The UK Defence Modernisation Programme: A Risk and an Opportunity

UK Defence Secretary Gavin Williamson announced today that the defence element of the National Security Capability Review (NSCR) will be subject to a further review, and is due to completed by the summer. Called the Defence Modernisation Programme (DMP), this new review has so far received cross-party support.

Williamson made it clear in his House of Commons announcement that the DMP ‘isn’t aiming to be fiscally neutral’, adding that it would be ‘irresponsible’ not to address the threats faced by Britain, as he encouraged Armed Forces chiefs to ‘have a voice’ and speak about them.

‘This isn’t aimed as being some operation to take money off the Armed Forces', he added. 'It’s making sure we have the Armed Forces – and give them the support – that we need, and [give personnel] the recognition [that] they do one of the most amazing jobs for our country and that is what we hope to achieve as part of this review’.

A long delay in concluding the DMP could risk damaging consequences for the country’s international credibility, especially if it has not been concluded before the NATO summit in July 2018. Despite being billed as a low-profile ‘refresh’, the NSCR has already lasted longer than either of the last two full Strategic Defence and Security Reviews (SDSRs), in 2010 and 2015, respectively. 

Moreover, as the military awaits the DMP’s conclusions, annual allocations within defence will still have to be set, and short-term savings made, without sufficient guidance on the fate of those capabilities under threat.

At the same time, the decision to extend the NSCR’s review of defence capabilities could be an opportunity for a more radical look at the balance of defence investment, accelerating the shift of resources into capabilities that are most relevant to a rapidly changing strategic environment.

The government has a pretty good story to tell on defence spending. It spends more on defence, in absolute terms, than any other NATO European member state, and is one of only five European states to meet the Alliance’s 2% spending target.

The MoD’s core budget has also been protected from the cuts in most other areas of government, and is due to be 5% higher in real terms in 2020/21 than in 2015/16. Procurement spending, already higher than in any other European ally, is set to rise by some 34% in real terms by 2020/21, consolidating the UK’s position as Europe’s most capable military power.

Still, as has been widely acknowledged, the 2015 SDSR made more commitments than it could afford. At the heart of this over-commitment was the procurement programme. The 2015 SDSR had announced that total spending on equipment (procurement and support) would increase from £166 billion for the decade 2015/16–2024/25 to £178 billion for the decade 2016/17–2025/26.

However, closer examination reveals that this headline figure significantly understated the scale of additional commitments. The 2015 SDSR bridged the gap between a 5% increase in the total budget and a 34% increase in procurement spending by promising substantial efficiency savings over its first five years, rising to some £2.5 billion annually by 2020/21, a level that would be carried forward in each subsequent year.

This is the core assumption underpinning MoD Permanent Secretary Stephen Lovegrove’s statement that the ministry aims to achieve £20 billion of savings over the ten years of SDSR 2015.

Yet, while other public services have been asked to make comparable, or larger, savings, the MoD has been constrained by the commitment to maintain military personnel numbers, while also being limited by the reality that the squeeze on personnel pay is making it more difficult to attract and retain the right quality of recruits.

The 2015 SDSR promise to cut the number of MoD civilian employees by 30% – from 58,200 in July 2015 to 41,000 by 2020, saving £150 million on the annual pay bill – probably will not be realised either, with the total number of civilian employees still at 56,900, and new opportunities for large reductions are increasingly difficult to identify.

Unlike the SDSRs of 2010 and 2015, the NSCR has not being conducted in tandem with a government Spending Review. Instead, for the MoD and other security departments, the Review has so far been based on the budgets already allocated for 2018/19 and 2019/20.

The 2015 Spending Review also agreed 2020/21 budgets for selected departments, including the MoD and the intelligence services. Since a government-wide Spending Review is due by the end of 2019, it is not clear how firm this latter settlement will prove to be.

Whether or not new cash is made available, the DMP will still have to make hard choices if it is to ensure that the resources available for defence are spent on the capabilities that are most relevant to a rapidly changing strategic environment.

A DMP worthy of its name is likely to involve some or all the following:

• Maintaining capabilities able to respond to possible conflict on at least two fronts, contributing to NATO’s deterrent capability against Russia while retaining the ability to play an active role in responding to crises and conflict in Europe’s turbulent southern neighbourhoods.
• An increased focus on the new technologies, capabilities and doctrines (including cyber and electronic warfare, robotics and artificial intelligence, air and missile defence, anti-submarine warfare, hardening and rapid dispersal) that are likely to be key in maintaining UK military credibility over the next ten to fifteen years.
• Additional resources for the remuneration packages and employment flexibility that will be needed to attract the best people into defence, including through greater use of reservist and part-time personnel.
• Rescheduling selected major procurement programmes, for example those for F-35B aircraft and Apache helicopters, spreading their costs over a longer period.
• A demonstrated readiness to cut back on lower-priority capabilities (equipment and personnel), taking advantage of the possibilities afforded by new technology and new systems. 

The issues raised in this Commentary will be expanded upon further in a forthcoming Whitehall Report.