Ministry of Defence

Lord Beamish Excerpts

Monday 26th February 2018 Commons Chamber

[Sir Edward Leigh]

That is an extremely good point, and if I have time I will deal with amphibious capacity later in my speech.

This is a real challenge. As Professor Malcolm Chalmers, deputy director-general of the Royal United Services Institute, pointed out in his evidence to the Defence Committee:

“While the MoD budget is set to grow by 0.5 per cent per annum over the next five years, national income (GDP) is projected to grow by an average of 2.4 per cent per annum over the same period.”

That means that the current Government commitments to defence spending imply that UK defence expenditure will fall from 2.8% of GDP in 2015-16 to 1.85% in 2020-21. I believe that Ministers need to come clean and make it clear whether they intend to abandon the 2% commitment, as seems to be the case.

[Mr Kevan Jones (North Durham) (Lab)]

I am grateful to the hon. Gentleman for giving way. He says that the Government are committed to a 0.5% increase, but does he agree that that is just on equipment, not personnel? Something like 55% of the budget goes on daily running costs and people, and that will be completely constrained if no new cash is put into the people side of the budget.

[Sir Edward Leigh]

That is an extremely good point, and I will come on to deal with the people side.

As the Defence Committee has pointed out, there appear to be some shenanigans going on in relation to how we reach the 2% target, and this is a really good opportunity for us to discuss money in detail and for the Minister to reply to these points. The criteria seem to change from year to year, with new bits—war pensions and other expenditure—qualifying when they have not previously done so. NATO is apparently satisfied, but this rather gives the impression that we are meeting our targets only by means of creative accounting, and when it comes to the defence of the realm, surely creative accounting is not good enough.

Let me say a word about procurement. What are our procurement procedures, and are we getting value for money? Professor Julian Lindley French testified, again to the Defence Committee:

“If you look at the $90 billion being spent by the Russians as part of their modernisation programme, the $150 billion or so being spent by the Chinese and what other countries around the world are doing, what strikes me is how few assets—both platforms and systems—the UK gets for its money.”

As a former Chairman of the Public Accounts Committee, I am talking not just about more money for the MOD, but about spending the money more wisely.

The MOD committed itself to new purchases arising from its 2015 strategic defence and security review before it established how they could be paid for. This requires the MOD to generate £5.8 billion of new savings from within the defence equipment plan itself, in addition to £1.5 billion from the wider defence budget, which is already under pressure. We never of course know what crisis may happen, and if a crisis happens and our troops have to be deployed, where will the money come from? In such a case, will we end up taking money from procurement that we had not expected to take?

--- Later in debate ---

[Mrs Madeleine Moon (Bridgend) (Lab)]

It is a great pleasure to follow the fantastic overview that the hon. Member for Gainsborough (Sir Edward Leigh) set out of the defence estimates. For Members who do not find themselves—as many of us do—becoming defence-obsessed, due to our concerns at the lack of funding being sent into the defence of this wonderful realm, it was a fantastic primer on the concerns that we must face as a country.

I want to look at the reserve forces, an area that the hon. Gentleman also raised. I declare a sort of interest as the chair of the all-party group on reserves and cadets. I recently met an academic from the University of Bath, Dr Patrick Bury, who has been looking at the progress of the Future Reserves 2020 plan, the main purpose of which was to provide direct support to a reduced Army and to increase the reserves to 35,000. Following the meeting, I rather upset a Minister in the Ministry of Defence, who received more than 100 parliamentary questions in the lead-up to Christmas. He took me aside to remonstrate with me for giving him so much work. I pointed out that if he had answered some of the questions the first time around, there might have been 50% less questions, but that is the way of asking and pursuing parliamentary questions.

The information I will speak to in today’s debate is all provided—sometimes reluctantly, but it was provided eventually—by the Ministry of Defence following parliamentary questions. I am deeply concerned that the expenses involved in Future Reserves 2020 not only show a programme that is struggling to achieve its goals, but are such that we need either to redefine or to look at whether the money we are spending, given the outcomes we are achieving, would be better spent elsewhere. We all know that the Ministry of Defence cannot afford to waste that expense. Every penny counts in the Ministry of Defence.

To provide context and make the costs clear, what is the current reserve structure? The reserve model means that Army reservists sign a contract in which they commit to achieving a certain amount of training time, and to achieving training targets over a financial year. That involves 27 days’ training, including a two-week continuous period away, which is known as annual camp. If the reservists achieve that commitment, they are considered to be fully trained and up to date, and ready to fulfil their role in supporting the Regular Army—in other words, they are deployable—and are rewarded with a tax-free bounty cash payment.

It goes without saying that, for a reservist to achieve a high level of practice and well-honed skills, they would need to achieve that minimum level of training. It is only 27 days. Many members of the armed forces parliamentary scheme spend more than 27 days in the armed forces and do not qualify to be reservists. They nevertheless give that commitment. Unlike those in the armed forces parliamentary scheme, the reservist is not compelled to complete their commitment to get their pass-out certificate. They have only to complete a minimum of 27 days. The only compelling desire is achieving the tax-free bounty.

