Defence Spending

Dai Havard Excerpts

Thursday 12th March 2015 Commons Chamber

[Mr Dai Havard (Merthyr Tydfil and Rhymney) (Lab)]

I would guess that many hon. Members will make contributions about the symbolism of the 2% target and its relationship with foreign policy and so on. I will try to restrict my remarks to its utility: the purpose for it, the benefits of having the process, and some predictions—guesses may be a better word—and advice on what we might do.

The 2% of GDP NATO target can be defined in all sorts of ways, and there have been many discussions on that recently. It is largely, but not totally arbitrary. It is largely the basis on which we currently spend our money, and so it informs our current decisions. I do not want to discuss what we have done in the past, however. I want to discuss what we are going to do in the future, and why it is important as a mechanism for the future. It should not necessarily be driven by NATO or US ambitions. It should be a matter of deliberate choice for particular strategic reasons, and there should be merit to it.

That is why I want to talk about this. We need certainty with which to plan against the uncertainty, and, in my opinion, the 2% mechanism would help and perhaps provide some structure and context. The truth is that we need a threat-based assessment. No doubt, there will be a new national security strategy, but we can no longer say, “We’ll have a long war over here, and then we’ll have a short war over there. Can you lot hold on until Christmas, and then we’ll come and fight you, because we haven’t quite finished this one yet?” That world is dead. We now have a series of threats and concurrent difficulties to deal with, and they will continue to be concurrent. The way we plan against that uncertainty has changed. Our methodologies are different—there was a great example in the Ebola statement earlier. We need an integrated process, not just within the military, but across the other Departments, if we are to deploy and do this properly. That is the big discussion. I have said to boys from my constituency in the military, “I’ll tell you two things, right—buy a thermal vest and a pair of shorts, because you’ll be in Estonia in the winter and no doubt somewhere warm a bit later. You’re going to be around the place, because there are going to be concurrent reasons to be deployed in different places at different times.”

I want to set out the benefits of the 2% mechanism. We now have five procurers in the MOD: we have the three chiefs—Army, Navy and Air Force; we now have this joint command; and we still have large projects done centrally. So there are five procurement organisations. I have been involved in the many discussions about how we buy equipment, but the real question is: how do we decide what to buy in the first place? We know where the inefficiencies have been, so the managerial structures have changed and we have a different set of relationships. We have chief executives now who are chiefs of services. These are the people who are going to buy this stuff. They told the Defence Committee, “Well, we have redone the structures in the original plans you gave us”, and I said to General Nick Carter when he redid the Army one, “Well done, Nick—you’ve provided a structure that protects you from me.” What do I mean by that? I mean we have this structure—adaptive and reactive forces—and it has some utility and it could be made to work, but it will work well only if we make the right decisions about how to fund and resource it and allow it to operate properly. Currently, the chiefs are telling us, “Unless we get 1% uplift on procurement and flat real, we cannot make those resources work. If you change that, we will have to change your plans or come back with advice on how you will change them.”

There are also questions about how we build this capability. The industrial agenda is really important, but it is not as well described as it could be. It needs to be better described. The defence growth partnership is a great thing, but it concerns applied research, not the whole business of how we deal with industry. Industry needs to plan. All the contractors—whether their function is to go to war or to provide support so that we can release other people to go to war—have to be factored in and they have to plan. This mechanism could produce some rigour, some tools, a language, an understanding and some certainty with which to plan. It might then allow us to plan strategically and even come together and find this magical thing—integration—that will give us the collaboration we need and which we talk about here and on the National Security Council.

The mechanism would test all sorts of things. It would test individual capabilities too. It could go up and down—because GDP increases and decreases—so some people might say, “Well, Trident—difficult question. It’s been set aside really—it’s a given; and therefore we’re arguing about the rest of it.” The mechanism would have to test itself against all others, and the military would have to decide its continued capability and utility. Everything would be in a process of iterative, continual assessment. In the future, these processes have to be iterative; they cannot be linear, they are not binary and they will not be spasmodic.

