I would like to thank McKenna, Long and Aldridge for organising this session for me to speak to you and inform you of current UK defence issues.
I am delighted to be here in the United States where I lived for two years in the 1980s and so have a huge affinity for this country.
So much of my wide ranging portfolio is critically influenced by the UK’s defence relationship with America.
One of my aims is to contribute to the closeness of that relationship.
Ensuring the interoperability of our armed forces, developing our approach to joint procurement, working to maximise technology exchange and promoting defence trade, in both directions, these are all issues within my particular remit.
And it is vital that we get this right, because the strength of Britain and America’s alliance is central to our mutual security.
At moments of true existential uncertainty, we have come together in the past, we worked together and we prevailed.
Churchill and Roosevelt ending the Second World War;
Thatcher and Reagan ending the Cold War.
When it really counts, our unique alliance can be counted upon.
And I believe that it is no coincidence that Britain’s greatest political leaders have been the most vigorous advocates of our transatlantic relationship.
That great woman, Baroness Thatcher, as Prime Minister said that whenever she visited America, she felt ten years younger, despite the jetlag.
I think this perfectly encaptures the sense of vibrancy that we gain when we work together, a vibrancy that derives from knowing you are amongst friends.
And it was Margaret Thatcher who helped to define the post war Anglo-American relationship.
She understood better than anyone that Britain and America are two of the most like-minded nations on Earth.
I am sure she would have been delighted to know that former Secretaries of State Kissinger, Shultz and Baker, and former Secretary of Defense and Vice President Dick Cheney all honoured her by attending last week’s magnificent funeral.
The defence relationship
The Anglo-American relationship is far wider than just defence and security: it is diplomatic, commercial and cultural.
But at its heart lies defence and security cooperation.
For we must be able to protect our shared values and defend our mutual interests.
We understand in the UK that we are the smaller partner in this relationship, but we believe strongly that both our nations benefit from our collaboration.
If you look at the depth and breadth of Anglo-American defence cooperation you begin to get an appreciation of how unique it is.
We have several hundred exchange and liaison officers working as integral parts of one another’s armed forces.
We share all forms of intelligence on a wide range of areas to an unprecedented level.
Our armed forces train, operate and, increasingly, equip together.
For example, our air forces both shall be shortly operating Airseeker and do operate Reaper, train together on a daily basis and are developing the Joint Strike Fighter where we are the only tier one partner nation.
In current operations in Afghanistan our armed forces fight side-by-side in the most difficult parts of the south of the country.
And I return to London on Thursday this week to host an event celebrating the 50th anniversary of the Polaris Agreement, marking our cooperation in the most sensitive of areas, the nuclear deterrent.
What other two countries share so much and work so closely?
Developing the technology of tomorrow, S&T (Science and Technology) cooperation
The high level of cooperation between our armed forces has significant implications for defence equipment: its development, its procurement and its through life support.
So I am very focussed on making sure that the decisions I make now facilitate the UK-US defence relationship of tomorrow.
I have no doubt that, just as we met the security challenges of the past together, in Europe, Korea, Iraq, and today in Afghanistan’ so too will we combine to tackle threats in the future.
The post 2014 environment represents a new dawn for defence, as we move from commitment to preparation; where our focus shifts from supporting long standing, largely land-based operations to the need to provide high readiness, highly contingent forces which can operate seamlessly in challenging environments.
The situations in Libya, Syria, North Korea and Mali have shown us what this new world looks like: unpredictable, rapidly evolving and involving many diverse threats.
It is difficult to predict exactly what the next threat will look like, how the next crisis will evolve or where next we will be required to operate.
But what we must be certain about is that our armed forces possess the operational advantage to overcome their adversaries.
To ensure this is the case we must continue to invest in research now.
This is why in the UK in our National Security Through Technology white paper, published a year ago, we protected our annual investment in science and technology at a minimum of 1.2% of the UK defence budget.
And this is why we are working hard to maximise collaboration on research.
Cooperation between the United Kingdom and United States in science and technology has been one of the corner stones of the wider strategic relationship over many decades.
The US and UK constitute each other’s largest research collaboration partners.
