Modernising Defence Programme

Lord Campbell of Pittenweem Excerpts

Tuesday 18th December 2018 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for repeating the Statement. When I first read it, I thought it was the sort of statement Pepys might have made—and probably with better reason. It is essentially a classic “We will try harder” statement. Let me illustrate. I was reading through it and trying to find something substantial, and I tripped over the phrase,

“the MDP has identified three broad priorities”.

I thought, “Well, that is different”. I went on to see what they were:

“We will mobilise, making more of what we already have ... We will make the most effective use of them … We will improve the readiness and availability of a range of key defence platforms”.


The noble Earl’s party has been in power for eight years. What has he done in the previous seven years, if not these sorts of motherhood-type things? It does say something tangible: namely, that,

“we will reprioritise the current defence programme to increase weapon stockpiles”.

I feel that “reprioritise” must have a specific meaning: to take from somewhere and give to somewhere else. One can hardly criticise increasing weapons stockpiles to more sensible levels—but can the Minister tell us where the money is being taken from to be reprioritised in weapons stockpiles?

Later in the Statement is the sentence:

“And, where necessary and appropriate we will make sure we are able to act independently”.


We are in the gunboat business again. What sort of independent missions does the noble Earl have in mind? To make that statement, defence must have developed a series of scenarios. Where does the noble Earl feel that acting independently would be a sensible thing for the United Kingdom to do?

Turning the page, the Statement says that,

“we will modernise, embracing new technologies to assure our competitive edge … targetting priority areas”.

This is 2010. Surely a good Administration who have been in power for eight years should have been doing that all along.

It is really only on the second page that there is anything new. We are going to have a “defence innovation fund” and a “transformation fund”. Can the Minister set out in detail what these funds are intended to do and what the difference between them is? The Statement reads:

“I will ring-fence £160 million of MOD’s budget to create this fund”,


and then talks of further funding. Previously, it speaks about “£50 million” in the “next financial year”. That is £210 million—a little over 0.5% of the defence budget. This is nothing like the amounts of money required to make a significant impact. Later, it says:

“We will embrace modern business practices”.


What are they? Why have they not been embraced before? I like this phrase:

“We will develop a comprehensive strategy to improve recruitment and retention of talent”.


Is that code for, “We are going to fire Capita?” It comes from such a low base that surely getting rid of it and having the MoD doing its own recruitment would be the way to go. Is it not true that, with Capita’s help, we are losing net numbers of trained personnel?

The Statement goes on to say something that might actually be meaningful—that a permanent net assessment unit will be established. That could mean a radical change in how the MoD makes its decisions. It could mean a movement towards the centre or it could mean that it is just some unit that passes comments. Can the Minister spell out what structural changes will be made to make this net assessment unit meaningful?

Earlier, the Statement reviews how the threat has become more significant in a whole series of areas and talks about £1.8 billion of extra money. I think that all this money has been announced before—I will be happy to be corrected on that. But can the Minister set out in some detail where and when the money will be spent? I have an uneasy feeling that it is just about enough to keep up with the increased threat.

The only glimmer of hope in the Statement is in the last paragraph:

“There is more work to be done as we move towards next year’s Spending Review”.


I hope that that is code for defence setting out to try again to get some more resources. The programme hinted at in the Statement—let us it call it “SDR 2015-plus-plus”—is unaffordable without cuts or more money, or are we going to muddle on yet again overpromising and underdelivering?

[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.