If we do that, this is what I think will happen: we will spend 2%, we have spent 2% and we will continue to spend more than 2%. But will we do it well? Will we do it in a strategic and planned fashion? Or will we do it just because we are responding to events? The “dogs of war”, as I call them, are a clear example—all these vehicles we now have: the Jackals, the Bulldogs, the Foxhounds. They are all individually important and useful, but they all came out of what? Urgent operational requirements—that is where they came from; they did not come from any proper strategic planning process. We now have to reintegrate this legacy equipment and fit it into the discussion about future planning. You could have avoided being in that position, if you had done some things differently—not you, Mr Deputy Speaker. I am not blaming you personally. We could all have been in a better position if we had done those things.

[Bob Stewart (Beckenham) (Con)]

On urgent operational requirements, the key is in the wording. We do not necessarily have any idea of the threats or requirements in advance. Our soldiers, sailors and airmen will suddenly be in a situation where we have to find a piece of kit to protect them better. That is the key—

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[Mr Havard]

Obviously, yes, we will continue to need them. I am trying to make the point that this became the process, rather than the exception to the process—it should be the exception—and the money came out of the contingency fund, not the core budget.

The budget should be 2%. As hon. Members might remember, when Labour was in Government and people said, “You should give more money to defence”, I used to say, “Well, if I was Gordon Brown, I’d say, ‘When you can spend the money I’ve given you properly, come back and ask for some more.’” That is the same debate, and it is the debate for the future. How do we plan for it properly? I think that 2% might give us a way of structuring the discussion. Spent well, the 2% could give us ways of planning and the right language, tools and transparency.

I have something to say to us in Parliament. This is probably the last time I will speak in this Parliament, so I will say something to the next one. The next Parliament will have to debate this better than we have debated it up till now. As I have said several times, we do not have structures any more and we do not discuss defence properly. We can make all the criticisms we like of other people and how well they do things, but we would do well to look at ourselves and consider how well we do them. In my opinion, the 2% could give us, if not certainty, at least some process by which to start to plan against the uncertainty, and it could enable other people to plan for themselves. For me, this is iterative; it will have to deal with the concurrence issue; and it is more than just a declaratory or arbitrary figure—it has a purpose.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

That was a perfect example of taking up to 10 minutes. If we all stick to that, everybody will get in with the same amount of time.

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[Sir Menzies Campbell]

The hon. Gentleman is right about that. I know a bit about this because I was invited by the then Defence Secretary to be part of the group of politicians, of all parties, who participated in debates with officials as to what should be in the Green Paper.

A defence review is not a hugely impossible concept to understand. What one needs to do is set out one’s foreign policy objectives; decide what military resources are necessary to fulfil those objectives; and then allocate the financial resources necessary to provide the military capability. We have not had a defence review that fulfils those three principles in all the time I have been in the House of Commons.

The hon. Member for Merthyr Tydfil and Rhymney made a sound point when he said that 2% cannot be described as a panacea for all the ills of defence. If 2% is to be spent, it must be spent wisely. We do not have to go far in Europe to see that several of our allies spend money, perhaps getting up towards 2%—there are not enough of those countries—which could much more readily be spent otherwise. For example, it could be spent on a greater amount of interoperability, force specialisation and such things. There is no point Mr Juncker talking about a European defence policy when European states have not yet properly fulfilled their responsibilities to NATO, of which almost all of them are members.

[Mr Havard]

May I take the right hon. and learned Gentleman back a little to the defence and security review? We can have a defence review and we can have a security review, or we can have an integrated process that looks at the whole business of future resilience, which I think is what he is suggesting we have not done and are not doing now. Does he think that when the new Parliament forms, the circumstances will be such that the current budgets for defence might be maintained in order to allow time for a proper, integrated assessment of defence and security, possibly in the next calendar year, if not this one?

[Sir Menzies Campbell]

The hon. Gentleman makes a very sound point. I am sorry that I cannot give any commitments in relation to the next Parliament, as I shall not be here, but as a spectator outside I shall firmly cling to the view that a proper, full-scale defence review of the kind I have described, and with which he agrees, is necessary if we are to provide ourselves with the proper defences for the foreseeable future.

