CONSERVATIVE
New Forest East

HCDC INQUIRY – MOD ANNUAL REPORT & ACCOUNTS [EXTRACTS] – 15 October 2019

Witnesses: Sir Stephen Lovegrove, Permanent Secretary, Ministry of Defence; Ms Cat Little, Director-General Finance, MoD; Air Marshal Richard Knighton, Deputy Chief of Defence Staff for Military Capability; Sir Simon Bollom, Chief Executive Officer, Defence Equipment & Support. 

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SDSR & MDP

Q5 Ruth Smeeth: How different would the next Strategic Defence and Security Review [SDSR] be to the Modernising Defence Programme [MDP]? Is it a valuable piece of work, given the amount of work that went into the MDP? The issue for us was always about whether there would be an SDSR so quickly afterwards.

Sir Stephen Lovegrove: It would be extremely valuable, which is not to say that we think the theoretical or conceptual underpinnings of an SDSR would be hugely different for defence. It is not as if we stick our analytical heads on only once every five years – we are constantly working on this kind of area.

I would identify two particular advantages to an SDSR. One is the money. The MDP was not a fiscal event in any shape or form; it was about setting a policy head-mark and ambition. The fiscal events associated with that were one-year settlements. That is not the case with the SDSR, which is meant to last for five years and gives much greater certainty of long-term money. The second thing about an SDSR – this is advantageous to the Government and to us – is that it gives us the opportunity for a different set of deeper and richer conversations with other colleagues across the security institutions in Government, in a way that sometimes purely defence discussions do not.

We are not under any illusions, particularly in a world of constant competition, that we are doing this as a solo sport. This is not a defence sport. We want an answer that works for the whole of Government, and that is constructed with the Home Office, the agencies, DFID, the Cabinet Office and all other interested parties. The SDSR gives us the opportunity to do that.

Q6 Chairman of the Defence Committee (Dr Julian Lewis): May I take you a little further on that? You will recall that the Modernising Defence programme was not originally intended to happen at all. It was originally the National Security Capability Review, and it became clear that that mini-SDSR would say that we had only the same pot of money for defence and security taken together. It was coming down in favour of spending a lot more money on what are called 21st-century threats – cyber-threats, intelligence and so forth – and defence was going to take another hammering.

That was when the then Secretary of State, Gavin Williamson, set up the MDP so that you could look at what defence required, without that being done in the context of a fixed pot of money that would result in some pretty horrendous cuts that were mercifully averted. Are you going to fall into the same trap with the SDSR?

You say you want to have all the Departments with a seamless defence and security strategy, and that of course is admirable; but it is not admirable if you lump all the budgets for those together in a single pot and then say:

“Well, if we’re going to spend more on intelligence, cyber and other 21st-century threats, the conventional Armed Forces are going to take further cuts.”

That was the trap from which Gavin Williamson extracted you. Are you about to walk into it again at the time of the next SDSR?

Sir Stephen Lovegrove: The Secretary of State did a terrific job while he was in the Department, but I do not recognise the characterisation of the NSCR that you have just given. The NSCR was certainly resource-neutral, because it was being done in isolation from any kind of fiscal event, so it did not really have any opportunity to be anything but resource-neutral.

Q7 Dr Lewis: Will the SDSR be done in the same way?

Sir Stephen Lovegrove: I would be very doubtful that the Treasury would say that an SDSR, which is likely to be alongside a spending review, will inevitably be resource-neutral. This is the moment at which the centre of Government – the Prime Minister, the Chancellor and so on – decide where the national priorities ought to lie. There may be a bit of shifting of money towards defence and security; there may not. I do not know.

Q8 Dr Lewis: Can we have a guarantee, as far as it is within your power, that you will ensure that you never again find yourself in a situation of conducting a fiscally neutral SDSR? There is no doubt about it; we saw in The Times a very specific table of all the major cuts in the conventional Armed Forces that were going to have to be inflicted if the National Security Capability Review plan had proceeded.

