. Quite apart from the competition for resources, to which I have already referred, I think it is important to remem- ber the weight of the sheer physical burden on the top management of those firms who have to fulfil both defence contracts and large export orders. It really is not easy to find either the time or the effort to go all out for new export markets, when one has in addition the responsi- bility for the many miles of wiring required for a modern fighter aircraft.

Secondly, there has been the vast increase in foreign competition—notably from Germany and Japan; and there is the prospect of even more serious competition from Soviet Russia during the decades which lie ahead. In view of the extent of this competition, Britain cannot hope to earn the trading surplus which is urgently needed, unless we take active steps to make British in- dustry really competitive in world markets. It is, I think, more generally recognised and under- stood today that the level of export trade which a country can achieve is closely bound up with the level of productive investment at home. Cer- tainly it is essential for a British Chancellor to keep inflation on the curb, if only to contain the import bill within bounds; but disinflation alone will not earn us the export surplus we need. We need a considerable transfer of resources into productive investment during the years ahead, and this is all the more important in view of the proposal for free trade with a European Common Market.

Thirdly, many people feel with justice that the time has come to review the basic assumptions of cold war strategy. It seems to me highly arguable that Britain, who led the world in the Industrial Revolution, could fight the cold war more effectively by devoting increased resources to engineering exports and overseas investment. And I have absolutely no doubt that the pursuit of economic growth in a capitalist—or mixed— economy is the most effective ideological counter to Marxist Communism. For it becomes so obvious that economic expansion really does enlarge the range of choice for the mass of the population, and that Marx was talking plain unadulterated nonsense when he claimed that in every society `man's social position determines his conscious- ness.'

Having stated the main economic case for de- fence cuts, I must now turn to the questions of 'how much' and `where.' I think it is important to realise that the budgetary aspect does not matter nearly so much as the release of key re- sources. Economics is fundamentally not about money but about people and things. And the target at which I should like to aim is that we should shift at least three hundred million pounds' worth of resources from production for defence to production for export and for home investment. If in the process we have to cancel certain contracts, then of course the purely bud- getary strain will be reduced by a correspondingly smaller amount. But I cannot see this matters very much. If, say, an engineering firm receives x million pounds in payment for a cancelled con- tract, and uses the money to finance its own expansion, then the Government's object will not have been frustrated but furthered.

As for the question where the cuts should be made, I should like to venture just three sug- gestions. First, I think we should prune drastically those parts of the programme which are not directly concerned with the defence of the United Kingdom, and which duplicate the effort of our American allies. I am thinking especially, of course, of heavy bomber aircraft. Secondly, I am very doubtful whether it can possibly be sensible for Britain to devote so much highly skilled man- power to the development of guided missiles. We are bound to remain several years behind the United States, and I should have thought it might well be more sensible to buy such defence equip- ment of this kind as we expect to be of use to us.

Finally, there is the question of the hydrogen bomb. It may well be that, having gone so far, we had better acquire the knowledge required to manufacture the bomb. I am sure we ought not to make any far-reaching decision except in con- sultation with our allies, and I appreciate the force of the argument that we ought to think hard before forgoing the possession of an ulti- mate deterrent of our own. Nevertheless, we should also bear in mind that a shortage of pri- mary fuel is the principal weakness of the British economy today. And I should very much hope that, in the nuclear field, we could bring about some shift of resources so that the civilian pro- gramme goes ahead faster.

In any case I am absolutely sure that the case for continuing with hydrogen-bomb tests arises from its value as a deterrent, and not because its possession would enable Britain to follow an independent foreign policy. It does seem rather strange that so many people should still hanker after `going it alone' at this precise moment, when it is obvious that our ill-starred Suez ad- venture has made us more economically de- pendent on the United States, and not less. And indeed, one of the principal reasons why I believe an international world order to be strongly in the interests of Great Britain is because it has become so clear that Britain simply has not the resources to compete with the giants. If we suc- ceed in bringing about a shift of resources such as I have indicated, then sterling will be streng- thened, and we may succeed in earning the trading surplus which we so urgently require. I believe that such a shift of resources can be achieved without putting this island at any greater risk, and that it will make it easier rather than harder for Britain to play a worthy role as a partner in the Western Alliance of free nations.

[The next article in this series will be by Richard Goold-Adams.]