The situation is worse than I have described, in a way. Not only is the 2% a public commitment, but it was restated at Celtic Manor during the NATO summit and in the final communiqué from that summit. Of course, it is also one that the British Government have been at pains to emphasise to other allies. How are we going to explain away the fact that in recent months, even years, we have been complaining about the level of defence expenditure of other allies yet we are about to breach the very standard we signed up to and advocated only a few months ago? It is a bit worse than that, too, because we know that the possibility that we should fall below 2% has caused great anxiety, particularly in the United States, which is our closely military ally. Senior official after senior official has made exactly that point.

I have another source of embarrassment: in about 10 days’ time, the United Kingdom delegation to the NATO Parliamentary Assembly, which I have the honour to lead, will be the hosts of the Standing Committee of the NATO Parliamentary Assembly. We have in the past 12 months, with the encouragement of Ministers, sought to persuade the other members of the Assembly of the importance of the 2% figure. We will look rather embarrassed in 10 days if the consequences of the actions that appear to be taken in this country are that we will fall below the very figure which we have been advocating and on which we have been seeking to hold the feet of others to the fire.

Let me finish by saying this: if we do not have sufficient defence—and 2% may not be enough—we will diminish our capability, we will reduce our influence and we will limit the options of government. We cannot afford any of those.

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[Sir Peter Luff (Mid Worcestershire) (Con)]

As for others who have spoken in this debate, it is likely that this will be my last debate in Parliament. I am glad that it is on defence—the defining purpose of the state and of Parliament. I will seek not to repeat what others have said, but I want to say this. We have no more important role than to keep those who elect us safe from our enemies. This view is not as popular as it was. Elections, we are told, are not won and lost on defence; there are no votes in defence. I am not so sure. If the political establishment is seen to be playing fast and loose with our security, we will all pay a heavy price in further disillusionment and alienation.

The 2% NATO floor or target, to which we are all politically and morally committed, is the minimum that we should spend, yet it is far from safe. I do not generally favour targets for spending of any kind, and I certainly do not favour writing them into law, but the unavoidable truth is that if we are to achieve our current objectives, spending of that order is needed. I understand the scope for increased efficiency in the area of human activity; indeed the increased sophistication of the technology behind military equipment enables us to do more with less, which means that fewer people are needed to deliver the same effect than even a decade ago.

A Type 45 destroyer is considerably more capable than the Type 42 that it replaces and needs a smaller crew. And there are opportunities to do more with less. That is one of the purposes of the UK-French defence relationship. The application of the whole force concept could increase the effect and efficiency of defence. So our debate about national security must not lapse into sentimentality. It is not sentimental to speak up for defence. I want to do so by addressing three things—the financial background, the fact that defence is a long-term game and the threat to essential investment in science and technology.

The Chancellor is right to say that strong defence depends on a strong economy. That is why as a Minister in 2010, I swallowed hard and accepted significant cuts to defence capabilities, even though they led to some very challenging gaps in capability. But for a trading nation like ours, the protection of the sea lanes and the maintenance of an open rules-based trading system are crucial. So a strong economy also depends on strong defence. Prosperity is built on peace. The urgent question to both Front-Bench teams today is this. The funding post-2015 that is needed just to achieve Future Force 2020 is based on a 1% per annum increase in the equipment budget and flat real for the non-equipment budget. That is what the chiefs of staff and Ministers were promised at the time. So will Ministers and shadow Ministers commit today to both the equipment and non-equipment figures that we were promised?

The commitment on the equipment budget made only by my party is welcome. There is a long list of very important capabilities, but it is not enough on its own. The significant cuts that appear to be pencilled in for current expenditure—RDEL, or resource departmental expenditure limit—are deeply worrying. I commend Professor Malcolm Chalmers excellent paper, “Mind the gap; the MOD’s emerging budgetary challenge.” It is an objective, factual assessment of the cost pressures facing defence. I doubt that the Minister can offer reasons to disagree with any of its deeply worrying conclusions, but even in the optimistic scenario that Professor Chalmers outlines, under which defence is given the same protection as health and education, those cost pressures would still force a total cut of 8.7% over the next 10 years—about £35 billion in total.

If further cuts are to be made, they would sadly have to be based on a refreshed and less ambitious strategic approach. The decisions in the 2015 review, then, could redefine Britain’s role in the world. There are other strategies, depending more on diplomacy, soft power and development assistance, for example. They are all vital components of our national security, but are they credible without strong defences too? No. Not when, for the first time since the cold war, Europe faces a real military threat on its borders. The world is more dangerous than it has been for decades.

