Before we start the debate, I should inform the House that while the Chair has no power to impose a time limit on opening speeches, Mr Speaker has made it plain that he expects those speeches to be kept to a maximum—not a minimum —of 15 minutes. In order to assist the opening speakers, I will now put the clock on at 15 minutes.
That this House has considered the First Report of the Defence Committee, Ready for War?, HC 26, the Eighth Report of the Committee of Public Accounts, Improving Defence Inventory Management, HC 66, and the Nineteenth Report of the Committee of Public Accounts, MoD Equipment Plan 2023-33, HC 451.
It is a pleasure to open this debate. There is only one way to start it, and it is how we should start every single debate on defence: with a clear-eyed appreciation of the threat to our country, our allies and our interests. Russia, which the integrated review identified and its refresh reaffirmed as our greatest adversary, has mobilised a war economy, spending nearly 40% of its budget on defence and security. Such is Russia’s rush to rearm that, notwithstanding all international sanctions, the International Monetary Fund has upgraded its economic forecast for the country from 1.1% to 2.6%, which makes it the fastest-growing economy in Europe.
Not only has Russia, through its renewed and devastating attack on Ukraine, shown its willingness to disregard every aspect of decency and international law, but its war machine is feeding an imbalance in munitions in Ukraine which we in the west are shamefully not doing enough to counter. The reality of war is that, ultimately, production lines tell. Notwithstanding the £2.5 billion that the UK is spending on military support this year, we need collectively to be doing more, not just in supporting Ukraine but in transforming our own supply lines. We need to enhance our own readiness to help deter Russia from a wider conflagration.
While the threat from Russia is grave, it is not the only threat we face. In east Asia, from which the Defence Committee has just returned, China has doubled its official spending on defence to $232 billion a year, although the real figure is much, much higher. North Korea is nuclear-armed, dangerous, unpredictable, and in closer alignment than for many years with Moscow. Iran and its proxies are destabilising the middle east, and, via the Houthis, pose a constant threat to shipping through the Red sea. In that regard, the Royal Navy and the Royal Air Force are actively engaged as we speak.
Following our withdrawal from Afghanistan, the willingness of the west to face up to these challenges is being studied by the global south—countries that are vulnerable to destabilisation and worse on the part of our adversaries. Any sense of the west’s being distracted, or unwilling or unable to rise to the challenge, risks encouraging the increasing number of autocratic states to act in contravention of international law. The sabre-rattling in Venezuela over resource-rich provinces of Guyana, a Commonwealth country, is just one recent example.
Has the risk picture changed for the worse in the last few years? Clearly it has. Have we fully risen to that challenge? We have not. Those of us who are old enough to recall the joy of the Berlin wall coming down will also recall that we had, in that decade, been investing more than 5% of GDP in defence—well over twice our current commitment. In 1989, there was a justifiable rationale for reductions in defence spending, but what goes down to match a decreasing threat must assuredly go back up to meet an increasing threat, and that is where we stand today.
The answer to my right hon. Friend’s question is yes. Could he explain to the House that one of the things that the Committee thought about very carefully was how candid we should be about the weaknesses in our armed forces? After much careful deliberation, we did not include anything in our “Ready for War?” report that we had reason to believe our potential adversaries did not already know.
I said we would hear from my right hon. Friend, and indeed we shall. He is absolutely right. We are incredibly careful as a Committee to keep to the right the side of the line. There are a lot of facts in our report that make for very, very unpleasant reading. I do not have time to list them all today, with the clock whirring as it is, but I commend the report. It goes through some of the problems we face in great detail. As my right hon. Friend says, they will be well known to our adversaries. If we do not front up to those problems, we will be fooling no one but ourselves.
Obviously, I have a personal interest in this matter, but I believe that over the past five years we have seen a real determination from the MOD to get better, and there are structural changes that will embed improvement. The defence and security industrial strategy moved the MOD away from competition by default and towards viewing our defence sector as a critical strategic asset. That has proved a timely intervention, placing more emphasis on building sovereign capacity and greater reassurance of our supply chains. DSIS has marked an improvement in the relationship with industry. Companies large and small are more engaged than they have ever been in the early thought processes around capability requirements and specifications. There is better investment in senior responsible owners to exercise control and authority over projects.
When the Department and industry work together—for example, on Poland’s defence expansion or on novel technologies for Ukraine—it is a formidable combination. Baking exports and industrial co-operation into procurement at the earliest stage works for industry and for the UK. Above all, achieving minimum deployable platforms early and allowing for spiral development, if properly invested against, will generate not only routinely upgraded state-of-the-art platforms, but industrial partners that are able to retain and invest in their workforce and their research and development. It means going beyond feast and famine, and towards long-term co-development.
