Ministry of Defence: Expenditure
Baroness Smith of Newnham Excerpts(11 months, 3 weeks ago)
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Lord Coaker (Lab)
The noble Lord will know that the situation with respect to the Belfast shipyard and Harland & Wolff is a difficult one. Our expectation is that those ships will be able to be built. Clearly, the company is looking for a private sector business to support it, and we will look to do what we can to support it in that.
Baroness Smith of Newnham (LD)
My Lords, is the Minister able to reassure the House, and perhaps the noble Lord, Lord Robertson, that this is intended to be a defence-led review, not a Treasury-led review? If the noble Lord, Lord Robertson, and his colleagues in the review find that expenditure needs to be not a vague 2.5% at a certain point but 3% or more, would His Majesty’s Government be willing to spend whatever is necessary?
Lord Coaker (Lab)
I thank the noble Baroness for her question. I think she slightly gets in front of herself. We have made a commitment to 2.5%, and that is a cast-iron guarantee. The noble Lord, Lord Robertson, is in his place and has heard the points she has made. We look forward to a deliverable, affordable plan that will meet the threats we will face in the future—not the threats now or in the past, but in the future. That is why the review of the noble Lord, Lord Robertson, is so important. The money that we spend has to be spent to deliver the capabilities needed to meet those threats. That is the fundamental principle that underlies what we are doing, and it will be maintained.
Tempest Global Combat Air Programme
Baroness Smith of Newnham Excerpts(11 months, 3 weeks ago)
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Lord Coaker (Lab)
As I said in answer to the question from the noble and gallant Lord—and the noble Lord makes the point for himself—the relationship between ourselves and Japan is extremely important. The technological advantage that both the UK and Japan get from our close partnership is extremely important. As I said in answer to the original Question, progress continues on the GCAP with the other partner, Italy. A strategic defence review will look at all the various programmes, but progress continues.
Baroness Smith of Newnham (LD)
My Lords, I welcome the noble Lord to his place. When he and I sat on adjacent Benches, we tended to agree. I always had the benefit of being able to piggyback on his comments before I asked my questions, so I very much hope that we will continue to agree across the Chamber. The only slight problem this afternoon is that, in answering the Question from the noble Lord, Lord West, he took away all the questions I was going to ask about diplomatic relations with Italy and Japan by giving an answer that I think is welcome. On the review, we clearly need to think about diplomatic questions and questions about our defence industrial base. While the defence review is going on, what security are His Majesty’s Government giving to defence contractors that the work being undertaken on various programmes will continue? Clearly, not just our international partners but defence contractors will be concerned.
Lord Coaker (Lab)
I very much hope that the noble Baroness and I can carry on working together. Without being pompous about it, all of us across this Chamber share an interest in the defence of our country and in freedom and democracy across Europe and the world. Working together is extremely important. On her question about the defence industry, she may have seen that yesterday the Prime Minister announced Skills England, which will work with the defence industry and defence companies to overcome one of the biggest hurdles this country faces: the skills shortage, which we have been trying to overcome for a number of years. Redoubling our efforts on that will make a huge difference—but that is just one example of how we intend to work with the industry.
Military Bases: Accommodation
Baroness Smith of Newnham Excerpts(1 year, 2 months ago)
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The Earl of Minto (Con)
My Lords, the Government fully recognise the vital importance of accommodation as a central part of the wider package we provide to those serving within His Majesty’s Armed Forces, and we remain committed to getting this right. We recognise and accept that there is still more to be done, alongside ongoing work to refurbish and upgrade what is an increasingly ageing and difficult property estate.
Baroness Smith of Newnham (LD)
My Lords, I have not yet had the opportunity to read the Kerslake commission’s report, but I have seen the headlines from Inside Housing, which reviewed the report and commented on rats, mould and other problems. The noble Baroness, Lady Anderson, raised many of these issues, but can the noble Earl tell the House which bits of the commission’s report the Government would refute and, if they cannot refute it, what they are going to do?
Nuclear Test Veterans: Support
Baroness Smith of Newnham Excerpts(1 year, 2 months ago)
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Baroness Smith of Newnham (LD)
My Lords, in responding to the Question, the noble Earl talked about the commitments to the veterans of the tests but said that the information, if it is kept at all, is now very old—which is true, but so are the veterans. Does His Majesty’s Government really believe that a medal, or the no-fault compensation scheme under the War Pensions Scheme, is sufficient for those who were subject to tests and to bloods being taken, potentially without agreement? Is His Majesty’s Government really doing enough for the veterans who are still alive and their families, many of whom, unlike with other issues associated with war, will have been affected by miscarriage or birth abnormalities?
The Earl of Minto (Con)
My Lords, the opportunities for nuclear test veterans are the same as for all veterans who are now in civilian life. All veterans can seek support from the Veterans Welfare Service, which is MoD-managed. The nuclear test veterans who believe that they have suffered ill health due to service can apply for no-fault compensation under the War Pensions Scheme. There is also the war disablement pension, which is available to all veterans who served prior to 2005, including all nuclear test veterans.