Sir Stephen Lovegrove: I do not particularly want to comment on the press reports at the time, but I can assure you that any actions that we were considering taking or not considering taking were absolutely nothing to do with a shift of resources from one part of the security establishment to another part of the security establishment in the NSCR.

Q9 Dr Lewis: So the plan to get rid of the two amphibious assault ships and 1,000 Royal Marines, just to give one example, was not related to the fact that they wanted to spend more money on countering cyber and intelligence, notwithstanding a very specific report in the Guardian that set all that out?

Sir Stephen Lovegrove: I am not going to comment on specific measures such as the ones you mention, but I can absolutely –  

Q10 Mark Francois: Why not?

Sir Stephen Lovegrove: Because it would be inappropriate for me to do so.

Q11 Mr Francois: But this is the Defence Committee.

Sir Stephen Lovegrove: I am afraid those questions ought to be directed towards Ministers. What I can say is that there is absolutely no question of any other parts of the security establishment, as a result of the NSCR, effectively making the kinds of raids that you are talking about on the defence budget. That is absolutely not the way in which that process evolved.

Q12 Dr Lewis: There was a very well informed report by Ewen MacAskill in the Guardian, which attributed to senior civil servants the fact that a battle had been raging between the security side and the defence side, and the security side had come out on top until this Committee produced its work on not scrapping amphibious assault ships and the Defence Secretary accepted it.

Sir Stephen Lovegrove: It is entirely for the Committee to decide which senior civil servant they wish to believe, but this senior civil servant is telling you that there is absolutely no way in which that zero-sum game between the Defence Department and other bits of the security establishment was being played out during the NSCR. It simply did not work like that.

Q13 Dr Lewis: So you are saying that all those cuts that were listed to the Army, the Royal Navy, the Royal Air Force and, above all, the Royal Marines and the amphibious assault ships were not going to happen?

Sir Stephen Lovegrove: Well, they did not happen. No decision was taken to make those cuts. But I think the point you are asking about is whether, somehow or other, other bits of the security establishment in Whitehall were capable, in that process, of trying to get some of the defence budget. That simply was not the way in which that process worked.

Q14 Dr Lewis: You will be pleased to know that I will not pursue this much further, but they did not happen because the Government was forced to stump up some extra money and prevent them from happening. The main point of this questioning is about whether we can rely on the Ministry of Defence not again to get itself caught in a situation where its capabilities are being lumped together and considered as a whole with the capabilities of what we might call the security establishment, cyber and so forth, in a financially neutral envelope.

Sir Stephen Lovegrove: You can rely on my understanding that an SDSR in the future will not be financially neutral because those kinds of exercises never are. You can also rely on my assertion that it would not be a question of “again”, because that has never happened.

Dr Lewis: We will have to leave it at that.

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MoD ACCOUNTS

Q35 Dr Lewis: I will bring in Gavin Robinson, who has just joined us, in a moment, but I just want to check something with you – Cat in particular. I am told that there have been improvements in the way in which you have been presenting the accounts. The NAO feels that last year’s accounts were clearer than previous accounts, and that one of the problems with the qualification of the accounts is whether the Department sufficiently understands the contracts to which it is committed.

What do you think you will be able to do, as you bring your touch to everything, to build on the improvements that have been made? Do you feel confident in making a prediction that a time will come reasonably soon when the accounts will not be qualified?

Cat Little: Of course we will do everything within our power to make sure that we set ourselves up to remove that qualification. As I keep saying to my team, that is a basic thing that we have just got to get right, but it is hugely reliant on the delegated bodies within the organisation understanding contracts, understanding what IFRS 16 is, which is no mean feat in itself, and knowing how you apply that standard to every commercial arrangement that we enter into.

We have tens of thousands of contracts, so for the last two years we have been working with our delivery agents and the frontline commands to make sure that we have improved not only the understanding of IFRS 16, but our contract management within the Department. We are working very closely with the Cabinet Office on upgrading all the training for all our contract managers, and our ambition over the next two years is to ensure that there is a minimum standard of contract management training across the whole Department – we are talking about several thousand people.