From longstanding research cooperation in, for example, space, chemical and biological defence, nuclear propulsion and armour technology, to our more recent work together on our most important challenge, supporting operations in Iraq and Afghanistan.
Our scientists and engineers have worked closely with our armed forces to develop technology that has countered the threat from improvised explosive devices and other threats in theatre, saving lives and enabling our operations to be successful.
The collaborative programme between the Army Research Laboratory and our Defence Science and Technology Laboratory to develop an enhanced IED detector for dismounted soldiers is an excellent example of this work.
Together we are also identifying the future threats that will challenge the security of our armed forces, and our nations, such as new forms of terrorism and the use of cyberspace and electronic warfare as a new battleground.
We attach huge value to our S&T relationship with the United States, both in defence, wider government and across industry, as it contributes so much to our future security and economic prosperity.
But I believe the investment that governments make in S&T can play a valuable role in catalysing private sector innovation.
Around 60% of our S&T budget is spent outside of government, acknowledging the contribution industry and academia make to the economy and to innovation.
I am a particular champion of SMEs within the defence sector in the UK.
I know that SMEs are not the only source of original thinking, but they often provide the niche expertise which can lead to breakthroughs in defence applications.
So in Britain we are striving to create as many entry points as possible for our defence and security SMEs to access our own supply chain.
We have great small companies like Digital Barriers, which has developed imagery technology to identify non heat emitting material secreted around the body, like weapons or drugs, which is being tested right now by security forces around the world, including I’m told the New York Police Department.
And I am glad that the Defence Trade Office in our Embassy here and the UK Trade and Investment’s Defence and Security Organisation will be co-hosting a “Defence Technology Roadshow” in the UK just before the Paris Air Show in June.
This will showcase cutting edge technology developed in the UK and allow British SMEs to meet with US primes and government officials.
But I know too that there are, of course, many excellent SMEs here within the United States, developing amazing technologies like Velocity Systems’ dog armour.
Or American Pacific Plastic Fabricators who make some fantastic target balloons also known as ‘killer tomatoes’.
I want to improve ready access of our SME’s to each other’s markets to bring capability advantages to our two countries.
We both get access to cutting edge technology, and we both reap the economic benefits of having vibrant defence sectors, which create jobs and profits.
The benefits of collaboration and free access apply right across all areas of defence acquisition: from research and development, to procurement, to open markets.
This reciprocity is a vital component of our relationship and enables us to get the best out of each other.
And in these fiscally straitened times, we cannot afford to work in isolation.
We cannot afford to ignore technological developments in other countries, and pay to develop those same technologies from scratch within our own defence industries.
This is inefficient and denies our armed forces important capabilities.
Neither can we afford to procure in isolation.
Britain and the US have had some significant recent successes that highlight the benefits of joint procurement.
The Joint Strike Fighter programme which I’ve already touched on is a superb example of where our two nations are collaborating at both the military and industrial level.
At Eglin the UK and US Marine Corps are already sharing F-35B aircraft, training together ahead of joint operational testing.
This is helping to build our combined understanding of the aircraft and its capabilities, but at reduced cost, pooling scarce resources at this relatively early stage of the aircraft’s programme.
On weapons, we are currently working together through the Big Safari Group in rapid prototyping a UK weapon, Brimstone, on a US platform.
Brimstone was used incredibly successfully during the Libya campaign, no one else has managed to develop a fast jet precision weapon system that can be effectively used in such a complex environment as was present in Libya, and deploying it from a US asset will further demonstrate its US-UK utility.
From the logistical support perspective, the C-17 transport aircraft is an excellent example of a truly inclusive and effective US-UK, and international, cooperative arrangement.
It enables all international C-17 users, including the United States Air Force and the RAF, to enjoy economies of scale, shared costs and a truly global footprint that would be unobtainable to their individual fleets.
This means we can all draw on the support that is available to the world-wide fleet of 240 aircraft.
And Reaper, which the UK and US use collaboratively to provide ISR and precision strike to protect our forces and the local population in Afghanistan, shows how we have taken interoperability to a new level.
