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7th REPORT OF 2017–19: 'BEYOND 2 PER CENT: A PRELIMINARY REPORT ON THE MODERNISING DEFENCE PROGRAMME' (HC 818)

Defence review must be built on firm strategic and financial foundations

Defence Committee Press Notice – 18 June 2018

The Ministry of Defence’s Modernising Defence Programme (MDP) must address the challenges presented by the resurgence of state-based threats and be supported by a fully-funded and sustainable financial settlement, says a report published by the Defence Committee.

The report, entitled Beyond 2 per cent, has been produced ahead of the anticipated release of ‘high-level findings’ by the MDP, towards the end of June. It examines how the process has proceeded and highlights areas, including capability, commercial practices, recruitment and international partnerships, which the Committee expects the review to consider.

The report explores how the MDP had its origins in the decision taken in mid-2017 to initiate the National Security Capability Review (NSCR) in response to the development of new and intensified threats facing the United Kingdom. The aim of the NSCR was to ‘refresh’ the findings of the 2015 Strategic Defence and Security Review and look again at capabilities across 12 broad areas of national security policy, including Defence. However, the ‘fiscally neutral’ nature of the NSCR meant that any new resources applied to some aspects of national security would entail reductions in resources available to others – even though the emergence of new threats had not been accompanied by the disappearance of pre- existing ones.

The procedural and financial restrictions of the NSCR led to a range of options being produced which would have resulted in substantial cuts in defence capability across the Armed Forces, such the potential loss of the specialist assault ships HMS Albion and HMS Bulwark. The Defence Secretary, Gavin Williamson, who later described the NSCR as a ‘straightjacket’, succeeded in having the Defence element of the NSCR taken out and then initiated the MDP.

The Committee’s report congratulates him for taking this bold step. The MDP is seen as an opportunity to review comprehensively the UK’s strategic position and the military requirements which flow from that analysis. It can, in this way, be a fully strategy-led exercise, reflecting the increase in the range and intensity of threats posed by state actors, in addition to ongoing international terrorist campaigns.

According to the report, failing to finance Defence on a sustainable basis will continue to result in supposedly settled policy having to be revisited. This makes the implementation of long-term strategy very difficult and fuels the impression that Defence is inherently financially unstable.

The report concludes that the only solution is to move spending on Defence closer to 3% of GDP – approaching the level of investment made by the UK from the end of the Cold War until the mid-1990s. This could produce a long-term settlement providing strategic and financial stability. Although further reform within the scope of the MDP will be necessary, for the MoD to prove that it can be the ‘responsible owner’ of a new settlement, it should not be based on elusive and ambitious ‘efficiency savings’ in order to make ends meet.

Chairman's comments

Dr Julian Lewis, Defence Committee chairman, said:

"We hope that our report will assist in sparking debate and focusing minds on priorities that should be considered by the Modernising Defence Programme. The Secretary of State was right to remove Defence from the National Security Capability Review which would otherwise have resulted in further disastrous cuts to the Armed Forces, and we endorse his efforts to obtain a better settlement for Defence.

“The Government now needs to look beyond the two per cent minimum on Defence spending, and begin moving towards a figure of three per cent, to place our defence policy on a sustainable basis to meet new threats and fill existing financial ‘black holes’. Defence is constantly described as the first duty of government. The MDP is the government’s opportunity to show that it means what it says."

[To read the full Report, click here.]

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REPORT SUMMARY

The Modernising Defence Programme (MDP) is a Defence policy review which was removed from the wider and cost-neutral National Security Capability Review (NSCR) and placed under the control of the Ministry of Defence. This provides an opportunity for the Government to realign the size and structure of the Armed Forces with the scale and range of intensifying threats that face the United Kingdom.

It also gives the Government the chance to confront the necessity of providing the level of finance required to strengthen the Armed Forces on a sustainable basis. In doing so, the Government must break out of the pattern, observable in past reviews, of strategic direction being lost because the conclusions of the review are inadequately funded and ultimately unsustainable – leading to the entire process being re-opened and revised. This cannot be achieved if a review is underfunded or reliant on seeking spurious ‘savings’ and elusive ‘efficiencies’ to make ends meet. A firm and sustainable settlement is required to achieve strategic and financial stability.

In this preliminary report ahead of the MDP reaching its conclusions, we make a number of observations on capability and force structure, recruitment and retention, international partnerships, business and commercial practices and Defence expenditure that we would expect to be explored in the course of the MDP. This is a ‘broad brush’ exercise based both on the evidence we have received and on the conclusions of reports produced by us and our predecessor Committee since November 2015.

The Defence Secretary should be congratulated on initiating the Modernising Defence Programme and removing Defence from the procedurally unsound National Security Capability Review. By operating within the straitjacket of ‘fiscal neutrality’ and counting the cost of Defence as only one strand in a combined ‘Security’ budget, the NSCR had created the dangerous and perverse situation of potential cuts in Defence capability whilst the country was facing intensifying threats. We strongly support his efforts to achieve an increase in the Defence budget; but reforms are also necessary within the MoD to demonstrate that the Department can be the responsible owner of a new settlement.

We have made recommendations that the Government should give time for the MDP’s ‘high level findings’ to be debated in Parliament before the summer recess. We have also recommended that the Department sets out a clear account of military requirements and their cost, so that the public is more aware of the scale of investment required to discharge the first duty of Government.

In our view this settlement should be based on a level of Defence expenditure approaching the figure of 3% of GDP which the United Kingdom still maintained as late as the mid-1990s. Whenever we ask about the place of Defence in our national priorities, we are met with the mantra that “Defence is the first duty of Government”. The Modernising Defence Programme provides this Government with a perfect opportunity to show that it means what it says.