UK Armed Forces in Middle East
Baroness Smith of Newnham Excerpts(1 year, 2 months ago)
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The Minister of State, Ministry of Defence (The Earl of Minto) (Con)
My Lords, there were about six different questions there. First, I confirm that the UK Armed Forces operate under a number of international coalitions in the Middle East and have done so for some time. They include the Jordanian-led international effort for humanitarian aid into Gaza, the RAF drops, the support that we are giving in building the pier, the global coalition against Daesh, Operation Shader and Operation Prosperity Guardian. We do all that to protect life, uphold the rules-based international order and secure UK interests against malign forces in the region. “Cardigan Bay” is providing living support for the American soldiers and sailors who are building the bridge. It lies off Gaza now in international waters, and will be there for as long as it takes.
Baroness Smith of Newnham (LD)
My Lords, can the noble Earl tell the House, first, whether the Government would give a parliamentary vote if there were to be boots on the ground? Secondly, what conversations have His Majesty’s Government had with the Israeli Government about looking for appropriate ways of getting aid into Gaza and ensuring that those delivering that aid are protected, be they UNRWA or other charitable organisations?
The Earl of Minto (Con)
My Lords, I cannot remember the first question, but on the question of talking with the Israeli Government, we continue to press them on international aid to open up as many opportunities as we can to get a considerable amount of aid in. That includes via Ashdod, Erez and this new floating pontoon. It is extremely important to get as much aid in as we possibly can.
Defence Spending
Baroness Smith of Newnham Excerpts(1 year, 2 months ago)
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Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I remind your Lordships’ House of my registered interests, specifically my associations with the Royal Navy.
As my friend, shadow Defence Secretary John Healey, said in the other place yesterday, there is “much to welcome” in this Statement, and any and all commitments of additional resource for our national security will receive cross-party support. It is clear that we live in an increasingly dangerous world. Our dedicated and professional service personnel are operating in multiple theatres, securing UK interests and supporting our partners. Every day we ask more of them and their families, asking them to make sacrifices so that the rest of us remain safe and secure at home.
These Benches welcome the new commitments to build up stockpiles, boost defence exports, give priority to domestic defence production and set up a new strategic headquarters in the MoD—all commitments for which the Labour Party has been calling for months. It is welcome to see the Government listening to the arguments made by the Opposition. I also take a moment to applaud the additional support for Ukraine, announced both here and in the US. Its fight is our fight.
A fortnight ago, when confirming our cast-iron commitment to the deterrent, Sir Keir Starmer, the leader of the Opposition, made our position clear. A future Labour Government will have a fully funded plan to spend 2.5% of GDP on defence, so our aspiration is the same as the Government’s. As always, there should be no political point scoring on matters of national security and defence. What there should and must be is the Opposition holding the Government to account for their policies and competence.
On that note, I hope the Minister can assist your Lordships’ House in answering questions that the Secretary of State struggled to answer in the other place yesterday. Where is the fully costed plan to get us to 2.5% by 2030? Only a matter of weeks ago, His Majesty’s Government presented and passed a Budget. The associated Red Book made it clear that the Government were planning to cut real-terms spending on defence by over £2.5 billion in this financial year, so where is the additional money coming from, and why did it not feature in last month’s Budget?
The Secretary of State keeps referring to page 20 of the Defending Britain policy paper, which was launched yesterday. The annexe on page 20 does not outline where the money is coming from. However, it does state the MoD budget for each year, up to and including 2030-31. Given the additional commitments the Government have rightly made to our allies in Ukraine, which we support, the annexe in the policy paper actually shows a cut in defence spending planned for 2024-25. This was not in the press release.
In various media interviews in the last 48 hours, government representatives have stated that some of this new funding will come from a cut in Civil Service numbers by some 70,000 posts. The last time this Government pledged to increase defence spending by cutting the number of civil servants was in 2015. The number of people in post actually increased by 50%, so please forgive my cynicism, but we have heard this before.
While on the point of civil servants, can the Minister confirm that the MoD will not face cuts in its workforce? As last checked, the staff employed by the MoD do the roles that we would prefer to be done by civilians rather than those in uniform, from R&D to procurement and business services. Any cuts in these areas will undermine our effectiveness and, in places, our national security.
No one in this House disagrees that the strategic environment in which we operate is becoming more challenging every day. While hindsight is a wonderful thing, I genuinely fail to understand why it is only this week that the Government have decided to respond to the assertion of Ben Wallace, the former Defence Secretary, that the defence budget has been hollowed out.
Since 2010, £15 billion has been wasted on failed procurement. Our Army is now at the smallest size since Napoleon, one in five ships has been removed from the Royal Navy fleet, more than 200 planes have been taken out of service since 2019, and morale in our forces has fallen by 20% since the Labour Party left office. There is clearly work to be done to ensure that, with increasing threats and growing tensions, we are fighting fit.
This month marks 75 years since a Labour Foreign Secretary, Ernest Bevin, signed the original NATO treaty. My party helped to found NATO and our ongoing commitment is unshakeable. The Labour Party has the same aspiration as the Government: defence spending at 2.5%—the same level of defence expenditure last achieved under a Labour Government. We will always do what is needed to defend Britain and we will always spend what is necessary to deal with the threats our nation faces—and we will do it with a fully costed plan.
