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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 761-v
HOUSE OF COMMONS
TAKEN BEFORE THE
THE SDSR AND THE NSS
TUESDAY 24 MAY 2011
AIR CHIEF MARSHAL (RTD) SIR BRIAN BURRIDGE KCB, CBE, ADC, IAN GODDEN, DAVID HANSELL and PETER ROGERS
ADMIRAL (RTD) SIR JONATHON BAND GCB
USE OF THE TRANSCRIPT
Taken before the Defence Committee
on Tuesday 24 May 2011
Mr James Arbuthnot (Chair)
Mr Julian Brazier
Mr Dai Havard
Mrs Madeleine Moon
Ms Gisela Stuart
Examination of Witnesses
Witnesses: Air Chief Marshall (rtd) Sir Brian Burridge KCB, CBE, ADC, Vice President, Strategic Marketing, Finmeccanica, Ian Godden, Chairman, ADS, David Hansell, Managing Director, MSI Defence Systems and Chair, ADS Small Companies Committee, and Peter Rogers, Chief Executive Officer, Babcock, and President, ADS, gave evidence.
Q344 Chair: Good afternoon and welcome. Thank you very much for coming to one of our evidence sessions on the Strategic Defence and Security Review. I think we all know you, but would you kindly introduce yourselves for the record?
David Hansell: I am David Hansell, and I am the managing director of MSI Defence Systems, an SME company. I believe I am here as a representative of the small companies committee within ADS.
Ian Godden: I am Ian Godden, chairman of ADS.
Q345 Chair: Is David here as a representative of the small companies committee?
Ian Godden: He is indeed.
Peter Rogers: I am Peter Rogers, and I am chief executive of Babcock. For my sins, I am also president of ADS.
Sir Brian Burridge: I am Brian Burridge, vice president, strategic marketing, at Finmeccanica. I am on the ADS council and the ADS defence sector board.
Q346 Chair: You are all most welcome. We would expect to keep you for about an hour, if that, but we want to get to the relationship between the defence industry and the SDSR, the National Security Council, the National Security Strategy and the Ministry of Defence in general.
The NSC has been established, the NSS has been written, and the SDSR has been written and published. Have they given you sufficient clarity to permit you to plan for the future and to develop your relationship with the MOD?
Ian Godden: Clearly, the SDSR and the NSS are helpful as part of a process, which the White Paper will continue. We are looking forward to that. The NSC is a relatively new body, which will take time to develop its own networks, its own ways of doing business and its own representation, and will require a further period before it is fully established. So far, the access for our views and opinions on various matters, including the SDSR and security issues, has been fairly strong. The NSC’s representation and consultation process has, certainly in the period from October or November onwards, has been quite active.
Q347 Chair: Would anybody like to add to that or subtract from it? No.
The working through of the SDSR has caused a lot of changes since October of last year. Have those changes been ones with which you have been involved as part of working out what the result of the SDSR is going to be?
Ian Godden: Again, from an overall point of view-each company will have a different view from being involved with direct negotiations and discussions on various projects-I would say that the consultation at a generic level has been effective, but there is still a lot of uncertainty. In many respects, having had the Green Paper, the industry is waiting for the White Paper. The Green Paper was, in the end, a significant list of questions that we’ve all tried to answer and tried to help with, but I don’t think the industry yet feels in a position to say that the uncertainty has lifted. In fact, the state of certainty is certainly not there.
Q348 Chair: What do you expect to see in the White Paper, given the questions that arose in the Green Paper?
Peter Rogers: We expect a further refinement of the directions given in the SDSR. The questions were clearly directed at a further refinement. It is fair to say that we eagerly await the White Paper, to see how far that further refinement takes us. Clearly, the more granular that becomes directionally, the more helpful it is to us.
Q349 Chair: Do you expect to see anything like the defence industrial strategy that we once had?
Peter Rogers: It would be a surprise.
Sir Brian Burridge: There may be three areas where the Government have to advance the argument for their own benefit. The first is operational sovereignty, the capabilities that need to be onshore. The second is potentially a paradox between off-the-shelf acquisition and supporting the sector through exports. The third is the manifestation reality of supporting SMEs. Those three subjects will bear some treatment in the White Paper. We may wish for more clarity over sector industrial strategies, but I think those three areas are fairly compelling for Government thinking.
Q350 Chair: The second area-the paradox between off-the-shelf and supporting the sector-has never had any clarity, has there? In the history of defence procurement, that has always been the paradox, hasn’t it? Is there any change that you notice in this Government’s approach to that paradox?
Sir Brian Burridge: If we think historically of the size of the sector and the size of the equipment programme, and compare that with what we predict might be the equipment programme of 10 years hence, the programme will be much smaller in future. Therefore, the significance of exports and the relationship with maintaining onshore capability is that much more critical. We have an unusual paradox, where on one side of the circle we have a smaller equipment programme, with a propensity for our indigenous customer potentially not to use indigenous products. On the other side of the circle we have increasing competition from the US and more creative approaches from European nations. The competitive environment is, therefore, all the more difficult and, predicting into the future, we may not able to say that this equipment is used by the UK armed forces, which is a very important brand aspect of exporting.
Q351 Ms Stuart: Can I just push a little more on this paradox? Do you think this artificial creation of competition, even when it doesn’t exist, and persistence on value for money, even when you are artificially creating the structure to do that-which we have had for the past 20 to 25 years-are creating an artificial and therefore misleading environment?
Sir Brian Burridge: If I understand you correctly, competition was necessary in the sort of defence sector that we had in the 1980s-no doubt about that-to drive out the inefficiencies inherent in cost-plus. That led to consolidation of the industry, matching the capacity to the size of the required sector. Competition still has its place, because it drives in innovation and investment into R and D, but only to the extent that there still has to be some certainty about the result. As a sector reduces-and particularly in terms of the UK’s propensity to operate small fleets-the notion of strategic partnering arrangements becomes necessarily more prominent. That is not to say it is not competitive; it is just as financially competitive perhaps as any other sort of competition because it relies on transparency. It relies on a total understanding across the customer-supplier divide. When it comes to strategic capabilities, like the ability to design and develop helicopters or design and develop uninhabited air vehicles, there is a critical mass of capability you have to have and that can presumably only in most cases be preserved through strategic partnering.
Q352 Mrs Madeleine Moon (Bridgend) (Lab): Mr. Hansell, I have a number of SMEs involved in the defence industry in my constituency and one of the things they complain about to me is not that they cannot see a contract from the Ministry of Defence when they come up, their problem is breaking into contracts where larger contracts have been set with a price and they are then subcontracting and getting in that way. Have you experienced that? Is there a problem for SMEs getting into the tendering within prime companies as opposed to the Ministry of Defence?
David Hansell: In answer to that perhaps it would be useful to explore what an SME is because it is a vast array of businesses and people from one or two-man companies right up to 250-man companies. So it is quite diverse and quite difficult to lump all of those different needs and concerns into one group. However, I understand the question and it is challenging to get into the supply chain, certainly where there are some barriers to entry in the supply chain, both contracting directly with the MoD and under a prime contractor. So there are challenges but the main way of entry is to offer value for money and that is what most SMEs do.
Q353 Mrs Moon: Offering value for money for the people who come to me has not been the issue. It is finding out where the subcontracts are being offered and how to break in to even demonstrate the capacity to offer value for money. If it is on an MoD website then it is open. The problem is that the complaint I am getting is that the prime contractors do not have an open tendering programme that allows new people to break in to offer that value for money. Is that your experience?
David Hansell: Through the committee that I chair, I have heard that voice coming through that it is difficult and challenging to get into the supply chain, particularly if you are a new vendor on the marketplace trying to break in to that market. Because there are challenges, as against a normal commercial business, where the terms and conditions from the MoD are onerous and reflected in the supply chain. So there are some big challenges in terms of the penalties and liabilities that are attached to defence business.
Ian Godden: In other industrial sectors where supply chains exist, such as in automotive and in energy, which I am familiar with, breaking in as an SME into the supply chains is not just a Government issue. Fundamentally there are huge barriers in those industries which are not Government related. So at one level some of the issues for SMEs relate to how to market yourself to multiple and global industries. As it globalises it becomes harder. A lot of our SMEs are going through that process of trying to understand how to play that game in a way that they have not had to before because, up to now, particularly in the US and France, there have been very nationally driven supply chains which have been very precise and very clear. Now they are opening up and, as a result of that, a number of the SMEs in our midst-we have about 600 in ADS-are finding that challenge quite significant.
Q354 Mrs Moon: My concern is that, if we lose those SMEs and that skills base-if the primes are not aware of the need to foster it and Government is not supporting that fostering-we could lose a huge amount of skills and knowledge just because people cannot break into the market.
Sir Brian Burridge: I talked about strategic partnering between customer and supplier; the same is true in the supply chain. In the majority of cases-our businesses don’t manufacture in-house at all-our SMEs are low-overhead, high-precision manufacturers who do an extremely good job. The relationship with them is long term, because it has to be with an SME, where it is necessary to smooth their cash flows, occasionally to manage their risk, and to provide them with orders that are perhaps in advance of when we would ideally like them to ensure that their viability maintains. That is obviously part of a long-term partnership, and, in a sense, it militates against the supermarket mentality of a prime going out into the environment and picking this, this and this team, on this occasion. It requires a long-term view.
