Modernising Defence Programme

Earl Howe Excerpts

Tuesday 18th December 2018 Lords Chamber

[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 earlier today in another place by my right honourable friend the Secretary of State for Defence on the modernising defence programme. The Statement is as follows:

“Mr Speaker, in July I made a Statement setting out headline conclusions from six months of intensive work on the modernising defence programme—the MDP. Since then, work has continued apace. First, I would like to welcome the extra £1.8 billion funding for defence, including the additional £1 billion that was in last month’s Budget. Today, I want to provide an update on the MDP and set out the work that will be ongoing. I have placed a full report on the MDP in the Library of the House.

First, I should put the MDP into context. The 2015 strategic defence and security review was the right plan for defence at that time. The Government put the defence budget on a firmer footing, increasing throughout the life of the Parliament. Defence is much stronger as a result. NATO is growing in strength and the UK is a leader. More allies are meeting the 2% spending guideline, or have developed plans to do so. We are the second-largest defence spender in NATO, one of only a small number of allies to spend 2% of our GDP on defence and to invest 20% of that in upgrading equipment. We can be proud of what we have achieved since 2015, but we must also be vigilant.

National security challenges have become more complex, intertwined and dangerous since 2015, faster than we anticipated. Persistent, aggressive state competition now characterises the international security context. In response to the growing threats, the MDP was launched in January, and in the last year our Armed Forces have demonstrated their growing capability, engaged globally and supported the prosperity of the UK. The Royal Navy has increased its mass and points of presence around the world. We have taken steps to forward base the Army, enhancing our global posture. The Royal Air Force has continued to innovate and has celebrated a proud past in the year of RAF100.

Progress has also been made in cyber and space, as the changing character of warfare makes both domains increasingly important. We have reinforced the UK’s position as a leading voice in NATO and European security, and our Armed Forces have led the line for global Britain, tackling our adversaries abroad to protect our security at home and nurturing enduring relationships with our allies and partners.

Through the work over the past year, the MDP has identified three broad priorities, supported by the additional £1.8 billion investment in defence. First, we will mobilise, making more of what we already have to make our current force more lethal and better able to protect our security. The UK already has a world-leading array of capabilities and we will make the most effective use of them. We will improve the readiness and availability of a range of key defence platforms: major warships, attack submarines, helicopters and a range of ISTAR platforms. We are adjusting overseas training and deployments to increase our global points of presence, better to support allies and influence adversaries. To improve the combat effectiveness of our force, we will reprioritise the current defence programme to increase weapon stockpiles, and we are accelerating work to assure the resilience of our defence systems and capabilities.

We can mobilise a full spectrum of security, economic and influence capabilities, and, where necessary and appropriate, we will make sure we are able to act independently. We will also enhance efforts with our allies and partners, aligning our strategic plans more closely with them, acting as part of combined formations, developing combined capabilities and burden-sharing. We continue to invest in, and grow, our global network of defence personnel and the education and training we offer in the UK and overseas.

Secondly, we will modernise, embracing new technologies to assure our competitive edge. Our adversaries and competitors are accelerating the development of new capabilities and strategies. We must keep pace and conceive of our joint force as consisting of five domains—air, land, sea, cyber and space—rather than the traditional three. We must modernise, targeting priority areas. A major new step will involve an improved Joint Forces Command that will better position defence for future conflict, improving the integration of offensive cyber across our Armed Forces and the rest of government, and providing advantage in the new information-rich environment.

This year the defence innovation fund put £20 million towards projects in areas including unmanned air systems, virtual reality training, and enhanced digital communications for the future commando force. The fund will grow to £50 million in the next financial year, increasing the scope, ambition and value of the projects it can support. We will launch new ‘Spearhead’ innovation programmes that will apply cutting-edge technologies to areas including sub-surface threats to our submarines, our intelligence, surveillance and reconnaissance capability, and command and control in the land environment. To drive innovation and change through the department, I am launching a transformation fund. Next year, I will ring-fence £160 million of the MoD budget to create this fund, which will be available for innovative new military capability. I will look to make a further £340 million available as part of the spending review. This fund will be available for new innovative military capabilities which will allow us to stay one step ahead of our adversaries.