I am glad that my right hon. Friend has mentioned accommodation, on which I focused after succeeding him as Minister for Defence Procurement. Does he agree that accommodation is as much a part of operational capability as hardware in the battlefield?
I support my right hon. Friend’s point. We had “fix on failure” for too long, although it has changed in recent years. More investment is being put into our housing, but it is needed because we have a crisis in retention and recruitment. As the report sets out in vivid and very scary detail, we are losing far more experienced personnel than we are able to recruit. Housing is part of the offer to our brilliant defence personnel that we need to get right.
While addressing all the issues I have mentioned, we must also increase our fundamental defence production capability. We underwrote commercial military expansion in the 1930s, and we should be prepared to do the same. It is absolutely clear that, although better buying will of course help, it should be alongside, not instead of, sustained, effective and increased investment.
Investment horizons on priority projects must stretch well beyond annual commitments to allow proper planning. We will make savings if the services do not gamble all their chips on the delivery of a perfect platform when it is “their turn,” and they will not do that if they know funding will be there for upgrades. Industry will invest alongside that, will work with small and medium-sized enterprises and will train the workforce we need if it knows that we are marching together for the long term rather than being marched over the edge of a cliff at the end of every order.
The need for increased defence investment would be true in any circumstances when faced by the threats we face. It is all the more vital when the United States’ commitment to Europe is being questioned. Since 2015, this Government have shown themselves to be ready to make difficult decisions, have shown leadership in the early days on Ukraine and have increased investment. In my personal opinion, the Government must now set out their timetable for reaching and sustaining 2.5%.
Although decisions should be taken “capability up” rather than “numbers down”, it is also my view that we are unlikely to be able to meet and deter expanding threats in the longer term for less than 3%, which remains a low level of annual insurance compared with the relatively recent past. However, the sooner the Government commit and invest, the lower the ultimate price likely to fall on this country. By doing so, we might be able to help save all of Europe by our example. Failure to invest could result in a very high price indeed.
I really welcome this debate, in which five former Defence Ministers are speaking. That is probably a record—certainly in recent years. I very much thank the Chair of the Defence Committee for laying out the global challenges this country faces and some of the capability concerns. Given the expertise in the Chamber, I know that we will hear more about that.
I stand here as Chair of the Public Accounts Committee, which sometimes feels a bit like the second Defence Committee because of the amount of time we spend examining the vast expenditure that this country makes on defence. Taxpayers give this money to the Government trusting that it will be spent well, but sadly all too often we see that it is not spent as well as it should be. We see money going in but we do not see the capability coming out that we require. The PAC examines that defence spending and the delivery; our job is to look at the economy, efficiency and effectiveness of how taxpayers’ money is spent by Government. As I say, the Ministry of Defence too often falls short on that.
The Committee has huge concerns about the MOD’s ability to deliver projects on time and to budget. This report is only one of our latest on the subject. Just because we have war paint on ships or something is very important, interesting and exciting technology to support our men and women on the frontline does not mean that it should not be treated like any other major project in Government and be managed well and properly. There is no point in having something perfect but late if our frontline personnel need it. As our report highlights, recent global events, which I will not go into, as the Chair of the Defence Committee has outlined them, throw into sharp focus why it is so vital that we deliver on time and that we have the capability, including industrial capability, to ramp up when something, such as munitions, for example, are used apace.
Does my hon. Friend agree that that has been made worse by the MOD’s tendency to purchase off-the-shelf solutions from the United States in dollars, which is now accounting for a huge amount of the defence budget? As she says, even with hedging, this is a deadweight around the defence budget.
My right hon. Friend raises an important point, and we could almost have a whole debate about that. We do not have time to go into the full detail today, but I will touch on our defence industrial strategy. That is what a lot of this comes down to; if we are buying things off the shelf, it can sometimes be more cost-effective, but we need to be careful and cautious, because the longer those projects are for, the greater the risk of foreign exchange challenges. There is also sometimes a risk to our own sovereign capability and the longevity of some of our defence industries.
We recognise that, with our allies, we work in an international world on this. So there is no straightforward answer, but defence industrial strategy is an area that not only the MOD but the whole of Government should be looking at, as it is vital. Both the Chancellor and shadow Chancellor talk about growing the economy, and our defence industries are based in areas where, if we could up the skills and jobs available, it could provide a major boost to the economy. So there are a lot of opportunities there.