Baroness Smith of Newnham (LD)
My Lords, like the noble Baroness, Lady Anderson of Stoke-on-Trent, and on behalf of these Benches, I fully support His Majesty’s Armed Forces. How proud we are of His Majesty’s Armed Forces and what they have done in recent months and years. I endorse the spending commitments that His Majesty’s Government are making, but I also express some concerns about where the funding will come from.
The noble Baroness, Lady Anderson, obviously has a better version of the policy document than I received, because the one I have has no page numbers at all—so if there is a page 20, I have no idea where it is. But we do have the spending detail annexe.
Baroness Smith of Newnham (LD)
I thank the noble Baroness; I am told that this is indeed page 20.
The percentage of GDP that is being looked at starts at 2.32% for 2024-25 and goes up, according to this, to 2.5%, in line with His Majesty’s Government’s commitment outlined yesterday, 24 April. But I note the words:
“Memo—UK GDP based on OBR’s latest forecasts”.
There is sometimes a little scepticism about OBR forecasts. While far be it from me to raise the sort of concerns and scepticism that a former Prime Minister might have raised about the OBR, can the Minister reassure the House that the forecasts for two, three, four and up to six years out are actually likely to be correct? It matters enormously to these commitments that the OBR predictions should be right, because the commitments being made now are vital.
The noble Baroness, Lady Anderson, asked why the announcement was this week. As something of a cynic, I wonder whether it was not simply part of the Prime Minister working his way up to a general election, because every day this week we seemed to have a new announcement, whether it was flights going to Rwanda or the commitments to defence. While on Rwanda we might disagree, on defending Britain we do not disagree at all that it is vital. In that sense, the Statement is welcome.
I have a few questions for the Minister. Clearly, the commitment is there to defence expenditure—it follows on from the commitment to improving defence procurement—but this is a relatively short timeframe of six years. In the context of global crises, which we see from authoritarian regimes—as His Majesty’s Government have suggested, Iran, Russia, North Korea and China all seem to work in consort in some arenas—do His Majesty’s Government think that this commitment, while in itself welcome, will deliver change sufficiently swiftly? How far are His Majesty’s Government looking not just to closer co-operation with our NATO allies as a collective—obviously, we are also committed to NATO—but to strengthening bilateral relations, for example with France, in addition to the commitments made in Germany two days ago?
Further, to what extent do His Majesty’s Government think that other regional patterns of co-operation, such as AUKUS, will help them to take the leading role in NATO, which has been stated is an ambition?
In the policy document, the Secretary of State reminds us that in his Lancaster House speech he noted that, clearly,
“the era of the peace dividend is over”.
That is obviously right. In terms of procurement and ensuring that we have the right industrial defence base, 2030 is actually very close. Does the Minister feel that this Statement goes far enough? Will he commit to coming regularly to the House to tell us how it can be delivered and, in particular, about the numbers of civil servants who might be still in post in the MoD? Are their numbers vulnerable alongside those of other civil servants to pay for this deal?
The Minister of State, Ministry of Defence (The Earl of Minto) (Con)
My Lords, this is indeed a very historic document, and I am extremely grateful for the support that we have received from all sides of the House, as well as outside it. Noble Lords will be well aware of my views on defence spending—they should be by now, anyway—so I am delighted to follow the commitments made by the Prime Minister and the Secretary of State in the other place that we will now reach the 2.5% of GDP that we have long talked about by 2030.
The headline figure throughout, where I appreciate noble Lords want to see more detail, and quite rightly so, is the £75 billion spent between now and then. Over the next six years, this additional funding to the budget will take us to the 2.5% of GDP, which at that point will work out at £87 billion in defence spending by 2030.
If your Lordships will allow me to get into the weeds for a moment, on page 20 of the pledge document—I promise the noble Baroness, Lady Smith, that there is a page 20 in this document—they will see how we intend to reach this trajectory. It is a flat line from now—it does not tip up at the end. They will also see how the NATO qualifying defence spend matches up against the core defence budget, as footnote 2 explains. To be clear, this is the same metric used across the NATO alliance. The figures used are also based on the OBR March 2024 GDP forecasts, as is standard practice, and cash totals will be confirmed at the relevant spending reviews as time progresses.
In short, this increase to 2.5% will be funded in full through savings, reallocation of resources, more efficient outputs, ruthlessly pursuing waste and delay—of which we know there has been a lot—and projected economic growth, and driving productivity throughout the MoD without any increase in borrowing or debt.
We will better invest in our relationship with industry—a critical point—in including £10 billion over the next 10 years on a new munitions strategy. In addition, through the integrated procurement model we will radically reform and modernise our Armed Forces following the Haythornthwaite review, and we will capitalise on our existing research and innovation expertise through the new defence innovation agency—the DIA.
What is more, this is in addition to the further substantial package of support also announced this week, our largest yet to our allies in Ukraine—many thanks to noble Lords for the continuing support on that. There will be some £500 million of support, as well as these 60 boats, including raiding craft, 1,600 strike and air defence missiles and more Storm Shadows, a mixture of 400 protected, armoured and all-terrain vehicles, and nearly 4 million additional rounds of small-arms ammunition.