We can therefore use that tax-free bounty as a useful way of assessing how many people in the reserves are deployable. It is possible to be an Army reservist without achieving any training targets in a financial year, so if we want to know about the Army reserves, we need to look at how many achieve their bounties. Let us look at the cost of the programme. The easiest way to calculate the cost is to look at the bounty payments combined with the number of reservist service days claimed over the past few years. I am making a general assumption. A basic private’s pay in April 2017 was £46.42 a day—some will earn more, and therefore my numbers might be lower, but I am giving the benefit of the doubt and working on the assumption that everybody gets the minimum payment.

In 2016-17, 1,008,290 reserve days were claimed, and 14,930 reservists qualified for their bounty. That resulted in a spend of £68 million—it was nearly £69 million. In the year 2015-16, 957,390 reserve service days were claimed, and 14,990 reservists qualified for their bounty. In 2014-15, 884,050 reserve service days were claimed, and 14,270 reservists qualified for their bounty. Therefore, despite the rising costs, and despite continual recruitment, the true number of qualified reservists has remained stable, at just less than 15,000. It is not just that we are failing to meet targets year on year, as pointed out by the hon. Member for Gainsborough, but we are not increasing our numbers of deployable reservists.

The wages and the bonuses are low.

[Mr Kevan Jones]

What my hon. Friend is describing is fascinating. Does she agree that Army 2020 was really designed to give the Government political cover in the light of the reduction of the Regular Army to 82,000? It is not just a question of the retraining days; it is a question of whether the 15,000 reservists to whom she referred can actually be deployed alongside regular troops. I am told that in some cases there is no joint training at all.

[Mrs Moon]

My hon. Friend is absolutely right. What we have here is a consistent pattern of only about 15,000 deployable reservists. Despite the money that has been poured into the reserve forces, we have not increased their number, but we have massively decreased the number of regulars. Our Army capability is therefore shrinking. That is something that we must be very worried about, but what worries me even more is the fact that we are spending huge amounts of money while receiving little or no return.

--- Later in debate ---

[Mr Kevan Jones]

I hear what the right hon. Gentleman says about civil servants, but the decision to cut the defence budget by 16% between 2010 and 2015 was not a civil servant’s invention. It was the political decision of the Chancellor of the Exchequer and the Government at the time.

[Dr Lewis]

Yes, and I will come to the issue of how we can use the percentage of GDP to track what has been happening to defence in a moment. I hope that the hon. Gentleman—a former Defence Minister in the Labour Government, of course, and a very good one—will try to be non-partisan about this for the simple reason that successive Governments are responsible for what has happened.

What actually took place was, as has already been hinted at, something that has been going on over a very long period. Colleagues on both sides of the House have heard me recite this so often that I am afraid they might do that terrible thing and join in, singing the song with me. But I will just run through it again. In 1963, the falling graph of defence expenditure as a proportion of GDP crossed over with the rising graph of expenditure on welfare at 6%. So we were spending the same on welfare and defence—6%—in 1963. In the mid-1980s, as we have heard, we regularly spent between 4.5% and 5% of GDP on defence, and that was the period when we last had an assertive Russia combined with a major terrorist threat—the threat in Northern Ireland. We were spending at that time roughly the same amount on education and health. Nowadays we spend six times on welfare what we spend on defence, we spend four times on health what we spend on defence, and we spend two and a half times on education what we spend on defence.

We have to ask what we mean when we say that defence is the first duty of Government. If it is the first duty of Government, it is a duty that is more important than any other duty, because if we fail to discharge it everything else is put in jeopardy.

--- Later in debate ---

[Dr Lewis]

What I am looking for today is agreement across the House that we recognise that we should not be having almost theological debates about whether we are just above or just below the 2% minimum guideline that NATO prescribes to its member states for defence expenditure, but that we have to get back to the level—at the very least—of what we considered appropriate for so long, right up until the mid-1990s, when the Labour Government came in, which was 3% of GDP.

[Mr Kevan Jones]

Will the right hon. Gentleman give way?

[Dr Lewis]

I will give way one more time, but I want to concentrate on the bigger picture, because frankly neither of the parties has much to be proud about on defence expenditure since the mid-1990s.

[Mr Jones]

The facts do not bear out what the right hon. Gentleman is saying. According to the Library, the last time defence expenditure was 3% was 1993-94. After that, there was a 7% decrease in 1995, a 1% decrease in 1996 and a 5.7% increase the following year. The Labour Government came in, following the Treasury rules laid down by the previous Government, and in 1998 increased defence spending by 5.8%. The idea that the last Labour Government were following a trend that had been set is just not the case.

[Dr Lewis]

It depends whether the hon. Gentleman is talking about absolute figures or percentages of GDP spent on defence. In 2016, the Defence Committee produced a unanimous report called “Shifting the Goalposts? Defence expenditure and the 2% pledge”. We had the Committee staff use all available sourcing to draw up a definitive table of what had been spent on defence by Britain as a proportion of GDP over the past 50 years. The figures for the period we are talking about are: 1990-91, 3.8%; 1991-92, 3.8%; 1992-1993, 3.7%; 1993-94, 3.5%; 1994-95, 3.3%; and 1995-96, 3%. It then dips below 3% in 1996-97 to 2.7%, and thereafter it is down and down, with little blips here and there, until it is hovering around 2.5% because the cost of operations were included.

