In his opening keynote address this morning, Paul Drayson, gave an upbeat assessment on the progress that he has made in improving the way that the MOD procures capability, but also said that there remains much to be done. I welcome the opportunity to pay tribute to his work. He has been an outstanding Minister, who understands business and is applying his entreprenurial skills to great effect. It may surprise some that, we have this degree of consensus across the political divide. The problems that we have in Defence are not of his making, and to a large extent is not the fault of any particular administration. There are systemic difficulties, which are not unique to the UK. What I shall argue is that continuing with managed decline in the way we have been doing for two decades is no longer a safe way forward.
We heard this morning from Brian Burridge and Keith Hayward an excellent survey of the strategic and economic global scene. We have emerging new security challenges some of which will require a military capability to meet. We find ourselves working on global problems through a raft of international organisations most of which are imperfect in the way they can respond. Anthony Dimmock gave us a realistic vision of what NATO (and the EU) can do. Internal and external conflict, proliferation, terrorism, migration, disease, natural disasters and environmental change all have security dimensions. Yet the UK forces grow smaller in number year by year. and our trusty alliances including European defence co-operation make uncertain headway.
It is a commonplace to blame the current strains in defence on the Treasury, or Government lack of funding. But it is not just the UK that is finding life difficult. The reductions among our European allies are well known. But even the mighty United States is finding it difficult to sustain its current level of tasking despite spending half a trillion dollars a year. For most of the 20th Century, British Defence policy was based on the assessment of military threats to the territory of the United Kingdom and its dependencies. Other military tasks were completed relatively easily from within the resources devoted to the primary defence requirement. The end of conscription in the late 1950s, decreased the size of the armed forces, while increasing the cost of personnel. We have now to compete with commercial salaries in a time of full employment. So personnel costs rise in line with economic growth.
The military has sought to improve its productivity using technology to compensate for fewer fighting units, but this has also driven costs higher. We have had equipment costs rising at a significantly higher rate than normal inflation. In his session today, Andrew Figgures, gave us a good insight into what technology may offer. I wrote a book 20 years ago called "The Technology Trap" in which I tried to tease out why military technology always did less than promised, arrived late and cost more than expected. I remain a sceptic as to whether we really think through what we need in terms of technological improvement, and whether we make the right trade offs between risk, cost and delivery in this important area. I listened with interest to the various research and technology presentations. But it is by no means clear that we are investing anything like enough in research to benefit from home grown technology advances.
Since the end of the Cold War, Britain has been safer from direct military attack than at any time in the past 1000 years, and political priority for defence funds has inevitably declined. The share of GDP allocated to defence declined from around 5.5% to its current level of 2.3%. (a bit higher if you add the extra costs of current operations).
Unfortunately as personnel and equipment costs increased at rates above normal inflation, the numbers and scale of operations which the armed forces have been undertaking have also increased significantly since Kosovo in 1999. The planning assumptions, which determine the scale of forces, equipment and supplies, have been exceeded every year since then. The result has been an increasing budgetary tension between the immediate operational problems and the longer term equipment procurement programme. There has also been a growing concern about maintaining the human resources necessary for the future, particularly in technically demanding areas. We have seen in a recent NAO report on recruiting and retention some real problems in shortfalls in critical specialisations, which will take years to replace.
Although scaling the size of the problem is arguable even from within the MOD, some suggest that the equipment programme is at least £15 Bn short to meet plans over the next 10 years. That could perhaps be made easier by an input of money, and that is why the coming CSR is key. But the immediate problems are much more difficult. Operating beyond the planning assumptions for such a long period has a number of unfortunate consequences. Equipment may be worn out faster than planned. We currently see C130Ks being retired early. Replacement is an unplanned expense. The strain on people is progressive, and is felt harder in the key areas of specialisations where there are already shortages. Trying to find extra resources to cope with higher than inflation pay rises, retention incentives, better accommodation needs exacerbates the problems. Some of the over tasking difficulties would be helped by an increase in force size of perhaps as much as 20% in the army, with some increases in particular areas for the other two services. Yet even if the funding were there, such increases are unlikely to be achievable within a useful timescale.
