I want to take this opportunity to say thank you to SSAFA for all the hard work you do to make the lives of our service personnel, their families and veterans that little bit easier.
This Government is determined to reinvigorate and respect an enduring military covenant.
And the most important thing to remember is that it is not a covenant between just the Government and the Armed Forces, but between the UK people and the Armed Forces.
Of course a public covenant as we intend will not in itself solve all the problems faced by personnel and their families.
And as hard as we work across government to fulfil our promises, choosing a life in the Armed Forces will continue to mean choosing a challenging future for those who serve, but also for the families who sacrifice so much to support them.
So the generosity that people like yourselves show in giving to charitable organisations like SSAFA will remain a critical part of the covenant.
Over the six years these annual dinners have been running they have contributed £700,000 to supporting SSAFA’s valuable work.
So thank you for coming this evening - and thank you for the support you give SSAFA.
Ladies and Gentlemen, I know this is a social occasion, and that would usually call for some light remarks - but it would be wrong to duck the tough messages that inevitably come from the tough reviews we have just completed - the Strategic Defence and Security Review (SDSR) and the Comprehensive Spending Review.
Over the last six months I have had a ‘simple’ task - to help produce a thorough, cross-government strategic defence and security review:
- after 12 years without a fundamental rethink
- in the midst of the biggest financial crisis in a generation
- with an inherited Defence budget in overdraft to the tune of some £38bn
- without undermining seriously capabilities, the military covenant, or UK industrial capacity
- and all at a time when our Armed Forces are fighting at a high tempo in Afghanistan
There is no need to explain to anyone in this room the complexity of this undertaking - working through the multi-dimensional knock on effects of each decision, and picking over the byzantine contractual arrangements in the equipment programme left by the previous government.
And of course this review comes against a backdrop where the wider risks to our interests and way of life are growing.
In the UK, with the difficulties we have at home, there is a danger of becoming more introverted - particularly when it comes to recognising the dangers that are growing outside our relatively safe Euro-Atlantic bubble.
This is not just a problem in the UK.
Across Europe we tend to see the world through this lens.
The world maps on the walls of European capitals place the Greenwich Meridian at the centre - technically correct, but often betraying a very Eurocentric view of the world.
But we must in future take a wider, more global view of the world, for example:
- Nuclear proliferation - North Korea, Iran and the regional implications of their drive for nuclear weapons
- A Middle East Peace Process under constant pressure with the ever present risk of escalation
- The risk of the return of civil war in Afghanistan creating a security vacuum and risking the destabilisation of Pakistan with potentially unthinkable regional consequences
- Al-Qaeda affiliates springing up in Yemen and Somalia with continued significant terrorist activity wherever there are failing states or weak government
- The opening up of new contested regions, such as the High North due to climate change - and new contested domains without geographic barriers such as cyberspace due to advances in technology and our dependence on them
That is why the National Security Council agreed the adaptive posture.
This was the force driver of the SDSR and is the basis upon which our Armed Forces will be configured in the coming years.
This posture demands that our Armed Forces become a more flexible and agile force with global reach:
- capable of providing nuclear and conventional deterrence, containment, coercion and intervention
- investing in new technology and capabilities more suited to the likely character of future conflict, such as cyber security
- divesting ourselves of capabilities that have less utility in the post-Cold War world
- and with the ability to regenerate quickly capabilities that are not needed now if threats change
This is what I believe we have achieved in the Defence settlement as part of the SDSR - meeting twin priorities of protecting front-line capability for Afghanistan and beginning the process of transforming our Armed Forces to meet the challenges of the future - setting the path to a coherent and affordable Defence capability in 2020 and beyond.
Achieving this in the circumstances we inherited means smaller armed forces, some painful decisions, and a degree of sacrifice.
For instance, politically it would have been easier to support the requirement for carrier strike in the future by maintaining the harrier force.
But the military advice was to do what was politically more difficult - to maintain Tornado.
If I had a clean sheet of paper, unencumbered by existing contractual or operational commitments, and without the financial pressures facing all government departments, the results would undoubtedly have been different.
But just as I’m a hawk on defence, I am a hawk on deficit reduction too.
And I always take consolation from the fact that hawks have a far greater life expectancy than doves.
I didn’t come into politics to make defence cuts.
But there can be no security without a strong economy.
Tackling the deficit and bringing the defence budget back into balance is a vital part of how we protect this country’s national security into the future.
And because of the priority we place on security, the defence budget is making a more modest contribution to deficit reduction relative to almost all other Departments.
Let me just say this to those who argue we should have placed resources to one side when formulating the SDSR.
Proper strategic thought encompasses ends, ways and means - matching ambition and policy, to commitments and resources.
To do otherwise is strategically illiterate.
A strategy that does not take account of fiscal or budgetary pressures is no strategy at all - it is simply wishful thinking.
And frankly, that was the fatal flaw at the heart of the 1998 Strategic Defence Review.
It was widely regarded as an excellent review.
But from the off, ambition was not matched with the resources required to achieve it.