The point about all this is that we should not be arguing about who did the most damage. We should be agreeing about what we need in the future. If we are hearing a chorus of voices from the Labour Benches—it is music to my ears—saying that we have not been spending enough on defence and we need to be spending more, that is what we should be saying loud and clear to those people who seem to be perfectly content to spend the existing inadequate sums.

I do not wish to prolong my contribution, but I do wish to speak briefly about the equipment plan that was alluded to in some detail by my hon. Friend the Member for Gainsborough. The equipment plan of 2016 is for £178 billion over 10 years. That includes a small number—nine, which some would say was too small a number—of new P-8A maritime patrol aircraft, replacing a capability that was quite wrongly dispensed with after 2010. We are also supposed to be replacing 13 Type 23 frigates and supplying mechanised infantry vehicles out of this budget, and we are of course engaged in resurrecting carrier strike capability—another capacity that was temporarily lost after 2010.

The first report of the Defence Committee in the new Parliament was entitled, “Gambling on ‘Efficiency’: Defence Acquisition and Procurement”. The word “efficiency” was in inverted commas because we believe that the affordability of the scheme is predicated on an estimate of £7.3 billion of theoretical efficiency savings that are to be made in addition to some £7.1 billion that was previously announced. As we have heard, the National Audit Office thinks that the equipment programme is at greater risk than at any time since reporting was introduced in 2012. The truth of the matter is that we encounter black holes everywhere we look in defence. This brings me to my concluding point.

--- Later in debate ---

[Vernon Coaker]

There we go—that is the power of Parliament. That is the point I am making. We had the debate before and this was fiscally neutral. The original review—the national security and defence capability review, or whatever it was—was not set up by accident; the Government set it up, and defence was included in it. Parliament said that that was not acceptable, and the Government responded and took it out. We then said that it was not acceptable for that review to be fiscally neutral, and now the Government are saying that it will not be. Of course no one is saying that we should buy chariots or whatever—what we have has to be relevant to the needs that we face. Before, the process was budget-driven: it was a case of having whatever it needed to be in order to meet the budget requirement.

It is going to be difficult for the Government to do this when, for example, we are told today that, even in their response to the Select Committee’s report on the F-35 programme, they will not put a figure on what one F-35 is going to cost. Then the Government say, “We’re buying 138 F-35s—that is the current plan—and 48 will be F-35Bs, but we’re not sure what variant the other 90 are going to be.” How can the Government talk about being fiscally neutral in their plans when they could not say to the Defence Committee a couple of months ago what the cost of the F-35 is and they cannot tell us in their response published today either?

[Mr Kevan Jones]

It is not just the F-35. Much has been said in the past few weeks about the procurement of the new Type 31e frigate. There is no line in the defence budget for that. Likewise, the P-8, which is being trumpeted as a vital need for our maritime patrol aircraft—I agree—is not capable of delivering the sonar buoys or torpedoes that are currently being used, so there is added cost there.

[Vernon Coaker]

I completely agree with my hon. Friend. That is the point of the debate on estimates days. For the Minister to be able to say that we will have the capabilities that we need to meet the threats that we will face, we need to be able to say how much those capabilities are going to cost. My hon. Friend raised the issue of frigates; I am using the example of the F-35s. Cannot the Minister go back to the people who plan this and say, “We need some detail on these costs. Otherwise, how can we project forward what the equipment plan or any other plan is going to cost us?”

--- Later in debate ---

[Mr Kevan Jones (North Durham) (Lab)]

I congratulate the hon. Member for Gainsborough (Sir Edward Leigh) on his introduction to the debate. I agree with him that it is important to secure more such opportunities to discuss defence and how it is financed.

I do not think that anyone who follows the defence world and the way that the MOD has conducted itself over the past few years would conclude that the situation is anything other than dire. It is fair to say that the new Secretary of State realises that as well. There is also, however, a collective sense of acute amnesia, certainly among those who were Government Members in 2010, about how we arrived at this position. It is clear that the mess that the defence budget is in today is a direct result of policies taken by the coalition Government and the present Conservative Government. Seven years of ill-thought-through, rushed cuts and, on occasion, very bad decisions are now coming home to roost. The new Defence Secretary has the unfortunate task of sorting it out—a task that I do not envy, to say the least. It is therefore worth recapping how we have arrived at this position.

The Chair of the Defence Committee, the right hon. Member for New Forest East (Dr Lewis), said that these were not political decisions. They were political decisions that led directly to the mess we have today. To ignore that is to avoid the evidence and means that we will not learn lessons for the future for how we manage our nation’s defence. In 2010, the new Conservative-led coalition implemented a number of deep cuts to the armed forces. The right hon. Member for North Somerset (Dr Fox), the then Defence Secretary, justified them by claiming that the defence budget had a £38 billion black hole, which somehow meant that rash and direct action would have to be taken straightaway. No one knows how he arrived at £38 billion. I have asked Ministers in this House to explain it on numerous occasions. The NAO and the Defence Committee could not arrive at a £38 billion black hole either, but it was used in every debate as the reason why cuts to our defence budget had to be made.