Together, these and other steps will enable the acceleration of our modernisation plans. Thirdly, we will transform, radically changing the way we do business. We need to improve markedly the way we run defence. To sustain strategic advantage in a fast-changing world, we must be capable of continuous and timely adaptation. We will embrace modern business practices and establish a culture that nurtures transformation and innovation. We also need to create financial headroom for modernisation. Based on our work to date, we expect, over the next decade, to achieve the very demanding efficiency targets we were set in 2015, including through investment in a programme of digital transformation.

We will develop a comprehensive strategy to improve recruitment and retention of talent, better reflecting the expectations of the modern workforce. We will access more effectively the talents of our ‘whole force’: all three services, regulars, reserves, Civil Service and industry partners. Looking ahead, dealing effectively with persistent conflict and competition will increasingly hinge on smarter, better-informed long-range strategy. To help achieve these goals we will establish a permanent net assessment unit, as well as a defence policy board of external experts, to bring challenge to defence policy and strategy. Our achievements under the MDP have made defence stronger. The capability investments and policy approaches I have set out—with the £1.8 billion of extra funding—will help to keep us on track to deliver the right UK defence for the challenging decade ahead. Without a shadow of a doubt, there is more work to be done as we move towards next year’s spending review. We must sustain this momentum if we are to realise our long-term goals of increasing the lethality, reach and mass of our Armed Forces. I will do everything in my power to make sure that the UK remains a tier 1 military power in the decade ahead, and that we continue to deliver the strong defence and security that has been the hallmark of the Government. I commend this Statement and my report to the House”.

My Lords, that concludes the Statement.

--- Later in debate ---

[Lord Campbell of Pittenweem (LD)]

My Lords, I thank the noble Earl for repeating the Statement. I share many of the observations that the noble Lord, Lord Tunnicliffe, made in the last moment or two. This is the second time that I have heard the Statement, because I took the opportunity to go and hear it when it was first delivered in the other place. I have to confess that hearing it twice has not improved it, in spite of what I anticipated being the mellifluous tones of the noble Earl, for whom I have the greatest respect. Looked at in the round, the Statement could easily have been made at any time in the course of its nine months of gestation. It contains a whole list of promises but is largely silent about how the promises are to be delivered.

When we examine some of those promises, we see that they reflect things which the Ministry of Defence should be doing now as a matter of course. Surely we are currently enhancing,

“efforts with our allies and partners”.

Indeed, one would think that the very possibility of Brexit would surely make that an even more urgent requirement. Are we going to “act independently”? For example, if independent action in defence of an overseas territory were required, surely we would be capable of doing that at the moment. Why are those two issues focused on in that way that they are in the Statement?

Nor is there any mention of the immediate challenges that face the Ministry of Defence, such as the gap of billions of pounds in the equipment budget—an issue that the noble Earl will recall I have raised with him on two recent previous occasions. How will that gap be filled? I will return to the question of financial support in a moment or two, because the Statement contains a couple of sentences that justify careful reading and interpretation.

There has already been reference to the fiasco of Army recruitment. How will that be remedied? Is the company that has responsibility simply to be sacked? Why not go back to the previous system, which, as far as I recall, was effective? Was the idea of letting it out designed to save money? If it was, it has certainly not been successful in the sense of producing the promises that were made in respect of it.

Finally, there is the question of the continuing fall in and erratic nature of the value of the pound. How is that affecting the ability of the Ministry of Defence to continue with its programmes of acquisition? What steps, if any, has the Treasury offered in order to assist if necessary because of these fluctuations?

Perhaps the most important passage is the one to which I referred a moment ago and said that I would come to. Two consecutive sentences say:

“We also need to create financial headroom for modernisation. Based on our work to date, we expect to achieve over the next decade the very demanding efficiency targets we were set in 2015, including”—


here there is a typographical error—

“through investment in a programme of digitally enabled transformation”.

I know of no government programme of “digitally enabled transformation” in the recent past that has proved anything other than more expensive than intended and with delivery several years after it was originally projected. It is a pretty optimistic tool to use in the issue of finding headroom in defence spending. I suspect that that tells us that the Ministry of Defence is not expecting any more increase in expenditure.

