Thank you Andrew [Manley, Director General Defence Commercial] for that introduction, and for inviting me to speak today, together with my great friend, Peter Luff.
When this Government came into office, the UK needed urgently to take stock of the changed international scene; to review its role in the world; and to configure its Armed Forces accordingly. With the loss of the Cold War certainties, it became essential to look to enhance existing alliances and foster new ones, in the wider interest of promoting regional stability, By helping other nations to build up their own Defence and Security capabilities, we can contribute to regional security and to help tackle threats to our own security closer to their source.
We were also clear that Government support for responsible Defence and Security exports could play a key role in the promotion of our foreign policy objectives, as part of our approach to national security.
And on top of this, in 2009 Defence and Security exports contributed almost £9 billion to our balance of trade. The Defence and Security industries employ and sustain hundreds of thousands of high tech jobs despite one of the worst recessions any of us in this room has ever experienced. And they are providing our Armed Forces with the best equipment they have ever had - and here I pay tribute to some of the decisions of the previous government such as the Light Protected Patrol Vehicle - the LPPV.
So Defence exports therefore help sustain those high end skills. And they help sustain the innovation which keeps the UK at the forefront of technology, and gives our Armed Forces the advantage over their enemies. Above all, Defence exports leverage more influence in bilateral relations with our friends and allies than any other area of trade.
So our policy is clear: helping one of Britain’s most dynamic and successful industries to export is unarguably in the British national interest, which is why the Government attaches so much importance to responsible Defence and Security exporting.
The question is: how best can we deliver this?
And that’s why the Green Paper asked how the Government and industry can best support responsible Defence and Security exports by UK-based companies to our friends and allies.
We’ve made a good start in our first months in office, and I want to say a few words about progress so far. But I also want be candid about the challenges we face.
Before I do, let me elaborate on the principles behind Defence and Security exports.
I believe that our mission is threefold.
First, we are gathered here at the Royal Institute of Great Britain. Not ‘Timid Britain’, not some mythological ‘Fortress Britain’, but Great Britain. That’s not some abstract or nostalgic concept. As William Hague said in his first speech as Foreign Secretary, Britain must have more “global reach and influence.”
Importantly, he acknowledged that “the world has changed and if we do not change with it Britain’s role is set to decline with all that means for our influence in world affairs, our national security and our economy.” So Britain will continue to be a global player and we reject the notion of “strategic shrinkage.”
Secondly, we live in a more volatile world than that which we faced during the Cold War, and we must never forget that context. In these more complex times, it’s important to have strong allies and friends. Britain has long maintained an unrivalled network of relationships. There are those one might call our immediate family - the transatlantic alliance, NATO, and the Commonwealth. And there is the extended family of nations whose people and Governments are on the side of justice, of the rule of law, and of freedom.
But for too long, many members of this family have been neglected or taken for granted. As I said a moment ago, nothing has the capacity to leverage a bilateral relationship like Defence, and it remains one of the aces in our pack on the world stage. Recent events illustrate this: in the Gulf States we have been able to influence events; in Egypt our influence was, by contrast, limited.
The lesson is clear - if you have partnerships you have influence; without partnership, your influence is limited. That’s why the SDSR stressed the importance of building strong, reliable and enduring alliances and partnerships, underpinned by a series of bilateral and multilateral arrangements. As Liam Fox said last month, “this new era is one of necessity, one of beneficial partnership between nations, not optional isolation. It is not a choice between multilateral or bilateral - the requirement is for both.”
Thirdly, this Government did not come into power to preside over the decline and fall of Britain plc. We know that a healthy industry, including SMEs, brings wider economic benefits in terms of jobs, skills, and the balance of payments. We have the sixth largest economy in the world; we can boast some of the world’s leading authorities and institutions in the fields of science, technology, and innovation; and we have cutting-edge Defence and Security industrial sectors. And with some of the toughest strategic export controls in the world, we should be proud - as this Government is, and I personally am - to support proper Defence and Security exports.
Exportability and exports themselves are vital components of any overall strategy for growth, and for the future of the British Defence and Security industry, as much as for the protection of the United Kingdom’s influence in the world.
But the biggest risk to the nation’s future would be failure to restore the public finances to good order. British business cannot prosper while the risk of a debt crisis continues to hang over the economy. We could not ignore the biggest crisis in the international system in decades where we inherited the largest budget deficit of any major economy - at 12% of GDP - including national debt increasing at the rate of £3 billion per week.
Nor could we ignore the fact that Defence was the worst in a grim set of inheritances. Any Defence Review, at a time of scarce resources, has to address the challenge of making more effective use of what we have, and prioritise our missions, otherwise it is not ‘strategic’ at all - though it doesn’t make taking the tough decisions we had to take, like retiring the Harrier, any easier.