The Government stopped using the figure after a while, when they realised they could not justify it. I think it came about from a clear misinterpretation of the 2009 NAO report on major projects started under the previous Labour Government. The report was a snapshot of cost increases in 2009 and related primarily to the Queen Elizabeth class aircraft carriers, the A400M transport aircraft and the Astute submarine programme.

[Mrs Moon]

I just wish to correct a mistake by my hon. Friend: he missed out the word “deliberate” before “misinterpretation”. I am sure he did not mean to, but it was a deliberate misinterpretation.

[Mr Jones]

It was a deliberate strategy, in the Cameron-Osborne Conservative party, to ignore the facts and spin—“If we keep saying it long enough, people will believe it.”

The 2009 NAO report said that if the equipment budget was not increased at all over 10 years, it might be possible to arrive at a figure of £36 billion. How did they then get an extra £2 billion? I think the then Defence Secretary just added some personnel revenue costs to get to the £38 billion figure. What the report actually said, however—this point was completely ignored—was that the scenario it envisaged, of the budget remaining constant in real terms over the 10-year period, would lead to a £6 billion funding gap, which could have been managed over that 10-year period.

My hon. Friend the Member for Bridgend (Mrs Moon) is right. The impression was given to the public, and to everyone else who wanted to hear this spin, that the £38 billion had to be found in year straightaway. That was a clear fabrication. We know that, because when the current Chancellor became Defence Secretary, following the resignation of the right hon. Member for North Somerset after two years, he suddenly announced that the black hole had disappeared. I do not know whether he was auditioning for his current job as Chancellor, but the idea that it is possible to get rid of a £38 billion in-year black hole in the defence budget in just two years is complete nonsense.

The Conservative Government used that as a smokescreen to allow them to cut the defence budget, as part of the Chancellor’s austerity drive, by 16%. The effect of that has been some of the decisions referred to earlier on, including the scrapping of capability such as Nimrod. Making people compulsorily redundant in our armed forces was completely inexcusable. Certainly, if the Government I was a member of had done that when I was a Defence Minister, we would have been rightly decried by the people who are always arguing for defence. Those decisions have had an impact on what is happening today. My hon. Friend the Member for Gedling (Vernon Coaker) referred to the increased expenditure on the Trident programme. The £1.2 billion to £1.4 billion in additional costs happened because that decision was delayed. The deal done by the then Prime Minister David Cameron to get the Liberal Democrats on board in coalition delayed the programme, which built in costs.

[Dr Julian Lewis]

indicated assent.

[Mr Jones]

The right hon. Gentleman is nodding. He and I kept raising that and asking why that decision had not been made. The costs arriving now are because of the decisions taken by the coalition Government. I accept all that has been said about increased defence expenditure, but we cannot get away from the core decisions that have led to the problems we have today.

The 2015 pre-Brexit strategic defence and security review announced an additional £24.4 billion spending on new equipment. Some of that, for example on the P-8, was to fill the gap the Government created in 2010 with a hasty decision to scrap the Nimrod. Reference was made earlier to the civil service making decisions. I am sorry, but it was not civil servants or generals making those decisions; it was Ministers making these decisions, including the right hon. Member for North Somerset and the current Chancellor, when he was Defence Secretary. They decided to reduce the size of the Army to 82,000. I asked a retired senior general, “Who came up with the figure of 82,000 for our armed forces?” He scratched his head and said, “We were just told that that was what the figure was going to be to fit the cash envelope.” We then had the construct of Army 2020, which is a complete political cover, to try to give the impression that we are going to keep the Army at nearly 100,000. As my hon. Friend the Member for Bridgend very eloquently outlined in her contribution to the debate, that is not only not producing the additional personnel required, but is actually costing more than if we had not done that in the first place.

Another point about the 2015 review is that, again, hasty decisions were taken in ordering the P-8. There is a gap, created by this Government, in maritime patrol aircraft. The P-8 was to be bought off the shelf—the Apache contract was announced at the same time—from the United States. That was pre Brexit. The added costs in foreign currency exchange are now creating pressures on the defence budget, and that is before we look at the effect on the economic and industrial base of our country. It may seem an easy option to buy off the shelf from the United States, but that lets our own industrial base decline, and that is what is happening. I have not yet seen any meaningful commitment by the contractors, Boeing, to create real jobs in the UK. What angers me is that if it was the other way around and we were selling equipment to the United States, we would be unable to do so without a clear commitment to jobs and investment in United States industry. That is where the MOD woefully and shamefully let down the British economy.

[Mrs Moon]

My hon. Friend will not be surprised to hear that during a visit to the Boeing factory in Charleston three weeks ago, I asked Boeing whether it regretted taking action against Bombardier and almost damaging and destroying the economy of Northern Ireland. Its response was, “We’re American, it’s what we do. It’s America first, second and third.” That is the sort of company that we were putting our trust in.

