Speech by Dr Liam Fox, Secretary of State for Defence
Go anywhere in the defence world and say ‘Farnborough’, and everyone will know what you mean.
It means cutting edge science, innovation, and technology.
It offers unique global business opportunities set against one of the best air shows in the world.
Here, you have the opportunity to see the best that UK defence industry has to offer.
The UK is uniquely placed in Europe as an attractive investment destination, because we combine large domestic defence and security markets with the business friendly environment all investors want.
Ladies and gentlemen, as Secretary of State for Defence I am committed to 2 things.
First, to play my part in improving the country’s fiscal position, bearing down on the huge budget deficit inherited from the Labour government.
The government’s plans announced in the budget to reduce the deficit announced in the budget will eliminate the structural current deficit and put the public finances on a firm footing.
This is necessary, not optional.
The British state is now borrowing one pound for every four pounds it spends, which is increasing the national debt by £3 billion every week.
This is not sustainable. We must create the conditions where the wealth creators can strengthen and grow.
Without economic strength we will be unable to sustain in the long term the capabilities required, including military capabilities, to keep our citizens safe and maintain our influence on the international stage.
My second commitment is to ensure that in this rapidly changing and dangerous world, and in this tough fiscal climate, the UK has appropriate defences for the threats we face.
It is true that we live in a period in which direct conventional military threats to the UK are low, but the security environment can change rapidly.
The wider risks to our interests and way of life, whether from terrorists, failed states, conflict between other states, nuclear proliferation, climate change or competition for resources, are growing.
We know from historical experience the difficulty of predicting future conflict and we cannot be confident about how, and how quickly, these trends might evolve.
We must break away from the recent habit of planning for the best case scenario and then hoping the worst never happens.
So I am determined to ensure the UK retains robust and well equipped armed forces capable of intervening abroad where necessary to protect our security and interests at home.
That would mean, when the national interest demands, maritime enabled power projection, the capacity to control air-space to guarantee freedom of manoeuvre and the ability to deploy land power with the logistical strength to sustain it.
But thanks to the mess left by the last government, the current defence programme is entirely unaffordable, especially if we try to do what we need to do in the future while simultaneously doing everything we have done in the past.
Support for the defence Industry
These are the unavoidable realities which govern the ‘Strategic defence and security review’ (SDSR).
So change is coming.
We do not have the luxury of time, money, or a benign threat environment.
The fiscal realities will unavoidably limit the amount of money the government has available for defence procurement in the years ahead.
So in this austere climate, to ensure this process is not detrimental either to our national security or to the prospects of one of our most profitable and successful industries, the government is looking to find new ways of encouraging business.
So there is a deal here to be struck.
The British government will support the UK defence Industry as a strategic asset; we will support the drive for exports with an active and innovative programme of defence diplomacy.
We will ensure that our licensing system works efficiently while ensuring responsible exports.
We will develop innovative training and exercise support in conjunction with industry.
We will ensure that our own requirements for new equipment are designed from their inception with exportability in mind.
We will continue to ensure a dedicated focal point for government support to exports, and let me pay tribute to the achievements the UKTI [UK Trade and Investment] Defence and Security Organisation [UKTI-DSO].
Britain is the second most successful defence exporter behind the US, sustaining our long term share of the global market at 20%.
Today I can announce that last year we achieved £7.2 billion of new business, a 70% increase over the 2008 figure.
But we will aim to grow the UK’s share of the defence market further.
Despite its success, we cannot be complacent about the great work of UKTI-DSO, so we must keep under review the respective roles played by MOD and BIS (Business, Innovation and Skills) in promoting defence exports.
We will reform our acquisition processes and provide our suppliers with increased clarity and predictability including a 10 year planning horizon agreed with the Treasury, audited by the NAO every year.
And I am pleased to confirm that a new ‘Defence industrial strategy’ will be published after the SDSR has concluded.
Now that’s what we can do for you, now what can you do for us?
Quid pro quo
Let me be clear to our suppliers, we demand, and the nation expects, that our armed forces are provided with the equipment and support they require to do the jobs we ask them to do.
But in addition, we demand, and the nation expects, that we can demonstrate value for money on defence expenditure.
So we expect to see the benefits of government support to industry in our own acquisition.
Having a strong defence industry is a formidable strategic asset.
It is a key part of our international security relationships.
We want and need a resilient defence industrial base.