As Labour’s outgoing Chief Secretary to the Treasury put it in a rare display of succinct honesty: “I’m afraid there is no money. Kind regards - and good luck!”
Thanks - very kind.
All of this has implications for industry and exports. It means providing better value for money in our acquisition programmes here at home.
One important option is likely to be greater co-ordination and collaboration with those allies and partners whose security interests and military capabilities are closest to our own - and I’m sure that Peter will say more about this later.
It also means being market aware and customer-focused abroad, and earning a reputation for delivering what we promise, on time, and to budget - so industry please take note. It means collaborating on research, development, and production of high technology equipment. And increasingly means technology sharing and transfer. It means Industrial Participation.
However, these initiatives are not without challenges or risk. The bargaining over technology transfer will be intense, and we shall need to strike a balance between co-operation and selling the crown jewels.
Let me turn to the Green Paper, and the section on exports - specifically marketing overseas, and support for exports here at home by ensuring that our acquisition processes give our exporters a fighting chance.
Wherever Defence and Security exports serve wider MoD interests, they will receive the maximum support which the MoD - in co-operation with UKTI DSO - can provide - and here I’d like to pay a very warm tribute to Richard Paniguian and the fantastic support his team are providing industry. Indeed, the visits I’ve undertaken have been precisely because they offer the opportunity of strategic government to government relationships, and I have a programme of quite intense visits coming up.
On the process side, we’re committed to factoring in exportability at an early stage in our acquisition process - and we are considering exportability in the Project Start Up stage as one of the necessary criteria to be considered.
Nowhere is this new philosophy addressed more than in our approach to our new Global Combat Ship. As we frame our requirement, we see a tremendous opportunity for establishing a partnership with other nations which have similar requirements. The benefits are self-evident - economies of scale and reduced through life costs for our own equipment, sustaining skills and high quality jobs, but, more importantly, the chance to strengthen existing alliances and develop new ones for the longer-term - a point I set out at the outset. So our aim with GCS is to develop jointly and internationally, an approach which will allow us to adapt the core capability for our own specific needs, while offering an affordable, yet flexible, mix of systems and roles which match the aspirations of others. And I’m pleased that the response so far from several countries has been encouraging, and that dialogue continues. I’ve also been encouraged by the positive response shown by the MoD at Abbey Wood and the Royal Navy.
So we now need to move ahead with exportability across a wide range of requirements, building on the progress on the GCS and also in the field of Complex Weapons.
Of course, the Green Paper is all about seeking your views. But, so far, we’ve received disappointingly little response to the questions raised in the section on exports. This is your best chance to influence our exports policy for Defence and Security for the next five years. You’ve got until 31 March to comment formally - do not miss this opportunity. Because once our White Paper is published later this year, the policy will be set in motion.
I recognise, however, that there are a number of difficult circles which we have to square. For instance, I recognise the tension between our own inventory and industry’s. It was at the UKTI DSO conference last year that the Turkish Defence Minister said to me, “If you have not got it in your own inventory, who else is going to buy it?” Clearly we have neither the ability nor the desire to buy everything which British industry produces, as good as it undoubtedly is. But HMG will lend its full support to those exports campaigns which further our national interest, even if the equipment is not in-service with the British Armed Forces.
I also recognise that some see a tension between buying off-the-shelf wherever we possibly can and an export-led growth strategy. The Secretary of State has said that he hopes the shelf will be stocked with British products, but of course not everything we need will be on British shelves. This is about better value for money, not perpetuating weakness, but exportability generally should be a useful marketing tool for British industry when making the case on an MoD programme.
And I recognise our own resources in the MoD are constrained. We are always receptive to good ideas - that’s the whole purpose of the Green Paper - and on this we’re open to the consideration of novel solutions proposed by industry that mean we can support exports even better.
So let me conclude.
20 years ago, this country, led by Margaret Thatcher, fought side by side with Kuwait and an international coalition to liberate Kuwait, and fight against the naked aggression of Saddam Hussein.
As the Prime Minister said recently, “To those who question whether it is right to take Defence companies on a visit to Kuwait, I would say that 20 years ago we risked the lives of our Service personnel to free that country. It seems to me an odd argument to say that Kuwait should not have the means of its own Defence.”
I know that the competition is fierce. As the Prime Minister said at the weekend, “do you think the Germans, and the French, and the Americans are all sitting at home waiting for business to fall into their lap?”
Quite so again.
But our national interest is at stake; our ability to help shape an uncertain world is at stake.
That’s why I’m not a defender of the Defence and Security industry; I’m its most passionate supporter!