The claim

“The defence budget will now be increased and we will meet the 2 per cent target.”
Michael Fallon, 13 July 2015

The background

David Cameron says he wants more “drones, spy planes and special forces” to step up the battle against the so-called Islamic State.

But how is he going to pay for it all?

Last week’s summer budget appeared to quell fears of senior military officers and Britain’s Nato allies when it committed this government to spending at least 2 per cent of GDP on defence.

But Labour has said the Conservatives will have to resort to “creative accounting” to get past the 2 per cent spending target, which Britain has signed up along with all other Nato member states.

The defence minister, Michael Fallon, gave a BBC interview this morning which failed to clear up some the detail. Is the government trying to fiddle the figures or is this really a victory for defence chiefs?

The analysis

Britain is one of only four out of 28 Nato member states who currently spend 2 per cent of national wealth on defence, the others being the United States, Greece, and Estonia.

Coalition ministers repeatedly failed to commit publicly to maintaining defence spending at this level before the election, so George Osborne’s announcement last week came as a surprise to many.

Mr Fallon said this morning that Britain “easily” meets the target, but experts disagree.

Professor Malcolm Chalmers from the defence think-tank RUSI told us in February that he expected defence spending to be “on the cusp” of 2 per cent in 2015/16, but thought it would fall below the threshold in 2016/17.

That was before the chancellor intervened, promising to increase the Ministry of Defence budget by 0.5 per cent above inflation every year.

This should take us over 2 per cent of GDP a year, but there are suspicions that the government has changed the accounting rules to include more spending items under the banner of “defence” that would previously have come under different departmental budgets.

The Financial Times has reported that the £800m cost of war pensions is now counted as defence spending in a bid to inflate the numbers.

And Mr Fallon has told parliament that there is a case to be made for counting money spent on conflict prevention and stabilisation – which currently comes under the international development budget – as defence spending.

The government would not confirm or deny to FactCheck whether either of these accounting changes have actually happened yet.

That’s because the details of the defence spending submitted to Nato for its officials to check is not made public.

In this morning’s interview Mr Fallon did appear to rule out the suggestion that money that would previously have been counted as intelligence spending will be reclassified as military.

But he appeared to cave in slightly on the issue of whether the rules have been changed – admitting that the remit of the defence budget will be “very marginally” bigger than before.

In fairness, Nato sets the rules on what is and isn’t counted as defence spending, so any accounting sleight-of-hand will still have to be within the guidelines.

Anecdotally, other countries have long taken advantage of flexibility in the rules: France reportedly includes elements of its police budget and the Americans get the whole of their National Security Agency spy agency on the defence books. Again, we can’t check all of this because the detail is not published.

The verdict

In the absence of any hard data, what’s the answer to our question: is the government cooking the books?

It’s hard to get beyond the fact that the Ministry of Defence is not offering robust denials to some accusations that it has changed the definition of defence spending to inflate the total.

And Mr Fallon appeared to confirm today that the goalposts have shifted slightly by admitting that the items covered in the defence budget have changed “very marginally”.

In the government’s defence, any tinkering with the accounts would have to fall under Nato rules in order to be signed off by the alliance.

And it remains the case that the government has protected the MoD budget from cuts, committing to a real-terms increase in spending, something which came as a genuine surprise to many analysts.