Q355 Mr Havard: You have partly covered something that I was going to ask about, because in September last year Ian King expressed concern that industry had not had a great deal of official engagement-I think that was the phrase that he used-with the establishment, given that the NSC had been in place for three months, and then we had the review and the strategy coming together. Industry had not been involved. You seemed to say earlier that that has now changed, and that you feel that you are more engaged in the process, is that right?
Ian Godden: I think I would say that we are more consulted since then. Engaged is a different word.
Mr Havard: Quite.
Ian Godden: We have been consulted, through the Green Paper and various initiatives, by the Ministry of Defence and Ministers seeking views. We have had some discussions on this in a wider context than we had up to, say, October or November. So I think that Ian King’s comments were of a period when I think it was true that the industry felt less than consulted, but since then there has been much more dialogue and consultation. We still feel that perhaps more could have been done, but there has been a significant change in the last few months.
Q356 Mr Havard: Given that that was the case, you do not feel that you were in any sense involved in the prioritisation of the risk that came out of the assessment that the NSC made, in terms of the security strategy and the review?
Ian Godden: The SDSR is, in a way, the Government’s business. It is for the Government to set conditions of strategy for a defence review, and it is their role to decide on the allocation of resources to it. In that sense, an SDSR, from our point of view, is really a scene-setting, fairly high-level activity, which in historical terms is followed up by-what we now have-a Green to White Paper, and in previous regimes it was a Defence Industrial Strategy approach. In that sense we are in a different era of the development and process, so you would expect it to be that way. But on the consultation, going back to the Chairman’s comments about DIS, we are clearly not going through that sort of process in the same detail as we did before.
Mr Havard: The list of priorities from the Government must have an effect on your prioritisation.
Ian Godden: They do.
Q357 Mr Havard: Clearly, in terms of how you target your own resources, how you order certain things, and how you plan. Do you think that this has perhaps produced a better understanding within the NSC of what industry needs to do in order to respond? I ask that question because there is the MOD reform process, and there is always a discussion about the extent to which the MOD itself understands it. Now there is the question of the NSC, which is meant to be a cross-Government body, and which involves BIS and all of the other Departments, including the Treasury. Is there a difference with the formation of the NSC and their understanding of where industry is in this?
Ian Godden: At one level it has exposed an issue about where industrial policy for defence is. In the past the assumption was that that was part of the Secretary of State’s responsibility, and the MOD’s. Most other industrial strategy is done in the Department for Business, Innovation and Skills, so there has always been a little bit of, "Where does defence industrial policy best reside and how is it best conducted?" In the creation of the NSC that issue has not been addressed or resolved fully, which is why I say that the NSC is immature as a body. It has been established and it will take a little bit longer to mature, as we would expect. It is not a critical point. You would expect it to take longer to develop and mature. On the NSC itself, clearly we have the Secretary of State for Defence as a representative, but in terms of a business oriented, industrially oriented perspective, I think it would benefit from a bit of extra work and some extra effort. All of the industry feels that that is an area for development.
Sir Brian Burridge: There are three points that I would make on the NSC. First, it is a very good advance in the machinery of Government, particularly when it comes to strategy that becomes operations. Secondly, it is a very good forum by which to make the comprehensive approach work when it is required. Thirdly, it is manifestly useful in particular areas such as cyber where it posed the importance of the cyber threat, which is a cross-Government threat, in a way that allows industry to respond.
Q358 Mr Havard: That is partly what I was thinking. In a sense industry does not just make things for the Ministry of Defence and another industry makes things for other people. The strategy was a defence and security review.
Sir Brian Burridge: Exactly.
Q359 Mr Havard: It is the crossover between those two things and the synergy between them. How is the industrial sovereignty that may come out of a Ministry of Defence review related to the same question about sovereignty of certain things across industry, not just the defence industry, because you operate not just in defence?
Peter Rogers: I think it is fair to say that it would be dangerous to regard what we have now as a finished article. We certainly do not regard it that way. So the White Paper is key, as I said before, in terms of granularity and so on. My hope is that it will extend into that security area as well. But I suspect there will be several iterations before everybody understands more precisely what the direction is. This is a very difficult thing to get right first time. Where we are now is about where you could expect to be if you had drawn up a plan 12 months ago, frankly.
Q360 Mr Havard: In terms of doing your planning is your expectation still that that would be published in July of this year?
Peter Rogers: Yes, that is our planning expectation.
Q361 Mr Brazier: In September, defence industry representatives expressed concerns about capability holidays causing skills gaps and the effect on the regeneration of capabilities. Were these concerns addressed in the outcomes of SDSR and to the extent that they were not, what risks do you think are emerging?
Sir Brian Burridge: I would like to take you back a step if I may. The nation chooses ultimately what sort of position it wishes to occupy on the world stage and how it will occupy that. One of those is the military instrument. We, traditionally, in the UK have had armed forces who are able to operate at the edge of the envelope and, when a new threat emerges, to address that threat at an acceptable level of risk. That does not happen automatically. That happens because there is a body of knowledge here in this country in which there are stakeholders who are armed forces senior people, researchers, civil servants across Government Departments, academics and industry. That body of knowledge is what you reach into when you are about to embark on military operations and say, "I need to do this, what’s the risk?" or "I need to do this, is it legal?" The danger is that as capabilities decay, you insidiously lose that body of knowledge, whether that be in design engineering on the architecture of fast jet aeroplanes and what it means to be able to integrate this piece of kit, or whatever. The trouble is that it decays insidiously until you wake up one day and ask, "Okay, is this going to be legal?" and you have not got the knowledge to understand. You may have bought off the shelf, and that knowledge does not come with it. Skills gaps are more than just the ability to produce a finished product.
Q362 Mr Brazier: Just following immediately up on that rather intriguing train of thought, a quick question. When you say, "Is it legal?" do you mean: would the particular piece of kit we are thinking of giving a particular role in this actually be likely to do something that was illegal if we used it? Is that what you mean?
Sir Brian Burridge: I will give you an example. It was necessary in 2003 to use Storm Shadow against air defence bunkers. Storm Shadow was in development, so we had to accelerate the development. MBDA did a magnificent job at Stevenage in doing just that. In parallel, we had to understand how the thing functioned in order to explain to the Law Officers that this would actually do what it said at acceptable or minimal levels of collateral damage, for example. That is what I mean by legal.
Q363 Mr Brazier: On a specific matter, may I ask you about the implications of the uncertainty of the future of the aircraft carriers, and in particular whether we are going to have one or two, or whether we are going to sell one? We have an eight-year gap in capability, which obviously has implications for the Navy and Air Force in terms of pilots and flying skills, but what are the implications for the aircraft carrier programme and the gap in the capability? What are the implications for industry?
Chair: Please answer that question. I then want to bring in Thomas Docherty on that.
Peter Rogers: There is a recognition that there is a risk of a skills gap. You can talk about the skills gap in pilot terms, in terms of sailors or in terms of anything you like that is related to the carrier. The Ministry has recognised that, and there are a number of streams of work going on at the moment on how you deal with that capability gap. No decision has been reached on how you do that, but it is a priority question in terms of how we operate this when the carriers come into service in 2020 or 2019, or whenever it is. The recognition of it goes 50% of the way towards solving the problem, frankly, and it is not an easy problem.
Q364 Thomas Docherty: Mr Rogers, as chief executive of Babcock, you are obviously intimately involved in the ACA. The Secretary of State has recently told the House of Commons that the cost of the carriers has risen by £1 billion to £2 billion. Could you briefly outline for the Committee what proportion of that £1 billion to £2 billion is additional cost that the ACA is asking for-for retrofitting, in the case of QE, or in the case of the Prince of Wales during the construction, fitting cats and traps-and how much of that cost would be for the development of the cats and traps themselves?
Peter Rogers: The easy answer to that is no, I am afraid; we do not know. The Secretary of State has given an indication to the House-
Q365 Thomas Docherty: Do you agree with that figure, though?
Peter Rogers: No; I didn’t say that. I said that the Secretary of State has given an indication to the House. We are currently doing the engineering estimate- our request to the Ministry. It is a big departure, and the timing on that-don’t forget the equipment is American-sourced, and it is new equipment-
Chair: I will need to ask you to speak up, please.
Peter Rogers: I am sorry; I thought I was shouting.
Chair: No, you are not shouting, but feel free to shout if you would like.
Peter Rogers: There are huge uncertainties, and if the Secretary of State says that it is £1 billion to £2 billion, of course I, as a supplier, believe that that is true, but the engineering estimates have not been done. As a supplier, it would be irresponsible of us not to deal in engineering facts and real engineering estimates, and they will not be available this side of the end of the year. The plan at the moment is that we get the P50 estimates by the end of the year, which will enable us to be contracted for fitting the cats and traps by the end of 2012 with very specific numbers. But you will appreciate that it is a very large engineering job to do this.
Q366 Thomas Docherty: But you will accept that a decision to switch to cats and traps has significantly added to the cost of the project?
Q367 Chair: Do you think that it will have added to the time taken to build the aircraft carriers?
Q368 Chair: But, according to the Bernard Gray report, retrofitting stuff and therefore adding to the time, adds to the cost. Is that right?
Q369 Chair: So delay equals cost?
Q370 Thomas Docherty: But you do not know that yet?
Q371 Chair: But looking at that one element of it, you can see just a little bit of cost and delay creeping in somewhere, can you not?