We can all agree that this is significant news and, most importantly, the 2.5% must be spent wisely. As the Prime Minister stated in Poland earlier this week, we did not choose this moment, but it falls to us to meet it. Finally, before answering the questions, I will say that in the heightened area of instability that we now face, our first duty in the Ministry of Defence is to the national security and defence of our nation at any cost.
I will address some of the specific issues. On the question of Ukraine, we have now raised the contribution this year to £3 billion and that level will continue. As to why this was not covered in the Budget, I say that there was an enormous amount of negotiation going on at the time, and this is in the relatively recent past. We were putting the plan together, but it just was not ready. If you look at the situation now, the economic plan is starting to work properly; inflation is down from over 11% to 3.2%. We have a security environment that is continuing to deteriorate, and that has given us an opportunity to set the 2.5% target.
The Chancellor made a statement that he wants to return the numbers in the Civil Service, across government, to where they were before the pandemic struck, and the Ministry of Defence will be a beneficiary of that. There is no suggestion of a cliff edge—the cuts will take place in a gradual process over three years. The turn and vacancy level is quite perceivable within that period, and although there is not a recruitment ban there is a 2-for-1 in place at the MoD.
On the size of the forces, capability is as important as much as anything else. We should not hark back to the size of the Army 200 years ago; things were quite different then, although they were not that different 50 years ago. We have learned an enormous amount with the issue in Ukraine, and that is why the DIA is being set up. That hopes to achieve a grouping together of all existing R&D bodies into a single responsible and empowered organisation, particularly with the enormous and remarkable strength this country has in DSTL, and to scale up R&D, drive cutting-edge defence technology in high-tech stuff such as DragonFire and hypersonic missiles, and low-cost, high-impact stuff such as single-direction attack drones. I will mention DragonFire as an example—the Secretary of State did as well. My honourable friend the Minister for Procurement has used the new integrated procurement model to work on DragonFire, and has brought the gestation period forward five years. When we were talking about the new procurement model, there was an issue about how effective that would be. and on this exercise it proved very effective.
On NATO, which has never been more important than it is now, the commitment to move to 2.5% has been widely welcomed and accepted. It was not long ago when the idea of most NATO countries moving to 2% was quite a difficult ask. As Jens Stoltenberg said, the UK is “leading by example” in moving to 2.5%. There is a hope and an expectation that that example will help to move other NATO countries in that direction, both bilaterally and as a defence alliance. That is certainly the intention and I understand that it has been very well received. In fact, I have just come from a meeting with some colleagues from the United States. They were extremely appreciative and absolutely understood where we were coming from, so that was very good indeed.
AUKUS and GCAP are absolutely fundamental to our international relationships. It depends how long I am here, but I certainly will commit to the House that I will come to keep everybody absolutely up to date, particularly about the size of the Civil Service within the MoD and all other matters relating to what is a very considerable ask on the British public.
LGBT Veterans: Financial Redress
Baroness Smith of Newnham Excerpts(1 year, 3 months ago)
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The Earl of Minto (Con)
My Lords, nobody can do anything other than agree with my noble friend. The progress we are making is as we set out after we received the review and considered it in December. Since that time, 26 of the 49 recommendations are now complete, eight remain to be completed by the Ministry of Defence, 12 remain to be completed by the NHS and three remain to be completed by the Office for Veterans’ Affairs, which is all about the very important memorial issue. The door has opened to the extremely important webpage “LGBT veterans: support and next steps” on GOV.UK—I will repeat this as often as I can. We have now had over 2,000 contacts, which have so far resulted in 415 applications to date for restorative measures, including financial measures.
Baroness Smith of Newnham (LD)
My Lords, there is something of a pattern here. When His Majesty’s Government pledged to make recompense to the war widows, there was an assumption that something would happen, but we heard a few weeks ago that some of the war widows were no longer eligible for the money they thought they were going to receive. We are now hearing that His Majesty’s Government are spending time creating a scheme for LGBT veterans. That is clearly welcome, but, as we have heard from both sides of the Chamber, there is an urgency about this, because some of the veterans have terminal illnesses. They and their families need to know that they are going to be recompensed sooner rather than later. Can His Majesty’s Government make a commitment to come back not just with another Statement but with the scheme that is needed?
The Earl of Minto (Con)
My Lords, I am fully aware of the war widows issue and we are addressing that at the same time. It is very important that all these things get finished off as quickly as we possibly can. As far as the content is concerned, I have given a commitment that I will return before the Summer Recess. That will not be another Statement; it will contain what the process is going to be.
Single Source Contract (Amendment) Regulations 2024
Baroness Smith of Newnham Excerpts(1 year, 3 months ago)
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Baroness Smith of Newnham (LD)
My Lords, I am grateful to the Minister for introducing this statutory instrument and explaining very clearly the purposes of the regulations being proposed.
Unlike so many of the statutory instruments linked to defence, this is quite a weighty document. Some of the amendments are relatively straightforward, although one wonders why nobody scrutinising the 2014 Act spotted the difference between percentages and percentage points. The Minister and I can be exonerated because I joined your Lordships’ House only in October 2014 so I was not party to any scrutiny at that point. I suspect that the Minister was not in the House at that time either and I am sure that the noble Lord, Lord Tunnicliffe, bears no responsibility. However, we clearly always find things that have been omitted. We have already heard that another slight error was found even when these regulations were being laid; that makes it clear how important it is that we scrutinise things properly.