In some ways, though, the 2015 SDSR will be easier than the last one. Crucially, a major programme of reform has rebuilt the MOD’s credibility, and its performance on equipment acquisition has been transformed. From both the industrial and security perspectives, the 2010 SDSR succeeded in protecting the very special US-UK defence relationship, but will this last? President Obama, the US Chief of Staff and the US ambassador to the UN have all warned us and are sending us a clear message about what they fear is the future of UK defence spending.

So to my second theme—the need to take long-term decisions to protect our operational advantage and our freedom of action. In layman’s terms, that means making sure that we have superior capabilities to our enemies and that we can use them and sustain them whenever we want to. At the heart of this for me is the alarming engineering skills shortage that we face as a nation, especially in defence. This is the area of the 2012 White Paper on defence acquisition, to which I put my name, with which I am least satisfied. The ingredients were all there, but the urgency of the issue was not properly articulated and opportunities were missed. Crucially, commentators did not understand what the White Paper said. It made it clear that

“We will take action to protect our operational advantages and freedom of action, but only where this is essential for national security.”

Here is the commitment to invest in what industry calls the body of knowledge essential to sustain capabilities in the long terms. We cannot protect all the skills and capabilities that we need and would like to on current budgets, but there are areas of capability that we simply must invest in to sustain our security. Short-term budget cuts make this White Paper promise, which is essential to our security, impossible to deliver, with serious long-term consequences.

My third theme is the priority that we must attach to sustaining investment in technology. The centrality of research investment to UK national security takes on greater significance in a new global security context—a context defined by state fragmentation, asymmetric threats and technology proliferation. Belligerent non-state actors are increasingly using technology to counter the traditional technological advantage of conventional military and security forces. Since the end of the cold war, we have seen widespread development of technology by commercial organisations and individuals driven by a consumer society and business sector hungry for tomorrow’s technology today. This has lowered the bar for entry to conflict, espionage, terrorism and serious and organised crime, meaning that there are far more threats out there now than there were. As a result “conflict” will be far less predictable than we have seen before. It simply will not conform to set-piece scenarios in the same way that the west planned for in the last century or in the last SDSR.

If we are not committing to investing a realistic amount in science and technology, I see several things happening. First, we will become less relevant to our key strategic allies—the United States and France. Secondly, we will miss the opportunities to build capability by adapting the best of the commercial and international technology sector because we simply will not know what the cutting edge looks like. Thirdly, we will cease to act as an intelligent client. How do you know what you are buying if you do not know what good looks like? Fourthly, we will be unable to evolve during a conflict. This is potentially the most serious if we cannot defeat the novel threats deployed against us.

If the 2015 SDSR correctly prioritises science and technology, logically the MOD must spend more on it.

[Mr Havard]

The hon. Gentleman is making an important point. The Defence Committee in reports in this Parliament and the previous Parliament has talked about the MOD devoting 2% of the money that it has to S and T as well as R and D so that such spending is structured into budgets.

[Sir Peter Luff]

I could not agree with the hon. Gentleman more strongly. That is the precise figure that I have in mind for the level of resources from the defence budget that should be spent on S and T. It was 2.6% under the previous Government, but it declined under them to 1.2%. The White Paper on technology put a floor under it of 1.2%. It is far too low a floor, and what is more, as defence budgets have shrunk, the sum being spent has gone down too. It is only a third higher than what the Department for International Development now spends on research. Two per cent. is the bare minimum, of rising budgets as well. The trouble is that the Department sees S and T as the cash cow of the spending round. It is a resource that is easily cut because contracts are short term, but the consequences for our security are devastating.

If cuts to revenue spending happen, the science and technology budget will go straight back into the firing line of the Treasury and the bean counters of the MOD. We must not let that happen. Maintaining operational advantage is a race against time to take innovation from the lab and into the battle-space.

Our partners envy our ability to do more with less. Key to this is understanding the operational advantage of technology and moving it quickly into the hands of the military. As Bernard Gray, Chief of Defence Matériel, put it recently,

“The key question is, of all the desirable things in the world, which are the ones you can afford?”