On IFRS 16, we estimate that we have somewhere between 1,500 and 2,000 people whom we need to train. In Simon’s organisation, there are online videos, resources and training materials that we are rolling out across the whole of MoD. Our anticipation is that if people understand what it is that they are looking for, it becomes embedded in the way in which we go about our business day to day.

Q36 Dr Lewis: Have you been able to establish exactly what the reasons were for the accounts continuing to be qualified? Do you then try to take in hand the people who, sadly, did not meet the required standard? Do you think that you have got nearer to not having the accounts qualified this year? Would you like to hazard a guess as to whether you are in striking distance of escaping from this next year?

Ms Little: We still have a lot of work to do. Having read all 11,000 contracts that we think are within the scope of the new accounting standard, we now have to value them, assure the quality of that valuation, and work out how to then bring it on to the balance sheet. Our work is by no means done and there is a lot to do in the next six months.

Q37 Dr Lewis: Do you think that you have got closer to not being qualified this year than the year before?

Ms Little: Absolutely.

Q38 Dr Lewis: Do they give you a sort of points score, so that you know what your grades are, as if it were a GCSE?

Ms Little: I am afraid auditors don’t quite work that way. I would say that the previous qualification, in part, is because there are lots of people who did not think it was their responsibility to understand accounting standards and left it to technical finance people to do that work on their behalf. Of course, accountants are not there on the frontline; they are not running programmes.

One of the biggest changes that we have made, certainly in my time, is the amount of training to non-accountants that we are doing in the core standards that impact our work. You may recall me coming to the PAC to talk about contingent liabilities. We have trained nearly 3,500 people on IAS 37, which, I have to say, is my favourite accounting standard and everyone should understand it. Ultimately, we need to keep going and ensure that people see it as part of their responsibility, not just the finance function.

Dr Lewis: I think it is a mark of approval that the NAO did appear to recognise that you are making progress. Obviously, this is a discussion to be continued in 12 months’ time.

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RECRUITMENT PROBLEMS

Q58 Mr Francois: This is my last question, Chair – you have been very decent. The answer we have at the moment is patently disastrous. Go to frontline infantry battalions and see all the soldiers who are missing. We are companies short. That is the effect in the real world of these idiots, and yet you cling to them like glue.

Sir Stephen Lovegrove: I really do not think that we cling to Capita like glue. You gave the good example of the DIO, where we moved decisively away from them. I also think that the problems of recruiting in the Army cannot be laid wholly at the door of the recruiting system. There are much bigger things in society and –  

Q59 Mr Francois: Yes, but the RAF and the Navy face the same challenges, and yet they manage –  

Sir Stephen Lovegrove: But they have a different offer. There is no question, as I said before, that the RAF and the Navy used a different way of making that first contact with potential recruits, which the Army have recognised is a better way of doing it than the way that they used to do it.

Mr Francois: My final point before I hand back to the Chairman, Sir Stephen: the emperor has no clothes. Everyone can see that this is a disaster. Just because a couple of very senior generals will be embarrassed doesn’t mean that you have to run this out to 2022. We all know that it is a total basket case. Before we have infantry battalions with one company left in them, for God’s sake, do something about it. My final word.

Q60 Dr Lewis: Are you being prevented by people in uniform from disposing of this contract?

Sir Stephen Lovegrove: Absolutely not. I can give the Committee the firmest possible reassurance that neither I nor any of my colleagues will be dissuaded from making the right decisions by virtue of the amour-propre of senior military officers.

Q61 Dr Lewis: You mentioned the distinction between the back office and the front office, when you talked about the interaction between recruits and uniformed members of the Armed Forces recruiting them. I can only speak from my very limited experience when I joined the Royal Naval Reserve in 1978 that to me, if there had not been a recruiting office on the high street, I would probably never have done it. I suspect that when Mr Francois joined the TA, I believe – in what year?

Mr Francois: In the last century, Chair.

Dr Lewis: But not as long ago as me –  

Mr Francois: I joined at university.

Dr Lewis: Okay, in that case that was the way in, but again you were interacting with uniformed personnel in doing that.

Mr Francois: Yes, sir.