First, what sort of reporting is envisaged for the single source procurements that are being talked about? The Explanatory Memorandum makes reference to
“reports to the Secretary of State”
but is there any scope for parliamentary scrutiny of the procurements that will be in place?
A second major item that I want to ask about is the substitution of Regulation 3, on the meaning of “defence purposes”, with Regulation 4, on the meaning of “defence purposes” and “substantially for defence purposes”. Something that puzzles and worries me somewhat is this statement:
“‘Defence purposes’ means the purposes of defence (whether or not of the United Kingdom), or related purposes”.
Can the Minister explain to the Committee how extensive that can be? Does it relate to the procurement of defence capabilities that we would then export as part of our defence industrial strategy and defence exports? Should we be concerned about aspects of this that could be linked to the export of arms to regimes about which Parliament might have some reservations, for example? Some clarity on that would be most welcome.
The general points that the Minister outlined on flexibility, speed and clarification in the light of the users of single source contracts are sensible, but I wonder whether we could hear more about the extent of the changes; they are to bring in not just “defence purposes” but “substantially for defence purposes”, which can mean 30% or more of a contract. What is that likely to mean for the number of contracts that might be brought within the purview of these regulations and the scale of the value that we would be looking at? Will a significant change arise from the Procurement Act?
On primary contracts and subcontractors, the changes to profitability and moving things to the cost line make a lot of sense, but could we understand a bit more about how the decisions on what should be dealt with at market rate are determined? If we look at market rates and the defence supply chain, where is the competition? Are we looking internationally? Are we looking to comparators—for example, if we buy a widget, are we looking at what it costs in Germany, the United States and South Korea—or are we looking at a wider civilian market? All these things, almost by definition, are not outlined in the regulations but it would be useful for the Grand Committee to have sight of them.
Lord Tunnicliffe (Lab)
I rise with a heavy burden because I was the party spokesman in 2014 when this document was created. If you think that this document is a problem, you should compare it to the Yellow Book that preceded it. I thank the Minister for presenting this instrument, but I must confess that I am not going to say anything terribly new. He has touched on the issues already; in a sense, all I am going to do is ask for a few comments on the converse of the goodness, where we are raising problems. I am also responsible because I was a founding director of DE&S, which managed this. It is an old friend; it requires old glasses as well.
The Government recently made a Statement in which, at long last, they admitted to a number of problems in defence procurement and set out some rather vague ambitions to fix them. Although these regulations are not relevant to the whole of defence procurement—just those contracts that are awarded to a single supplier without competition—there are, as the Minister said, 575 single sources adding up to a total spend of around £90 billion. These are sizeable chunks, and it is important that they are taken in the wider context. We know that there are times when single source contracts work well, particularly for more traditional procurements such as ships, aircraft carriers and submarines. However, for less traditional contracts, such as in the digital sphere, they are less effective; in this case, I expect that the respective difficulties in establishing precise timeframes, specifications and knock-on effects are a big reason for that, but I would welcome the Minister’s further thoughts.
I will not spend too long reflecting on last week’s Statement but, as the noble Lord, Lord Coaker, said in his response, it is important that we get defence procurement right not just for the sake of being careful with taxpayers’ money—although that is of course important—but because of the message that it sends to the world in terms of our sovereignty, economy and obligations to our allies. This may sound slightly ridiculous in the context of a single statutory instrument but it is an important principle.
I turn to the specific details of these regulations. As the Minister explained, they amend the Defence Reform Act 2014 and the Single Source Contract Regulations from the same year, which, in combination, provide the rules for these single source contracts to ensure a fair agreement between the taxpayer and the supplier. This instrument intends to increase the flexibility of these contracts so that more can be done without compromising that fair agreement. So far, so good.
The regulations achieve this in three ways. The first relates to pricing. Currently, there is a bottom-up formula. Reasonably simply, you determine the costs, add a profit margin and there is your price. These regulations allow for a contract to be priced in relation to market rates instead. This is where things get a bit more complicated, with seven new pricing mechanisms. This will certainly bring additional flexibility, but it is hard to see a situation where it does not come by trading off the simplicity of the previous system.
I ask the Minister: how exactly will the Government quantify this trade-off, when there is a loss of simplicity, which is in itself a rather abstract concept? How can the Government be sure that it is beneficial? This was raised during the consultation, to which the Government’s answer was that additional clarity and further explanation of how this will work in practice will follow in guidance. That is not ideal either for the suppliers that are responding to the consultation or for those of us contributing to this debate and attempting to scrutinise this instrument. What is the Government’s plan if, in practice, these new mechanisms do not work as intended? I understand that this dilemma has been shared with the industry and will be published in a few weeks, but perhaps the Minister will take this opportunity to set out a bit more detail and even share any feedback received from those with whom it has been shared.