The MOD has not credibly demonstrated how it will manage its funding to deliver the military capabilities the Government want. Our latest report says that they need to get “firmer control of defence procurement” because of this very large deficit in respect of the capability requirements needed. The budget has increased, and I am sure the Minister will stand up to tell us how much extra money is going into defence, but this is about not just the money, but how it is managed. The budget has increased by £46.3 billion over the next 10-year period compared with what was set out in last year’s equipment plan. As I said, the PAC has warned that the deficit is even bigger than expected, so that extra budget will be taken up by the deficit if it is not managed down. Part of the reason for that deficit is inflation, but another major impact on it is the costs of the Defence Nuclear Organisation, which is responsible for the vital nuclear deterrent. Those costs have increased by £38.2 billion since last year’s plan.
I am listening carefully to what the hon. Lady is saying. I have not cast my eye over the report she is speaking about. She talks about the Government or the MOD trimming projects. The lessons of George Osborne slashing the number of Type 45s in half have had a huge impact on naval capability, and of course we have more than 530 Ajax tanks to come. When we say that we must make savings, are we talking about a false economy? In the long run, it is far better to increase the GDP spend than to slash projects and totally undermine how the defence programme was originally laid out.
I am tempted by the right hon. Gentleman to go into all sorts of long discussion about how the PAC looks at these issues. Resetting projects and programmes can certainly be problematic, and sometimes stopping something part way through can be expensive. Equally, however, altering the requirements part way through can add on costs. When I talk to the commands or the centre, one problem I find is that people sometimes want to gold-plate what they are procuring, and we sometimes need to look at doing those things in a different way. Brutally, let me say that the current situation is not affordable, which means we must make hard decisions about whether something is stopped or no longer procured, or more money is made available. As I have said, and as the PAC repeats ad infinitum, if more money is made available, we need better project management.
The MOD is also saying very clearly that it will not make any decisions until the next spending review. As everybody in the Chamber knows, that is supposed to be in November, but a general election is looming. A spending review is usually six months after the first Budget of a new Government, so we could be floating on the fumes of the current spending settlement until the summer of next year. In certain cases, we will still be pouring good money after bad; the Ministry of Defence needs to tighten up on that, because it cannot live on hope alone.
I touched on industry in answer to my right hon. Friend the Member for North Durham (Mr Jones). Industry needs a consistent and certain supply of business to keep the supply chain going, both for resilience and to ensure there is proper investment in the necessary infrastructure. We have seen some of our private sector industries leave equipment and buildings to crumble because they have not had continuity of supply. Some blame lies with them, not just with the Ministry of Defence, but consistency of supply is vital and getting that right provides a potential boon to the economy.
Order. Although there are not that many hon. Members present in the Chamber, it is immediately clear that there is a considerable amount of defence expertise present. That means we are likely to have a well-informed debate, which is not always the case. That being so, I will impose a 13-minute limit on speeches. That should enable all Members to have their say, and allow time for a full and proper response from the Front Benches. I hope that will satisfy all Members. It will be a formal time limit, which means the usual injury rules will apply. If Members take interventions, time will be added.
May I begin by saying to the Minister for Defence Procurement, for whom I have great regard and who is trying to reform our broken procurement system, that everything I say in the next few minutes is not personally aimed at him? To quote “The Godfather”:
“It’s not personal…It’s strictly business.”
At his speech at Lancaster House on 15 January, the new Defence Secretary now famously said that we are moving
“from a post-war to a pre-war world”.
His words clearly resonated, both nationally and internationally. For example, when I was on a visit to Washington recently, those words were played back to us by Pentagon officials. Shortly after, in an unclassified letter to all Conservative MPs, the Defence Secretary stressed the need for industrial improvements and to rearm, in terms reminiscent of the 1930s.
However, let us consider what that actually means. The head of the MOD, a senior Cabinet Minister, has said, in effect, that we are now likely to go to war. Although he did not specifically state who with—be it Russia, China, Iran or someone else—that one statement, which I fear may turn out to be true if we do not rapidly improve our conventional deterrence, has incredibly serious implications for our entire defence and security posture. The much-vaunted integrated review has now been completely overtaken by events. In a world with increasing Iranian-inspired violence in the middle east, sulphurous threats over Taiwan emanating from Beijing and now the state-sponsored murder of Alexei Navalny, even the most naive liberals surely have to concede that the Defence Secretary might just be right. The integrated review, and its 2023 refresh, are completely lacking in any great sense of urgency in response.