Dr Lewis: But what about the back-office side of things? How can it be that in making a presentation on defence to a group of retired officers a few days ago, I was told by one that his grandson is keen to join the Army, and he has been told that he will have to wait until next September before he can go to Sandhurst? His life is on hold for 11 months because the system is too inflexible to seize recruits with both hands and say:

“Welcome. Come on-board straightaway.”

Have you any observations to make on either of those two things, the first one being of the rather obvious nature that if you want to get young or youngish people interested, you want them to be interacting with people who look like what they wish to become?

Sir Stephen Lovegrove: As I say, the Army is very open to the realisation that they got that part of it wrong. I think what they would say in their defence, although it would only be a partial defence, is that it was a time when there was intense activity in south-east Asia, and they needed to get as many soldiers on to the front line as they could. They took the view that they could do some of the recruiting without that interaction of somebody in uniform. It did not work, and they are going back decisively to the former, rather obvious approach that you outline.

Q62 Dr Lewis: So there is no question that Service recruitment offices are going to continue from now on, then, in those other Services. There is no question of the Army not bringing them back.

Sir Stephen Lovegrove: I do not know about the offices. I do know, when we are talking about the first interaction with the system that a potential recruit will have, it will be much more generated and channelled through serving military personnel. It will not be with a –  

Q63 Mr Francois: Why do you need Capita, then?

Sir Stephen Lovegrove: Because there is a back-office processing exercise that they provide to us. One of the problems that both Capita and the Army have been very clear about is that at the beginning of this contract, they both hugely underestimated the complexity of transforming that back-office system.

Q64 Dr Lewis: And the 11-month wait for Sandhurst?

Sir Stephen Lovegrove: I am not in a position to answer questions about Sandhurst, because I simply do not know what the normal wait would be, or an 11-month wait in comparison with it. What I do know is that as a result of the initiatives that we have been putting in place for ordinary recruits in the past nine months or so, the transition time has come down from 200 days to 150 days. That is still too long, and certainly –  

Q65 Dr Lewis: Do you know what it used to be?

Sir Stephen Lovegrove: We accept that it is still too long.

Dr Lewis: But do we know what it used to be before this outsourcing?

Mr Francois: Nothing like that.

Sir Stephen Lovegrove: Ninety is a number I have in my mind, but I would have to get back to you on that.

Q66 Dr Lewis: So it used to be about three months, and then we brought in this system and since then, it has skyrocketed.

Sir Stephen Lovegrove: Whether or not it was purely because of the system is open to question, but we are very conscious that that passage time has to come down a lot. It has come down a lot; we are working on making sure that it comes down further.

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DEFENCE EXPENDITURE & GDP

Q84 Gavin Robinson: Perhaps, if you have time, we could discuss that afterwards. Will the spending review 2019 that has been announced increase the level of defence spending as a percentage of GDP and, if so, by how much?

Ms Little: Government has not yet agreed to what extent there will be an SR or SDSR, for how long and over what time period. Just to build on what the permanent secretary said earlier, we would expect some sort of fiscal envelope to be set, and we would expect there to be some sort of discussion about how we would measure defence spending. Obviously, the 2% and whether it is 2% or higher is the sort of discussion we would expect to have as you enter an SDSR, but none of that has yet been agreed.

Q85 Dr Lewis: Sorry – I just want to clarify that. What we are talking about – what was behind this question – is that the spending round that we have now –  

Ms Little: Yes, apologies.

Dr Lewis: It’s all right – don’t worry. The spending round that we have now is just this £2.2 billion extra, although a lot of that was for pensions. And what we are looking at are the two sets of figures that we have. We have calculated as a Committee, doing the best that we can, that on the basis of the NATO rules, we are on 2.1% GDP, which we believe – on the basis that we used to calculate it – equates to 1.8%. And just to give you an idea, our rough calculation is that the £2.2 billion would just about take the 2.1% up to 2.2%, and the 1.8% up to 1.9%. We wonder whether you agree with that; it’s not a trick question.

Ms Little: I did see your paper in July, which updated the 2% calculation –  

Dr Lewis: That was before this announcement, of course.

