Examination of Witnesses (Questions 160
WEDNESDAY 7 FEBRUARY 2001
MP, MR KEVIN
TEBBIT CMG, AND
160. It remains this Committee's concern that
that very important statement that you have just made about the
independent objective advice may be put at risk and that companies
who are developing new technologies in civil research may not
have the confidence to believe that they are able to share that.
(Mr Hoon) The distinction that we are drawing is between,
if you like, the basic research and having the right kind of people
to be engaged in the excitement of first-stage research as against
the ability then of scientists to be able to make an assessment
of that research when it is applied to particular projects that
we are contemplating purchasing on behalf of the country. That
is the division that we have set out very clearly in the way in
which we are dividing the existing operation. Kevin, do you want
to say something?
(Mr Tebbit) Just to add to that, we will be keeping
system integration work, the sensitive technology work, the intelligent
and client/customer role, a lot of very high-quality scientists
and, also, a contracting function to make sure that we are getting
what we need and know exactly what it is we require, not just
from the privatised DERA but from all the other elements in the
private sector that are doing critical research to defence. We
have already started on placing contractsjust, at the moment,
a small proportion of our research blockout to competition.
Interestingly, DERA won 70% of those contracts on merit, but other
people won 30% of those contracts, and we would see that, I think,
as a way of increasing this resource that we can use in science,
that is not just limited to DERA.
161. Secretary of State, can we turn to page
10 of the same document? Again, in the highlighted purple section
on that page it speaks of the sharing of specialisations in our
forces amongst our allies. I wonder if you could give us an indication
of which of those specialisations will remain in the United Kingdom
and which you believe could go to our allies?
(Mr Hoon) When you say "could go to our allies",
I think what we have to do, on an entirely pragmatic basis, is
judge what capabilities we have available and what other countries
would be prepared to co-operate with in developing. I gave a couple
of illustrations earlier of the kinds of things where we perceive
there to be gaps. I think it is logical and flows from what we
are doing in relation to Helsinki and the headline goal that the
process of making an assessment of the kinds of capabilities that
each country hasand, in a sense, that is when we held a
capabilities conference in Novemberthen leads to a proper
debate which is under way and which will be the next stage of
the process of assessing where are the gaps. What are the deficiencies
in capability that the countries of Europe (and what countries
of NATO have is a parallel process in NATO) in order to be able
to participate in the likely modern deployments that the Community
needs? In those circumstances, the next stage of identifying those
gaps will almost necessarily involve a degree of multinational
co-operation because it follows, logically, at this stage, that
if individual countries have not had the ability to satisfy those
gaps they are unlikely to be able to do so in the short-term but
are more likely, having identified the gaps, to be able to work
together to remedy those problems.
162. Has a protocol been developed to, really,
get down toonce you have identified gapswho is best
able to fill them? Has any work been started on that?
(Mr Hoon) I think it is a very good question because
it is an obviously sensitive issue between countries as to how
those particular gaps will be addressed. There is not a precise
protocol or formula for achieving that. There are some indications
of the way in which this will be tackled. The Dutch Defence Minister,
for example, has made clear to the members of the Netherlands
parliament that he will make judgments for the future of procurement
in the Netherlands in the light of the headline goals. He will,
on behalf of his country, say "Is this decision going to
contribute to satisfying the headline goal in reaching a conclusion?"
The United Kingdom is not in that position because our defence
needs and our capabilities are far more extensive than simply
those set out in the headline goal, but, nevertheless, it is an
interesting indication of the way that a particular country, with
some considerable military capability, views the importance of
this process. I think you can look as well at, for example, the
Scandinavian perspective on the Nordic Brigade, because, again,
historically it has been difficult for smaller countries to participate
in these kinds of multinational operations because, essentially,
they have been trying to complement what already exists in terms
of capability. If they can fill a particular required segment
of what is needed then that is both good for the alliance or for
the European Union as well as being very positive for those particular
countries. I think there are a range of other areas. I think one
of the things that we are undoubtedly concerned about are medical
services. There is no doubt that a number of the countries who,
perhaps, do not necessarily have our war-fighting ability will
be very pleased to contribute medical serviceswhich, actually,
make a huge difference to our ability to conduct operations.
163. I hope that is not an excuse not to do
anything about our own medical services.
(Mr Hoon) It is not an excuse at all, but it is realistic.
164. Last question on the Strategic Context
document. In paragraph 84 it rightly speaks about the need for
superior intelligence and the importance of headquarters. Has
any thought been given to how that may impact on personnel and
how it structures the way in which we do business for the future?
Chairman: Information superiority, I
(Mr Hatfield) Indeed. There is a lot going on about
this in our own country. America has gone into this at great length
and General Shinseki has a particular programme at the moment.
