The Government does not set the level of Defence spending as a proportion of an economic model which can vary due to many factors. What matters is the resources provided to the MOD to enable the Armed Forces to carry out the tasks placed on them. The Comprehensive Spending Review, announced in July 2007, gave the MOD an average annual increase in its Budget of 1.5% in real terms. By 2011, the Defence Budget will be some £36.9Bn - 11% higher in real terms than it was in 1997, this marks the longest sustained period of growth in the Defence Budget since the 1980s.

The settlement has allowed us to proceed with a number of equipment programmes that will equip the Armed Forces to meet the challenges they face both now and in the future. These cover the full range of military hardware, from aircraft carriers to man-portable weapon systems.

We will also continue to invest in our people. We are investing some £630m over the next three years on improving Service accommodation. We have recently accepted all the recommendations of the recent report by the independent Armed Forces Pay Review Body. As a result, members of the Armed Forces will receive an average pay increase of 3.6% from the 1st April 2008. In addition to basic pay, we have also improved the overall welfare package for those in operational theatres, including tax-free operational allowances and council tax rebates for those serving in Iraq and Afghanistan together worth up to about £2500. We have also introduced free parcel post and increased access to the internet for those serving in Afghanistan and Iraq.