[Mr Jones]

It is. As an example, we have to look only at the sale of Airbus in the United States market. As part of that deal, it had to build a plant in Alabama, I think. We have the mindset in this country that somehow the ticket price looks cheap, but we are not thinking about the loss in tax revenue going back to the Exchequer and the fact that the defence industrial base is suffering.

Some decisions in 2015 were very strange. The Navy has been mentioned, and I accept that naval platforms are far more capable than they were 10 or 20—and certainly 50—years ago, but people are fixated on the number of hulls. The Government came up with the novel idea of having a cheap alternative through the Type 31e. This was literally just to deal with the idea that we have a certain number of hulls. I asked what the Type 31e is capable of doing. It cannot do NATO tasks and it is not clear what weaponry will go on it. Lo and behold, when I looked at the Ministry of Defence budget, I saw that there was no budget line for it at all—it has a £1.3 billion price tag on it—so again, how will it be paid for?

The Secretary of State needs to look not just at asking for more money, which the budget clearly needs, but at some of the ill-thought-out decisions. Take the P-8, for example. Buying off the shelf from the United States might look like a simple solution, but as I understand it, sonar buoys and missiles cannot be fired from the P-8 as it is configured, so we will have to redevelop the programme, adding more costs in. This is about looking at whether we have to revisit some decisions and take things out of the budget. I think that will be the case if we are to fit the budgets,

The issue of numbers is always contentious. When we were in government, I remember the hue and cry from the Conservative Front-Bench team—the right hon. Member for New Forest East was part of it—when we froze training days for the Territorial Army. The cost was £20 million. From looking at the headlines and at the way some Conservative politicians were going on, one would have thought that the world had stopped. If a Labour Government had slashed the defence budget by 16% and sacked people or made them redundant, as this Government have, they clearly would have been condemned.

It is the same old story. I understand the point that the right hon. Member for New Forest East made about arguing for defence—I have argued consistently for it in this House—but these are political decisions. When I was in the Ministry of Defence in 2010, I did not hear Conservative politicians stand up and say, “No, we do not need extra expenditure.” We were being condemned because we were not spending enough. In 2010, I did not see a single poster or anything in the Conservative manifesto saying, “We are going to slash the defence budget by 16%,” but these are the real facts and we cannot ignore them.

Let me turn to recruitment, which my hon. Friend the Member for Bridgend touched upon. I do not like to say, “I told you so,” but the decision on the Capita contract for recruitment was criticised at the time. My hon. Friend the Member for Gedling raised complaints, asking why armed forces personnel were being taken out of recruitment centres and why such centres were being closed in some areas. The position we find ourselves in now was bound to happen. We have heard some of the stories. The recruitment process is not only taking a year, but given the rate at which people are being failed, it is no wonder the Government are not meeting the targets. It is now time to revisit the contract and put uniformed personnel back into recruitment centres. The Capita contract should be scrapped, because it is completely failing to deliver what was outlined.

My hon. Friend the Member for Bridgend talked eloquently about reservists. It is time to rethink Army 2020. It was never going to work. It was political cover so that when the Government were cutting the Army to 82,000, they could still give the impression that they had an Army of more than 100,000. The issues my hon. Friend raised are not the only concern. I have never had an answer to the question about how we get formed units. How do we get training whereby regulars and reserves can train side by side to go on operations? I have not seen any evidence that that is happening in practice. If, in addition, it is costing what my hon. Friend says it is, it might be time to revisit it and see whether those resources can be put elsewhere. Let us come back to the suggestion that Ministers were asking advice from the Army about this. They were not; it was a political decision imposed on the Army.

[Mr Francois]

Before the hon. Gentleman moves on from recruitment, may I ask whether he accepts that the other main problem with Army recruitment is the very large number of people who are being failed on medical grounds, often for very minor medical ailments that date back to their childhood? For instance, in the year to February 2017, some 10,600 people—both regular and reserves—who wanted to join the Army were told, “No, you cannot join on medical grounds.” At the same time, the regular Army was 3,000 recruits short. Does he believe that the MOD should look at that area again?

[Mr Jones]

That situation was predictable when the system was set up. What is worse, I have heard stories about young people who have nearly got to the end of the selection process but do not get called back in, but then get a telephone call from some Capita call centre saying, “I’m sorry, you’ve failed. That is it.” I am sorry, but that is not the way to treat people who have tried to join the armed forces.

The right hon. Member for Rayleigh and Wickford (Mr Francois) makes a good point. When we had senior non-commissioned officers stationed in recruitment offices, they could work out how to handle the recruits and use their breadth of experience to explain what life in the armed forces is like. This situation could have been avoided. Unless something has changed radically in the last few years with injuries, I agree with the right hon. Gentleman. I had case in which someone had a childhood knee injury. That person had to wait six months for a decision and then the knee injury was flagged up as the reason why he could not join the armed forces. That cannot be acceptable.

[Mr Sweeney]

To give a personal example, I joined the Territorial Army back in 2006 with a good friend, who went on to serve in Afghanistan. He left the reserves and when he sought to rejoin, he was disqualified on medical grounds. That is someone who had actually served in Afghanistan and who did not have any obvious injuries.