I have fewer concerns about the other two ways in which flexibility is increased. Allowing contracts to be split up into different components so that they can benefit from different profit rates may again reduce simplicity, but it certainly seems to make sense. Have the Government made any assessment of the negative impact of not allowing this in the past 10 years? Would this apply only to bottom-up pricing or to the new mechanisms too? Could different components be priced entirely differently? Can the Minister assure the Committee that the pricing is the full extent of how components are split? I ask these questions on a similar basis to my previous concerns that every layer of additional complexity could undermine the benefits of additional flexibility. To check against this, what steps are the Government taking to ensure that, in practice, the mechanisms work as they hoped?
The third key change is widening the definition to qualify under the 2014 Act. As I see it, this has the potential of making quite substantial differences to the significance of this instrument. Even a reasonably small adjustment in the number of contracts could be worth many millions. Given the variability of how well single sourcing contracts work, which this instrument may improve through additional flexibility, our biggest concern, which the instrument does not necessarily address, is that widening this scope could draw in contracts that have no benefit being processed in this way. Have the Government considered this? Have they made any assessment of the qualitative widening in this way and, if they accept it, are other steps being taken to prevent it, or is it also an accepted trade-off?
Finally, and more generally, it is not long at all until these regulations come into effect on 1 April. When they were considered in the other place just under two weeks ago, the Minister for Defence Procurement said that the guidance will be published in four weeks. I put it to the Minister that that is after the implementation date. Whether that is correct or otherwise, if a movement on the contract needed to be made, nothing has been taken away from the old regime, so I am sure that this would not be a critical issue, but it raises a wider question. Consultations on these changes began in 2019 and a lot has happened since then. After all that time and all that has happened, it is not exactly reassuring for things to be pushed so close to the wire. Will the Minister comment on that and perhaps reassure us that this SI will work as planned?
From what I hear, the regime that we are talking about has been a great success. It is a vast improvement on what happened before 2014, and therefore my comments are not meant to be unsupportive. To be even more supportive, I shall be entirely content with a longish letter.
Red Sea Telecommunication Cables
Baroness Smith of Newnham Excerpts(1 year, 4 months ago)
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The Earl of Minto (Con)
My Lords, I will cut to the chase. We take all this extremely seriously, but it is important to contextualise the risk. The most likely cause by far of damage to subsea cables comes from accidental damage by industrial fishing and shipping and from underwater geological events. That is not to say that undersea cables are not prone to attack but it is extremely rare, and the commercial organisations can divert very quickly to alternative routes. Having said that, the Ministry of Defence has capabilities to monitor the seabed and has invested in a multi-role ocean surveillance programme which enhances our joint intelligence surveillance and reconnaissance capability. We work collegiately with allies, including NATO, to ensure that subsea infrastructure is resilient.
Baroness Smith of Newnham (LD)
My Lords, one issue is clearly the cutting of cables. The other is cyberattacks on undersea cables. What is the MoD’s position on that, and do we have adequate resilience?
The Earl of Minto (Con)
My Lords, the question of resilience is one of ongoing technological change. However, through maritime domain awareness, which is a critical part of our maritime defence and is more specifically about the UK’s national waters rather than international waters, we collect an enormous amount of data to provide accurate information through surveillance software, coastal radars, aviation operations, space-based reconnaissance and government vessels. We get an enormous amount of data. Resilience is something which we consistently and constantly work on.
Defence Acquisition Reform
Baroness Smith of Newnham Excerpts(1 year, 4 months ago)
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Lord Coaker (Lab)
My Lords, I thank the noble Earl for coming to the House to respond to these questions and the necessary scrutiny, on a repeat of the Statement from another place. It is welcome that the Government are finally beginning to acknowledge what we on these Benches and many others, including the National Audit Office, the Public Accounts Committee and the Defence Committee, have been saying for a long time—that defence procurement is not working.
The Statement referred to the narrative of the acquisition system being dogged by major programmes and, while certain programmes have indeed been over budget and over time, the issues go much wider. Some 46 of 52 major projects have been either late or over budget under this Government. It is a systemic problem. In the past 14 years, £15 billion of taxpayers’ money has gone to waste, £5 billion in this Parliament. Report after report from the NAO and the committees that I have mentioned have been critical.
This is not just about the wasted money, as important as that is. Continuous failure in MoD procurement sends a message to the world, to both our allies and our adversaries. Good defence procurement can strengthen our sovereignty; make our country more secure; provide economic growth by creating and supporting jobs; and ensure that our troops can fulfil their roles and fight, while allowing us to fulfil the obligations that we have to our NATO allies. As we would all agree, it is therefore a top priority.
The changes are right and welcome and we agree with the reasons for the reforms set out by the Minister. Indeed, there is not too much in the Statement that you can disagree with, but the real concerns with the Government’s approach stem from the lack of action to tackle the bigger issues, which is a disappointment and a missed opportunity.
The Government’s policy for acquisition reform, as set out in the Command Paper refresh and the Statement, do not address the waste and poor value for money that have plagued the Government’s mismanagement. Without addressing the waste of taxpayer money at the scale that I have set out, it is difficult to see how the reform as set out by the Government will fix the problem. How will the Government ensure that these reforms offer value for money and stop the waste that we have seen? What steps are they taking to address the underlying systemic issues that have contributed to the delays and mismanagement that the Minister has acknowledged in the Statement, which have led to these projects being late and over budget? It certainly does not appear that they would have prevented the issues with some of the major programmes mentioned in the Statement, such as Ajax or Morpheus, or others that were not mentioned, such as the E-7 Wedgetails. Is that analysis wrong and, if so, why?
