2010/08/13 - The Need for Defence Reform

Speech delivered by Secretary of State for Defence at The Royal Institute of Chartered Surveyors on Friday, 13 August 2010.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The Rt Hon Liam Fox MP

For many of us, the weeks after the election have produced mixed feelings.

Relief that our long period in opposition is over - and a few of us spent all 13 years on the opposition front bench - and hope that we can produce something better for our country.

But these positive notes are tempered by the growing knowledge that dealing with the dangerous deficit left behind by Labour will be difficult and painful.

I set out at the Farnborough air show the two tasks which I believe I have as Secretary of State for Defence in addition to the war in Afghanistan.

The first is to help deal with the deficit as part of the coalition cabinet, which understands that without healthy finances we can create neither the public services nor the national security we desire.

The second is to carry out a long overdue Strategic Defence and Security Review (SDSR).

It is a disgrace that Labour allowed 12 years to elapse without conducting a Defence review despite committing our Armed Forces to conflicts in the Balkans, Sierra Leone, Iraq and Afghanistan and with the enormous changes in the global security picture.

This Government will not shirk our responsibility however hard the task may be.

Now, I didn’t come into politics wishing to see a reduction in our Defence budget.

Neither did David Cameron.

Indeed, we have both often argued in the past that in a dangerous world - the world in which we live - there is a strong case to increase our spending on national security.

But while we can never predict where events will take us or the unavoidable bills we will have to pay as a consequence, we must confront the ghastly truth of Labour’s legacy.

Next year the interest bill alone for Labour’s debt will be over £46bn - more than the entire Defence budget for the UK.

The cuts that we are facing are Labour’s cuts.

If it had not been for the policies of Tony Blair and Gordon Brown they would not have to happen at all.

There is an unfunded liability in Defence of around £37 billion over the next 10 years.

The equipment and support programme alone makes up over £20 billion of this - that is equipment they planned without ever having an idea whether the budget would be able to afford it.

During their time in office Labour pushed projects ever more desperately into future years to try to make an impossible budget balance in year, only to increase the overall cost of the Defence programme still further.

They behaved like someone who has just received a catalogue in the post and who keeps ordering more and more items from it without once considering whether they might have the income to pay for any of them when the goods arrive.

The price of this irresponsibility will ultimately be paid for by short-term reductions as we try to return Defence to a sound footing.

So we face the SDSR with unavoidably constrained finances.

There are three ways to conduct a Defence Review in the circumstances.

First, you could just cut a bit of everything.

This is what the Department sometimes refers to as the equal pain option across the Services.

When I practised medicine I would have regarded giving patients the same treatment irrespective of their diagnosis as profoundly unethical.

It is a lazy option.

It does not differentiate between capabilities or assess real risk, and I believe it to be intellectually indefensible and strategically dangerous.

We cannot continue living hand to mouth with endless salami slicing without any sense of security or stability in either the Defence industry or the Armed Forces.

That has too often been the solution in the past and we must do better now and in the future.

The second option is to protect current capabilities within a tight financial envelope and trim away any other spending including spending on innovative and future programs.

This would merely have the result of fossilising what we are currently able to do at the expense of capabilities we need to invest in for the future.

The third option is what I call the 2020 option.

It means looking ahead to the end of the decade and deciding what we want our Armed Forces to look like at that time based on the foreign policy goals we have set ourselves, our assessment of the future character of conflict and anticipating the changes in technology that we will need to incorporate.

The National Security Council has agreed that the overarching strategic posture should be to address the most immediate threats to our national security while maintaining the ability to identify and deal with emerging ones before they become bigger threats to the UK.

This flexible, adaptable posture will maintain the ability to safeguard international peace and security, to deter and contain those who threaten the UK and its interests, and where necessary to intervene on multiple fronts.

It will also, crucially, keep our options open for a future in which we can expect our highest priorities to change over time.

For Defence this means taking decisions for the long-term and breaking away from the crippling short-termism which was the hallmark of Labour.

We need to invest in programs that we will require to put our Defence on a sound footing for the years ahead and divest ourselves of the capabilities which we are unlikely to need in a world where the moral climate demands precision weaponry and where the battle space increasingly embraces the unmanned and cyber domains.

So the SDSR is not simply a random selection of cuts but the objective process by which we will shape the Armed Forces we will need at the end of this decade.