But the country can afford more, as it should choose to do. In the end, this is not about votes, it is about leadership. We must all in this place do everything we can to sustain the national understanding that we maintain peace through strength, not weakness. That is why it is imperative that the next SDSR is well argued, persuasive and properly funded, and why all the political leaders of our nation must show their deep personal commitment to this outcome.

After every major conflict we have cut defence and regretted it. The Crimean war, the first world war, the second world war, the cold war—cut and regret, cut and regret, cut and regret, cut and regret. As Hegel said,

“We learn from history that we do not learn from history.”

In 2015 we celebrate the 800th anniversary of the foundation of our freedoms, Magna Carta, and the 750th anniversary of the beginning of our representative democracy and Simon de Montfort. It would be depressingly ironic if in 2015 of all years a timid Parliament, an intellectually feeble SDSR and another round of austerity combined further to weaken our defences and threaten our freedoms at such a dangerous moment in world history.

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[Sir Richard Ottaway]

I used the figure of 20% for effect, rather than for any serious argument.

On the defence budget in the context of NATO, the same point applies. Russia is now spending heavily. I believe that nearly a third of its federal budget is being spent on defence, though no one is arguing that we are going to see Russian tanks rolling across the central European plain in the foreseeable future. With hindsight, Russia’s intentions have been flagged up for longer than we realise. We should have realised that when the intervention in Georgia started. Then Russia’s focus moved to Syria and later to Crimea. Russia’s human rights record is appalling. It is a country under authoritarian and unpredictable rule at the top and in the Kremlin.

[Mr Havard]

Will the right hon. Gentleman give way?

[Sir Richard Ottaway]

I give way, for the last time.

[Mr Havard]

The Defence Committee produced a report in 2009 after we visited Russia because of the Georgian conflict and we made recommendations then. Does the right hon. Gentleman agree, on the basis of reports from his own Committee and others, that as a Parliament we do not properly debate the recommendations that we advise it to discuss?

[Sir Richard Ottaway]

I hang on every word of the reports of the Defence Committee. They are authoritative, powerful and impressive. The Chairman of the Defence Committee was once a valued member of the Foreign Affairs Committee and might follow the Foreign Affairs Committee in instigating debates on our own reports, through the Backbench Business Committee.

The focus now may be on the Baltic states. We are right to deploy troops and aircraft there with the Spearhead brigade, and we should make it clear that if there is an intrusion which poses a threat, we shall not hesitate to use that force. But it is ultimately a political decision and one that will be very difficult to make when it comes because the intrusion will involve the use of militias, rather than an overt use of force.

But we are not going to defend Europe on our own. As has been said by many people, the rest of Europe needs to live up to expectations on its level of expenditure. It is ironic that NATO, which was formed in the aftermath of the second world war and of German re-armament, is now calling for Germany to re-arm. I wonder what will be the public reaction if Germany, the largest economy in Europe, said that it was going to double its defence budget. One thing is certain: that would mark the end of the post-war era.

Russia is spending heavily on equipment and so are we. The two new aircraft carriers soon to be launched are the most powerful weapons that this country has ever produced. As someone who served for several years on aircraft carriers in the 1960s, I am well aware of the projection of power that those bits of equipment bring. Where the mistake has been made is in the lack of support equipment to go with it. As my hon. Friend the Member for Penrith and The Border (Rory Stewart) said, the issue is not just the fruit and veg being transported behind the carrier, but the anti-submarine underneath it, the air defence aircraft above it and the air defence screen around it. That is the distortion that we will get. Most of the Royal Navy will be required to defend just that one ship, distorting the whole projection of Royal Navy power. If I had been in the Admiralty at the time, I would have preferred to have a dozen Type 45 frigates, which are equally formidable bits of equipment, than the two aircraft carriers.

We have to accept—again, this point was made in an excellent speech from the Chairman of the Defence Committee—that the nature of warfare is changing. As I said, we are not going to see tanks coming across the central European plain. The real battles of the future lie in cyber-warfare—attacks on both economic and military targets. It is the anoraks inside cyber-warehouses in eastern Russia or in Asia who are the current enemy. It is absolutely legitimate for us to increase our levels of expenditure on the security agencies, in particular on GCHQ, to address that. We can argue about whether that should become part of the budget, but the need to do it is beyond doubt.