And when planning assumptions were swept aside after the strategic shock of 9/11, no serious recalibration was undertaken.
This has been a recurring theme throughout the Chilcot Inquiry.
In short - you cannot go on a procurement binge, increase commitments and squeeze spending all at the same time - because the results are inevitable.
The outgoing Labour government bequeathed us an overheated equipment programme, an overcommitted budget and overstretched forces.
We do not intend to fall into the same trap.
That is why the SDSR is a point of departure not the end of the line.
We have set a path to 2020 and beyond, with regular reviews every five years.
And with the focus on adaptability, we have sought to ensure that where cuts have been made, we are be able to regenerate cost-effectively should the need arise.
It is my strong belief, one shared by the Prime Minister, that the structure we have agreed for 2020 will require year-on-year real terms growth in the defence budget beyond 2015.
It would be nice to do more sooner, but that great socialist Tony Benn could have been commenting on our budgetary inheritance when he said ‘some of the jam we thought was for tomorrow, we’ve already eaten.’
The reality is that implementation of what we have set out will be no easy ride, there remain hard decisions to take, and there is no new money.
So if the penny has yet to drop, let it drop now.
Of course the choices we have made will result in changes to our equipment and support requirements and therefore what MOD will be buying from industry in future.
In some cases, where particular programmes will be stopped altogether, there will sadly be job losses - and just as with the reductions in manpower in the Armed Forces and civilians in the MOD, these are a matter of regret.
The industrial implications of the key SDSR choices were given careful consideration.
We will now undertake an extensive programme of commercial negotiations with our suppliers in the coming months, as part of the SDSR implementation process.
This will focus on the areas where there have been the most significant changes, but is expected to involve all of the MOD’s key suppliers.
Let me be clear about my approach to industry.
Having strong and viable industry in the UK is a formidable strategic asset and a key part of our international security relationships.
Successful industry provides jobs, maintains skills and makes a considerable contribution to the exchequer.
The defence industry actually makes and sells things abroad at a time when the Government wants growth, and export-led recovery and a rebalancing of the economy.
It helps drive technological innovation which gives our Armed Forces their cutting edge and can benefit society as a whole as the same innovation is applied more widely.
But none of us should forget that Defence procurement is not a job creation project.
Its prime purpose is to provide our Armed Forces with the equipment and support they need, at the right time, and at a cost that represents value for taxpayer’s money.
And this is all the more important because there simply isn’t the money there was before.
The long-term prosperity of the UK defence industry therefore depends on two things - offering better value for money to the British taxpayer; and being competitive and market sensitive so that the successful export of what is produced is more likely.
Over the next four years we will be spending around £50bn on equipment and support.
This is not the Government’s money.
There is no such thing as Government money.
There is only taxpayer’s money.
It is the money that hard-working people and companies big and small have entrusted to us through their taxes so that our country can be more secure.
That requires our Armed Forces to be the right size and shape - and to have the right equipment.
I do believe in free trade, and in buying off the shelf.
Often that shelf will be stocked with British products.
But if we don’t get value for money at home we will buy elsewhere.
Sometimes we forget that the right kit is central to fulfilling the military covenant.
Equipment is a welfare issue - not only to the men and women in Afghanistan who I must look in the eye but families at home who worry about their safety.
However, industry will not be alone in meeting this challenge.
We have pledged our full support to a re-invigorated export strategy as the best way to protect and promote the best of British industry.
I will chair the new Defence Exports Group, fully supported by Gerald Howarth and Peter Luff.
We need to create a more stable base for industry, less dependent on the UK economy alone
Over the next few weeks my ministerial team will be engaging with you to get the best from both Government and industry in support of Defence.
Next week Peter Luff will be launching a wide ranging discussion with industry and others to provide a more measured, strategic consideration of UK Defence industrial needs and broader economic competitiveness.
This will mark the beginning of the formulation of a comprehensive defence industrial and technology policy.
At the UKTI DSO Symposium Gerald Howarth will be updating you on our plans for greater export support.
And under the umbrella of the Defence Reform Unit, led by Lord Levene, we will continue to build on the work of the acquisition reform programme to drive through further reform to the acquisition process.
Ladies and gentlemen, I do not need to tell you the scale of the economic difficulties we face or the challenges that lie ahead.
But I also know how passionate and committed you all are to the defence of our nation, to supporting our Armed Forces and their families, and to making sure they have all they need to keep the country safe.
And I again want to say thank you for all the hard work you have done - in helping to look after our people, and in making sure they have the best equipment for the dangerous and difficult job they do.
We are in a process of transformation towards a more balanced and stronger economy where industry will play a major role.
While we cannot provide certainty in Defence in an unstable world, we can provide better management of unpredictability to enable better management and investment planning for both the military and industry.
As difficult as it has been over the last few years, and as difficult as it will remain, I believe that the SDSR has set our Armed Forces on a path towards a sustainable future - in tune with the foreign policy requirements of the country and meeting the needs of national security.