[Mr Jones]

My hon. Friend raises a very good case from personal experience. This needs to be looked at. I would scrap the contract and take it back in house. The old system perhaps needed tweaking, but it was delivering.

[Mr Francois]

I am sorry to hammer the nail, but this is very important, and we have the Secretary of State on the Front Bench at the moment to hear this. Is the hon. Gentleman aware that in some cases, people have been failed and prevented from joining the Army for relatively minor issues such as asthma? Paula Radcliffe and Sir Chris Hoy would have failed on the same grounds.

[Mr Jones]

That prompts the question, “How are the tests being done, what criteria are being used and how are they being interpreted?” The problem is partly that if we have a civilianised and, as it has been described to me, bureaucratic, tick-box process, common sense does not kick in, and perhaps common sense is what we need as well.

The problem is that we need to look at the size of our armed forces from a strategic point of view. What do we actually need? A decision was taken suddenly that the answer was 82,000—the Army was told that that is what it would get because the budget required it—but we need to look at the strategic needs of our armed forces. Members of the Royal Navy are under severe pressure in terms of deployment. With smaller numbers, there is a bigger turnover of individuals. In addition, people are doing constant back-to-back tours, which is not good for morale or family life. If that is happening, the chances of people staying long term will clearly be affected.

We need to look at our Navy. The idea that we have a Navy that cannot deploy and that we have ships that are laid up—my hon. Friend the Member for Gedling said that we are not deploying ships—is a damning indictment. The sight this week of HMS Mersey, an offshore patrol vessel, escorting three Russian vessels through the English channel summed it up in one. We need to think seriously about what we need. The hon. Member for Gainsborough said that we are a maritime nation, and that it is about not just kit, but people.

[Vernon Coaker]

My hon. Friend makes a good point. If we do exactly what he says, we will be in a ludicrous position. We will be saying, “To facilitate scrapping Albion and Bulwark, we will modify our aircraft carriers,” which takes us into the realms of never-never land. What does that mean? We are not going to do a beach landing from an aircraft carrier. We might have a few more helicopters or a dry dock facility, but the idea of carrying out an amphibious landing from an aircraft carrier belies the point of having amphibious craft, which is to land on beaches and lay marines off on them.

[Mr Jones]

I do not disagree with my hon. Friend, but that goes to the point—this was the problem back in 2010—of the Treasury being let in the door of the MOD, and being in control and in the driving seat. When I was a Minister, I chaired the finance group in the MOD when we were looking for savings and dealing with the Treasury. I know exactly what Ministers are dealing with. The Treasury does not understand the value of our armed forces and how they operate. I am glad that the Secretary of State seems to have wrestled control of that element back. If our defence policy is determined by Treasury figures, we will have very strange decisions that will not match strategic needs.

We keep hearing from the Government that they are meeting the NATO 2%. As someone who is committed to NATO and who supports it—I am a member of the NATO Parliamentary Assembly—I can say that that is an academic argument. It is important in that we are trying to get people to spend a minimum of 2%, but it is also important to look at what our NATO partners spend that 2% on. It is clear that the Government have rejigged the figures. I am not saying that they have done something illegal or anything like that, but in 2015, they changed how defence spending was calculated. War pensions of £820 million were included; assessments of contributions to UN peacekeeping of £400 million were included; and the pensions of retired military personnel, which was another £200 million, were included. The thick end of £1 billion of that 2% is made up of things that the hardiest defender of Government policy would not think were frontline defence commitments.

It is about being realistic. It would be fine if we were spending only 1.8% on defence but spending it on the right things. There is a case for increasing the defence budget—that argument was made by the right hon. Member for New Forest East and by my hon. Friend the Member for Gedling—but we need to do it by setting strategic objectives that show why we need more than we are spending. There is also an onus on the MOD to ensure that what it is spending is not only efficient, but provides value for money for the taxpayer.

All hon. Members who have contributed to this debate have said that our armed forces are universally and rightly held in the highest regard. I agree, but it is not just national sentiment; it is because they are vital for our nation’s security and because they define our place in the world. I do not think for one minute that the new Secretary of State or his ministerial team lack commitment to the armed forces—they are all committed to defence and want to do the best for our armed forces, so I wish them well in the battle they will have with the Treasury—but without new money or a radical rethink about the commitments we ask our armed forces to fulfil, I fear for our forces’ future, and more importantly for Britain’s place in the world.

--- Later in debate ---

[Mr Kevan Jones]

Does my hon. Friend agree that when equipment such as ships is being ordered, the payback to the Exchequer in tax should be taken into account and the jobs should not be exported?

[Mr Sweeney]

Absolutely. My hon. Friend has made an excellent and salient point. He and I are both members of the all-party parliamentary group on shipbuilding and ship repair, which is currently undertaking a study of that issue. According to another study, conducted by the Fraser of Allander Institute at the University of Strathclyde, the overall benefit to the UK economy per annum from the shipbuilding industry on the Clyde alone is £366 million a year, in purely multiplier effects. As for the idea that we can competitively tender programmes overseas, we are losing the opportunity of industrial benefit as well. We are not just talking about the loss of core capabilities; we are talking about the loss of revenue and economic potential for our country.

