Lords statement on the Defence Modernisation Programme - Jan 29

The Minister of State, Ministry of Defence (Earl Howe) (Con) 

My Lords, with the leave of the House, I shall now repeat a Statement made in another place on 25 January by my right honourable friend the Secretary of State. The Statement is as follows:

“I undertook to return to the House at the earliest possible opportunity to update honourable and right honourable Members on the programme to modernise defence, which the Ministry of Defence will be conducting in the months ahead.

Following agreement of the high-level findings of the national security capability review by the National Security Council, I have agreed with the Prime Minister and Chancellor that we should take forward its recommendation for a programme of further work to modernise defence to deliver better military capability and value for money in a sustainable and affordable way. This is essential if defence is to make its full contribution to national security.

The National Security Strategy and Strategic Defence and Security Review 2015 set out a clear ambition to ensure that the Armed Forces can tackle the threats that we face. It also proposed important new policy initiatives, including a stronger international approach, pursuit of innovation, modernised personnel policies and defence making a bigger contribution to our national prosperity, and we are making real strides to unlock greater efficiency and productivity.

Protecting the United Kingdom and our people remains our first priority and responsibility. As the threats we face become more complex and intertwined, we will need to work ever more closely with our NATO allies. We can also expect to remain actively involved with our partners in the Gulf in tackling shared threats to our security, and the Asia-Pacific region will become more important to us in the years ahead. The Ministry of Defence is making a major contribution to our prosperity as we procure the equipment that our Armed Forces deserve and support defence exports, in which there have been recent successes, most notably the £6 billion Typhoon contract agreed with Qatar.

Significant events last year—the callous terrorist attacks in London and Manchester, and the major storms that ravaged British dependencies in the Caribbean—are reminders of our wider responsibilities. We need to contain threats that have their origin overseas and be prepared to react swiftly and effectively when crises arise. As we identified in 2015, this will require the joint force that we are building to be versatile and agile. It will need to be capable of operating in all five domains: land, sea, air, space and cyber. It will need to be international by design, routinely exercising and operating with allies and partners. It will need to be credible and capable of operating against state and non-state threats—normally not alone but with NATO allies and other partners, but we must also be able to act on our own if and when required. It must be able to contribute to our national security at home, working with the police and other national security organisations.

While the major elements of our plans for Joint Force 2025 remain the right ones, in order to secure competitive advantage over our potential adversaries we need to ensure that we can move quickly to strengthen further our capabilities in priority areas and reduce the resources that we devote elsewhere.

The Government commissioned the national security capability review to ensure that we have the policy and plans to implement our national security strategy, so that our investment in national security capabilities is as joined-up, effective and efficient as possible to address current national security challenges. A report will be published later in the spring.

As my right honourable friend the Prime Minister said in her recent Lord Mayor’s banquet speech, the threats, risks and challenges have become more complex and intertwined and have developed in areas and ways that we broadly expected, but at a much greater pace than was foreseen. The defence budget is £36 billion this year—the fifth largest defence budget in the world—and it will increase by £1 billion each year so that it will be almost £40 billion by 2021. The UK remains one of the few countries to exceed NATO’s 2% spending target, and this Government have committed to continue to increase the defence budget by at least 0.5% above inflation every year. However, we must do more to ensure that we use our resources effectively and deliver the efficiencies that the department has committed to, so that they can be reinvested in the capabilities that we require for our Armed Forces.

It is for these reasons that I have agreed with the Prime Minister and the Chancellor to launch the modernising defence programme so that we can strengthen and modernise the Armed Forces to meet the threats that the NSCR identified. Modernising defence will allow us to deliver better military capability and value for money in a sustainable and affordable way, and it will allow us to ensure that defence capabilities complement other national security capabilities in the most effective way. I am determined to realise this goal through a modernised, more productive and more effective joint force that can deter threats more effectively and ensure that we can deliver what is required of defence today and succeed in any future conflicts. Turning this approach into reality will be my key goal for the modernising defence programme.

This programme will involve four strands of work. The first three will optimise how the MoD is organised and is operating; identify further efficiencies and ways to be more productive, including through an aggressive programme of business modernisation; and improve our performance on the commercial and industrial issues. The fourth strand will look at the capabilities that defence requires to contribute to our three national security objectives today and in the future, but also and most importantly, to understand the ever-changing threats that this country faces. I am determined to use the modernising defence programme to ensure that defence can make its full contribution to our national security on a sustainable basis.

I will speak to right honourable and honourable Members about this programme of work on a very regular basis and I will keep the House updated as decisions are made. In the meantime, I would warmly welcome any contributions that right honourable and honourable Members would like to make. My department and I will be consulting beyond the House as this programme of work gets under way in the weeks ahead.