This review needs to be judged in 5 and 10 years time not the weekend after it is announced.

So, let me set out the process of analysis we are going through at the moment.

We are contrasting cost savings and the capability implications with the risks that we face in the real global security environment.

This means assessing any proposed change in a current programme or platform, against a series of criteria including:

First, the cost saving in years zero to 5, 5 to 10 and 10 plus.

Second, the capability implications - what capability will be lost as a result of this decision and what other assets do we possess that might give us the same or a similar capability?

Third, the operational implications - what operations that we currently undertake, or are likely to undertake, will we be unable to undertake as a result of this change?

Fourth, the ability to regenerate the capability, at what cost and in what timeframe.

And fifth, the risk in the real world that this capability currently protects us from or is likely to protect us from in the foreseeable future.

This is done under the strategic framework set by the National Security Council who will be responsible for decision making on the SDSR as whole.

But the SDSR alone will not be enough to sort out the problems facing Defence.

As well as setting out the mechanics of the SDSR process, I am today launching a full review of how the Ministry of Defence is run and how we can reform the Armed Forces to produce more efficient provision of Defence capability, and generation and sustainment of operations.

There are two broad principles to be followed in the MOD review.

The first is a structural reform which will see the Department reorganised into three pillars of Policy and Strategy, the Armed Forces, and Procurement and Estates.

The second is a cultural shift which will see a leaner and less centralised organisation combined with devolved processes which carry greater accountability and transparency.

The reason behind the first change is that in Opposition we set out why we believed that the management structure was wrong.

A logical management structure would be Foreign Policy leading to a Defence strategy, then portfolio management which identified capability gaps followed by specific program identification and finally physical procurement.

The new three pillar structure is designed to make this easier and to stop the constant over specification and then re-specification of programs which has led to so many cost overruns and program delays.

To ensure oversight and implementation of this programme, I am today setting up the Defence Reform Unit.

A heavy hitting Steering Group of internal and external experts will guide the hard thinking and challenge preconceptions.

I have asked Lord Levene to Chair this Group and I am grateful for his acceptance.

He will be supported from outside the MoD by Baroness Sheila Noakes, George Iacobescu, Dr David Allen, Bjorn Conway, and Raymond McKeeve.

I will announce other members of this team in due course.

An MOD implementation team will complete the blueprint for reform by September 2011.

We will also review how the Armed Forces undertake the tasks of force generation and sustainability.

It has been widely commented upon that it takes our Armed Forces of over 180,000 to sustain a combat force of under 10,000 in Afghanistan.

We need to challenge some of the fundamental assumptions which drive force generation, such as tour lengths and intervals, taking into account the varying pressures on our personnel resulting from widely varying missions to see if we can update our practices and produce greater efficiency while implementing the military covenant.

A few weeks ago I announced changes to the Rest and Recuperation (R&R) arrangements for Afghanistan.

It reduced the length of short tours to less than four months, a duration which does not require a mid-tour R&R break, thus removing an unnecessary pressure on the air bridge.

However, it not only maintained the two week entitlement for those serving six month tours but also gave new rights to post-deployment leave if the two weeks are not achieved, thus fulfilling a promise that the Prime Minister made before the election.

We need to review all our current practices to ensure that we are using our greatest asset - our people - to the best of their ability.

I have asked the First Sea Lord, Sir Mark Stanhope, the new Chief of the General Staff, Sir Peter Wall and the Chief of the Air Staff, Sir Stephen Dalton, to begin this review once the SDSR has been delivered with a view to completing their work by the spring of 2011.

I will also ask the Defence Reform Unit to work with the Permanent Secretary, Chief of the Defence Staff and the Service Chiefs to find ways of devolving greater responsibility for the running of the Services themselves.

We must get away from the over centralising tendency that has become the hallmark of the MOD in recent years.

They will also consider whether the current Senior Rank structure across the Services is appropriate for the post-SDSR world.

We cannot demand efficiency from the lower ranks while exempting those at the top.

Taken together the SDSR and these changes represent a radical agenda for change.

They will turn the appalling legacy of Labour into a once in a lifetime opportunity and demonstrate clearly the commitment of the Prime Minister and the Coalition Government to the long term view.

It will reshape the MOD and the Military for the challenges of the future and give greater certainty to those who depend on our defence industries.

It is a clear example of how we will govern, not in our own interest, but in the national interest.

Published 13 August 2010