There are three possible approaches to coping with the deepening crisis in defence: managed decline; more money; or fewer tasks through shared burdens.
The current approach amounts to managed decline. Immediate problems are solved through the use of urgent operational requirements,and unusual procurements procedures like the Danish Merlins, and the outflow of personnel is stemmed by financial retention schemes. Despite new approaches to procurement, delays in the longer term programme to provide the funds can seem an attractive short term fix. But they just increase the costs of maintenance of current systems and the eventual procurement of new systems. There will also be less money devoted to proving technologies at an early stage. Private Finance Initiatives are used as funding devices to bring forward urgent projects, but they narrow the flexibility within the future programme. The decline in capability is continuous, and increases the risk of failure in future operations.
More money is often the favoured option. The Government will rightly point to the way that overall since 1997 they have arrested the steep decline in defence funding. Given the different accounting conventions, and PFIs, it is much more difficult to make a valid comparison, but the budget has at least kept pace with domestic inflation. Yet more money does not provide an instant solution. It can help the longer term equipment programme, and can speed up improved conditions for personnel. Increasing the size of the military would take some years, and considerable extra funding. Without some agreed cap on commitments, it would run the risk of being absorbed by expanding the tasks being undertaken. Nor is there any political enthusiasm for a significant uplift in defence spending. I do not see the arrival of Gordon Browne in Number 10 as easing this situation. Indeed from his RUSI speech of last year, he appears much more likely to want to look at the broader challenges of security in an integrated way, which might mean that defence has to give up resources to the other relevant departments.
When I look for an answer to our difficulties, I am giving you a personal view – not a party political one. It seems to me that it is time for a radical reappraisal of our defence policy, in order to make it an appropriate and sustainable capability for the challenges of this century. I can put down some of the drivers which would need to be fed in, but the final shape of our forces would need a full scale review which took in the wider security challenges that we face. Let me give a few of the uncomfortable pointers that would underpin such an approach.
The only rapid way to adjust to the immediate resource problem is to reduce the military tasks, either by giving up commitments or by sharing the burden more with others. The British military is greatly attached to its high end warfighting capability, and also its ability to be a player across the spectrum of military capabilities. This carries with it the need for a range of major platforms and weapon systems. Since WW2, it has deployed a joint force to fight a conventional enemy in the Falklands and twice in Iraq. In Kosovo, the campaign was an air war. Apart from the Falklands campaign, all such major operations were as part of a coalition force. It would be politically difficult, and unwise from a security point of view, to move away from being able to operate at the high intensity end of the spectrum, but the scale of such capability is something which will need to be reconsidered. It could be possible to tailor it more directly to our NATO and EU commitments. We would not then expect to equip and field all the armed forces for a major conventional warfighting role. We already make the assumption that we will be operating alongside the US in such circumstances. The scale might be sized around our contribution to the NATO Rapid Reaction Force. However, these would need to be available at all times rather than the occasional 6 months of the NRF. Some of the more expensive enabling capabilities such as air to air refueling, air transport, space based navigation, reconnaissance and communication systems, would be more cost effectively as EU or NATO assets on a cost share basis. Funding for alliance operations would also need to be done on a cost share basis. But even with such a shared approach, given the problems of defence inflation the budget would need to be at least coupled to GDP rather than retail price inflation in order to sustain capabilities.
A parallel disciplined approach to international tasks for the military would also be needed. The defence planning assumptions would be built around a sustainable well equipped force size, which would allow a mix of tasks for the UN, NATO or the EU to be undertaken.
We are overdue a comprehensive look at our defence policy. It is nearly a decade since the Strategic Defence Review laid out a vision for the future. Much has happened since then on the global scene, and in any event the SDR never received the sustained funding it needed, and we have seen the resulting cuts since then. The Defence Industrial Strategy makes a good job of trying to produce a more stable future for those involved in producing capability, but there remains the need to underpin it with a credible defence programme which provides the resources for today's commitments as well as the investment in the future. Better management practices can only do so much. We need to take the challenges that we have heard today seriously. Just carrying on as before will mean continued decline – a strategic approach beyond domestic politics is needed, which must involve our allies as equal partners.
Lord Garden
Liberal democrat Defence Spokesman