Operations using this jointly procured equipment are so integrated that the RAF’s 39 Squadron have 109 personnel based permanently at Creech Air Force Base in Nevada, providing much of the human interface for UK Reaper sorties in Afghanistan.
The principle of interoperability is especially important as we also look to create efficiencies in the way we work together to provide collective security around the world.
Britain understands that we cannot expect the US to bear a disproportionate cost of the world’s security bill.
We are keen to lead America’s European allies in taking greater responsibility for the security of their own interests, particularly in the context of the US’s increasing Pacific focus.
Reform of NATO is one solution.
Bilateral defence agreements, like our recent defence treaty with France, represent another.
But central to all of these is the need to maximise interoperability.
This is why we are striving hard to build interoperability into our equipment programme. This is why the UK armed forces chiefs came to the US recently for an historic meeting with the Joint Chiefs, the first apparently to have taken place since 1948.
We accept that our ability to work with your armed forces is a crucial part of our defence strategy.
Finally, we cannot afford to close our defence markets.
The UK imports at least $2 billion worth of US defence goods and services a year.
We the UK have the fourth largest defence budget in the world and represent a significant customer.
But we are also a defence exporter, second only to the US.
In 2011 the UK exported £8 billion of defence and security goods and services worldwide.
In any given year, approximately 17.5% of our defence exports go to the US, a proportion that I personally am keen to increase.
And we believe it is in your interest to benefit from other allies’ development costs, particularly in areas where we have capabilities that you need, including complex weapons such as the Brimstone missile I mentioned earlier, or the Hawk Advanced Jet Trainer which is a strong contender for the US Air Force T-X program.
But it is not just direct trade that should be considered; our defence industries are so intertwined, that British exports to other countries often include US made components, and vice versa, some US exports contain UK components.
All of this Transatlantic trade and cooperation is important to both our economies.
But it is also important to both our military capabilities.
We know that the UK benefits from being able to buy specialist equipment like US developed Night Vision goggles, which give an advantage to our troops on the front line.
And the UK developed pelvic protection system, which reduces the severity of injury from grit and dust in a blast, currently is helping to protect the US Marine Corps on its operations.
These examples highlight how free trade helps to save lives.
This is why the UK government is extremely committed to the Defence Trade and Cooperation Treaty, which has just had its first anniversary.
The Treaty is rapidly becoming a working reality.
The first government to government transaction recently took place under this Treaty, through which the UK procured components for the Rivet Joint surveillance aircraft programme, a bilateral success story which is running several months ahead of schedule, as I was reassured to see when I visited Greenville in Texas on Monday.
An encouraging flow of UK companies have already signed up to join the approved community of industrial partners, giving them access to the opportunities created by the enhanced cooperation between our two countries.
We want to do all that we can to encourage inward investment from US companies, and to help those companies work in partnership with the best of UK industry.
Our Defence and Security Industrial Engagement Policy invites overseas-based companies to work with UK companies and other institutions.
This initiative, launched a year ago, already has three US companies, Boeing, L-3 Communications and Rockwell Collins, signed up.
A number of other American firms are in discussions to join and take advantage of the opportunities the scheme offers, making clear their commitment to be a long term partner of the MOD.
I believe the UK is a good place to do business.
Many US companies agree and have subsidiaries in the UK, which they tell me they regard as the best location from which to develop their defence business throughout Europe and the growing defence markets of the Middle East and North Africa.
But we are not complacent, and we are trying to make the Ministry of Defence easier to do business with: cutting down on bureaucracy and increasing transparency.
We recently published our £160 billion equipment plan, the first ten year forward looking and funded equipment plan ever published by the Ministry of Defence.
This gives our suppliers more information about our major equipment priorities.
Crucially, unlike equipment plans under the previous government, it is based on a balanced budget.
So it allows the defence industry to plan and invest in future capabilities with much more confidence.
It also gives our armed forces certainty about the future equipment they will be able to use.
But we didn’t get to this point by accident.
The UK has already undergone significant reform in defence.
The defence budget has been balanced for the first time in a generation, eliminating the black hole our Government inherited back in 2010.