In advance of today’s Statement and the publication of the report, there was an apparently well-sourced leak that the Secretary of State for Defence was going to announce that one of the ambitions would be to raise defence expenditure from 2% of GDP to 3% annually. That did not appear in the Statement. When the question was put to him specifically in the other place by the Chairman of the Defence Select Committee, he very neatly sidestepped it. I suspect that that might well be an ambition of the department—but I equally suspect that the Treasury has made it pretty clear that that ambition is not capable of being resolved.

It is also a pity that we have had the Statement and that the publication of the report did not take place in sufficient time for it to be considered as a whole. I very much hope that the noble Earl will, through the usual channels, be willing to commit to endeavour to have a full-scale debate on the terms of the report. That is a much fuller indication of what the Government’s intentions are—albeit, so far as the noble Lord, Lord Tunnicliffe, and myself are concerned, that the report and the Statement leave a great deal to be desired.

[Earl Howe]

My Lords, I am grateful to both noble Lords for their questions and comments, which, in some respects, have covered similar ground. I will endeavour to reply to as many of the points as I can.

It is a little unfair to level at the Government the accusation that we have been doing very little since we came into office. Chapter 1 of the report spells out the wide range of investment and procurement that the Government have taken forward since 2015 in particular. That programme continues on a rising budget, as is often overlooked.

The noble Lords, Lord Tunnicliffe and Lord Campbell, asked about the additional money we were granted in the Budget. The first thing to say is that the additional money granted to us this year and next will enable us to proceed with programmes that we are clear are priorities. One of these is our defensive cyber programme; another is stockpiling and spares. A further priority is the work we are doing at pace on offensive cyber. The money will also enable us to proceed with a more cost-efficient profiling of payments relating to the dreadnought programme. More generally, the money is excellent news for our modernisation programme in a number of areas. The report spells those out. Some would say that the significant thing about the Budget settlement is that we are not anywhere near making or talking about the kinds of cuts to military capability that some commentators were predicting earlier in the year. That sends an important message.

Both noble Lords asked about the circumstances in which we might act independently. I would not want to place too much emphasis on that part of the Statement. In the vast majority of situations we plan on the basis of working alongside our allies in NATO—the cornerstone of our defence—or as part of some other multilateral force, hence the emphasis in the report on the theme of international by design, which was a key strand of policy articulated in the SDSR. We are the lead nation in the JEF, for example. We lead the framework NATO battalion in Estonia. However, the nation would expect that we should, in exceptional circumstances, be able to act independently, not least in defence of the realm and our overseas territories, and to respond effectively in disaster relief and humanitarian operations that our allies might not necessarily wish to take part in.

As far as the modernisation of defence practices goes, we in the ministry are aware that there is ample scope for more automation and digitisation in back-office functions more broadly. This is covered quite well on page 17 of the report. It is about instilling a culture in defence built on leaner structures and less cumbersome reporting lines, not least when it comes to our relationship with industry.

The noble Lord, Lord Tunnicliffe, asked what the practical difference was between the innovation fund and the transformation fund. Both are about improving our capability. The transformation fund will add to our ability to pursue promising new projects, technologies or equipment at the pace required to counter the threats. It will focus in particular on opportunities to increase our lethality and mass. The innovation fund, which of course emerged from the SDSR, is a 10-year programme. That is much more about seeing how new ideas can transform defence and testing the utility of those ideas at an earlier stage of their development. It is also about pump-priming good new ideas.

Both noble Lords asked me about the people programme and, in particular, about Capita and our recruitment and retention. We accepted the conclusions and recommendations of the recent NAO report. We await the PAC report before replying formally, but I will just say that the tone of the final report is disappointing and provides only limited acknowledgement of the work that the MoD has undertaken or has planned. The NAO recommendations largely address areas in which work is already under way or planned. As regards Capita, we accept, of course, that the recruit partnering project has not performed to the satisfaction of the Army or, indeed, Capita itself. Significant time and resource has been invested to improve that situation. Part of the problem is that the defence recruiting system let us down. Significant additional Capita resource has been deployed to improve the DRS performance and, while there continue to be issues, I can tell both noble Lords that performance has improved significantly.

The noble Lord, Lord Tunnicliffe, asked about the strategic net assessment. Strategic net assessment is an intellectual discipline. It looks across all dimensions of military competition and assesses how the choices of both friends and foes may play out over the short, medium and long term. Its conclusions can be used to develop more nuanced and better-informed defence strategy so that we can better anticipate our adversaries’ actions and counter them more effectively. That will be closely co-ordinated across government to ensure coherence.

