RESOURCES
195. This Review addresses the long term. If its plans are to be effective, they must be affordable. It is also vital to the confidence of the forces that the plans are properly resourced. And if defence is to command the support of the nation it must be seen as good value for money.
196. The plans set out in this White Paper require substantial investment to improve inherited areas of weakness measured against future operational needs. They also require us to fund a continuing major equipment modernisation programme to ensure that our forces cannot be out-matched and to enable us to benefit from new technology. The resources needed will come from savings generated within the Review.
197. Savings will come from rationalisation in the support area, an increased efficiency programme and smarter procurement. The Review's drive for greater effectiveness and better value for money in both areas has produced impressive results. In the longer term, procurement reform will produce major savings in both acquisition and in-service support costs. Savings will also come from reductions in some areas and programmes identified in the Review as of lower priority in the current strategic environment. As a result, defence expenditure plans for the next three years will be:
198. Savings will build up gradually and there will need to be investment to remedy key weaknesses. By 2001/2, we expect that defence expenditure will be £915M a year lower in real terms than this year's budget. Taking account of one-off asset sales, however, the underlying effect is a reduction of some £685M. In an expanding economy, this is likely to mean that the defence share of GDP will fall from 2.7% today to 2.4%.
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