Ms Little: Yes. So, broadly, yes, I agree with your calculations. We haven’t done the old calculation; we only use the NATO definitions.

Dr Lewis: Well, I’m sure you do, because the old one takes us to below 2%.

Ms Little: The one that I focus on is Government policy on the 2% and it is the one that I am audited against. To be precise, it was 2.13%. Obviously, that assumes that the percentage of defence spending remains equal and that GDP remains equal. The big thing for us now is, obviously, to get a revised forecast for GDP.

Q86 Dr Lewis: Yes, but like for like, assuming – ?

Ms Little: Like for like, it is 2.13%. It broadly maintains the level of defence spending as a proportion of GDP –  

Q87 Dr Lewis: So you don’t think the £2.2 billion will take it up to 2.2%? Ms Little: It’s a very small increase. So, in real terms –  

Q88 Dr Lewis: Because it’s £2.2 billion over two years, isn’t it?

Ms Little: Yes. That’s correct.

Q89 Dr Lewis: So you think we are really still at 2.1% on that?

Ms Little: Yes, it’s still around 2.13%, using the latest GDP forecast.

Dr Lewis: Thank you. That is helpful; that is clarity.

[ … ]

NEW THREATS, CONVENTIONAL FORCES & SPECIALIST SKILLS 

Q116 Dr Lewis: We have about half an hour and just eight topics to go, so you can do the maths. I want to make a couple of quick points on Martin’s questions. The point about cyber skills versus conventional activities obviously harks back to the quite robust exchange that you and I had right at the beginning, Stephen, so may we just get this firmly established?

While we accept that there are a whole new raft of threats that we have to face in the 21st century as a result of these new dimensions, most notably cyber-space, we do agree, don’t we, that these are threats that are additional to the traditional hard-power threats for which we have to supply Armed Forces and conventional capabilities, and they are not substitutes for them?

Sir Stephen Lovegrove: We are absolutely with you that there is not going to be any substitute for having hard kinetic power of the type that we have and will always require.

Q117 Dr Lewis: We are completely at one on that. To go back to the programme about addressing military skills gaps, Richard, the reason that that question was in there was that in your report on page 75, you actually refer to “further work to address skills gaps”, which was “a key consideration…of the Modernising Defence Programme.” It said:

“a programme initiation exercise has been carried out. It aims to bring together execution of this plan and the Enterprise Approach Project into a single and coherent programme of activity. This is in response to the NAO and Public Accounts Committee reports of April 2018 and September 2018 respectively.”

That is why we are interested to know what progress you had made in that respect.

Air Marshal Knighton: That is the programme that the Chief of Defence People runs. The enterprise approach was about working through how we can sustain the skills that the defence sector needs, both inside and outside the Armed Forces, by changing the relationship with the private sector – the commercial sector – and the whole force, so civilians and reserves. General Nugee has brought that programme together. It is not a programme that I imagine will stop in my time of service; that is something that we need to continue working at to make sure that we continue to develop the skills we need.

[ … ]

WAR WIDOWS, FLEET SOLID SUPPORT SHIPS & FLYING TRAINING DELAYS

Q146 Dr Lewis: We are doing quite well. We have got just three topics left, but they are all highly specific. I do not expect that we are going to resolve them here, but they are ones that matter a lot to this Committee. The first is the War Widows’ pension issue, which I am sure you are familiar with, and I give you fair notice we will be raising it in the strongest possible terms with the Defence Secretary next week. The issue is, as you know, that the law was changed by the David Cameron coalition Government so that, on remarriage or cohabitation, no longer would War Widows lose their pension which had been awarded after their bereavement and in recognition of their sacrifice.

The problem that remains is that something like 260 or so were not covered by this, in respect of the fact that their War Widows’ pensions, which are largely symbolic – I believe it is about £7,000 a year, something of that sort – have not been automatically restored to them. However, were they to divorce their second husbands, as it usually is, the pension would be restored to them, and were they then to cohabit with or remarry – including remarrying the second husband they had just divorced – it would not be taken away from them.