Protecting our national security and the safety of the British people both at home and abroad remains the Government’s first priority. Let us make no mistake—the world is becoming a more dangerous place. We cannot afford to shy away from this reality, nor can we take our security for granted. But even more than that, in a post-Brexit world, Britain must continue to champion the global good. It must continue to reach out to seize global opportunities and deal with global threats. Our history teaches us that we cannot have prosperity without security. To protect that prosperity we must have Armed Forces that are primed and ready to tackle the challenges to come”.

My Lords, that concludes the Statement.

Lord Tunnicliffe (Lab) 

My Lords, I thank the Minister for repeating the Statement, and perhaps I may be the first to congratulate him on his birthday. That is the charming bit over.

We welcome the decision to separate out the modernising defence programme from the national security capability review. That, frankly, is not much of a statement because anything has to be better than a Cabinet Office-led NSCR which is financially neutral. But this Statement reads as though one has had access to a whole series of other Statements, so I will confine myself to trying to understand the detail of what it sets out. Early on in the Statement it says:

“Following agreement of the high-level findings of the national security capability review”.

Are the high-level findings of that review already in the public domain? If not, can the noble Earl tell us what the other high-level findings of the review are? Have they been published, and if they have not, will he explain why we have heard about just one finding and not the whole suite?

Later in the Statement we are promised that the national security capability review will be published later in the spring. Seasons of the year can be variable in this place, so can I ask for an assurance from the Minister that we will have a precise definition of “spring”? This morning I took the trouble to google the word and you have two choices: meteorological spring ends on 31 May while astronomical spring ends on 21 June. I will settle for either date provided that we have a commitment that the review is going to be published. The reason I am looking for that assurance is that I think I have been told—I may be misquoting the noble Earl—in one of our many debates on defence that there would be the second annual report on SDR 2015 by the end of 2017. The end of 2017 was last month. Is there to be a second annual report on SDR 2015? If so, when?

Later in the Statement there is slipped in—“slipped in” is unfair, but it is towards the end of a long paragraph—the commitment:

“However, we must do more to ensure that we use our resources effectively and deliver the efficiencies that the department has committed to”.

What are those efficiencies? Are they the ones committed to in SDSR 2015? The noble Earl will know from our debates about defence, of which we have had several in recent months, that virtually nobody believes that such efficiencies are achievable. Indeed, in the areas that one has been able to measure, the reduction in resource has clearly stalled. What does the noble Earl mean by “efficiencies”? Having been in the efficiency business in my professional career, I define “efficiencies” as achieving the same with less resource or achieving more with the same resource. All too often in defence, “efficiencies” has meant cuts. Could we have a categorical assurance that these efficiencies genuinely will be about achieving more with less? If it really is about more with less, why, in the last seven years, have the Government not achieved those efficiencies anyway?

Later in the Statement, we are told that the “programme”—that is, the defence modernisation programme—

“will involve four strands of work”,

but it then goes on to define only one. What are the other three strands? It sounds very precise and as though there is a very clear plan behind the Statement. If there is, could it be revealed to us? The fourth strand is to look at what is required to contribute to the “three national security objectives”. I am sure that in the tons of paper that the MoD produces I could find what the three national security objectives are, but could the Minister enlighten us as to what the three national security objectives are that the fourth strand pursues?

Following the Statement in the other place there was a debate. Somewhere in that debate there was a commitment by the Government to deliver the report on the defence modernisation programme by the Summer Recess. Will the Minister restate that it will be delivered by the Summer Recess? Could he give us some feel as to the certainty of that, particularly given the failure to deliver previous reports by their due date?

I do not think that the Statement says anything about “financially neutral”, but in the debate that followed the Secretary of State for Defence said on at least four occasions that the defence modernisation review would not be financially neutral. I think he said it four times, but perhaps it was more often. Does “not financially neutral” mean that the Government have decided to provide more money for defence? Presumably “not financially neutral” does not mean that there will be even less money. I hope that is what it means, but could we have a straightforward yes or no answer: is more money to be found for defence? Whatever the answer to all these questions is, I have real trouble in my own mind understanding how a fiscally neutral NSCR will work with a not fiscally neutral defence modernisation review.

Lord Campbell of Pittenweem (LD) 

My Lords, I join in the congratulations to the noble Earl on his birthday and thank him for repeating the Statement. He must feel, to some extent, that today is a rerun of the discussion we had last Monday. On these occasions tribute is often paid to the Armed Forces, but I have a question on that. What evidence is there of any impact on recruitment and retention as a result of the uncertainty that has surrounded these issues? I also remind the noble Earl that, as some of us in the House will remember, a lot of the language in the Statement is very similar to what we saw and heard in Options for Change and Frontline First. We know that the outcome of both exercises was a substantial reduction in defence expenditure and hence in capability as well.

