This paper reviews the issues involved in the measuring defence output, inputs and productivity within the UK national accounts. The little literature that there is on this subject suggests that providing such measures would be a challenging task. Given the diverse audience this paper may have – in academic, national accounting and defence communities – I have included discussion of issues that may be well known among those who work in each particular area.
Until 1998, measures of government output in the UK national accounts assumed the volume of inputs equals the volume of outputs, which implies that there can be no productivity growth. Subsequently the UK began to adopt measures of the volume of output for some government services and this process was accelerated by the Atkinson Report of 2005. The volume of output for many government services, like elements of health and education, was measured by the number of activities performed.
For defence, there is a problem of comparability because the nature of the activities, capabilities and objectives of defence change over time, and for good reasons, as threats, technology and strategy evolve. These issues are discussed in the paper. When these activities or capabilities are discontinued to reorient to the new context, measured output will have fallen while the military are fully occupied doing different activities. For defence, performance measures include elements like success in operations, maintaining readiness, and stopping equipment being delivered late, over budget and not meeting technical requirements. These are difficult to convert into indicators that would match national income accounting criteria.