Q372 Mrs Moon: Can you give us an idea of what effect on the credibility of Britain’s defence industry and our skills capability was created by the decision to scrap the Nimrod MRA4 as not fit for purpose, given how far the project had gone? Did that have an impact right across the industries that were involved in the development of that platform?
Q373 Mrs Moon: And credibility for British industry-is that damaged?
Sir Brian Burridge: It is worth pointing out that the sector is very narrowly defined, in that customers do not tend to generalise. If they are buying a maritime patrol aeroplane, they certainly would not come to the UK, but that does not affect their judgment about a fast jet aeroplane, an armoured vehicle, or whatever. It tends to be very narrowly defined.
Q374 Chair: Can I ask you about Harrier capability? In a previous evidence session, we asked the Chiefs of Staff whether it would be possible to regenerate the Harriers, and we got various answers, which were not necessarily identical to each other. Do you think that industry would be capable of allowing the Harriers to fly again if it were requested to do so?
Peter Rogers: I think it would depend how much you were prepared to throw at it. Anything is possible.
Q375 Chair: That is one of the answers we got. Have the relevant people-the relevant experts and engineers-been dismissed from industry?
Peter Rogers: I cannot answer that, Chairman. You would have to ask the companies concerned.
Ian Godden: No, I cannot answer that either.
Q376 Chair: If you can’t, you can’t.
There are reports that the Ministry of Defence is considering further reductions in personnel and equipment; this three-month review is going on. Do you know anything about what is happening? Are you involved? If you are, know, and can tell us, what impact might it have on the defence and security industries?
Ian Godden: The trade association is not involved. As far as I am aware, none of the specific companies are involved in discussing that aspect of the review.
Q377 Chair: So, you are essentially just waiting for these tablets of stone to be produced from on high?
Ian Godden: Yes.
Q378 Chair: You do not have to be rude, but what do you think about the skills base within the Ministry of Defence, in terms of dealing with contractors and with the defence industry? Are improvements being made there? Is there anything that you recommend that the Ministry of Defence should do to improve its skills base?
Ian Godden: I will start with a relative ranking, rather than an absolute one, because I know that we need to come back to the absolute ranking. In relative ranking terms, if you believe any of the international studies, we are the best in the world. McKinsey and John Dowdy published a report demonstrating that, and I recommend that the Committee read it. I cannot remember the title, but with his permission, I will send it to you-he has certainly given permission for it to be used before. So, let’s start with the view that says, "We are the best in the world". We have a long way to go, however, in terms of skill base, both for the whole industry and within Government in this area. The reforms that have been discussed and reviewed before, and the reforms that have been discussed in the last year are very positive additional points that we need to work on.
So, starting from the relative, I think that we are doing very well. Starting from the absolute, there is a lot of work to be done. In the commercial area, which has been described before, there is a lot of work in contracting commercial skill, which is not a unique problem around the world. It is one of the biggest problems for all defence departments.
Q379 Chair: How should the Ministry of Defence set about doing the work that needs to be done?
Sir Brian Burridge: The end state for the Ministry of Defence acquisition organisation is that it has to be a really intelligent decision maker. It has to have a clear view about its decision-making capability, as an executive, if you will, versus its ability as a deliverer. There are areas, in terms of delivering programmes, which still could be outsourced to industry. The Committee may be aware that there is a pilot programme on CBRN-chemical, biological, radiological and nuclear detection-where the boundary between the DE&S and industry has moved all the way into industry, so that industry provides the service. That has much more potential, thereby releasing resources both to deliver manpower savings that are required in the civil service and to develop this really intelligent decider capability. That will require greater commercial and engineering expertise, so that, right at the outset, when a requirement starts to emerge in the centre at the MOD, there are skilled people who can instantly say, "Don’t think about that in isolation. Think about what else you need to do. Then we’ll go to industry and have a reasonable conversation, peer to peer, about the most cost-effective way of doing that."
It is an apocryphal example, but anything to do with wiring looms in helicopters you try to do once, because these things are hand-built. You can see the set of circumstances where modification after modification becomes incredibly expensive, and yet if you have the engineering expertise at the outset, either contracted to you by an expert consultancy or within your own indigenous capability, you start to increase your quotient as being a really intelligent decider.
Peter Rogers: The MOD is actually an easy target. It does incredibly complicated things over a long period. Sometimes, it orders things that have not been invented yet. In general, you do not hear about the successes; you hear about those projects that are less successful or even, in some cases, failures. We do not just deal with the MOD, which is certainly no worse than the Department of Health, which ordered a new computer system that five years on is £2.5 billion overspent and widely described as of no use. The Home Office has had similar kinds of problems. It is not a specific MOD problem; it is just that, because it does more purchasing and because the issues are complex, such cases tend to become public knowledge more often. That does not mean that it does not need to improve the skills, but it is not a specific MOD problem; it is a governmental problem.
Q380 Chair: Mr Hansell, do you have anything that you want to say?
David Hansell: No, I think that I am rather low down the supply chain to make a comment on that.
Q381 Mr Brazier: Following that one step further, in order to procure effectively, the Ministry needs a wide range of skills to be an intelligent customer. Some of that base went off when QinetiQ was floated, and one was left with the impression that the Ministry was down to one official as a purchaser in one or two key technology areas. Do you think that the Ministry is getting close to the point where it can no longer be an intelligent customer in some areas, because it has simply lost the in-house technology base completely, or is that something that we should not be worried about?
Sir Brian Burridge: There is a danger that the degree of specialist scientific and technology advice available to the MOD becomes very thin. In other words, it hinges on one or two people. That is not the way it used to be, where it would get a range of opinions, but, apart from that, it is as aware of that as any of us.
Q382 Thomas Docherty: We have had representations, and there has been some argument in the House and in the media, that the SDSR has particularly hit some of the nations and regions of the UK and will continue to do so as the outcomes are rolled out. What is your assessment of whether that is, in fact, based on reality? Have you seen any examples where nations or regions have either gained or lost a proportion of industrial work? Have you had to move any personnel or contracts?
Sir Brian Burridge: Perhaps I can start, because, sadly, at 11 o’clock this morning we announced 150 redundancies with 92 at Basildon and 50 at Luton. At Basildon, some are engaged in what might be called production work-machinists-but some are skilled engineers and others are support personnel. At Luton, they are almost exclusively engineers, so they are highly skilled graduates. There is a handful at Aberporth in our UAV test facility. That is the first manifestation in which we’ve had to invoke redundancies. Until now, we’ve not replaced people leaving through natural wastage, or we’ve redeployed people, but we’re now reaching the point where forward order books make redundancies inevitable.
Ian Godden: The expected impact will probably be later. There are exceptions, and there are examples of current impacts, which you’ve just heard. The expectation in the industry as a whole is that this will probably start to filter through towards the end of this year and in 2012-13, rather than right now. But there are plenty of examples in the SME community where either contracts in specific areas-small contracts with the MOD-have been delayed or future volume has been reduced.
We are expecting a hit on private high-value jobs to start filtering in now and to accelerate into 2012, but the exact extent is very difficult to judge. There are some 300,000 highly paid jobs in the UK. We don’t know how many are at risk, but clearly we will start seeing some of the effects fairly soon. Some of them have already been announced.
David Hansell: As the volume reduces, there is a disproportionate impact down the supply chain. The bigger effects will be seen lower down the supply chain in the SME area, where, traditionally, the business model of a prime contractor would be to outsource that work. With the capacity prime contractors now have within their business, they will probably retain such work in-house rather than subcontracting it down the supply chain.
Peter Rogers: That is precisely the point I was going to make. That is the model. SMEs will be disproportionately hit in some cases, because of volume reduction.
Q383 Thomas Docherty: You’ve been hit at Babcock, have you not? You have moved Somerset and Richmond from Rosyth dockyard to Devonport because you have lost the 22 contracts.
Peter Rogers: No, it is much more complicated than that. If I had to say that, yes, we had to lose 150 people as a result of that, there would be some truth in it. You know that we are still hiring at Rosyth. We are still hiring apprentices, and we are still using subcontractors. We are very busy at Rosyth. There is a balancing of work load within the company.
Q384 Thomas Docherty: I was not being critical. I simply said that you’ve had to move work to Devonport because Devonport has lost the Type 22 work it would have had. So you’ve moved Somerset and Richmond, for example.
Peter Rogers: No.
Thomas Docherty: Well, Peter Luff wrote to me on Friday to tell me that that is what you have done.
Peter Rogers: From my point of view, that is only part of the story. I do not know what the Minister said to you, but the prime motivation for moving those was commercial. It suited us at Babcock and our customer to do so, and it has not resulted in job losses at Rosyth.
Thomas Docherty: I did not say it had.
Peter Rogers: We do things all the time that balance the work load, because it is the best thing for our customer and the most economic way of doing things.
Q385 Thomas Docherty: None of you has answered the question whether you have done any analysis on whether any of the regions or nations has been more adversely affected by the SDSR decisions.
Ian Godden: No, as an industry we have not done the analysis. As you are aware, defence is scattered throughout the whole UK. Wherever I go in the UK, I am always proud to stand up and say that I am at the heart of the defence industry, and I can get away with it. So it will have an effect in all regions. We have not done an analysis of what the inter-regional impact will be, nor, I think, has any company so far affected.