--- Later in debate ---

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

During this debate, the subject of how much we should spend on defence and what we should be spending on has taken up a lot of the time, as is only right in an estimates day debate. I want to take this opportunity to put on record my agreement with the sentiments expressed by, among others, my hon. Friend the Member for Gainsborough (Sir Edward Leigh), the hon. Member for Bridgend (Mrs Moon), my right hon. Friends the Members for Rayleigh and Wickford (Mr Francois) and for New Forest East (Dr Lewis), the hon. Member for Gedling (Vernon Coaker), my hon. Friend the Member for Angus (Kirstene Hair), and the hon. Members for Chesterfield (Toby Perkins), for North Durham (Mr Jones) and for Glasgow North East (Mr Sweeney). Simply put, I agree that more needs to be spent on the defence of our nation, and that the continued speculation about cuts to capability and manpower not only weakens us in the eyes of our allies, but does untold grievous damage to the morale of our men and women serving today. I also want to mention something that has not been touched on this afternoon. I pay tribute to my hon. Friend the Member for Plymouth, Moor View (Johnny Mercer) and others for their tireless campaign to get more help and investment into mental health support for serving personnel, and to the MOD for the announcement this weekend of the creation of the new helpline operated by Combat Stress.

Today, however, I want to raise something different, which I estimate would cost the UK Government very little money at all. All Members are aware of the current problems in recruitment to the armed forces. I know that a great deal of time and effort is going into revamping and modernising the recruitment process and the new recruitment campaign. However, there is one group of people that, apart from in the rarest of circumstances, is very unlikely to be found in the ranks of the Army, the Navy or the Air Force: subjects from the British overseas territories. These territories are British by choice and their residents are British subjects. However, despite being loyal citizens and holders of a British passport, and being fit and able and willing, individuals are still ineligible to serve in the armed forces of this country unless they have resided on the British mainland for five whole years.

Let us put that into perspective. That means that an 18-year-old Falklander or Gibraltarian who wanted, like his compatriots on these islands, to have a rewarding career in the armed forces would be forced to move to the UK mainland and live, and presumably work, here until the age of 23 before being eligible to join up. Some might argue that, for example, the Royal Gibraltar Regiment and the Falklands Island Defence Force give the chance for rewarding careers in the armed forces for citizens of overseas territories, but if they wanted to join the Royal Navy, the Royal Marines, the Air Force or any regiment in the regular British Army they would be prevented from doing so for five whole years simply by virtue of not residing in these islands long enough. I put it to the House that that is not only daft, but is borderline discriminatory, and it is doing our loyal subjects in our overseas territories a huge disservice, and denying our armed forces willing volunteers at a time when we are struggling to fill the books.

[Mr Kevan Jones]

I am listening carefully to what the hon. Gentleman is saying, and I have no problem with it, but it was his own Government when they came into office in 2010 who turned off the pipeline of recruits from the Commonwealth. If he wants to increase the numbers and “fill the books”, as he said, there is an easy option in terms of Commonwealth recruits.

[Andrew Bowie]

I agree. That was a decision of my party and the previous coalition Government, and I am taking action on it with the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard); he asked me to join him in attempting to change the situation, and I was only too keen to assist.

This is simply an unfair situation, so in late November the hon. Gentleman and I wrote to the Home Secretary expressing our hope that something might be done to arrest this wrong. We received a reply from the MOD, which was welcome of course, saying it could not do anything as this was a Home Office policy. We knew that, which is why we sent the letter to the Home Office. It obviously feels it has enough on its plate to be dealing with just now, which is understandable, but the fact is that this is not a tricky issue to solve; it requires a minor tweak, and it has precedent. Until 2006, citizens of British overseas territories had to pay “overseas” fees at British universities. In 2007, however, due to the fact that overseas territories do not have their own higher education institutions, the Government brought in legislation equalising the levels of tuition fees, so that now at British higher education institutions a student from Stanley will pay no more than a student from Southampton.

Surely it is possible to do something similar for those young people who want to serve their country in the finest armed forces in the world. In this 100th anniversary of the end of the first world war, a conflict that saw thousands of young men from across the then empire volunteer to fight for this country—76 from the Falkland Islands alone—we should do honour to those who fought under our flag by righting this wrong.

We have heard many times this year that Britain is charting a new course in the world, re-establishing relations with allies old and friends new. What better signal to send to the outside world that this truly is a “global Britain” than granting citizens of our overseas territories the same rights as citizens living on these islands? What better way of honouring the commitment to this country of citizens of our overseas territories throughout the years than by removing this residency requirement and allowing British subjects, wherever in our global family they reside, to serve without restriction in the armed forces of this country?

--- Later in debate ---

[Stewart Malcolm McDonald]

I am grateful to my hon. Friend. I would hope that such a model could avoid some of the incredibly alarming passages in the NAO report, which have been highlighted by many right hon. and hon. Members. There is a funding hole in the equipment plan of up to £20 billion. To make that clear, that means that we cannot afford to buy the equipment we say we need in order to keep us safe.