For us there is a sort of two-step process: there is the step
of getting the most out of what we have got in the service now,
and in the course of the next 10 to 15 years there will be a huge
step-jump as we get in not only new information systems but the
precision weapons which can be used and the ability to link it
up. Work is already going on to think about how, if you like,
the concept of using those forces will change when all those capabilities
are in, in 10 to 15 years. There is no blueprint yet, either here
or in the United States, but there is very active work and thinking
about the concept which will only be possible when you have got
the whole group of precision weapons and the IS, as the jargon
goes, and the stuff to go with it.
165. I wonder if I could ask a question on reporting
cycle documents, Secretary of State. This was another question
that was in great demand, and I was lucky enough to win this one.
To what extent do you find that the documents in the MoD's annual
reporting cycle, particularly the Expenditure Plans, the Performance
Report and the Investment Strategy, are moving swiftly enough
in the direction of linking outputs to resources applied?
(Mr Hoon) The particular documents that we have published
are obviously prepared for publication and, therefore, have that
character, but I think it is fair to say that part of the underlying
reason for changing the nature of the documents that we publish
and make available is to link that publication more closely to
the work that goes on inside the department. In a sense, what
we are trying to do is to open up the processes that lead to our
reaching particular conclusions for greater examination by the
public and, obviously, by this Select Committee. So, in a sense,
what we are publishing is a distilled form of the documents that
we rely on in reaching precisely the conclusions on decisions
and on outputs, therefore, that we have within the department.
So I think the real answer is that there is a connection but it
is not that these documents are directly leading to particular
outputs and particular conclusions, but they are certainly based
on a wider process that goes on inside the Ministry of Defence.
166. You are agreeing, I think, that you see
them as a useful management tool?
(Mr Hoon) This is the distinction I am trying to draw.
The particular documents are prepared for publication but they
are based on more detailed work that goes on inside the Ministry
of Defence that, therefore, is part of the management process
of reaching conclusions in the department and therefore taking
decisions. So, in a sense, we cannot publish every single document
that the Ministry of Defence depends on, but it does mean that
you are seeing, in a sense, a picture of the wider work that is
167. Do they enable you to prioritise your resource
decisions with confidence so that you understand the effect that
you will be having on defence outputs?
(Mr Hoon) I am confident that it does because resources
are an integral part of any manager's decision about the way in
which we reach conclusions. Balancing the resources that we have
with the decisions we take and the particular equipment that we
purchase is the essence of any management decision in any organisation.
Perhaps the best person to respond to that is the accounting officer,
but ultimately, obviously, I take responsibility for those decisions
and it is central to what we try and achieve. Kevin might want
to add something.
(Mr Tebbit) It does run very similarly to what you
would recognise in a modern business. Ministers set the priorities
for the department on a daily basis, but also the Defence Council.
We know that we have to deliver the Strategic Defence Review,
that we have to modernise the department generally, that we have
to, in particular, apply lessons from operations such as Kosovo
and that we have to put in place a package for our people, which
is a wide thing. That is then done by the Defence Management Board.
We have very detailed discussions which attach resources to those
priorities, cascaded down to all sort of programmes. Indeed, later
today we will be presenting a very detailed plan allocating resources
to those priorities to the Secretary of State and his colleagues
in the Defence Council. In driving that forward over the year
we are using a thing called the Balanced Scorecard, which I have
mentioned at a previous meeting, which is a modern technique used
by most companies for tracking the way in which resources are
being used to deliver objectives in-year. It gives us signals:
red, amber or green, according to whether these are on track,
needing attention or going badly. So we do have a very complex
and efficient (complex because we are a big organisation, but
simple in the sense that it is clear from top down through to
the operating units) scorecard on how we are doing. What we cannot
do yet is link our money precisely to outputs. The reason for
that is simply the degree of accounting change which we are in
the middle of, because of the transition to resource accounts.
Once we have completed that transitionand this coming year
is the first year which will be run on accruals rather than cash,
which is a different currencythen we will be making progress
in more sophisticated output budgeting. At present we can only
really talk in terms of three big outputs: Department of State
policy, the equipment programme and our operational expenditure,
but that will get more sophisticated as we go along.
168. What would you say is the most useful management
information tool available to the MoD?
(Mr Tebbit) What we are developing, this Balance Scorecard,
covers the keyat the moment there are about 17 or 18priority
areas that we judge important, and that will be giving uswhen
I say "will be" it was started in September, so it is
coming up on a quarterly basisthe main internal accounts
for driving this. The Secretary of State will get reports on this
on a quarterly basis, and it will be the opportunity for intervention
in our Department.