We know that this is a problem primarily with the Treasury making difficulties about precedents, and so on, although we understand that a similar problem – I am looking at you, Gavin, here – was resolved in respect of Police Widows in Northern Ireland. We believe that this is a monstrous and disgraceful state of affairs and we expect Defence Ministers to grip it and to simply announce that these pensions will be restored. We are not going to let go of this till it happens. Cat, you are looking as if you know all about this.

Gavin Robinson: You are right to say that the Department of Finance and Personnel at the time in Northern Ireland resolved it for Widows of the Royal Ulster Constabulary, but there is an immoral imperative where you have two individuals who served alongside one another and if they were killed together – one RUC and one UDR – the wife of the RUC has had it restored and the wife of the UDR has not.

Dr Lewis: This cannot be allowed to continue. It is one of those things where, frankly, you are going to lose on it if you resist it, so why not make a virtue of necessity and get these pensions restored, and argue about it with the Treasury afterwards?

Ms Little: The very simple answer is that the Department is very sympathetic to the issues and the Secretary of State has asked for some urgent advice on this issue.

Q147 Dr Lewis: Not from the Treasury, I hope.

Ms Little: No, from the policy functions within the Department. Of course, we are very mindful of the fact that Treasury’s view is that there could be precedent, and we are also aware of the other, historical cases that have been settled. So the simple answer is, sympathetic, and urgent advice is being pulled together.

Q148 Dr Lewis: Can I just suggest something? It is rare that I recommend people to read any speech that I have ever made in the past, but I did seek, and quoted from, four letters from these Widows in a speech on 22 November 2018, and I defy anybody to read those four letters without being deeply moved by what those brave ladies said, including one who felt it sufficiently necessary to join the Armed Forces herself, seven years after her husband had been killed in action.

The next one is the tenders for the fleet solid support ships, which, as you know, is something that we feel strongly should not have to be put out to foreign tender given the advantages to British shipyards and, in particular, the way it would help to keep a flow of work going through places like Rosyth in between carrier refits, for example. The specific question is, have you considered reclassifying fleet solid support ships as warships given that some of our allies do exactly that? Then you could restart the tender. Would there be any particularly unbearable costs associated with this?

Sir Simon Bollom: There are two parts to the question. One is the ongoing fleet solid support competition, and then there is the forward policy. With regard to fleet solid support, as you know we put that out to tender. We put it out to five interested parties. The bids have been received, just at the end of last month, and we are going through those right now. I hope you will understand that I can’t really comment on those particular bids, or any of the specifics. As we come towards the end of the year, we will come to a judgment on that.

Q149 Dr Lewis: Are you obligated to accept the lowest bid, or can you take into account both the prosperity agenda and the implications for us having a coherent shipbuilding strategy that will enable us to keep our shipbuilding footprint in being over the medium to long term, so that it is available when we need to do other things with other warships?

Sir Simon Bollom: On that specific, I cannot really go into the criteria; we discussed those at the last session, but essentially there is a value-for-money judgment. It does not just take the lowest bidder. We are going to be looking for technical compliance. We are going to be looking at a whole ream of qualifying elements within each tender. A broad assessment is carried out.

Q150 Dr Lewis: Do the elements that I have just said – the prosperity agenda and the strategic shape, continuation and size of the shipbuilding footprint –  count in what you consider?

Sir Simon Bollom: Certainly the strategic shape of the shipbuilding enterprise – I am not sure how we would actually be able to do an assessment around that. We have not set those criteria out.

Q151 Dr Lewis: If you knew that, for example, in the case of the Rosyth shipyard, it could make a decisive difference to whether that shipyard is still viable in, say, 10 or 15 years when we might need it to refurbish HMS Queen Elizabeth the aircraft carrier, that would surely be a relevant consideration on whether we were able to give it the work that would keep it going by having one or more of these big fleet solid support ships being built there.

Ms Little: I am the chair of the investment approval committee, which oversees the way in which we make decisions, and it is entirely legitimate for us to bring into our consideration both prosperity and the operational and practical implications for the shipbuilding industry. When we talk about value for money it is not just about lowest cost; it is obviously about making sure that we are doing the right thing to deliver a capability within the budget envelope that we have, and maximising the amount of money that we have available.