Q386 Ms Stuart: In respect of the abolition of regional offices, in the case of the West Midlands, Advantage West Midlands had a technology corridor, which then had QinetiQ. Is that something you have looked at, even if you have not looked at the regional impact? Would those structures remain for you?
Ian Godden: Not specifically. We have not analysed it, other than to know that the regional shifts will have an impact. We have not done a macro study.
Q387 Ms Stuart: Will you?
Ian Godden: We hadn’t planned to, but now that you have raised it, I will go back to the office and look at the matter.
Sir Brian Burridge: We simply do not know enough about the future. Until we get the White Paper and whatever level of clarity that presents and, more particularly, until we know what the forward equipment programme is in reality, we can’t make those predictions. We can guess, but there is no value in guessing.
Q388 Thomas Docherty: Would you refute the suggestion, for example, that Scotland in particular has been hit on the industrial side by the SDSR?
Peter Rogers: I would like to see some evidence that proves that is the case, because I don’t have any. We have 3,000 people in Scotland; we had 3,000 people there six months ago; and we still expect to have 3,000 or more in a year’s time. I don’t see any evidence of Scotland being picked on or suffering more than any other region.
Ian Godden: The ADS Scotland council-we have a council of 50 companies in Scotland-has never raised that subject with me, and we have not debated it at any of our last four meetings. If it is an issue, it is in somebody else’s mind not ours at the moment.
Thomas Docherty: It is not in mine, either.
Q389 Ms Stuart: I want to take you back to the big ballpark figures. The SDSR states that there is a £38 billion over-commitment to the defence programme. Some people say that even that is an understatement. I was at a conference this morning where people thought it was closer to £60 billion. Even the SDSR thinks that £20 billion of that is related to unaffordable plans for new equipment and support. Do you think that the industry has any culpability in that?
Peter Rogers: I am always a little reluctant to try to allocate precise blame.
Q390 Ms Stuart: Rough figures-the odd billion-will do.
Peter Rogers: We work with the Ministry of Defence; it is the customer. It is not a conflictual relationship in most cases. If there is £38 billion composed of offering to buy something that we couldn’t afford at the time, or if we thought it was going to cost so much but, due to changes in specification, incompetence on the part of the supplier or whatever, it is now going to cost more, clearly there is some culpability in the industry. We would put up our hands and say that is the case.
Q391 Ms Stuart: How much would you put down to overruns in costs?
Peter Rogers: I do not know. I don’t even know whether the £38 billion is right, or whether it is £20 billion or £70 billion. We have no idea; we do not have access-we will never have access-to the detailed records of the Ministry of Defence.
Q392 Ms Stuart: But you will have access to your cost overruns.
Peter Rogers: But for one programme.
Q393 Ms Stuart: Let us start with one programme. In what percentage of a programme would you say that you have culpability?
Peter Rogers: I do not have any programmes in the past five years that have overrun.
Q394 Ms Stuart: None of you?
Sir Brian Burridge: No.
Ian Godden: The NAO does a pretty good job of assessing it. If my memory is correct, 25% of projects overrun-in the US it is 50%, by the way-and are not the right times. The averages in NAO terms are 75% of projects. The 25% is what Peter was talking about.
Peter Rogers: I am not trying to be difficult, but the only way you can analyse that is on a programme-by-programme basis, because the responsibility for these is different in each case. One of the things we suffer from as a complex is that people love to generalise, and it is far easier to generalise if you do not have the statistics. I have never seen the statistics, because you can only build those bottom upwards.
Sir Brian Burridge: Let me make specific points that you may find helpful. First, the propensity to embark on programmes with imperfect knowledge is a major shortcoming in any complex piece of project management. By and large, it is accepted in the industry that with a complex piece of equipment, system, whatever, you need to invest about 15% of the development and production costs before deciding that you are definitely going to do this; otherwise you take significant uncertainty into the programme. It is that uncertainty for which both industry and the customer bears responsibility, no doubt, but it is the reluctance of the customer to invest up front to avoid that uncertainty. It is interesting to look at the US record, where actually they take much more uncertainty into programmes because of the degree of dynamic competition beforehand.
The second point is a point for the MOD: stability of intent. If we knew that a funding line would endure and if we knew that a delivery forecast would endure without change, then the stability that that brings-as we discussed in terms of shipbuilding, there is a cost whenever there is a delay-that would change things significantly.
Q395 Ms Stuart: That leads me conveniently to the next question. If the SDSR says that major contracts will be cancelled or changed as a way of tackling this problem, then clearly that creates further liabilities. What is your assessment?
Peter Rogers: I am starting to sound as though I am being really difficult, but I don’t know the terms of the contract which existed between BAE Systems and the Ministry of Defence over Nimrod. You are quite right-it will create liabilities, and with no end result. That is for sure. The extent of those liabilities, I am not privy to, because it is a commercially sensitive document.
Q396 Ms Stuart: That is the problem, though, isn’t it? You could say that we have got the wrong people in front of us to answer the questions, but if we had BAE Systems here, they would say, "That is commercially confidential, and it’s for you to ask and for us to know."
Sir Brian Burridge: Let us revert to the Secretary of State’s speech of Thursday, where he talked about the manifestation of the project review board, and saw this as a point at which the market would intervene-in other words, if any programme that the Chief of Defence Materiel is running is not on time or budget, the team leader will be called in front of the board. If, in the opinion of the MOD, the fault lies with industry, that will be made transparent to the market. In other words, this programme is in jeopardy and shareholders will take a view-the market will take a view. That is true.
Q397 Ms Stuart: I can safely assume that you are co-operating with the MOD in tackling this problem?
Peter Rogers: It is in our interests to co-operate-we get as much trouble out of cost overruns as the MOD does; we just don’t have to report to quite such an august body on a regular basis.
Q398 Chair: One final question. What is the question that you were dreading we might ask, and what is the answer to it?
Peter Rogers: Cup of tea, please. [Laughter.] We did not rehearse this one, so if my colleagues want to venture something other than a cup of tea, feel free.
Sir Brian Burridge: It is worth having a brief conversation about research and development, not because I dread the question, but I dread the result. Research and development is the seedcorn of tomorrow’s capability. I have already said that the body of knowledge may dissipate insidiously, but certainly, if you don’t invest in research and development, then in 20 years’ time you have no body of knowledge. You have no choice, then, but to buy off the shelf and your armed forces will have to operate in a different way. We have some world-leading technologies in defence in this country onshore at the moment. It is a matter of ensuring that the White Paper acknowledges that, and in this matter of operational sovereignty recognises the importance of those technologies.
Chair: I am grateful to you for raising that, because it is an issue on which we as a Committee bang on and on and on. We will continue to do that, but I am glad that it came from you this time.
Q399 Mrs Moon: The MOD has a number of major projects itself, such as the return of the British Army from Germany. Does that have any implications for industry-the delay in getting a decision about when the Army is coming back and the changes in relation to RAF stations? Is the fact that you cannot get dates and you cannot get a review of that decision impacting on industry?
Peter Rogers: It is fair to say that yes, it has an impact to the extent that uncertainty persists. However, by the nature of the kind of decisions you are talking about, people grit their teeth and it’s business as usual. You are surprise, but what you were doing yesterday you will continue doing tomorrow, until somebody says, "We’re not doing that next week." It is clearly more helpful to have certainty. It is clearly much more helpful to have a precise date and timeline, but in negative terms I don’t think it is doing any real damage. It is just another uncertainty, which is unhelpful.
Ian Godden: Can I reinforce that? Again, on committees uncertainty is not an issue that is raised internally within the industry as the main issue.
Q400 Mr Havard: Hopefully, in July the defence industrial White Paper will be produced, from which you will be able to plan. Do you feel that it will be important for that to be supported by a development of the other idea that was proposed, which was a 10-year planning horizon for the Ministry of Defence in terms of its ability to allocate money over perhaps longer periods of time? Or is that just a desirable outcome?
Ian Godden: The White Paper is not a DIS, but it has elements of it. We are believers-I think we went public-that SDSRs should take place at least once every four or five years and that planning horizons need to reflect the projects and the programmes in the nature of business. If you risk imposing an annual or even a two-year budgeting cycle on a 10-year programme, you get the consequences of what you expect. Most corporations avoid that. They have both in place: they have budgets both tight and long-term. Now as we know, the world changes quite regularly, so 10-year plans do not last too long in one sense, but they tend to set expectations and intent and an intent that is very important. We are great believers in the one to two year, five-year review and 10-year intents as being a necessary change to the way in which we do business between Government and industry in this sector.
Q401 Chair: Before he became Chief of Defence Materiel, Bernard Gray was a little mocking about the difference between a 10-year planning horizon and a 10-year budget. Do you think that mocking approach has survived his translation to Chief of Defence Materiel?
Ian Godden: Oh dear. Chairman, was that the question you were asking for?
Chair: Shall we stop there?
Ian Godden: I think so.
Chair: Thank you. I will just say thank you very much indeed to all four of you for coming to help us on our inquiry. It has been indeed helpful and we are very grateful to you. I don’t think you’ve have put yourselves in schtuck with your major customer.
Examination of Witness
Witness: Admiral (rtd) Sir Jonathon Band GCB, former First Sea Lord and Chief of Naval Staff, gave evidence.