There are only two passing references to NATO. I press the noble Earl on how far, and to what extent, interoperability with NATO and our other allies will lie at the very heart of the exercise it is now proposed to carry out. As has been said on a number of occasions in response to questions in the other place, the Secretary of State asserted that the exercise would not be fiscal-neutral. Last Monday the noble Earl rather adroitly avoided answering my question as to whether he agreed with the Secretary of State, and indeed the head of the Army, that more money needs to be spent on defence. I offer him another opportunity to answer that question and I hope he will forgive me if I ask: yes or no?

Earl Howe 

My Lords, I thank both noble Lords for their good wishes. I will do my best to answer the questions that have been put to me. The noble Lord, Lord Tunnicliffe, asked about the findings of the NSCR. We are not making an announcement on those findings today. The NSCR is the report referred to that will be published in the spring. It will not be the early spring; I hope the noble Lord will allow me to leave the Government some flexibility on that matter, but our ambition is to publish the findings of the NSCR before what most people would regard as the summer. As for the annual report on the 2015 SDSR, which was indeed due at the end of last year, the noble Lord is right: publication has been slightly delayed. I hope it will be delayed for not too much longer but we remain committed to publishing the second annual report.

The noble Lord asked about efficiencies, as a number of noble and noble and gallant Lords have done in the past. In taking this work forward we will take all existing efficiencies into account and our targets for achieving further efficiencies. We will also look for opportunities to identify new efficiencies by understanding how the MoD can reduce duplication and adopt new approaches to delivering a more modern organisation. I am well aware that there is a great deal of scepticism around efficiencies. I endorse the noble Lord’s interpretation of the word: this is about finding savings that do not adversely affect defence outputs. We are very strict about that and if any noble Lord would like to quiz me further, I will be happy to answer.

He asked about the work strands of the MDP. I hope the timetable and detail of the work will emerge very soon. In essence, we are looking at a work strand that focuses on the MoD operating model and will deliver plans for a stronger and more capable head office.

Secondly, there is the efficiency programme and business modernisation. This consists of obtaining independent assurance over the existing efficiency plan, identifying any new savings deliverable through up-front investment and understanding how the MoD can reduce duplication and adopt new approaches to delivering a more modern organisation.

Thirdly, there is the work relating to our commercial and industrial partners: assessing how the MoD can improve on strategic supplier management, improve its commercial capability, and build on improvements to the performance of Defence Equipment and Support—DE&S. Those three work strands are already under way. There will be a continuation of those work programmes.

The fourth strand is, I am sure, the one that interests noble Lords the most. It is about defence policy, our outputs and our military capability. It is about analysing the global security context and implications for defence policy, understanding the relative priority of defence roles and tasks, and identifying opportunities—and, indeed, imperatives—for modernising capability, the workforce and force generation. I hope that gives a flavour of the four strands of work.

The noble Lord asked me to enlighten the House on the three national security objectives. To refresh the memories of noble Lords, as described in SDSR 2015, the first is,

“to protect our people—at home, in our Overseas Territories and abroad, and to protect our territory, economic security, infrastructure and way of life”.

The second is,

“to project our global influence—reducing the likelihood of threats materialising and affecting the UK, our interests, and those of our allies and partners”,

and the third is,

“to promote our prosperity—seizing opportunities, working innovatively and supporting UK industry”.

What confidence do the Government have that the MDP will be completed by the Summer Recess? We intend the MDP to be substantially complete by the Summer Recess. Our aim is to be in a position to share headline conclusions by that time and we are confident that we can achieve that. That means sharing as much as we possibly can with Parliament and with Heads of State and Ministers at the NATO summit.

I was asked by both noble Lords about the prospect of defence receiving more money. It is only fair that noble Lords do not press me too hard on this at this point but I will say that my right honourable friend the Secretary of State has been speaking regularly to the Chancellor since arriving at the Ministry of Defence. He will continue to do so as the MDP progresses, but let us put this question into its context. Against the backdrop of the increasing threats that the Statement refers to, this work is about ensuring that the Armed Forces have the capabilities they need to keep our nation safe. That is the objective. Given that, it is important that we maintain the dialogue that is already in train with the Chancellor. I will not pre-empt the results of the dialogue by plucking extra funding figures out of the air, but if we conclude that defence needs more money, we will have a very alive conversation with both my right honourable friend the Prime Minister and my right honourable friend the Chancellor.