We are under no illusions that the problems can always be eliminated entirely—as the Statement says, these are incredibly complex programmes and procurements—but they should not be on the scale that we have seen. Does that not mean that there is real scope to improve in this situation? How will these reforms ensure proper accountability to prevent further delays and mismanagement of these vital defence contracts, those that we have now and those we will have in future? A fundamental question that the Government need to answer is how the report will make the difference that we all want, and why it will be successful when so many other reports have failed.
We believe that we should create a new strategic leadership in procurement. If we form the next Government, we will establish a fully fledged national armaments director, responsible to the strategic centre for ensuring that we have the capabilities needed to execute the defence plans and operations demanded by the new era. We envisage core delivery tasks that currently do not seem to be vested properly anywhere in the system; they should have sufficient authority or accountability to carry these out effectively. This leadership includes alignment of defence procurement across all five domains to cut waste and duplication, securing NATO standardisation, collaboration with allies, driving export campaigns and delivering a new industrial strategy. What is the Government’s view of a new director such as this to drive the change that we all want? Which of the things that I have said does the noble Earl disagree with? They are a sensible plan for driving forward change.
We have to do better. Report after report promises action on the problems in defence procurement and promises that there will be improvement as we move forward. Yet our procurement process is dogged with failure and delay, which means that our troops and Armed Forces do not have the equipment that they rightly should. The fundamental question that the noble Earl needs to answer is this: why will this report be different from the reports that have gone before it?
Baroness Smith of Newnham (LD)
My Lords, “over-complex, over-budget and over-time” is how major programmes of defence procurement have been characterised not just by the opposition, our enemies or even our allies but by the Minister for Defence Procurement in giving this Statement in the other place. Defence procurement has, over years, been riddled with problems, as the noble Lord, Lord Coaker, pointed out. While this Statement is very welcome, there is a question about whether it goes far enough or thinks about the wider pattern of defence procurement.
I read the Statement as it was produced and put into the Printed Paper Office last week. It said, “Check against delivery”. I read it, and there were various points where I thought, “Surely no Minister actually said this”. I went back and looked at Hansard to see what the Minister for Defence Procurement said in the other place and, indeed, some of the slightly strange comments were made in the House of Commons. I will therefore ask a few very specific questions.
What we have as the fifth aspect of the new approach to procurement is:
“Fifthly, we will pursue spiral development by default”.
Other noble Lords might know what spiral development is, but I am afraid that I do not. The Statement did not give me much clarity on it, nor does the document that was produced to go alongside it, so I hope the Minister can explain a little more what spiral development means.
Even more, however, I would like to know what is meant by the next line:
“seeking 60% to 80% of the possible, rather than striving for perfection”.
I realise that there have been concerns about the fact that we have looked for exquisite solutions and platforms that are so highly specified that they become ever more complicated, with the timeline for procurement shifting ever further to the right. However, “60% of the possible” raises a lot of questions. Does it mean that only 60% of our ammunition is going to work, or that only 60% of our trials of Trident will work? Given that we seem to have had a couple of problems with Trident recently, I very much hope that the Minister can explain what this means. There is nothing in the Statement or the document that explains clearly that we do not want to spend so long over-specifying things that we never deliver the platforms or equipment that our Armed Forces need. Do we think that we need to specify less? What do the Government mean?
The Statement talks about learning the lessons of experience, which is clearly very welcome. We do not want another Ajax. Learning from that experience is highly welcome and I am sure the Minister would be very grateful not to have to face the situation that his predecessor, the noble Baroness, Lady Goldie, did, of repeatedly coming to your Lordships’ House and having to answer questions about Ajax for which, frankly, there were not any good answers.
Do the Government think that just learning the lessons of the recent past is enough? Will that deliver, at pace, as we say we need, the defence equipment that the United Kingdom needs in an era of unprecedented challenges? Will the noble Earl, in his response, tell the House how far this procurement model will really help us deliver beyond what we have been seeing and help ensure that, if we are sticking at 2% of GDP on defence expenditure, which seems to be the case from the Budget, that we are actually going to be equipped at the level we need to be to face the challenges that we and our allies are facing, and send the messages that we need to be sending to Russia, China, Iran and other countries, some of which we certainly would not think of even as collaborators in international relations?
The Minister of State, Ministry of Defence (The Earl of Minto) (Con)
My Lords I thank the noble Lord, Lord Coaker, and the noble Baroness, Lady Smith, for their questions and their very well-made points. The whole point of this paper is to look forward, not to the past. I think there is a full acceptance on all sides of the House that we can agree on the need to reform our acquisition processes, because they are rooted in the past, not in the current; and of course they ought to be rooted in the future.
As mentioned by my honourable friend the Minister for Defence Procurement in the other place,
“the long-standing weaknesses … are well known”.—[Official Report, Commons, 28/2/24; col. 354.]
