It is my pleasure to be here amongst such illustrious company and glittering uniforms.
I remember very well 2 years ago, making my first ever speech as Secretary of State for Defence at this dinner.
I thanked SSAFA then because my brief told me of the excellent work you do. In the intervening 2 years I have had many opportunities to experience for myself the contribution SSAFA makes to the well-being of our armed forces personnel.
So let me start by reiterating my thanks to SSAFA for providing vital support to our armed forces for well over a hundred years.
Back in 1885 you were helping families left behind in the wake of the Second Expeditionary Force to Egypt during 2 world wars you were on hand to support the millions of men and women in uniform under general mobilisation and you continue to extend that lifelong support today.
Whether helping soldiers returning from Afghanistan find a new home or a new job.
Or providing accommodation for families visiting injured personnel who are recovering at Queen Elizabeth Hospital and Headley Court.
Challenge of the drawdown
But as our troops draw down from Afghanistan and the army is brought back from Germany as we move from campaigns to a more contingent posture we all know that you are going to have to work harder to provide the same level of support.
We have seen a period of unprecedented public support for our armed forces and of unprecedented generosity to our service charities.
But we cannot take public support and financial generosity towards our armed forces for granted.
When I talk privately to service charities, I know you are all preparing for leaner times ahead.
The service people who depend on the support you provide will be greatly reassured to know that you are preparing for the challenges of the future, with a realism and pragmatism that will ensure your continued success.
For our armed forces and the MOD too, realism and pragmatism are also the key to success as we address the big challenges we face. After operations in Afghanistan (where our armed forces continue to do a fantastic job as they progressively transfer security to the Afghans), the 2 key challenges of the future will be recruitment and retention; and procurement.
The good news is, when I spoke at that SSAFA dinner 2 years ago, I had a third, and most immediate, challenge: balancing the budget.
That challenge has been met, despite further demands from the Treasury over the past 2 years.
So now we still have the fourth largest defence budget in the world and a fully funded 10 year equipment programme supported by a devolved model giving real power to front line commands and a decision making process that will not allow the reckless over-programming of the past.
And I make no apology for adopting a prudent approach to budgeting, while we still lack the basic management information to understand completely the risks being carried in our major programmes.
The brownie points we have earned with the Treasury have allowed us an unprecedented level of year end flexibility, giving us the best of all worlds: a prudent budget approach with a guarantee of being able to carry any unspent money forward into future years.
Recruitment and retention
Continuing to recruit and retain the brightest and the best for our armed forces (both regular and reserve), in a period when it may be increasingly difficult to explain what they are for, will require a major effort.
Our experience in Afghanistan has shown that ongoing campaigns act as a major recruiting sergeant.
But now we need to work out how to attract and retain the right people in an era of contingency.
In part, that will be about ensuring a programme of adventurous training that, if not quite operations, is still challenging and stimulating.
But it will also be about taking advantage of the reduction in tempo to tackle some of the less attractive features of service life.
We know that one of the reasons people leave the services is because of the tension between service life and family life; and particularly the lack of opportunity to put down roots.
Our New Employment Model will give our people an expectation of being stationed in the same part of the country for significantly longer periods.
Offering their spouses and partners the opportunities to find jobs that allow them to contribute to the family income providing their children with the stability of education they need to maximise their life chances and offering a realistic chance to buy a home.
The new Forces Help to Buy scheme that I announced last month is designed to address the low rate of home ownership in the armed forces.
It is an initiative that will help armed forces personnel get on the property ladder by allowing servicemen and women to borrow up to 50 % of their salary to provide a deposit to buy their first home.
Being able to achieve the aspiration of homeownership while continuing to serve is a big step forward in supporting retention and a key component of delivering the covenant: helping armed forces personnel to enjoy the same opportunities for homeownership as their civilian counterparts.
And for those for whom home ownership is not the right answer, we will deliver our covenant commitments by investing in rebasing and new accommodation.
We’ve put £1.8 billion into the new army basing plan to ensure we are making the best use of our estate across the UK, from Catterick to Colchester.
£1 billion of this will be spent on brand new accommodation.
And that will mean almost 2,000 new family homes are built as well as nearly 8,000 new homes for single soldiers.
The demographic challenge
But our recruitment challenge is not just about the necessary improvements to the offer; it is also a demographic challenge.
Currently fewer than one in ten people employed by the armed forces are female but, last time I checked, half the population in our recruiting age group are.
And, while it won’t be long before roughly a quarter of secondary school children will be black or minority ethnic…only 3% of our armed forces are currently drawn from this cohort.
If our armed forces are to remain sustainable, common sense tells us they must do more to use female recruits more effectively, and to make service careers more attractive both to women and to Britain’s ethnic minorities.
We cannot sustainably expect to recruit 89% of the armed forces from 38% of the population in the age cohort!
So, recruiting and retaining the right people is a challenge; so is paying for them: defence budgets are unlikely to rise in real terms any time soon (beyond the 1 per cent promised in the Equipment Programme) but average earnings will resume their long-term real-terms rise as the economy moves to recovery.