Similarly, the MOD defence Command Paper, which was meant to dovetail into the integrated review, also lacked a sense of urgency, even to the point of retiring a number of key frontline systems, such as radar planes and tactical transport aircraft, in favour of new equipment, arriving much later in this decade. Many analysts expected that to change post Ukraine, but no major equipment decisions were altered, despite Putin’s barbaric invasion in February 2023—something that some members of the Defence Committee effectively predicted in a debate in this House some six weeks before the invasion began.
The right hon. Gentleman is in the unique position of being a member of both the Public Accounts Committee and the Defence Committee. Does he share my view that it is a bit like groundhog day when hear the words “defence” and “review” in whichever order? I do not know how many such reviews we have had in the last few years, yet we never see the step change necessary to ensure we will deliver the capability our country needs.
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In the Defence Committee report, we are robust not only about the professionalism of the armed forces, but about their ability to rise to any challenge. However, they are being run hot continuously, and that has a direct impact on their ability to train for, recruit and retain for, and be equipped to face the toughest challenge imaginable: a full-scale prolonged conflict, alongside our allies, with a peer adversary. That is just one of many challenges that our armed forces are designed to meet, but it is the most significant—the challenge above all others that we seek to deter.
I welcome the extensive engagement of our armed forces in this year’s NATO exercise, Steadfast Defender, but the days when that could be a routine exercise conducted by forces dedicated solely to the preparedness to face the Russian threat are long gone. Our forces’ sheer range of commitments, from global engagements to domestic MACAs—military aid to civil authorities—maintain constant pressure. The impacts are simple: recruitment and retention that is not up to the task; a hollowing out of munition stockpiles and our means to replenish them; and an inability to prepare and train for the worst-case scenario at the intensity required to bolster our allies, and with the confidence to deter adversaries. Our report highlights the urgent need for change.
To enable us to be fully prepared for peer-on- peer warfighting, something must give, be it the scale of operations and engagements or the size of national investment in defence. There is no doubt in my mind about the course that needs to be taken. The global operations conducted by our armed forces have a critical supporting role in our efforts to deter and prevent expansionism by our adversaries. What the UK needs is not a diminution of our ambition, but an increase in our investment.
In saying that, I am acutely aware of the regular charge that additional UK investment in defence is wasteful if the Ministry of Defence does not get its house in order on procurement. The Public Accounts Committee has set out in its report the difficulties faced by the MOD in meeting its equipment plan objectives. Reports over the years, not least from the Defence Sub-Committee under my right hon. Friend the Member for Rayleigh and Wickford (Mr Francois), have highlighted where the MOD needs to do better on procurement. I have no doubt that we will hear from my right hon. Friend and others about some of the core weaknesses that these reports have revealed.
I believe that the Minister’s recently announced reforms are excellent. They institutionalise reforms that really will improve our procurement, but for them to work as they deserve, there needs to be cultural change. Uniformed SROs need to recognise the profoundly different skillset that applies to procurement. They need to be encouraged to seek commercial and legal advice early in order to escalate problems. Above all, they need to be willing to recognise that when a project will not work, they should take the learning and call it a day. If we are focused, as we must be, on cutting-edge solutions, we must recognise that some will not work. For any commercial entity, that is not a sign of failure; it is a recognition that, in a portfolio, some risks will be taken that do not succeed.
In Defence Equipment & Support there are many good people doing a difficult and demanding job, but I believe it is absolutely possible, as part of the current reforms, to instil and reward greater entrepreneurialism and productivity. DE&S has the pay freedoms to do so. With cultural change and proper investment, the reforms will move us from peacetime lethargy, influenced by staccato funding, closer to the urgency and realism that the threats demand.
It is clear that no one on either side of the House should think that we can get to where we need to be against the current threat simply by being a bit better at procurement. As our report makes clear, significant improvements are required in everything from stockpiles to housing simply to retain and maintain the size of our current force structure, let alone increase it, as we should.
The PAC has examined the annual equipment plan from the MOD for more than 12 years. We have done that throughout the time I have been a member of the Committee, for the past nine years of which I have had the privilege of being its Chair. The defence equipment plan is the 10-year programme for the capability that the MOD says it requires and it lays out how that will be funded, and where the challenges and gaps in funding are. All bar last year’s plan were deemed unaffordable, but the PAC took the view that even in the year when the plan from the MOD came out as affordable, it was based on assumptions that were not realistic, and we did not believe it was fully affordable.