Q152 Dr Lewis: So we are able to take those things into consideration.

Ms Little: We are able to. One of the challenges that we have is being able to reliably quantify some of the economic impacts. I think Philip Dunne quite rightly pointed out some of the things that the Department has to do in order to better quantify the impact economically on prosperity, so that we can take it into account more fully.

Q153 Dr Lewis: We have the main thrust of it, but just coming back to the question, have we considered reclassifying these ships as warships given that some of our allies have done precisely that, and would it cost us a great deal of money to restart the tender if we were to reclassify them in that way?

Air Marshal Knighton: Shall I pick that up? If I may, Chair, I will talk about Rosyth in a moment as well, because I am aware of your interest in that.

Dr Lewis: Yes; you have about six minutes.

Air Marshal Knighton: The competition is running, and it was established on the basis of the classification of the fleet solid support ships not being a warship. We will not change that classification while this competition is running.

Q154 Dr Lewis: Might you change it in the future?

Air Marshal Knighton: That would be a matter for Ministers to decide in the future, alongside all other policy matters. Just on your point about Rosyth, it is worth making the point that the preferred bidder for Type 31 intends to build those ships in Rosyth. That would overlap with a period where fleet solid support is due to be acquired, and so actually the security around the future of Rosyth is set for at least a decade, really, as part of that Type 31 programme. We know that there are future requirements in the maritime sector for surface ships – for example, Type 45 will need replacing as well – so we will consider all of those factors when we approach the programme for the future shipbuilding requirements for the UK and for the Royal Navy.

Dr Lewis: You all seem pretty much unanimous that it does not just go to the lowest-cost estimate for short-term savings, and naturally we would approve of that.

Q155 Gavin Robinson: Is it right to say that there has been a change in that approach? I have to say that in the exchanges we have had, Sir Simon, that is not what has been said. We have gone through scoring metrics; we have asked you clearly about whether there is an appreciation for national spend, tax receipts and wider implications, and your answer was always no, so has there been a change?

Sir Simon Bollom: No –  

Q156 Gavin Robinson: Or are you talking in the round, that these are things that can feature but actually don’t?

Sir Simon Bollom: If I may, I have to make it clear that the important thing – whether you agree with it or not – in doing an international competition is that there has to be a level playing field for all of the bidders. When we are looking at the strategic laying down of the footprint for whatever solution we choose, we have to do that as a second-order consequence, but it is really important, and I just want to state that where we have issued a set of criteria to all of the bidders, we will stick by that.

I think the reference that Cat was making here is that when we sit down and look at that evaluation on the investment approvals committee, clearly we can take a number of factors into account.

Ms Little: We are talking about two things here. One is the very commercial assessment process that the DE&S, or any other delivery agent, will undertake on our behalf. At that point, there are very strict procedures that Sir Simon and his team will follow, but the investment approval committee and the Green Book for investment decision making in Government absolutely allow us to take those things into consideration. The issue, quite often, is that we are not able to reliably quantify economically the impact that some of these decisions are having, so it is my responsibility to make sure that we have enough high-quality evidence. In the absence, of course we can take it into consideration, but we do have to moderate depending on the quality of the data we have.

Gavin Robinson: One for revisiting on another occasion, I think.

Q157 Dr Lewis: We will have to leave it at that because we have one more, and that is the question of the serious shortcomings of the military flying training system identified by the NAO, and also by quite a memorable “File on 4” Radio 4 investigation not so long ago. Where are we on this ridiculous situation whereby that minority of highly skilled potential pilots who are identified as being fit, particularly, to fly the most sophisticated and complex aircraft in the world are being held for periods of years in a holding pattern – possibly to the age of something like their late 20s – before they get to do that?

I need hardly remind you, I think, about the average age of pilots in the First and Second World Wars, where by their mid- to late 20s they were regarded as positively antiquated. What on earth is going on? Is it, once again, something to do with the fact that that work is being contracted out to private sector partners instead of remaining in-house?