169. And then?
(Mr Tebbit) To be still more basic about it, the most
important document that we continue to work from is, of course,
the Strategic Defence Review, in the sense that that sets out
our programme. It has always struck me that my job, essentially,
was to work within the framework of the Strategic Defence Review
delivering what had been worked throughsubject, obviously
(and these documents reflect it) to the kinds of change of emphasis
that inevitably will occur as the world moves on. In terms of
a basic position, I do not think that you could do better than
look at the Strategic Defence Review as a starting point for judging
what we have to achieve in the Ministry of Defence.
170. You said, Secretary of State, that the
documents you produce are just a distillation of other documentation
that the public are going to be able to look at. Is there a series
of documents upon which the public face of your own Strategic
Defence Review was constructed? If this document is only a fraction,
we saw the SDR as a fraction, are you satisfied the public is
as aware as it should be and will require to be of the options
you are working to and not just a three-volume, glossy document
which is the tip of a very large iceberg?
(Mr Hoon) I tried to give the Committee a sense of
the huge amount of work that must inevitably underlie this kind
of publication. I am sure you did not intent to disparage it by
calling it "a glossy" but the reality is there is an
astonishing amount of information here that has not previously
been published. Like any organisation, like any company, we take
decisions against a background of a very large amount of information
and a very large amount of work that is done. What I was trying
to get across is the sense in which we are seeking to extend the
public debate about the processes of decision-making by the publication
of this sort of document, which is for publication but which is
based on the kind of work that goes on inside the department.
Chairman: In fairness, there is a lot
of documentation coming outmuch more than there ever has
171. I am intrigued by the scorecard business.
None of your reports ever flag up the amber and red situations
for wider participation of Parliament, do they? That is the failure,
really. We only ever get the green gloss rather than the amber
and red warning signs. The failure, surely, and the lack of transparency
is in those two particular areas.
(Mr Tebbit) Internal management always requires people
to actually look at where management attention needs to be focused.
That is not the same as saying things are red in terms of the
total judgment of the thing, but where we need to give management
attention to make sure it is put right. That is what you would
expect us to do. I do not think we gloss over areas. I remember
this discussion with you last time. We were not saying, for example,
that we were satisfied with our performance on medical services,
it needs to improve, and we were honest about that.
(Mr Hoon) I was just looking for that precise point,
because in preparing for our meeting I was actually conscious
of a number of areas where we had indicated our concerns, and
medical services was one of them. I do not think it is entirely
fair to say that we do not flag up the difficulties.
172. But you are flagging that up, Secretary
of State, to justify a significant change in policy, which some
of us actually do not agree is going to make the situation better.
(Mr Hoon) I am sorry that I do not have your conspiratorial
view of politics.
Mr Hancock: I think you did a little
173. Just before my question, could I ask Mr
Tebbit, while he is here, how we are doing on letting the Committee
have the other four-fifths of the list of efficiency savings?
(Mr Tebbit) As I explained, I think, and as we have
explained to the Committee on several occasions and I thought
we had discussed this rather fully last time, we do not capture
inefficiencies in every single detail at the centre, it is a devolved
process to the budget-holders. What we gave you was an illustration.
I have an internal process of audit which assures us that these
efficiencies are genuinely real. That is done by the Defence Management
Organisationour internal audit process. As you know, we
struck efficiencies very high last year, at £590-odd million,
and this year we are on track for £500 million of efficiencies.
I also said that I was not satisfied that this was an ideal way
of doing our efficiency process, and we are going to be in discussion
with ministers about ways of linking our efficiencies more clearly
to our outputs rather than to this rather abstract counting of
money, which is not necessarily telling us about how we are performing,
because it is a gross figure rather than a net figure in the organisation.
It tells us nothing about the overall thrust of our achievement.
However, I am not aware that I said I was going to give you a
paper detailing every single piece of our past efficiencies.
174. I think there was reference to the document.
(Mr Tebbit) I think I told you we were going to be
moving forward with our efficiency process and that I would keep
175. The more information, I am certain, the
(Mr Hoon) Could I help to this extent, Mr Brazier,
that I was impressed by the comments you had made previously about
the efficiency process in the department, and I can assure you
that we are looking at new and different ways of securing efficiency
that, I hope, will be more effective as far as the department
is concerned but, I also hope, will satisfy you that your previous
criticisms have been taken on board.