They include highly exquisite requirements—“exquisite” is his word—constrained export opportunities, vulnerable supply chains, personnel wary of speaking up when problems emerge, not to mention the overprogramming and unintended competitiveness between different parts of the organisation for finite funding. All these have to be addressed if we are going to move forwards.
I draw all noble Lords’ attention, if they have not already been made aware of it, to the publication placed in the Libraries of both Houses last week, Integrated Procurement Model: Driving Pace in the Delivery of Military Capability. Within that document, noble Lords will find the five core principles through which we will deliver acquisition reform. For the benefit of the House, these are as follows—some have already been mentioned.
A coherent, joined-up approach across the defence portfolio to break down the silo nature of procurement.
New checks and balances to challenge assumptions. Taking expert advice from the outset of projects, not half way through, when it is either too late or no longer appropriate.
Prioritising exportability. Far too much of what we have done has been tailor-made. We work in a global market now, where there are skills and abilities outside our shores, sitting with our allies, where we should not only take advantage of their industrial capability but also the sales opportunity that it presents to us.
Empowering industrial innovation through greater transparency and common endeavour. Transparency is so important in this ability to be honest about the situation as things progress. We need to be able to have the honesty to challenge each other the whole way through the process, to make certain that we do not disappear down blind alleys and that things are produced to time and to budget, when they ought to be, and that everybody feels open enough and relaxed enough to be able to challenge some of these issues.
Then there is the whole question of continuous improvement, or spiral development. Spiral development is a new term for me as well. I come from the private sector, where it is called “test and refine”. The principle is very simple. There is a point when you know that what you are doing is capable of achieving the aim. It is not perfect, but you test it, you use it, you learn and you refine it. You can also refine it for other customers as well: you have the base model, it works well, you can test it and then start to develop it in various different directions, to do various different things that you might want, but also what any potential customer might want. It does make perfect sense, I must admit.
Before turning to the questions quite rightly raised, and some of the challenges, I will look at the way procurement has been taking place. Let us be in no doubt, these are extremely complex pieces of technology and equipment, and they do take a long time to bring to fruition—particularly some of the larger ships and aircraft, as I am sure noble Lords are fully aware. It is a long gestation process, where checks and balances need to be inserted at the right place. But it appears to me, looking from the outside, that the process is well overdue an update, and that it needs to be much nimbler, quicker, more open, more collaborative, more informed, more technologically advanced, more digitally enhanced—you name it. There is such opportunity here.
Will it work? Well, it has certainly made a good start. I will mention just a few things about where we have got to. We already have some initiatives under way, and they are starting to improve things. We are starting to drive pace; risk and complexity are being looked at; senior responsible owners and their teams are much more focused; the strategic alignment is getting better; and the capacity and capability of the professionals involved and the SROs is improving. Psychological safety—this idea of being open and honest with each other and having a non-blame culture, which I do not think we have had in the past—pan-defence category management and financial savings: all these things come down to capability having to be holistic. To have an effective operation and delivery across organisational boundaries, you have to have a holistic view.
I will now address some of the questions. The question of value for money, as raised by the noble Lord, Lord Coaker, which I am sure everybody is aware of, is a question of budgeting and taking a sensible approach, being up front about the budget and making certain that the opportunities and contingencies within the budget are transparent. That is very much the case.
On the question of underlying mismanagement, there are various plans in place within the organisations to ensure greater accountability, less project management and more specific accountability for specific parts of work, which makes the whole ownership that much easier and more driven on a private sector opportunity basis.
I think I have addressed the questions of analysis and accountability in speaking on the empowering of individuals. Will this work? Like everything, it is never going to work from day one, but it is a real move in the right direction. It is the current way that large industrial organisations work now, and the ability to insert SMEs in the process the whole way along is absolutely critical. If one thinks about technology and digital in particular, it is often SMEs that come up with the good ideas. They need to be inserted within the business and supported right the way through so that—I hardly dare say this—the primes do not gobble them up and sometimes destroy their nimbleness. So, this is the right thing to do. The question of co-operation with NATO and other allies is, equally, extremely well made.
The noble Baroness mentioned spiral development. It is a strange concept to be described like that, but I completely understand that it is “test and refine”. You get to a certain level, which is 60% to 80% of where you want to end up; you feel confident enough that you can actually put it out into the live environment, in the clear knowledge that you are going to get it back to make it better once it has been used and other people have seen its breadth of opportunity.
On the question of overcomplication, it is a difficult matter. We are dealing with very complicated machinery and skills, and everything we have learned in the past couple of years suggests that things do not need to be overcomplicated; they just need to work, and we need to be able to produce them at pace and in volume.
On Ajax, the Sheldon review has addressed this, I hope. Without making silly jokes about it being back on the road, the lessons really have been learned on Ajax—luckily, it is a thing from the past. We do learn from the lessons of the past, and procurement, if it is properly addressed, is about learning from experience, or enhancing and living with the concept of change. I hope that the challenges that we have seen have been addressed by what I think is a an extremely sensible and practical way forward for the very complicated and broad-ranging challenge of military procurement for a nation state. We could not take it more seriously; I certainly undertake to keep noble Lords fully up to date with all progress as we start to introduce some of the main milestones that will come up within the next two to three years.