Q402 Chair: Sir Jonathon, thank you very much indeed for coming before us to help us with the Strategic Defence and Security Review. Your role here, with the freedom of having left the Ministry of Defence, is to be a little more independent than anybody still serving is able to be. I wonder whether we could begin by asking you about the establishment of the National Security Council. It was established to make sure the Government take decisions properly, and the MOD states: "The new NSC provides high-level strategic guidance to Departments, co-ordinates responses to the dangers we face, and identifies priorities." Do you see it acting in that way?
Sir Jonathon Band: Broadly. Let me say at the start that I think the establishment of the machinery was right. Indeed, when I was a serving Chief of Staff I argued that this was what we needed, because security and defence were no longer separate blocks. It was very much a banner, of which you might say a policeman was one end and perhaps nuclear deterrence at the other. For that reason, one needed a bit of co-ordinating Government machinery that did that and broke down the stovepipes that are Government Departments.
It was a good idea to create the National Security Council. I think it was quite demanding to ask it, as the very first thing it had to do when it arrived, immediately to redo the National Security Strategy-of which, of course, round one had been done under the last Government-and then to conduct a defence review, which is pretty challenging at the best of times, and particularly so when you do it at the same time as a CSR. The question the National Security Council was asked pretty early on was demanding. I think it did not a bad job, but it did it by co-opting people from the Departments, because it has no standing secretariat. Right now, of course, having done its work, it has no secretariat at all, really; there is a team in the Cabinet Office. I think that, enduring, it will find that mission statement quite hard without its own small staff.
Q403 Chair: Is that an improvement that you would recommend-that there should be a staff?
Sir Jonathon Band: Yes, I would. I would say that small is probably beautiful in its case, but it needs some people that are the head of the NSC’s own men and women. I really think that would be helpful. I only say that because the default factor in Whitehall is strong Departments and a weak centre, in my view.
Q404 Chair: Do you think that is the right way for it to be?
Sir Jonathon Band: If I had a say-which I don’t-my view, as a citizen of this country with 42 years in defence and knowing the current climate quite well, is that the NSC would serve the country better if it had its own small secretariat, which could balance the regular inputs from the big Departments, which it is bound to survive on. The guts of Home Office policy, defence policy and overseas aid policy will come from the Departments, but it needs some form of mechanism to balance it.
Q405 Mr Havard: One of the comments that has been made about it so far is that it has been very much Foreign Office-dominated in relation to its assessment. If that is your concern, would it be the Foreign Office, or the Treasury? Which Department?
Sir Jonathon Band: In the end, what it has got to do is deliver-its capping document-is the National Security Strategy of the day. We are on round two of that; the first one was done by the last Government. I think the National Security Strategy is a pretty good working document, except that it is not a strategy because it does not relate to resources. It is more of an aiming point. It has many of the right sentiments in it, but it is quite hard to have a document that at one end talks about numbers of policemen, and at the other end is talking about the higher levels of conventional defence and whether you should be doing stability operations or intervention. I think these things get better with time.
I don’t think I have a comment on which Government Department has greater sway in it; I don’t think I’m close enough to it. All I would say is, in the writing of the SDSR it was I think obvious that it was the first time that the MOD was not marking its own homework, in terms of review, because it was doing it within the mechanism of the NSC. That would have been different for Defence, because the last SDR in which I was a major player was the MOD’s own vehicle, and all it did at the end was pass it to Cabinet for final approval. I wouldn’t comment on which one was in the lead.
Q406 Chair: By the use of that phrase, it sounds as though you are speaking with approval of the fact that the MOD was not marking its own homework.
Sir Jonathon Band: If you believe, as I do, in a National Security Council set-up, and that therefore that should be the leader in this banner of security reviews, then the MOD has a very powerful voice, but it shouldn’t mark its own homework.
Chair: We are now moving on to the National Security Strategy itself.
Q407 Mr Havard: The reason I made the point about Foreign Office involvement and so on is that one of the questions that has come from it is the business of the declarations by the Prime Minister and others that the outcome of the Defence and Security Review, the NSS and so on is that there will not be a period of strategic shrinkage as a consequence. What is your observation on that?
Sir Jonathon Band: I am not sure whether you can turn the tap on and off on things like strategic appreciation. You either are a country with a strategic vision and a part to play in the strategy of this global world, or you are not. I don’t think that is something you can turn on and off very easily. If it was meant to say that by failing to invest in parts of defence for a period you will do no harm to your influence, then that is rubbish. Because unless you-
Q408 Mr Havard: We took evidence from the Chiefs and they said that we were no longer full-spectrum capability. Is that what you mean?
Sir Jonathon Band: Yes and no. The Navy is certainly no longer full spectrum. You cannot be a full spectrum navy without carrier aircraft. That’s a fact, just in terms of quantity. In terms of quality, it depends on the depths of your capability, but we’ll probably come to that. It is naïve to think that. If the Government’s priority is to get the books straight-and I am not challenging that view; I actually think it is very important that we get the basis of public funding straight-there are always consequences, whatever you do. I believe that if you deliberately spend less on defence, apart from potentially jeopardising some areas of capability, you will be less effective for a period. Part of that is in the influence game, because if you no longer show up at the defence party with a capability, why should your allies consult you as much? That is clear. Whether you call it strategic shrinkage or taking a risk on influence, if you do not do as much, and you are not seen to be in the van of this activity, you will be consulted less and have less say. I say that having been a Chief of Staff and knowing, particularly in the naval sense, how much the White Ensign abroad does for this country, or did when I was the head of the Navy.
Q409 Mr Havard: Do you think that is equally true of the BBC World Service?
Sir Jonathon Band: A number of our organs have a lot of say in the world, much more than we, in our good old British understated way, sometimes admit,. I have no doubt that the voice of the BBC, or the voice of our defence forces-I can certainly speak as head of the Navy-is very influential abroad, but we will be less influential while we are unable to do as much as I think we’d like to do, but cannot afford.
Q410 Mr Havard: Do you think the position is recoverable? How is it recoverable?
Sir Jonathon Band: I don’t know. I don’t know whether, if you drop out of the Premiership for five years, you get back in again. Very good question. If you do not get the funding right, you certainly will not.
Q411 Mrs Moon: I am interested in the concept of influence, and where influence is reactive or proactive. One of the areas I have been concerned about is the reduction of our listening and knowledge-gaining capability. Our ability to have eyes and ears that will give us the information that will make us-
Sir Jonathon Band: Human, electronic?
Mrs Moon: Both. Our capacity to look forward, to see what the problems are and to see what is coming up so that we make sound judgments about what we put on the ground and what we send up in the air and what we send to sea.
Have we cut that too much? Are we reducing our information-gathering capacity too much? Maritime patrol capability has been lost with all the intelligence-gathering capacity there. Have we gone too far in cutting back our intelligence-gathering capability in the various platforms within the three services?
Sir Jonathon Band: It is very difficult to say that you get to a point when you have lost something. It is very much a sliding scale. I do not think intelligence-gathering and awareness is something with obvious step changes. What is true is that our ISTAR capability has reduced as a result of the SDSR. With the reductions in Nimrod, Sentinel and all those things and with the reduction in some of the analysis equipment that the Navy took to sea we are tactically less well off. This means that if we go into a coalition to do some operations we will be relying more on other people. That is a fact. I am unaware of any high-level reductions in terms of our relationship with the Americans for the higher level stuff and, as far as I am aware, relations are as strong as they have always been. They are part of the strategic take and why the American relationship is so important.
There is another aspect to it, which is what I call horizon scanning. This is intelligent people either trying to guess the future or, more sensibly, looking at the future and saying China could go that way or this way and we will make an assessment somewhere in the middle. It is the known knowns and the known unknowns. In that aspect, I do not think we have been that clever but that is a personal view. I do not see in the SDSR the so what of an adaptable Britain. Some of the aspects of our force structure are actually not adaptable or less adaptable than they might be.
It is a complicated question. Tactically we have reduced some of our tactical information-gathering and ISTAR capabilities. Operationally, it is about doing it with others, and strategically, so far as I am aware, we are all right, as we were before.
Q412 Mrs Moon: Can I ask you about influence and capability in another way? Are we reducing the human skills base and capability of some of our people by their lack of ability to gain knowledge and experience across a number of platforms in a number of settings and how is that also impacting in terms of our influence in having a broad spectrum and inviting other nations to send their future leaders within their military to us for training.
Sir Jonathon Band: You have asked the question the bottom-up way. At the moment we went into the SDSR we had three armed forces, each of which mentally was aspiring to be able to fight high intensity on the first day of the war with the key coalition partners and allied partners. The scale of operation in the Army was corps command, which is high level and very much operational. The Navy was talking about running large task groups, either by ourselves or with a key ally like the French or with the Americans. The Air Force was talking about being into serious packets of air power.
When you aim that high you train hard and you have a certain base. There is then a cascade of confidence right down to the platoon commander because he is part of an impressive big show. If you start dropping that level of ambition, if you start dropping the quality and quantity mix, you will find that you aspire to do less. You then become a very good wingman, but you do not bring the centre forward to the party. Out of that, you are less influential, less capable, and less of an outfit that other forces benchmark against.