My time has almost expired, but I want to answer the question of the noble Lord, Lord Campbell, about the funding gap in the equipment plan identified by the NAO. The NAO report reflects the unlikely situation where all the equipment plan financial risks materialise at the same time. We are confident that we will deliver the equipment plan within budget this year, as we did last year. We recognise the financial challenges that our programmes pose: they are ambitious and complex but we are addressing these after securing the financial boost arising from the Budget and reducing forecast costs through efficiency savings. We have taken steps to enable longer-term affordability by improving financial management of the plan. A new executive agency has been established to lead on procurement and in-service support and decommissioning of all nuclear submarines, as the noble Lord is aware. It is important to understand that the MoD manages a £5.1 billion equipment plan contingency and a £1.1 billion nuclear contingency within the £186 billion allocated to the plan precisely to manage those cost pressures.

As for the value of the pound, I believe that I have said on previous occasions that we benefit from being able to engage in hedging operations to shelter the fluctuations in sterling against the dollar, in particular. I will write to noble Lords on those questions that I have not had time to answer.

[Lord Craig of Radley (CB)]

My Lords, I thank the noble Earl for repeating the Statement. There are some bits of the Statement that are, of course, welcome, such as further thought and action on cyber and on space. The noble Earl mentioned improved resilience, but I see very little indication of that. Will he spell out a little more what he means by improving resilience? One word that was not mentioned, either by the noble Earl or in the “Dear colleague” letter, which I have read, is the word “Brexit”. I wonder how the Ministry of Defence is dealing with this subject. Can the Minister give any indication of the possibilities that could impact on what we have heard today about the way the money is to be spent, for example if Brexit takes a turn in the direction of no deal?

[Earl Howe]

My Lords, I can deal very quickly with the second part of the noble and gallant Lord’s question. The Ministry of Defence stands ready to support other government departments if called upon, and if we find that the resources of those departments are insufficient in themselves. Having said that, we have received no formal bids as yet from other departments, despite the fact that we have asked them what they envisage requiring. There will be approximately 3,500 personnel standing ready in case of need to meet such situations.

Resilience has been a major theme of our deliberations. There are quite a number of strands to that. One is to look carefully at how we can enhance our chemical, biological, radiological and nuclear defence capabilities, investing further in Porton Down. We are also, as the report makes clear, enhancing our ability to share submarine threat data with our closest NATO allies. We are improving our secure communications, protecting our networks from cyberattacks and improving our ability to exchange information with NATO partners, as I have said.

We are also clear that we need to invest in improving power-generation capabilities for both Type 23 and Type 45 Royal Navy ships, enhancing their overall capability and productivity. There has been criticism, as I am sure the noble and gallant Lord is aware, of the extent to which some Royal Navy ships have been kept in port rather than being deployed. We are clear that we need to enable the Royal Navy to do better in that area.

The other obvious example of improving resilience is increasing the provision of spares and support to enhance global deployability and presence, particularly as regards the helicopter fleet.

[Lord Browne of Ladyton (Lab)]

My Lords, I woke this morning to the news of the transformation fund of £160 million. Clearly, that was what the MoD briefed last night from this Statement because that was what the Secretary of State wanted the media to focus on—and they have done, for most of today. So I too will focus on this in your Lordships’ House.

Since the Statement was first made, the MoD has briefed further that the fund will be used in part to look at artificial intelligence and its uses in a series of new programmes, as well as—this is the phrase that I understand was used—tackling threats to submarines. These must be new threats. The Statement itself expresses another ambition for it, saying:

“This fund will be available for new innovative military capability which allows us to stay one step ahead of our adversaries”.


This seems a heroic ambition for £160 million. I say that because, in 2014, Google paid £400 million for a University College London spin-out called DeepMind. The 2017 accounts of that business show that Google DeepMind staff costs are in excess of £200 million a year. So it does not seem that £160 million will go very far in that challenging environment.

In order that your Lordships’ House and others who will have to do so can assess what this money will be used for and whether that is a justifiable use with any significant result, can the Minister explain—either today or in writing—what series of new programmes this money will be deployed to develop? What are these new threats to our submarines that need to be tackled and are not already accounted for in the MoD budget?