The noble Lord, Lord Campbell, asked me a number of further questions. The first was about the effect on recruitment and retention. As I have said, any prolonged uncertainty is damaging and we have to acknowledge that. The recruitment and retention climate is difficult. It is difficult, however, to pinpoint a single reason for that. I think there are multiple reasons for it. What we will see over the next few months, however, is a much more inclusive dialogue about the programme as it goes forward. I hope that that effort in the direction of transparency will dispel a lot of the uncertainty that perhaps exists at the moment. My right honourable friend the Secretary of State is very clear about the outcome: he does not wish to do anything that will damage defence. It is important to restate that with regularity.

Interoperability with our NATO allies is certainly an important strand of our work, as it has been since 2015, when we articulated one of our overarching aims, which was to be “international by design”. That means not only working with our allies on training, strategy and doctrine but having equipment that is interoperable.

I hope I have answered noble Lords’ questions but I am happy to answer further questions.

Lord Boyce (CB) 

My Lords, I guess we welcome this quasi-defence review, although it would probably not have been needed if SDSR15 had been properly funded in the first place. If the NSCR is to be a benchmark for this review but will not be published until the spring, and noting that the Secretary of State for Defence in his Statement is encouraging contributions and consultation, how can sensible contributions and consultation take place without knowing what the benchmark is until the spring?

Earl Howe 

My Lords, the NSCR and the modernising defence programme that flows from it are intended to act a means of implementing the 2015 SDSR. It is the SDSR that we should take as the baseline for the work we are doing because we still believe that many of the headline findings of the SDSR are as valid today as they were then. We can have a sensible discussion about our defence needs but clearly, as the work proceeds, the Ministry of Defence will wish to consult closely with other government departments that have an interest in what we do.

Lord Sterling of Plaistow (Con) 

I draw attention to the summary of the national defence strategy of the United States of America, which was released last week. If noble Lords have not seen it, it is by General Mattis. It is an extremely interesting document, down to earth and in spoken English, and I cannot recommend it more highly. I would like to plagiarise it and pinch some of his comments. I had the pleasure of joining the Secretary of State for breakfast last Wednesday, and I came away with the view that he is a man we should support foursquare, and parliamentarians from both Houses who are interested in defence—there are many of them, from all parties—should support him in every way possible. A key relationship for the future will be between Sir Mark, our national security adviser, and the Secretary of State, but I suggest that the fourth strand is the key strand. The last word of the fourth strand talks about strategic needs for the future. A combination of brains and innovation can deal with the first three; much of it is already known. I suggest, however, that the key date we have to consider is that of the next NATO summit which takes place on 11 and 12 July in Brussels. The right outcome to that will go down marvellously with our European friends, our American allies and, most importantly, the Commonwealth. If we walk in with empty words, they will forget us completely. When we walk in—this is the key—we need at least 3% for the future. We must have a greater presence, with many more people in the armed services. That way, when we go in to speak at that summit, the result should be, “The Brits have come back”. Does my noble friend the Minister agree with my last comment?

Earl Howe 

I am very grateful to my noble friend for his support of this programme of work and for the support that he expressed for my right honourable friend. I can tell the House, having worked with my right honourable friend for a number of weeks now, that he is 110% behind our Armed Forces and will fight very hard to ensure that we have an outcome that is credible, sustainable and affordable, and in which everybody will have confidence. My noble friend is right in that a critical date this year is that of the NATO summit. I am sure that we will arrive at a position where our allies have as much confidence as we do, and it is very important that we work towards that date in our minds.

Lord West of Spithead (Lab) 

My Lords, the noble Earl is absolutely right that there is cynicism. It is not surprising when one bears in mind that for the last 12 months the noble Earl has very loyally been telling us how all in the defence garden is rosy, how wonderful the money for defence is and how wonderfully everything is going. Then we find out last week that his Secretary of State, a year ago, had seen the Prime Minister and said there is insufficient money in defence. We desperately need more money and are making cuts now that are very painful, so that is hardly surprising. My question relates to the crisis in defence today. If we are not being fiscally level, and there is fiscal enhancement, is it possible, in year, to find some money from the Treasury to stop the cuts to training, in terms of spare gear and of repair work, to enable our forces to actually do the things they really need to do? There is a very real crisis in defence.

Earl Howe 

My Lords, I hope noble Lords will agree that I have always been open with the House about the stresses on the defence budget, not least those arising from the EU referendum. In particular, we have been quite open about the fact that the exchange rate has impacted our procurement budget, so I cannot agree with the noble Lord that we have tried to obscure the strain on our budget. I am not aware that there is the prospect of any in-year money, but I take issue with his word “crisis”. Speaking to my finance colleagues in the Ministry of Defence, it is pretty clear that we can get through this year, albeit with some temporary cuts to training which I agree are regrettable. But we can get through this year in good shape. The decisions that we need to take affect next year and beyond.