Even on our worst day in the British armed forces, the rest of the world is always fascinated by what the Brits are doing. Despite all that we say about our procurement and our value for money, you get more bang for the buck with the British armed forces than with anyone else. I know armed forces around the world, and I certainly know the navies. There is no one with whom you get as much bang for the buck. There is no one who has as much influence for the amount of money that is put in. In the end, it is what the country wants to do. It is all about level of ambition. If you want to be a global middleweight power, it requires a certain amount of investment. If you play with that level of investment, either in the short or long term, you will have an influence. It is quite hard to say exactly when you will get that influence-perhaps when you are first not invited to the planning conference, or when you are first not asked to do something. My fear is not that that will actually happen, because I think that people want the Brits there. It is not chance that Sarkozy and Cameron had to do Libya together. Look at the world; look at the Europe we are in. It is not surprising that the Americans wanted us to do a fairly major part of Iraq and Afghanistan. We can get in all sorts of debates about whether we had the right scale, but that is the position we are in, and the position in which we have put ourselves. We do it, because we have put sufficient investment in. We are pretty good at it, and we show up.
With what we have done now, I am not saying that we have jeopardised ourselves specifically. However, my hard view is that the level of armed forces that we look as though we are able to afford now means that playing across the piece at that higher level will be increasingly challenging, which is why I think the Chiefs of Staff said no, in answer to your question. In the Navy’s case, it is black and white: if you do not have carrier air, you do not have a full-set navy.
Q413 Mr Havard: We took evidence from Rupert Smith last week, and we had a similar discussion with him about what the SDSR provided. One thing it does, in a sense, is give a description of intent, and partly describes what you want your sovereignty to be. By default, it also describes your dependencies, particularly if you are giving away capabilities. In that context, the NSS sits alongside it and comes out of the architecture of the NSC, which also deals with security and not only defence. Do you think that that the NSS-the security strategy-is a coherent description, balanced against those things?
Sir Jonathon Band: It is a reasonably good stab. It describes a world that I recognise, and it tries to balance, to some extent, our heritage and our reality. Where it goes wrong is not at that level. It starts to go wrong when you say, "You need this bit of defence capability to underpin the hard defence bit, and you need this bit of police activity," but if you are not prepared to-or cannot afford to-pay for the underlying fruit on the tree, it questions the strategy. In the end, a strategy is about how you use a set of resources to achieve an aiming point. You can write any aiming point, but if you do not have the reality of the finances available-we could say that we want a two-corps army, but if you only have money for a one-corps or one-division army, that’s what you get. You can do it however you want, but woolly or general strategies without the underpinning finances-and, that is the fear that most of us have about the SDSR. The challenge will be actually getting to that force structure 2020, when we do not have a financial planning horizon that goes for 10 years. We know what we have for the next three years, but that does not get you to 2020.
Chair: We will come on to that in a moment.
Sir Jonathon Band: General words, I agree with, but in the end, being a practitioner of defence, I then want to see the money.
Q414 Mr Havard: Within the strategy, though, there is a list of priorities and a prioritisation process. Have you any observations about the current prioritisation of the associated risks?
Sir Jonathon Band: I might have No.4 where No.3 is. I think they broadly describe the concerns. I think the attention that they gave to cyber was absolutely appropriate. If anything, it is a bigger issue than maybe we have written down, and it is a bigger issue for everyone, rather than just Government. With the NSS and words, we could all wordsmith something better, and it was certainly better than the last one. We have got better at it. All these Government documents are used as vehicles for their own purposes, but I did not really have a problem with that, and I thought that adaptable Britain meant let us have something that is as flexible and manoeuvrable as you can. One thing that we have learnt in the last 10 years is that over-commitment is really expensive. We cannot afford it. We do not really like doing it, and we probably do not have the strategic patience to do it either.
Q415 Ms Stuart: I have been listening to you, and I am getting increasingly confused here. You say that we are a global middleweight power. You talk about adaptability, which actually assumes that we have something to adapt. Can I just put a notion to you? If you are a global middleweight power-an island-everyone talks about resilience. 95% of our imports come via the sea. If the straits of Hormuz and the Suez canal are closed, it adds another 90 days to our supplies, of which name the things that you think we have 90 days of supplies of. Within that strategy, do you actually think that we have cut the Navy too much?
Sir Jonathon Band: Yes, I do.
Q416 Ms Stuart: Can you say a little bit more? How much too much?
Sir Jonathon Band: I think that we have cut it too much, and I will give three examples. I am delighted that Force 2020 has a carrier-strike capability. It is extremely disruptive to get to not only a carrier-strike capability of some complication and some ability, but to do it without having a path to it is disruptive. In the end, if you want to be able to do independent or partially independent maritime operations, that is the sort of capability that you need. Going back to it, the NSC talk about the two environments that we must be able to fight in being littoral and urban. The Navy’s urban is littoral, and that is about amphibious capability and being able to look after your troops with air power over the top of them, so what do we do? We pull out the carrier air capability and we take one third of the amphibious force away. That is my view there.
It is things like carrier air, amphibiosity and nuclear submarines that mark a navy as a global middleweight navy. The heart of all navies-the day-to-day policemen-are your destroyers and frigates, and how many of those you need really depends on what you aspire to do and in how many parts of the world.
Q417 Ms Stuart: If we only aspire to protect the resilience of the United Kingdom, how many would it have to be?
Sir Jonathon Band: I do not believe that the resilience of the United Kingdom is best achieved by putting a frigate off Brighton beach. You actually want that frigate deployed, giving reassurance and forward presence in areas of strategic importance such as Hormuz or whatever.
Q418 Ms Stuart: Given the 90 days of supplies and given that 95% of our supplies come by sea, the straits of Hormuz and the Suez are strategic. Do we have enough frigates to deal with that?
Sir Jonathon Band: How much do the Government want to do? How many straits do you want to cover? All I would say is that, with the force level that we have at the moment, we have nine of 19-nearly one in two-of our frigates and destroyers deployed at the moment. That is a level of stretch that you cannot sustain. If the Government want to do as much activity, the Navy is too small in that area.
Chair: I will stop you there, and bring you in on this issue later.
Q419 Thomas Docherty: In terms of the amphibious power from the sea and the loss of carriers for possibly more than a decade, what is your assessment of the UK’s ability to undertake expeditionary operations, particularly where we will not have overflight from land bases?
Sir Jonathon Band: If you haven’t got carrier air, and you have a worry either that you don’t get the overflight or it comes too late for the operations, you have answered your own question. You are seriously limited. We can still do expeditionary operations. The challenge will be how high in intensity they can be without an aircraft carrier of your own, or without relying on the French or Americans to do it for you. If the members of the right partnership all agree the mission, we can probably still do quite a lot, and what we provide will be high quality. When it comes to doing something that only worries Britain, then we are badly placed.
Q420 Thomas Docherty: As a former commanding officer of Illustrious and the carrier group, how worried are you that we could go between four and seven years with Queen Elizabeth class carriers without strike capability, and that that will become a more permanent feature?
Sir Jonathon Band: At best, it is unfortunate; at worst, it’s worse than that. I am delighted the 2020 force structure has a Queen Elizabeth class carrier, with modern aeroplanes promised. I am delighted with that. That will be a greater capability per ship certainly than the current small carriers. For the period that we do not have any carrier capability, you could not do a rerun of something like Sierra Leone. We can’t do anything by ourselves where there is serious risk, because you would not do that without a carrier.
Q421 Chair: As a matter of interest, why are you delighted with the carrier capability?
Sir Jonathon Band: I am delighted that we have what is promised, because I know jolly well that during the SDSR there was a very good debate about whether we should keep it at all.
Q422 Chair: Yes, but that carrier capability, you could argue, was provided at the expense of a viable surface fleet of other types of ship.
Sir Jonathon Band: You could say that.
Q423 Chair: Would you?
Sir Jonathon Band: What I would say is that for the level of ambition that I still read into the NSS, and the sort of activities in the past two months of our Prime Minister and statements from our Foreign Secretary, it seems we need a set of defence forces certainly nothing smaller than 2020 force structure. My personal view is that in some areas that is too tight. However, that is the choice of the Government of the day.
On the maritime side, it will be very challenging to run the carrier force that we want on one ship only. We will see how we go. It is a great pity that we couldn’t afford to run the two carriers that we are building. I think we will regret that. I am glad that we are still looking at doing, even on a small scale, capable carrier operations. I am pleased about that. It is impossible to say whether we have traded too much for that capability, because I don’t know what was on the table. I know what the conclusion was and can guess some of the debates that went on. A lot of the debates tend to appear most years. To say whether it is fair or not is not a sensible answer for me to give. If we hadn’t continued to invest in carriers, even at the light level we are now, we would not be the same Navy at the end.
Q424 Chair: Is it not possible to say that over the past 10 or 15 years, the Navy has mortgaged its soul and everything else it possesses, for two carriers?
Sir Jonathon Band: No, I would not agree with that. What I would agree with was that if we had lost the carriers, after the prioritisation that we had to do, that would have been very unfortunate.
Q425 Chair: Why would you agree with that?
Sir Jonathon Band: Because in the end, if you don’t aspire to do the naval equivalent of two divisional warfare, the higher level task group stuff, then your whole reason for having a lot of the other parts of the Navy is less clear. While it is fantastic to do all these things around the world-all the maritime security operations-we can do that on the back of having capable ships, which are ready for the rainy day, and to do the high level operations. If we were not a Navy that aspired to do carrier operations, amphibious operations, I would suggest that our escort and destroyer force would be a very different capability mix of ships.
