Chancellor’s budget – good news for defence but don’t break out the champagne

Yesterday the Chancellor of the Exchequer, and a former defence secretary, Philip Hammond, announced he would provide the MoD an additional “£1Bn to cover the end of this year and the next”. Any new money for defence is to be welcome and it is right to celebrate rare good news but this modest sum must be seen in the perspective of a bigger financial crisis.

The future of HMS Albion and Bulwark and the Royal Marines has now been assured, which is quite a change from how things appeared just a year ago. Credit should go to many people from all political persuasions and on many platforms who made a strong case to retain amphibious capability. Sometimes campaigns to save the Royal Navy can have an effect… The suspicion that retaining LPDs would come at the cost of decommissioning frigates has perhaps also been averted for now at least. In reality, the number of ships the RN can put to sea is constrained more by available personnel than actual hull numbers at present and gripping the manpower issue remains paramount.

Gavin goes large

New money must be seen as a major success for the Defence Secretary, Gavin Williamson who has almost completed a year in office since his surprise appointment. Williamson is a divisive figure and his presentation style is not to everyone’s liking. When he initially took the job it was seen as an opportunistic move driven by ambition for top jobs. Despite this, he has been willing to aggressively argue for more MoD funding in a way that Michael Fallon or many of the recent defence secretes would never have countenanced. There have been rumours of stand-up rows with the Chancellor and Treasury ministers and that he even threated to close RAF Marham just so the Chief Secretary to the Treasury, Liz Truss “can feel the pain of defence cuts for herself” in her own constituency. Williamson is also said to have stated that the 2.5% armed forces pay rise was paltry and Liz Truss should be “named and shamed for it in a letter to every serviceman.” These are unconfirmed reports but whatever the truth, some might consider this borderline bullying while others may see it as a politician who finally has some sense of urgency about reviving the armed forces.

The Chancellor has repeatedly rejected calls to increase the defence budget on the grounds that the MoD is wasteful in inefficient in the way that it spends its money. He certainly has a case and when serving as Defence Minister, could have see the details for himself. Repeated attempts to reform and reshape the MoD to make it more efficient by governments of all colours have had very mixed results. Various initiatives such as SMART procurement, PFIs, cuts to Civil Servant numbers and the Lavigne reforms have not solved the problems. Mistakes and gross inefficiencies still plague defence procurement but it remains a very complex business and there is no magic bullet. There is something of a mismatch in providing £20Bn extra a year to the NHS, a giant and notoriously inefficient enterprise, while begrudgingly giving the MoD and extra £500M a year and accusing it of being too wasteful. There is no question further improvement and reform can and should be made, but mistakes of the past cannot be changed or used as an excuse for inaction, it’s what is done today and in the future that matters on the frontline.

Show me the money

The senior servant at the MoD, Stephen Lovegrove described the MoD’s funding for the equipment plan agreed in 2015 as “extremely challenging”. While refuting there was an actual accounting ‘black hole’, admitted there were “considerable financial risks”. This is Civil Service-speak for saying that the equipment plan is unaffordable. The National Audit Office estimates the MoD is short of between £10-20Bn over the next decade (or between £1 – 2 Billon per year). The £500M that the Chancellor has provided for this year and next will, therefore, reduce the pain but is not a long-term cure for the underlying mismatch of funding with aspirations.

Hammond said the £500M extra would be spent “to increase cyber capabilities, anti-submarine warfare capacity and the Dreadnought programme”. Cyber is certainly an area the UK must invest in and should be welcomed. From a political perspective, announcements on cyber are always attractive as it sounds like a government responding to cutting-edge threats. Due in large part to the nature of cyber, it is very difficult for independent analysts to quantify exactly what defensive and offensive cyberwarfare capability the UK is developing and precisely how much is being spent on it.

As we have argued for many years, UK ASW capability has been neglected and is inadequate. ASW kit is expensive and the full £500M would not pay for even one extra Type 26 frigate. Most analysts assume this funding is to cover cost overruns associated with the purchase of aircraft, weapons and support facilities for the £3Bn P-8A maritime patrol aircaft programme.

Dreadnought class Trident nuclear submarine, the bedrock of UK security from nuclear threats into the 2050s

The £800M ‘extra’ for the Dreadnought programme is not really new money, rather the Treasury has given the Submarine Delivery Authority (SDA) permission to draw down the money from the £10Bn contingency funding wisely set aside, over and above the core £31Bn allocated for constructing the 4 Dreadnoughts. This is a sensible move and is primarily to provide cash flow to key submarine component suppliers who could potentially go out of business or have to close down facilities which would result in much higher costs or delays later in the programme.

The Modernising Defence Review (MDP) which is supposed to decide the shape of the UK’s future armed forces continues in the background. When pressed by the Commons Defence Select Committee for a date on when the MPD would be published, Gavin Williamson said: “sometime in the Autumn, yet to be defined”. He then admitted that ‘Autumn’ in this instance means sometime before the end of the calendar year. He also claimed the MPD would be “done on a strategic basis but not within a fixed cost envelope”.

The economic impacts and effects on Government finances of Brexit in March 2019 remain unknown, should there be a real crisis, the MoD is quite likely to be one of the first departments in Whitehall to take a hit. The £500M for the MoD is a ‘sticking plaster’ but not a long-term solution, it allows a little breathing space and a weak government can put off facing questions about grand strategy for a little longer.

 

 

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