Lord Hennessy of Nympsfield (CB) 

My Lords, I warmly welcome the winnowing out of this exercise from the Cabinet Office’s capability review, but could the noble Earl explain the difference between a defence review and a defence modernisation programme?

Earl Howe 

My Lords, as I tried to explain a little earlier, a fully fledged defence review would look very like the exercise that we conducted in 2015: going back to basics on what threats we face, what our ambitions are as a country and what we need to do to deter those threats and to provide for those ambitions. This modernisation programme takes the fundamentals of the SDSR as read, because we believe them to be credible. It is to decide what capabilities we now need, in the face of intensifying threats around the world, to counter those threats in a way that ensures that we have a sustainable programme going forward.

Lord Cormack (Con) 

My Lords, I have particular knowledge of the right honourable Gavin Williamson, the Secretary of State for Defence, who succeeded me as Member of Parliament for South Staffordshire. Because most Members of your Lordships’ House do not know him, and many of them have a lifetime’s knowledge and experience of the things we are talking about, could my noble friend—in whom I have very real confidence and for whom I have great admiration—arrange, at an early date, a meeting in the Moses Room, so that the noble and gallant Lords in particular can have the opportunity of meeting and questioning the Secretary of State?

Earl Howe 

I am grateful to my noble friend. That is a very constructive idea, which I shall relay to the appropriate quarter.

Lord Davies of Stamford (Lab) 

I second the admirable suggestion by the noble Lord, Lord Cormack. If we are serious about value for money in defence, is it not important that we seize every viable opportunity that presents itself for collaboration with allies in defence procurement? The F35 programme is a good example of that, though of course the size of the US defence budget means that it is hardly an equal relationship. Does the Minister agree that OCCAR has done, and is doing, a splendid job in managing the collaborative defence procurement of a number of European countries in some very important programmes, including the A400M? I declare an interest because I renegotiated and relaunched that project in its present form. Can he give the House an assurance that if we leave the EU, which I think would be a disastrous idea from every point of view, including this one, we will nevertheless remain committed to OCCAR in the work that it is doing in this field?

Earl Howe 

I join the noble Lord in commending the work of OCCAR. He is absolutely right that many of our defence programmes are not directly related to our membership of the EU but are bilateral or multilateral, and we certainly wish to see those continue. That is why we at the Ministry of Defence are keen to ensure that the Brexit talks result in as frictionless a trading environment as possible between ourselves and the remaining members of the EU. Interoperability is one consideration in our support for these joint projects; another is value for money and a third is cutting-edge capability, a lot of which this country is in the lead in providing.

Lord Craig of Radley (CB) 

My Lords, it is welcome news that there is to be this study programme. “Modernisation” is a portmanteau word; perhaps the Minister could give some examples of defence capabilities that are most urgently in need of study under the modernisation rubric.

Earl Howe 

I cannot give the noble and gallant Lord specific examples of equipment. However, I can say that in the area of cyber we need to ensure that we are ahead of the game and that our programmes for the Royal Navy are as up to date as they can be. It is about focusing our resources on the areas that are most important regarding the threats that face us. It is also about ensuring that we have infrastructure that is fit for purpose, both in our head office and in the Armed Forces themselves. That relates very much to the efficiency programme. I am confident in that programme; we have a way to go on it but we are doing well. If one thinks about certain platforms in the Army, the Royal Navy and the air force, efficiency is a very live issue in all those contexts.

Lord Touhig (Lab) 

I add to noble Lords’ comments in wishing the Minister many happy returns of the day. I think he is 67; he should be reassured that that is only 19 degrees Celsius. Just 10 days ago in the Moses Room, the Minister said he could not stand before us and commit the Government to conducting a full defence review. I am very sorry that this is not going to be such a full defence review because it will be another wasted opportunity. We need a major review, as has been said all across the House by noble and noble and gallant Lords today. Just picking at the edges is not going to be sufficient. If we do not have a major and full defence review. then in one or two years’ time, if he is still the Minister, the noble Earl will be back apologising once more for having to go through the whole exercise again.

Earl Howe 

I hope I can assuage the noble Lord’s concerns to some extent by reminding him that we wish the modernising defence programme to be an inclusive process. We are eager to hear from parliamentarians and others about what we should be thinking about most of all. So, even if this is not badged as a fully fledged review, I hope noble Lords will feel able to raise with the Government the concerns and issues that they wish to.