I give all the weight I can to the Ministry of Defence in trying to get it the money that it needs—if not just to stand still, then certainly to move forward—but I do have some criticisms of how the Department has managed to get into this position. Why were the exchange rate projections so badly out—by up to a quarter in some cases?

[Mr Kevan Jones]

Brexit.

[Stewart Malcolm McDonald]

I understand that that was what caused it, but how did the MOD manage to get the calculations so badly wrong? When there is a funding hole of £20 billion just in the MOD’s equipment spending—before we get to estates, personnel and all the rest of it—why is no one being hauled over the coals? I cannot think of another Minister or Department that would be allowed to get away with that, but it is due to a fundamental problem in how this Government, this Parliament and Governments over many years have decided to fund defence. It needs radical change. Even if the solution that we think might be helpful is not the perfect solution, something has to give, because the situation is unsustainable. The NAO is clear that the result is that projects must be cancelled, delayed or scaled back. I therefore ask the Minister to make it clear to the House which projects are to be cancelled, delayed or scaled back. Can we have a guarantee that not a single project in Scotland will be cancelled, delayed or scaled back, because that is the road that the NAO says the UK Government is heading down?

The situation adumbrates the need for a new SDSR—one that takes account of the change in currency fluctuations and of the fact that Britain will no longer be in the European Union. Our current security policy is based on our being members of the EU, so we need a new one that takes account of the fact that we are coming out, because that undermines operational capability.

--- Later in debate ---

[Mr Ellwood]

I can say it again and I think I am going to say it a bit later, because it is in my speech: I am happy to confirm that it is not fiscally neutral. That is exactly why we are doing this. I am not saying this just because the Defence Secretary is in his place, but the first thing he recognised was the fact that the capability review was fiscally neutral and it was prohibiting us. We saw a lot of the stuff that came out in the media and so forth. The challenges that that would have imposed on our armed forces were exactly why there was a requirement to look in more detail at what our armed forces are doing. We now have that opportunity and we have to make the case as to what changes we need, what our defence posture is and how we move forward—

[Mr Kevan Jones]

rose—

[Mr Ellwood]

I am not going to give way again. If I may, I will make some progress.

Let me make it clear that this approach will allow us to deliver a better understanding of the implications of the new threats. It will confirm what conventional capability is critical and it will place the MOD on a more sustainable, affordable long-term footing, optimising our relationships with the private sector.

[Mr Kevan Jones]

rose—

[Mr Ellwood]

I am not giving way at the moment. As I have said, as has the Defence Secretary, the programme is not fiscally neutral. It allows us to expand and propose changes. It will assess the capabilities and the force structure we need to deal with the threats the UK faces. We will then consider the implications for funding.

When the Prime Minister, the Chancellor and the Defence Secretary met in December to confirm a way forward on the national security capability review and the defence modernisation programme, it was agreed that no changes would be made to our capability until the modernising defence programme was complete. With one eye on next year’s 2018-19 budget, I very much hope that that is still the case. The requirement for the defence modernisation programme is making sure that we understand the financial pressures affecting defence and looking into the future. If it is not the case, there would be no requirement for a defence modernisation programme. As the Deputy Chief of the Defence Staff for Military Capability told the Defence Committee last week, we are, unfortunately, seeing cuts to training exercises and

“a general suppression of some force generation across…frontline commands”

I stress that this is being managed without affecting prioritised units which are heading on operations, but if units are not training, it builds up a backlog of diminished capability.

Another issue raised in the Defence Committee last week related to the National Audit Office report on equipment, which cited a £20 billion deficit over the next 10 years. I make it clear that that makes some significant assumptions of risk, many of which will not be realised, and does not factor in the efficiency recommendations that the defence modernisation programme might make. Nevertheless—

[Mr Kevan Jones]

rose—

[Mr Ellwood]

I am sorry that the hon. Gentleman does not listen to what I am saying, because it is important and pertinent. Perhaps he can hold on to his seat for a second and allow me to finish this important point about the NAO report. Is that okay with him?

The NAO report does not factor in the efficiency recommendations, but nevertheless we must acknowledge the financial pressure on our equipment programme. As has been mentioned, there are also new and emerging factors, such as cyber, space and complex weapons upgrades. We must respond to them all, which of course adds to the bill.

[Mr Kevan Jones]

rose—

[Mr Ellwood]

I will give way to the hon. Gentleman for the last time.

[Mr Jones]

I am grateful to the Minister for giving way. He says that this is fiscally neutral. He knows what the problem is now—[Interruption.] What was agreed in 2015 was fiscally neutral. It was unachievable because the efficiencies were unachievable and the land sales were unachievable. That is not my opinion; that is what the former Secretary of State, the right hon. Member for Sevenoaks (Sir Michael Fallon), said. If we know that, we know that in reality the only way that we can fix this is with more cash.

[Mr Ellwood]

The hon. Gentleman should refer back to Hansard to understand what I have actually said. I shall make some progress.