That has meant some tough decisions have been taken.
The decommissioning of some older platforms, cancelling some contracts and reducing personnel numbers, including through redundancies, these have all been difficult decisions.
Difficult, but necessary.
We would have liked to do things differently in an ideal world.
But we do not live in an ideal world, as your Department of Defense is now funding out.
In the real world, we have chosen to abandon what was an overheated and essentially aspirational equipment programme, in favour of one that is sustainable, fully-funded and deliverable.
And, in my own area there is still a good deal of reform taking place.
A core element of our Defence Transformation Programme is reforming our acquisition system.
Under the Materiel Strategy, a compelling case has been made for reform.
Analysis has shown that cost and schedule overruns have resulted in significant additional costs to the defence budget of hundreds of millions of pounds each year.
The Materiel Strategy is seeking to address this, and is focussed on three main areas.
Firstly, the overheated defence budget.
We have worked hard to balance the defence budget, as I have already said, but although much work has been done this has not fully addressed the underlying issues which cause underperformance in defence acquisition.
Secondly, an unstable interface between requester and deliverer.
At present, the moral imperative to ensure our servicemen and women in theatre have the best possible equipment and support can lead to demands to incorporate changes over short timescales and at any point in the programme, making accurate cost and time estimating difficult.
Thirdly, insufficient skills and freedoms within the Defence Equipment and Support organisation.
The skills and expertise which our procurement agency called DE&S needs to perform its role effectively are very different to those required and valued by much of the rest of the civil service, skills which often have a high market value, and therefore are easily poached by the very defence industry companies with whom they are negotiating.
The Material Strategy must address these three aspects, and our objective is to find the optimal way to improve efficiency in the process of procurement and to cut waste.
We believe the private sector can help and we are looking carefully at how best this can be done.
In the near future we expect to launch the formal assessment phase for the Materiel Strategy Programme.
This will be a significant milestone towards the delivery of an improved acquisition system.
The assessment phase will focus on developing the information required to make a rational decision between two options:
A commercial negotiation to enable us to understand how a government owned contractor operated, or GOCO, option would work, and the costs and benefits associated with such a model;
And secondly the development of a costed proposition for making our existing acquisition organisation the best it can be, while remaining within the public sector.
The final decision between the two options on the future operating model will be made at the end of the assessment phase, scheduled for summer 2014.
Whatever option we select, we will work with you as our major partner as we proceed through the assessment phase to identify any challenges and agree how we best manage them.
To this end, my staff are directly engaged with the task force, established by Frank Kendall, to explore what a GOCO decision might mean for our joint business with the US.
I think this highlights one of the many advantages of our close relationship, which is that we can openly and frankly share our collective experiences as we go through our own respective processes of reform.
This is essential, because we are not operating within a vacuum.
Fiscal realities apply pressure to both Britain and the United States.
And nobody has a monopoly on good ideas.
Who knows, if we are able to introduce private sector skills and expertise successfully into our defence procurement, other countries may follow.
Many are looking on with interest.
It has happened before, where Margaret Thatcher started reforming our telephone, oil and gas, electricity and water industries, other nations swiftly followed.
But to conclude on defence, I believe we are entering a new era of defence cooperation between our two nations.
One which acknowledges changing geopolitics and economic realities.
Important elements of this new era are recognised in the Defence Trade and Cooperation Treaty.
It reinforces our commitment to keep our markets open and deliver the best possible equipment to those on the front line.
This benefits our defence industries, who remain competitive and have access to major export markets; benefits our armed forces, who are unhindered in their ability to develop the capabilities that protect all of us; and it benefits our tax payers, who get the best value for money.
The great contradiction in the term protectionism, is that it protects no one, particularly in the context of defence.
But the UK-US defence relationship is not just about trade, or collaborative research, or combined exercises, or shared equipment.
Fundamentally, it is about trust.
Knowing that when it comes down to it we both have powerful military capabilities and the moral authority and political will to use them when necessary, in defence of ourselves, in defence of each other and in defence of our allies.
It is this trust that has bound us over the last hundred years and I believe it is this trust which will bind us over the next.
Thank you very much.