Air Marshal Knighton: I will start, and Sir Simon might want to add some comments. It is worth us stepping back a little bit through time to understand why we are where we are in the way that you describe it, Chair. In 2010, there was a major reduction in the size of the Armed Forces, which led to a reduction in the requirement for pilots. At the stage that the military flying training system programme was at, it was early enough in the process for it to be resized to match the future requirements set out in 2010.

At that time, I do not think any of us – I was not in the Department then, but I was obviously in the Air Force – foresaw the increase in pilot requirement that came in the 2015 SDSR, which saw significant increases in the number of pilots required, particularly for multi-engines. We brought in P-8s, we ran on C-130 longer than was originally intended from the 2010 review, we increased the number of combat air squadrons and we significantly increased the requirement for unmanned air systems operators. That decision was taken in 2015, which massively increased the demand over quite a short period.

On top of that, the period from 2015 to now has been a period where we have completely recapitalised and replaced all the flying training aircraft with brand new aircraft. So you bring a transition programme to a new exciting modern fleet – with some risk, and I will talk about the poor performance – right at the point at which you are also trying to significantly increase the throughput. The Air Force decided in that time, around 2015, to maintain the recruitment of pilots to have that group of pilots to push through the flying training system to meet that new long-term requirement for the frontline.

What has happened in the intervening period is that we have worked with Ascent and internally within the MoD and the Air Force to grow the capacity, but that takes time to develop. With the introduction of new aircraft into service, there have been teething problems with that that have caused further delays. The position that we are in today is that all the infrastructure is now basically complete. The last component of the flying training system is the basic flying training – the Texan T-6. The students are now in ground school and they will start flying training at RAF Valley in November.

We are seeing a reduction in the number of pilots in hold, as we describe it. The peak was in July 2018, when there were 261. We are down to around 200 now and the Air Force has a plan to reduce that number to around 30 over the next two years.

Q158 Dr Lewis: After this hearing, can you perhaps supply us with a grid that shows us what the story has been in terms of the career timetable of a new recruit, from what it was before 2010 through to where it is now and where it is projected to be? Just as we referred earlier to the person who has to put his life on hold for 11 months before he can get on the next Sandhurst course, this is an even more starkly alarming situation.

Air Marshal Knighton: If I may, I will mention three things. The NAO report criticised us for our ability to have really good data right across the Armed Services about that timetable. The Air Force is rather better, but I will make sure that we do the best that we can in response to the Committee on that.

Q159 Dr Lewis: I think we would like to have this updated every six months or something like that, so we can see what sort of progress has been made. I think we have to keep a close eye on it.

Air Marshal Knighton: You will be pleased to know that the Secretary of State is in exactly the same position. He has written to the Chief of the Air Staff in the last 10 days or so to explain to the chief that this is the highest priority he sees for the Air Force, and that he intends to look at the plans and the numbers on a monthly basis. The final point I would make is that, having joined the Air Force in the 1990s when we went through a similar problem, we learned quite a lot of lessons about how to manage these young people going through the system at that time and also how to support them through their careers; if you were not getting to the frontline until your late 20s, that could have an effect on your long-term career. The Air Force is considering very actively how it will manage people through that process. We are managing all of them individually inside that holding pool and making sure that they are given, to the best possible extent, meaningful, valuable work. We have seen very positive feedback from the team.

Q160 Dr Lewis: Stephen, would you like a last word about anything that you would like to summarise?

Sir Stephen Lovegrove: No. Well, I say no and then I am about to say something! As always, this has been a very helpful session. Thank you very much. I hope that you picked up in a recent speech that I gave at DSEI a reference to the work that the Committee has kicked off on an industrial strategy. Some of the questions you are asking very much accord with the kinds of question that we are asking ourselves in the Department. We look forward to talking to you more about that, because I think that many of the questions we have touched on today have some relevance to that. We are constantly working to try to make the system work better. It is a big and complicated system, as you know better than anybody, but we are committed to improving all the things that we talked about today.

Dr Lewis: We look forward to working with you all on that. Thank you very much. It has been a long session and we have covered a lot of ground. We are extremely grateful to you all.