In simple terms, affordability is about the gap between the capability the plan lays out and the money available. As the plan covers 10 years, there have been times when Ministers, including some of the former Ministers present and perhaps even the current Minister, might have come up with reasons for that. They say, “Over 10 years, it is fine. We’ll juggle it a bit. We will balance a bit. We’ll get efficiency savings here and there.” We have seen those arguments and excuses far too often, and the efficiencies do not arrive or issues arise and defence programmes are put off and delayed. By delaying them we see a reprofiling of the costs, but no real reduction in them, and we see those chickens coming home to roost.
This year, the gap between the capability required and what is affordable is £16.9 billion—so it is nearly £17 billion over the 10-year period. We can then add in what the Army would deliver. It is perhaps worth my explaining that for some odd reason—the PAC has taken a strong view on this and even the permanent secretary at the MOD has acknowledged that there was an anomaly—when the Commands and the MOD put in their costs for the programmes, most of them put in the full costs of all the capability required, but the Army puts in only the costs of what it could afford. If we add in the capability that the Army actually requires, we are adding a further £12 billion to that nearly £17 billion, thus making the gap even bigger. There has been a clear deterioration in affordability. It is fair to say that £10 billion of that is because of inflationary costs—we partly know the reasons for that, but I am not going to go into them now—and about £2 billion is to do with foreign exchange costs. Again, the PAC examines those regularly with the MOD and the Treasury, but however we hedge it there will be some challenge on foreign exchange because of the nature of some of our defence procurement.
One of our Committee’s other concerns is that the MOD has been putting off making decisions about cancelling or reprofiling programmes. Reprofiling is not always a good thing, but sometimes we have to trim according to what is necessary. If the MOD cannot afford the plan, it should take a hard decision, but it has optimistically assumed that the plan would be affordable if the Government fulfilled their long-term aspiration to spend 2.5% of GDP on defence each year, despite there being no guarantee that that will happen. Of course, in an election year there is not even a guarantee as to which party will be in government to consider that. We know, and the Defence Committee will know even more than the PAC, how much the MOD is increasingly reliant on the UK’s allies to protect our national interests. That means that we also have to play our part by making sure that we are delivering that.
For all the time that I have served on the PAC— 13 years this year—the MOD has been led by optimism bias, and it is now pressing on based on not optimism but the sniff of optimism, as there is so little left in that approach that will deliver. We must call that out and call a spade a spade, by saying that the MOD can deliver only what is affordable. So either the money goes in or the MOD trims what it is trying to do, because the approach of trying to do everything all at once and not being able to afford it is just not going to work.
The Committee looks at procurement a lot. For the last decade or more, we have been saying that senior responsible owners need to be in place for far longer. They need to be where their expertise is needed for the right period of time, and then be moved on for the next phase of the project. We need to reward people who stay in those jobs, rather than expecting civil servants or military attachés to roll over on a three-year basis, thinking they just need to keep things ticking over. They need proper ownership and proper reward when they get things right. The MOD is beginning to move in the right direction on senior responsible owners’ skills and longevity, but it still has a lot of work to do to catch up to where it needs to be.
I touched on funding timeframes. The Treasury needs to seriously consider properly controlled longer-term budgets, as it is beginning to do in certain areas with the defence equipment plan. That does not mean giving carte blanche to the MOD; those budgets need to be tightly controlled, as the Public Accounts Committee has made clear. However, controlled longer-term budgets are vital.
Finally, the Public Accounts Committee has access to many areas of Government and all areas of spending, if we choose to look at them. I pay tribute to my fellow Committee members who have never leaked a single piece of information, of whatever sensitivity, in the last nine years. However, the Committee looks at certain issues through opaque glass and it is now time to have full transparency. I want as much information as possible to be in the public domain, but the mechanisms of open, public committees are not always appropriate for certain sensitive areas, including defence.
In our latest report, the Committee recommended that there needs to be a new mechanism and approach that allows Parliament to properly examine such issues in the right, secure context. That might be along the lines of the Intelligence and Security Committee, although we would certainly not be looking at information in that area and not in exactly the same way, because the Public Accounts Committee needs to be more fleet of foot on certain day-to-day spending issues. It is time we had transparency so the British taxpayer knows that every tax pound that is spent, whether on defence or on sensitive matters in other Departments, is being seen and scrutinised by senior parliamentarians who know what they are doing. It is an early thought of the Committee, but important to raise. We need full transparency so that officials and Ministers who are spending taxpayer money in this area of vast expense are properly scrutinised on their work.