Q426 Thomas Docherty: Returning to Gisela’s point from earlier, do we have enough surface ships? If we had, for argument’s sake, one carrier in active service carrying out an expeditionary operation, it would require support and escorts. Looking forward to Future Force 2020, without the new Type 26 ships, which haven’t got off the drawing board yet, would we have enough surface ships both to carry out escort duties for the QE and to do things such as anti-piracy, anti-smuggling, protection of the Gulf straits, and so on? With the size of the surface fleet we have, will it be either/or?
Sir Jonathon Band: The smaller the Navy gets, the harder it is to do an operation and to keep your peacetime tasks going at the same time. Libya is a classic example of that, because it has suddenly required two frigates that were not required the week before. That is why we have a high level of commitment. There is no way that the British Army or the Royal Air Force could commit half their force structure, as the Navy is at the moment.
The Navy prides itself on deployment, but the figures are staggering. By my calculation, some 8,500 of the Navy’s 34,000 people are deployed today. More than 25% are out now, let alone the ones that have just come back or are just about to go. I do not know how many submarines we have at high readiness, but clearly, from what you see in the newspapers, we have a few out at sea at the moment. It is a staggering level of commitment. How long can you keep that going? The smaller we get, the less resilient we are. When the big operations come, the Navy will have to give up the peacetime tasks.
Q427 Thomas Docherty: That is the choice that we are making?
Sir Jonathon Band: The consequence of having a smaller Navy, Army and Air Force is how much you can do together, which is why the defence review makes planning assumptions about what we can do to get an idea of how much we can do together. None of those planning assumptions, as expressed, describes what the Navy does on a day-to-day basis. They never have, and I don’t think they ever will. I don’t know anything specific, but I imagine we have a ship in the Gulf, a ship in the Gulf of Aden and one down south. That’s not even the Navy rule of thumb of one in three or one in four, let alone the very smart one in five that some of our services get away with. You are getting a lot of work out of a damned small fleet, and it is going to be smaller.
Q428 Mrs Moon: When the Committee was in the United States, we went to have a look at the USS George H.W. Bush. Yesterday, the Vice-Chairman and I went to see the cats and traps in operation. One of the things that has concerned the Committee is the gap between our current aircraft carriers and the future carriers and the loss of capability and skills base, and not only of the pilots, who are the icing on the cake.
Sir Jonathon Band: That is the easy bit.
Q429 Mrs Moon: It is the deck crews and it is the management of everything that makes it safe for someone either to land or to take off.
Sir Jonathon Band: I cannot tell you how delighted I am to have a lecture from you on how complicated an aircraft carrier is. That is heartening. I wish some other people in positions of direct authority understood it, too.
Q430 Mrs Moon: We agree on that. Can we agree on the difficulties of rebuilding that capacity when the current force is stretched to the maximum and we have to take people out to build a future force? Is it realistic, and is it realistic to think that we can do it in conjunction with the Americans, who have one system, and the French, who have a different system?
Sir Jonathon Band: I agree that it is very challenging, and I agree that it is a challenge that we shouldn’t have been asked to do, because it is potentially disruptive, but I think we can do it. Our relationship with the United States Navy and the French Navy is such that they will help us to get there; without their help we couldn’t get there. To continue to keep at a low level the deck skills, the co-ordination skills and the flight planning skills-all the things that you don’t tend to hear about, unlike the good-looking pilot in a fast jet-we are going to need the French and the Americans to help us. That is absolutely clear, and I am sure the First Sea Lord would tell you the same. That is why the relationship is so important, and without them we could not do it.
Where there is a willingness there is a way. It would certainly be helpful if a number of people-I will not be drawn on who, but you can guess-were a bit more positive generally about the importance of getting this carrier strike programme going in 2020 or 2022 or whenever it happens, because it does need strong leadership to do it. It is going to be a fantastic capability. I agree that it is a challenge, but I don’t agree that it’s not doable.
Q431 Mrs Moon: We have seen and met a number of young officers who have been on exchange programmes, building up their skills and their capability. But what about junior ranks? We don’t have, I believe, a tradition of sending junior ranks on exchange programmes.
Q432 Mr Havard: This is one of those dependencies, and we have people collaborating with us to help resolve it. There are costs associated, presumably. All the discussion has been about the costs of the actual matériel, the carriers. What do you see the costs being in this, in terms of money and any other costs?
Q433 Mr Havard: Do you see there being any other costs, in terms of influence, or the ability to bargain about some of the things? For example, the shape and availability-
Q434 Chair: We were told this afternoon in a statement that no decision had been made.
Chair: I am sure they will.
Q435 Mr Havard: One of the things that we discussed with Rupert Smith last week-he had a concern about elasticities, as he called them. In all the strategies that talk about agility and the ability to deflect, what is the argument, as you see it, about changing the structure of the forces, not just in the obvious way, but this balance between reserve elements and standing forces? For all aspects of the NSS, something might not simply apply in the direct military context.
Sir Jonathon Band: There are three things that I would say. One is that the best elasticity is given by scale. With numbers of people, with size, you have got a huge reserve. I think we have all got to the stage now when looking at a navy which should be 29,000 of which 6,000 will be marines, and an air force of whatever it is, and an army of whatever it ends up as, certainly smaller than it is now, I imagine-you will lose that capacity and elasticity of scale. I don’t know whether Rupert was talking about this, but where I think you have to be really hard now is to say, "Which are the jobs which have to be done by a regular serviceman?" I believe that in support, in logistics, in supporting the tail in engineering support, there is much more room for industry to do things. Whether they need the sponsored reserves or reserve mantle we will see. To a certain extent that is a legal and duty of care issue. With the size of forces that we’ve got now, you have to be really careful about where the investment goes in the bayonets-the fighting people. Where you don’t have to have that in the regular force you can have the reserve force and you can then look at quite an elastic total force concept with industry doing more, with the reserves almost certainly doing more, and making sure that your regulars are doing what only regulars can do.
Q436 Mr Havard: Do you think there is an optimum number? The US forces are around 40% reserves. They have both scale and reserves of an order we don’t have.
Sir Jonathon Band: Without doing a bit of analysis of how you block it out I would find it quite hard to give you a percentage.
Q437 Mr Havard: Do you think in building a 2020 force structure that question about the balance between-
Sir Jonathon Band: It does. If we want to optimise the effectiveness of the three armed forces, we don’t want anyone in uniform who doesn’t have to be. The fact of life is that we have people on airbases and we certainly have people in barracks whose need to be in uniform is questionable when things are tough as they are now. It is lovely to have all these people in uniform, but they are expensive. The HR costs of people are very significant and are rising. That is why the Navy has always been very tight on manpower, which is why we have always been delighted to have lots of civilians in support and why we have the most grown-up support relationship with industry in Babcock because we don’t want those to be servicemen.
Q438 Thomas Docherty: If there were one area of the SDSR that you would like the Government to revisit what would it be and why?
Sir Jonathon Band: I would agree with the First Sea Lord. It is the carrier issue. To have no carrier air provision, even a small force, between now and when we get the new carriers is potentially quite destructive. I think, too, if I were a guessing man when we get to 2020 or 2022 if we’ve got two carriers, we will run two carriers.
Q439 Thomas Docherty: The First Sea Lord when he came before us said that he expected that we would effectively have a single squadron initially on the first carrier and that over a number of years that level would be increased. So for you, what is the point where we have an effective carrier strike? Is it when the first squadron lands or is it when we have built beyond that point?
Sir Jonathon Band: I don’t know what today’s definition of initial capability is for a carrier strike, but it is something like a worked-up squadron on board the ship, I would imagine. That is what it was in my day. In the end we will afford what we are prepared to pay for. But even a small force does something for you. At the moment off Libya there are six US Marine Corps harriers on the Kearsarge, providing 24-hour harrier carrier capability. It is only six aeroplanes and people laugh at six. That is quite a nice contribution. Now I would like it to be bigger. The basic thing is that it can do its job. It is very unfortunate that we are not in that position, but that is the way it has gone.
Q440 Chair: We know that the Prime Minister has said that it is his strong personal wish that defence spending should rise from 2015 onwards. A very distinguished predecessor of yours as First Sea Lord asked me whether I believed in jam tomorrow. What in your view would be the consequence if a significant increase in defence spending were not achieved from 2015 onwards?
Sir Jonathon Band: We are due to have the next review, aren’t we, in about that time scale? Frankly, if that review is not done with a financial assumption of real increase, people will look back and say, "Well, they were dreaming for force level 2020, because force level 2025 will be much smaller than we are even trying to get to now." That is the key issue. Personally, I would like a slightly bigger force level than 2020, because I could just see us getting involved in something where we will need a bit more scale. I am very happy, however; I have worked in a democracy all my life and I would prefer to work in a democracy. I just want to make sure that whatever we have is coherent and efficient and that it works.
If I have a worry about the CSR, it is the fact that at the moment we are driving the money throttle down. Can we pull it up at the right moment to achieve 2020? If we don’t, you have to say that the whole SDSR is rather a waste of time. In the end, it is about combat capability. Force level 2020: an Army, a Navy and an Air Force that are equipped and do their job. It is great to have an aiming point, and we have to plan for that aiming point, but to get half way down and not to know what is happening in 2015 is not an ideal way of doing that.
Q441 Chair: What do you think of the decision to change the type of aeroplane that we are using on the carrier to the carrier variant, and to put cats and traps on?