176. Great, a move towards transparency and
very welcome, I am certain, for the whole Committee. The question
I would like to ask, Secretary of State, is on the key trends
in the application of resources over the next decadespecifically,
the balance between the two main items, expenditure on equipment
and expenditure on personnel. If, for the sake of brevity, I could
throw in an example with the main question: there is a hint somewhere
in your policy document that you see more investment in better
and better equipment leading gradually to personnel savings in
looking at the through-life costs as a whole. How do you see the
balance going between personnel and equipment savings over the
long time-frame you are looking at in your policy document?
(Mr Hoon) You know that it was an objective of the
Strategic Defence Review for the Ministry of Defence to spend
a greater proportion of its budget on equipment than in the past.
That was set out and, broadly speaking, that is what we have sought
to do. However, if your question is implying somehow that there
is, as a result, a lack of emphasis on personnel then I can reassure
you that that is not the case. We would not allow any change in
extra spending on equipment to, in any way, affect our policy
for people. Indeed, what we are looking at are ways of ensuring
that we continue to support people in the Ministry of Defence
and to a still greater extent than ever before. There is a great
deal of effort being made to ensure proper levels of pay and that
we address difficulties in relation to retention and operational
welfare, accommodation and so on. The extra spending on equipment
is not in any way affecting our policies for people.
(Mr Hatfield) Can I explain a point you picked up?
The reference to investing in equipment in order to save people
is against the background that we expect the size of the pool
of the relevant age group to reduce quite significantly over the
next 10 to 15 years. If we look in paragraph 18 of the Strategic
Context document there are some statistics. One of the ways of
responding to that, apart from increasing our recruiting effort,
is to try and reduce the requirement for service manpower, in
particular, to operate equipment and support it.
177. I understand that point in general, but
I had a helpful answer at the beginning of the week to a question
on RAF fast jet pilots. We are now a staggering 17% short. Our
biggest single equipment programme by far, the Eurofighteris
it really sound to be investing the staggering sums we are in
this very important programme if we are not going to be able to
fully man it until 2010?
(Mr Hoon) We are going to be able to fully man it.
Indeed, we are able to carry out the range of operations that
we need to today. That is not to say that we are in any way complacent
about those shortages, and there are other areas where we are
concerned about key personnel and where we are taking appropriate
action as far as financial incentives, for example, are concerned
targeted at those particular shortages. To amplify Mr Hatfield's
point, every major organisation today is looking at demographic
trends, and we, in particular, recruit 25,000 young people every
year. If the numbers from which we are recruiting are falling
(and most big organisations are concerned about that) inevitably
there will be more competition for the talented people that we
want to recruit. In those circumstances, we have to address those
issues in order to maintain the pool of pilots and other skills
that we will require in the future. The one advantage of using
Eurofighter as an example is that we do have some time in order
to train people. The actual problem, though, Mr Brazier, just
to make it quite clear, is not recruitment. We can train any number
of pilots, it takes time but there are very many willing volunteers.
The problem is keeping them.
178. Just a final one on that and then a related
question: why is it that the RAF's record in retaining volunteer
reserve fast jet pilots is so pitifully small? They have a pool
of seven part-time fast jet pilots. In America it is a large proportion
of the total, and even our own tiny Royal Naval Reserves has 14
fast jet volunteer reserve pilots. Surely that is something which
should be looked at.
(Mr Hoon) It is something that we are looking at.
It is something that I recognise we could improve and it is an
ambition that we should make that pool larger. However, equally,
we looked at the problem of retention as far as our pilots are
concerned, and the answer to your point is that there are a range
of different factors affecting retention as far as pilots are
concerned. Frankly, the state of the economy is probably the single
most important reason, because whilst the economy continues to
grow the amount of resources that individuals have available increases,
they can spend more on flying abroad for their vacations and that
is increasing the demand for pilots in the civil sector.
179. Final question: I suspect we see the hand
of Mr Hatfield in this report and I look forward to reading it
properly after the meeting. We had mention from the Permanent
Under-Secretary earlier of the importance of getting feedback
from actual operations. Is there not a danger that the growing
dominance of peace support operationsas we are currently
involved in nowmay not bias the overall setting of priorities
as against a much wider spectrum of problems and risks that we
may face, which your policy document rightly points to?
(Mr Hoon) I think it is a fair concern to express,
and certainly whenever I have meetings with the Chief of the Defence
Staffand it is right to pay tribute, at this stage, to
Charles Guthrie who is retiringhe has constantly emphasised
to me the importance of maintaining our war-fighting skills. I
doubt, with his retirement, that view of the Chiefs will change
because it is an area where the United Kingdom has particular
abilities, and you are right that it would be quite wrong for
us to neglect those skills at the expense of others.
(Mr Hatfield) I think it is fair to say that we have
actually had experience of high intensity conflict in the last
two or three years. So I do not think it necessarily follows that
peace support operations take the focus away from that either.