The escalating cost of sending troops and military hardware around the world to provide security when and where it is needed is causing major financial headaches across Europe. As the world economy slows, funding for defence spending is becoming scarcer. Yet the global security challenges are increasing. So Europe’s finance ministries face a dilemma over how much of their stretched national budgets to allocate to the military; and European defence officials have to work out how to make sure that precious funding is spent in the most efficient manner possible.
The problem is particularly acute in Britain, not only because of our current troop deployments in Afghanistan and Iraq but also because of the unfair systems by which NATO-led missions and military operations under the European Security and Defence Policy (ESDP) are financed. Under both systems, those who accept the responsibility to take military action also take on the lion’s share of the financial burden as well. It is time our collective security alliances overhauled these inequitable funding methods and made sure that all member states pay a proportionate price for global security.
Britain, of course, has a vested interest in promoting stability around the world. Every nation’s economic and security interests are so interlinked in our globalised world that we cannot avoid sharing many concerns with a multitude of actors all over the planet. We also cannot avoid importing strategic risks. Just as the global credit crisis saw instability in one corner of the globe spreading quickly to affect everyone else, so security risks are now globalised too.
It is also no secret that the British Ministry for Defence (MoD) is facing a funding crisis. Despite British forces having been engaged in two major military operations since 2003, defence spending only represents 2.3% of Gross Domestic Product – the lowest since the 1930s. As a share of total government spending, defence expenditure has fallen from 7.8% in 1998 to 6.1% in 2006. Any future UK government will inherit a military that is overstretched, undermanned and working with worn out equipment due to the on-going operations in Iraq and Afghanistan. The unfunded liability associated with this will total billions of pounds.
Exacerbating the MoD’s dire financial situation is Britain’s heavy reliance on the Urgent Operational Requirement process as an ersatz procurement programme. Money from the Treasury Reserve is funding equipment which is urgently needed in the field, without paying the through-life maintenance costs. This will have implications for future defence spending and could end up costing the MoD’s core budget more in the long run.
There are various options open to the next British government to fix these problems. A sound procurement policy that provides a degree of predictably for the defence industry, plus a Strategic Defence Review to match resources with commitments, would both be steps in the right direction. On a broader scale, however, I feel that better military and financial burden sharing within both NATO and the ESDP would not only benefit the UK but would also help to alleviate some of the pressure on other national defence budgets in Europe. We must take full advantage of our organised security structures to ensure that the global security burden is shared in a fair and proportionate manner. To date, this has not happened.
Let’s look first at the case of NATO. For the transatlantic alliance to work properly in the post-Cold War world, its members must be willing to do at least two things. First, they must be prepared to take equal risks with regards to supplying troops and equipment for NATO-led military operations. And second, they must be willing to fund and sustain these operations until the mission is completed.
At the moment, certain member states do a disproportionate amount of the fighting, funding and dying. This is simply not sustainable in the longer term. All NATO countries need to understand that membership brings implicit and explicit responsibilities to ensure that their military forces have the capability to fight and win on the modern-day battlefield. They must also recognise the need to create a sounder financial system for alliance operations.
There is currently common funding for certain shared costs such as headquarters, with contributions linked to the member states’ GDPs. But the amounts covered by common funding are usually only a very small part of the total cost of an operation. All other expenses “lie where they fall.” Therefore, the more troops and equipment a country contributes to a mission, the more it ends up paying. The cost to the UK for its contribution to the NATO operation in Afghanistan, for example, totals £3.1bn. This is a heavy burden on the British taxpayer.
Because of the expeditionary nature of today’s military operations, the “costs lie where they fall” system is an anachronism in the post-Cold War era. Yet fixing this problem will be easier said than done. NATO has been trying for years to get its member states to spend the required 2% of GDP on defence – without success. If the 2% target alone were realised, it would mean an estimated $67bn increase in NATO defence spending – roughly the equivalent of adding another British or French defence budget to the alliance. Reaching the 2% benchmark is not a panacea, but it would certainly help.
Last April, the leader of the UK's opposition Conservative Party, David Cameron, told an audience of the Chatham House think-tank in London why we should set up a real operational fund for NATO expeditionary missions, with every member state being required to contribute. It would allow countries that currently carry an unduly large part of the burden some reimbursement. It would also offer potential funding to those countries that might deploy forces but face short-term financial difficulties in meeting the cost.
The new NATO operational fund would clearly be more equitable than today’s system, which penalises proactive member states and encourages nations that prefer to “sit on the fence” to do nothing at all. Why should the few carry the many? Common security implies common commitment; it is quite wrong for everyone in the street to get the same insurance cover when only a few pay the premiums. I hope this issue is addressed at the next NATO summit in Strasbourg. What better way to celebrate the alliance’s 60th anniversary than making sure it has the institutional framework to succeed for the next 60 years?
Solving NATO’s burden-sharing problem is not enough by itself. There are similar issues for the European Union’s crisis management missions when military forces are involved. EU civilian crisis management is funded directly from the Common Foreign and Security Policy budget. But apart from the common costs of an operation (usually less than 8% of the total) the ESDP uses the same funding method as NATO. Therefore the bulk of the money for both ESDP and NATO-led military operations comes out of the same defence pot in each member state. Thus we must realise that there is no point in just fixing one funding mechanism without simultaneously fixing the other.
Interestingly, there was some discussion under the French presidency about reforming the Athena Mechanism, which is the means used to determine the amount each EU member state contributes to the common costs of a mission. Like the NATO common fund, EU contributions are also largely based on GDP. The French have also specifically called for the “costs lie where they fall” concept to be abandoned in the name of so-called financial solidarity.
I believe that any change made to the Athena Mechanism must include reforms to its rules and procedures. Currently, non-EU members of NATO that contribute troops to an operation can neither vote – nor even be present at votes – when the Athena Special Committee sets the budget for the mission. This is true even though their troops are going to fight and possibly die. This is discriminatory, undemocratic and no way to treat important NATO allies like Norway and Turkey.
The Lisbon treaty lacks any attempt at reforming the Athena Mechanism, and there has been no real effort made to address some of its shortcomings. Although reform in this sector won’t directly help to make the funding for military operations more proportionate, the indirect effect of such a change could encourage third countries to contribute.
There is little doubt that some of our European allies can afford to pay more to offset the unfair burden placed on others. We must act quickly and decisively. The more NATO and the ESDP take robust military action in out-of-area theatres like Afghanistan and sub-Saharan Africa, the more the question of funding will cause divisions in both alliances. I imagine the day is not far off when our taxpayers will also demand a fairer system of finance for military operations. This is completely rational. Collective security alliances are just that – collective. It is time that everyone contributed their fair share to the common good.