So yes, for industry, it is about profit and shareholder dividends, these are no longer dirty words.
A resilient defence industry provides jobs, tax revenues and an improved balance of payments.
But industry’s long term prosperity also rests on offering better value for money to the British taxpayer.
The ‘Strategic defence and security review’ is underway and we expect that the defence section of the SDSR to report in the autumn, to coincide with the outcome of the comprehensive Spending Review.
As part of this work there are three things that must be understood between us.
First, without cost containment in the current programmes we have no option but to either cut the programmes currently underway or curtail investment in future programmes.
Second, we must reduce fleet numbers that provide any one capability because we cannot afford the luxury of multiple supply chains and the associated training and infrastructure costs.
Third, too often in the past we have simply replaced old platforms with an upgraded version of the same sort of equipment.
If we continue to spend money on the next generation of what we already have, we will never give ourselves the opportunity to reshape expenditure plans to take into account the need to invest in the technology that is necessary to maintain our advantage in the constant battle for the upper hand in national security.
So we will all need to think differently, and this is part of my challenge to you today.
We need to make a conceptual leap and develop new capabilities that help us stay ahead of our opponents - particularly when faced with asymmetrical threats.
We need to think carefully about what the 21st century battle space requires.
In the Second World War, RADAR transformed the way we fought.
We need the same kind of transformative innovation for the new era.
For example, ISTAR [Intelligence, Surveillance, Target Acquisition, and Reconnaissance] and communications can provide critical understanding of the battle space - but only if the information gets to the right people, in the right place, at the right time.
New technology, such as instant messaging and ‘Satcom on the move’, are becoming tools of choice, drawing on established civilian technology and applying it in a military context.
We need this kind of agile approach to capability if we are to succeed.
This kind of new thinking about the character of warfare and what gives us a technological edge provides an opportunity for industry - particularly, I would venture, Small and Medium size Enterprises (SMEs) who will play a central role in ‘Defence industrial strategy’.
Acquisition reform and Defence industrial strategy
In order for industry to take advantage of these opportunities, I will make sure that the MOD’s defence acquisition reform programme is driven by the need to define and then maintain a programme that is affordable in the long term and sustainable year by year.
There’s no doubt that in the past there has been a culture of mutual over-optimism on costs, timing and performance.
We will need much more hard-headed estimates in future programmes.
I do recognise that there are some areas where sovereignty of action for our armed forces requires particular industrial capabilities to be protected, as a matter of national security.
But we will continue to use open competition on the global market for many of our own major acquisitions, a global market, incidentally, where UK companies compete as global leaders already.
We have a close relationship with the United States in a broad range of capabilities and acquisition programmes.
And we will step up our engagement with other partners, notably France.
Our new ‘Defence industrial strategy’ will explain our priorities and our key policies on supporting both exports and Small and Medium Enterprises.
It will also set out our sovereign requirements, and how we will protect the associated industrial capabilities.
There will be a wider consultation process that will be announced later this week.
By doing so, we will provide governments and industry around the world, with a firm, sustainable basis for planning credible relationships with the UK.
Today we have a full defence ministerial team, and I’d like to give a big welcome to Nick Harvey, one of our Liberal Democrat coalition partners, and Lord Astor. I would like particularly to mention Peter Luff, and Gerald Howarth, and not just because we are in Gerald’s constituency but because both have a central role in the reform process.
Peter will be pressing ahead with acquisition reform and DIS [Defence industrial strategy] as well as his primary role of equipping and supporting our armed forces in the wake of the SDSR.
Gerald as you know has always been a strong supporter of efence exports and in giving a specific Ministerial role to exports, he will be your champion in the MOD.
But let me say that you can count on the whole team to lend our personal support to export campaigns whenever we can.
I’m off again on Sunday to Saudi Arabia. We intend to push at every opportunity to maximise every chance we have for defence in the United Kingdom.
Ladies and gentlemen, I hope I have been clear today about what we face.
The armed forces must be reconfigured to meet the needs of the evolving security environment and satisfy the needs of the country.
The MOD itself will undergo very wide ranging structural reform and there will be major reform to our procurement practices.
I do recognise that the UK defence industry is a special strategic asset that underpins our strategic relationships.
But industry must bring more to the table.
If you help us reduce costs, and that includes reduced prices.
If we all take difficult decisions now we can avoid having to take bad decisions later.
Then I promise if we do so, the rewards for us, you and our country will be worth it.