That will place a sustained pressure on the defence budget, the type of pressure which in the private sector is met, can only be met, by productivity improvements.
We therefore have to focus on improving military productivity in order to be able to maintain competitive pay and conditions within tight budgets.
Focus on outputs
That means focusing on measuring outputs, the military effect we are able to deliver, ahead of inputs.
Now “military productivity” will not necessarily be a familiar phrase, but it is a familiar concept. Everybody who thinks about it understands that the modern infantry platoon will deliver significantly greater military effect than its predecessor of 20 years ago; and an unrecognisably greater effect than its predecessor of 50 or 200 years ago.
A Type 45 destroyer is far more lethal than the Type 42 it replaces, but with only two-thirds of the crew; our new aircraft carriers will be operated by a crew the same size as that of the Invincible class, but for a ship nearly 3 times as big.
That is why I sometimes find it difficult to conceal my irritation with those who look stubbornly backwards to a past of vast armies, fleets and air forces, while never acknowledging the step change that has occurred in the lethality of the individual soldier, ship or aircraft. Those who insist on counting numbers, rather than military effect.
Because what matters in the end is having the right capability to protect our national interests and the ability to generate it efficiently, so that we can reward our people properly and keep our offer competitive.
The numbers matters
Our second challenge is to reform the MOD’s procurement system to make it as effective as it can possibly be. Now, the first thing I need to say is that MOD procurement is not as ineffective as the popular media, and sometimes the PAC, suggest. Benchmarked against our international comparators, we do creditably well.
And the fact is that almost no one in the private sector has to manage huge, long-term engineering projects of the complexity of our nuclear submarine or aircraft carrier programmes and certainly not subject to the scrutiny that the MOD faces.
To read some of the media you could be forgiven for thinking that the problem is that when the MOD needs a box of paper clips, it stubbornly refuses to pop into Rymans and pick one up for 99p but instead insists on commissioning the local blacksmith to hand-craft them in titanium for £99million, with delivery at any time to suit him in the next decade!
The reality isn’t quite like that; but we definitely could do better.
That is why we are engaged in a process of radical reform, either by bringing in a private sector partner to create a GOCO ‘Government owned, contractor operated’, entity to procure our defence equipment, a model we already use to run the Atomic Weapons Establishment and the US uses to run most of its nuclear programmes; or by creating a public sector entity with much greater freedom to hire, fire and reward personnel, giving us the commercial clout that we need, a model we call “DE&S+”.
I know some of our friends in the industry do not like our plans, I wouldn’t necessarily expect them to, their purpose is not to make life easier for industry, it is to ensure that we and our industry partners work effectively together to deliver the battle-winning capabilities that our armed forces need, at a cost that is value for money for the taxpayer.
I’ve just spoken about the 2 biggest challenges for fefence over the years ahead. And we are facing them with realism and with determination.
Alongside these challenges, we have more work to do to deliver on our commitment under the Armed Forces Covenant. This is a key MOD priority but it is not the work of MOD alone. It is a cross-government agenda, touching almost every department. Through the Community Covenant it reaches out to, already, about 80% of local authorities and to civil society beyond them. And the Corporate Covenant programme, launched a few weeks ago, is already signing up businesses large and small in support of the covenant.
So, government led initiatives can play an important part but I see charities and the voluntary sector as critical partners in this enterprise. We must work together to get the most out of what we’ve got.
The charitable sector is often much better placed than government to deliver the vital help that our service people need, particularly after they have left the armed forces.
But we know that if we’re asking more from you, particularly at a time when you are under pressure, we must do what we can to help.
That is why we have prioritised funds to help you continue your good work.
Almost a quarter of a billion pounds of government money, in tandem with the largest single donation ever made by military charities, is now helping all injured service personnel get support tailored to their individual needs, through the network of Personnel Recovery Centres that is now being rolled out.
And we have made sure that our service charities benefit from the Libor fines being paid by financial institutions.
So far, more than £9 million out of a total pot of £35 million has been given to armed forces charities to support good causes.
The Libor funding has triggered a wave of activity right across the country, from the University of Wolverhampton’s programme, to help reservists and veterans launch their own businesses, to the Warrior Programme, which assists in the transition to civilian life.
SSAFA are also putting their Libor money to good use, helping young service children with additional needs develop social skills and gain independence; and providing mental health first aid trainers and mentors to wounded, inured and sick service leavers.
Charities and government working together to honour the covenant.
This is what the future looks like.
Of course, big challenges remain for all of us, if we are to live within our means, keep retaining and recruiting the people we need, deliver the equipment that supports their work, on time and on budget and provide the best possible support to the men and women of our armed forces.
But working together will help us to address these challenges and uphold the covenant.
I want to thank SSAFA and indeed everyone here tonight for your work in supporting the armed forces. We in the MOD know what we have to do but we cannot do it without you.
So thank you for the nearly 130 years of support and service that SSAFA has given. And thank you for all you are going to do over the next 130!