[Earl Howe]

My Lords, the defence transformation fund means that £160 million will be available next year from within the MoD’s existing budget, and we are looking to make a further £340 million available as part of the spending review. That will be part of our bid. The transformation fund has been established, in general terms, so that we can respond rapidly to new opportunities to invest in technologies that are game changing, and projects that move us forward at pace in areas that represent priorities. It will complement the innovation fund, as I have explained, although that fund will in itself more than double next year. It is too soon for me to itemise the projects and technologies that this money will be spent on. This is work in progress, but we are clear that the fund will perform a very useful function in enabling all the commands to focus their minds on priorities and potentially game-changing areas of activity. As further information becomes available, no doubt noble Lords can ask me about that and I shall be happy to provide further details in due course.

[Lord Hennessy of Nympsfield (CB)]

In the noble Earl’s judgment, what above all in this defence review distinguishes it from its 13 predecessors since 1945? As a footnote, I am greatly interested in the new tauter approach to strategic policy-making, with the new net assessment unit. To enable your Lordships to test the quality of this new approach, I wonder whether the Minister could place in the Library a copy of the new strategic assessment of the high north, undertaken as a pilot project, which is mentioned in today’s document?

[Earl Howe]

My Lords, if it is possible for the Ministry of Defence to share that document, I will certainly do as the noble Lord asks. In answer to his first question, there are two things to say about the MDP. First, this has been a major and very thorough piece of work. Secondly, the document is essentially strategic in its nature; it focuses on key defence capabilities and has affirmed the central elements of our strategy as articulated in SDSR 15, from which, as the noble Lord is aware, it emerged. It has also guided our investment decisions on capabilities, announced at the Budget, and updated our key policies. It is designed to keep us on track to deliver the right defence for the UK, and does so in what we see as a challenging decade ahead. As noble Lords read and reread the report, I am sure that it will make clear a lot of detail underlying the general proposition that I have just articulated.

[Baroness Smith of Newnham (LD)]

My Lords, as the noble Earl has just said, the present document is very detailed, yet in many ways it appears to be a glossy brochure with a lot of aspirations. These remind me rather of the vagueness that we get on what Brexit might look like. There do not appear to be clear strategies for where the Government want to go. Can the noble Earl explain what £160 million might actually be able to deliver? I think it is about the equivalent of two F35s, and I am not quite sure how will keep this one step ahead of our adversaries. I also come back to the question raised by my noble friend Lord Campbell about the exchange rate because hedging is one thing, but we are moving towards a one-for-one rate in the pound to the dollar. Is it really credible to say that the Government have hedged all of our defence budget in that way?

[Earl Howe]

We have not hedged all our defence budget, but we have hedged a substantial proportion of it, particularly that which is payable in dollars. I was speaking to our finance director last week about this. Although she could never be sanguine about the way the pound is moving, she is much clearer now that we have an affordable equipment budget over the next couple of years, which is the period over which she aims to hedge. I have already made it clear to the noble Lord, Lord Browne, that it is, unfortunately, impossible for me to enumerate at this point those projects which will come under the umbrella of the transformation fund. It was said that £160 million is not a great deal of money—it sounds like a great deal of money to me, I must say—but one should not think of transformation simply in terms of platforms and assets. One has to think of it in terms of different ways of working and of modernising practices within defence. That is where this fund will score most heavily.

[Lord Touhig (Lab)]

In the Statement we are told that the Government wish,

“to improve markedly the way we run Defence”,

and that:

“Based on our work to date, we expect to achieve over the next decade the very demanding efficiency targets we were set in 2015”.


Can the Minister remind the House of how much money the 2015 defence review said would be saved by efficiency savings and over what period? How much has been saved to date? Have any service personnel been deployed to work in the MoD to fill vacancies caused by civil servants leaving because of efficiency savings achieved to date?

[Earl Howe]

I am afraid I do not have the information in my brief to answer the last part of the noble Lord’s question, but the target we set ourselves in 2015 was £7.4 billion of efficiency savings. We have achieved 70% of our target; we have achieved £5 billion. That was the target over a five-year period. We are now looking further ahead to see what further efficiencies we can generate over a 10-year period. That work is ongoing.