Sir Jonathon Band: In an ideal world, if you are going to do carrier aviation in the ultimate form it is the US navy form. We will never, obviously, achieve the number of hulls that they do, but it is a physical fact that the longer the run you can give the aircraft, the more bombs it can take off with and the further it will go, so that is the best way of doing it. We knew that, and Ministers knew that, when the decision was made. I personally was always happy with the VSTOL way of doing carrier aviation for two reasons. I was persuaded that the vast majority of our target sets and target ranges were within the VSTOL type capability. It was also less of a change; to go from a small carrier to a big VSTOL carrier is much less of a conceptual change and much less of a skill set change. One half of me asked why we did not do that some time ago. I hope that everyone has thought through all the issues.
My view is that that was quite a late call in the SDSR process, from all indications; I don’t know, but I think it was a fairly late call. To make the change of variant call and at the same time to get rid of your Harrier force, which would have helped you to get there, is unfortunately a strange set of decisions-let me put it that way-in my view. The Navy has got the will, as I have said to one of your colleagues, to get over that problem, but in my view it is not a clever way of doing it; it is a destructive way.
Q442 Chair: Do you think if we had made that decision earlier in that process-clearly, there were pressures within the Ministry of Defence to do so-we would have saved some money and reduced some delay?
Sir Jonathon Band: I can’t comment. I was not part of the process; I was not in the building; and I do not know exactly what the debates were. I could have a view, but that does not help your body of evidence. What I can tell you is the operational effect of various variants and things like that, but you know those. As I say, I have told you already in my evidence that I believe that reduction in the carrier air aiming point-I would prefer to have two carriers and more weight of effort planned to come from the sea, because I am absolutely sure when we get these carriers that is exactly how we will do it.
Q443 Chair: You were talking earlier as though you thought a decision had been made to have only one carrier.
Sir Jonathon Band: That is the force level. As written, the SDSR talks about one carrier in commission. I think I am right, am I not? Yes, I am sure I am right. It is one carrier.
Q444 Thomas Docherty: The Government have moved the Trident replacement into the MOD’s budget, and, as you are aware, there are huge discussions about the future of the carrier and whether or not we will commission the carrier ultimately. In the worst case scenario, given how strongly you have talked about the carriers, if you had to choose between the deterrent and the carrier strike, which is more crucial to the Royal Navy and to the UK’s armed forces?
Sir Jonathon Band: That is not something I can or should answer. I am not going to muddle the position of nuclear deterrents with part of our conventional force structure. In my view, they are not an either/or.
Q445 Thomas Docherty: I think you’re right, but were you therefore surprised that the deterrent has moved into the MOD’s budget, given that very strong principle?
Sir Jonathon Band: Deterrent money has always been in the MOD budget. When the Navy managed the arrival of Trident, every pound that we signed off the cheque book came out of the MOD vote. The question is how much the Government give you to do it. The mechanism is always through the MOD budget, and there is no special Trident bank account. The MOD is the Government Department that runs the deterrent, so all the finance goes through the MOD. The question is, when the Trident programme first appeared as something that the MOD needed to do, was the MOD given the right amount of money to execute it?
Q446 Mr Havard: One of the things that the Secretary of State said is that, if you argue that we should reopen the SDSR, you are actually arguing that we should reopen the CSR, because it’s the money that is important. You said that you thought the decision on carriers was wrong; what then would you recommend that we do in the interim period, before we get the new carriers? Is there something that can be done?
Sir Jonathon Band: I was absolutely clear-this is exactly what I said when I was First Sea Lord on whether we could afford to keep the Tornado and the Harrier going-that we needed that sovereign capability and a route to the new carrier capability, so we should keep a small Harrier force going, operating off the CVSs. When Queen Elizabeth arrives, she should be a Harrier carrier. If at some stage someone wanted to do a cats and traps change, it should go into the Prince of Wales, which would be worked up as the first JSF carrier, and then, if you could afford it, you convert Queen Elizabeth. That was a very, very simple plot, which I’d guess-though I don’t have my hands on the figures-would be the cheapest decision, too.
Q447 Mr Havard: It was very interesting that, when the Secretary of State visited the George H.W. Bush, he said what he has said elsewhere, which is that it is not a case of regenerating between now and 2020, although there are a lot a capabilities, such as the MR4A stuff, that would have to be regenerated. He said that it is not a case of regeneration, but of generating.
One thing that Jock Stirrup said to us was that because of the way that the money is currently working and the cuts in the MOD, no one is actually planning for 2020. They are planning on a flat budget, so there is no planning process in place to get to 2020, because of the way that the money works. Do you believe that this 10-year planning horizon argument is of particular importance for the future when we come to a reiteration of the SDSR? The process is not matching the declaration of policy.
Sir Jonathon Band: I think I know where you’re heading. The fact is that we have a row of figures from the last CSR, which doesn’t go for 10 years; no CSR gives you your in-years. But you still need a policy and planning horizon longer than that, so I am absolutely convinced that the Navy is planning how it gets to Queen Elizabeth-manning her up and getting her worked up. Then, if the decision is made, putting the cats and traps into the Prince of Wales, which seems to me to be the one they will take. So there will be people planning to do that with the expectation that there will be some resource. What the resource is we do not know. We hope that the Prime Minister is as good as his word and that the Cabinet of the day votes it in, but we make lots of plans in defence without knowing exactly what money will be there.
The interesting thing about this particular review and financial situation is that it is quite clear, because we’ve got the stick down to take money out of defence at the moment, that it will take a conscious political decision to pull up and put plus signs back in. That is what worries people. I’ve already answered the question; if it doesn’t happen, the next SDR will be really very challenging in terms of who gets the priority for funding. Just because you don’t know what the money will be in year five doesn’t mean that you don’t do any work for year five, year six or year seven. You keep going forwards, which is why the Navy has a transition plan for how we meet this challenging business. In broad terms, it is fairly obvious that the crew of Illustrious will go to the Queen Elizabeth, and then there will be people lent. I can just about imagine what the plan is, but I obviously don’t have sight of it. The root worry of everybody is that money tap-whether the country will be able to afford to put the plus signs in in 2015. We very much hope so.
Q448 Chair: Do you think there is still a conspiracy of optimism in the Ministry of Defence? Do you think there are strong enough moves to get away from it, in terms of procuring things in defence generally?
Sir Jonathon Band: I don’t think I can answer that. To answer that, I would have to be sitting on the defence board or on the navy board. There is a serious dose of realism around the whole defence scene at the moment, which I see from my small engagement with defence industries. There is a lot of uncertainty. We have the policy that came out in the review, and the reform unit is doing its work. You have a new chief of defence procurement, who came with the backlog of his report. There has been a big change in personalities, such as a newish CDS, a new PUS and a new second PUS. A lot of settling in is happening.
Q449 Chair: Do you think too much is happening at the same time?
Sir Jonathon Band: I think that they need to steady the ship pretty soon. We need to know what the reform unit has to say; it needs to set the course of MOD. In my view, one of the consequences of the last few years-not just in procurement, but quite a lot around that whole issue-is that I do not find the standing of the MOD in Whitehall as high as it should be. In the end, it is a very important Department. Getting defence right is challenging; it is quite a complicated formula managing defence. I tried it and was part of it. We need to change the ambience around the whole of the defence scene, whether it is procurement or force structure. If we don’t do that, at a period when we are making people redundant, the human formula is quite a delicate one. It needs strong direction, strong focus and strong commitment by the Government to what they have decided to do. We don’t want statements about we don’t want to have these carriers. We want to hear that we want these carriers and that we want them to work, and we want to go with our allies to make them work. We want to do the force structure changes in the other services as fast as we can and look to the new ground.
Q450 Chair: You said earlier that you did not have a say in something. This afternoon, you do have a say. Is there anything else you would like to say about the SDSR, the NSS or any of the process that we have not asked you questions about?
Sir Jonathon Band: There are two areas. We have talked about the coincidence between the start of the new Government, the set-up of the security council and the SDSR and the CSR. The financial stricture was a defining issue in that review. It would be naive not to accept that every review must have a financial assumption--every review that I have been part of has had a financial assumption. However, one that was in debate while the review was going on and was not settled until during the review. Secondly, the consequence of 10 years of engagement in Iraq and Afghanistan was weighing on people’s minds quite heavily. The Afghanistan factor was strong in the review, and I am not sure that I had the chance to say that.
The other thing that really worries me about resources is my rough calculation of the sums being spent on defence now and the projections into the future. It seems that once we are no longer doing Afghanistan, I fear that we are going to drop below the famous 2% of GDP. As a senior member of NATO, that would be an appalling example for us to set.
Q451 Chair: So, you share my concern that just at the moment we are leaving Afghanistan, it is going to be tricky to persuade the British people that we ought then to be increasing our spending on defence.
Sir Jonathon Band: I don’t think it should be difficult. You have to explain what you want to spend the money on. It is about influence and intervention rather than expensive stabilisation. If you can’t do that, then you can’t. I think the British nation is quite happy to spend about that on defence, but it needs a modern articulation of the argument. It is about not talking down what the country wishes to do. I think the nation still wants us to have a level of ambition. I personally think that you need 2% out of the public cake to do that. If you can’t explain that, you shouldn’t be in the job.
Chair: I entirely agree with that. Well, Admiral Band, thank you very much indeed. That has been very helpful, straightforward and punchy as ever. We are most grateful.
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