[Lord West of Spithead (Lab)]

My Lords, I do not normally wear a uniform for a Statement on defence, but I have just been at a commemoration of the Battle of North Cape, where the very modern German battle cruiser “Scharnhorst” was sunk on Boxing Day 1943 by a British battleship, two cruisers and 10 destroyers, which hit her with numerous 14-inch shells and 6-inch shells and 19 torpedoes before she sank.

There is lots of rain coming in. If the roof comes down, I will stop talking. It is a bit like being on “Ardent” under gunfire; I rather like it.

The reality is that numbers count, but that is not my point. I feel this is rather a damp squib, to be quite honest, and so was the Statement in July. It is full of platitudes—motherhood and apple pie-type statements. There are lots of things that I would expect to be going on anyway. If they were not, somebody ought to be taken out and shot. It is really very disappointing. The good thing is that the Secretary of State for Defence managed to get £1.8 billion extra for defence, which was fantastic, and he has managed to kick into touch, or into next year, when the really interesting things will happen in the spending review decisions about defence. Not long ago, it looked as if decisions would be made to cut things that would have been quite disastrous for the nation, so he has managed to slip that sideways. To be quite honest, this Statement is not exciting. It is like a glossy brochure, as the noble Baroness said, and I find that very disappointing. The £1.8 billion figure has been talked about before. The £800 million was for Dreadnought and has been pulled forward. We were told that the £1 billion was for Dreadnought, anti-submarine warfare and cyber. It seems that some of this has been purloined for other things. I will be interested in how much of it is for anti-submarine warfare, which is what was mentioned by the Secretary of State when he said we have an extra £1 billion.

The Statement refers to an increase in the “mass” of the Navy and the military. We have certainly got heavier because we have a bloody great aircraft carrier. In terms of numbers, the only difference is that, because we kept three OPVs, we have two extra ships—that is all over the next 10 years or so, because the 31e is replacing other ships. I find that a little misleading.

The Statement says that we are a “leading voice” in European security. Europe’s disgraceful decision on Galileo does not make me think that we are a leading voice in European security—we are in NATO, but not in European security. That is worrying.

My noble friend Lord Tunnicliffe mentioned the increase in weapon stockpiles. The MoD has always been bad about that but, as soon you increase weapon stockpiles, you take money from somewhere else. We do not know where this money is coming from. Similarly with some other references to amounts of money, it is not clear where they are coming from, but what is quite clear is that we cannot meet the demanding efficiency targets. One knows that from talking with everyone in the MoD. To pretend that we can is wrong; it is no good fooling and deluding ourselves. Does the Minister really believe that we will meet all the efficiency targets and save the amount of money that we said we would? Yes, we can manage to balance the books over the next two years and manage to get equipment by slipping and sliding things around—the MoD has done that for years—but we have a real problem. Let us face it: there is insufficient money in defence at the moment to run the programme that we would like. Somehow that has to be resolved. It will be fought out in next year’s spending round—the Secretary of State has been clever in sliding it to then and not taking terrible decisions now, but, my goodness, we need to look carefully. To be quite honest, this Statement is really a damp squib.

[Earl Howe]

I am sorry that the noble Lord feels that way. I gently put it to him that the size of the document belies the depth and significance of its content. This was never going to be about a catalogue of future assets or platforms or number of ships in the Navy. As I said earlier, the programme is largely strategic, focusing on those key defence capabilities on which we think we should concentrate in the light of the threats facing us. In effect, it is a sense check of the SDSR of 2015.

The noble Lord rightly says that the spending review will be an important ingredient in our budget over the longer term, but the outcomes of the MDP will inform next year’s spending review in a helpful way. It provides a solid foundation on which to base the case that we will present for defence spending over the coming few years.

Noble Lords should not underestimate the importance of the Budget settlement. That settlement will undoubtedly enable our Armed Forces to modernise and meet the intensifying threats and risks that we now face, including prioritising investment in key capabilities. The spending review will come next year, but we have in the meantime the ability to move forward on a number of vital fronts, which is extremely valuable.

[Lord Touhig]

My Lords, the Minister was not able to answer my third point. Will he discover that information and write to me?

[Earl Howe]

Yes, gladly, my Lords.