Money alone won’t solve Britain’s defence gap
The Memorandum | No. 05.2024
There is a fundamental difference between the cost of things and the price of things. In the 2010s, His Majesty’s (HM) Government chose to spend £11 billion on its roads, which was the equivalent of almost a quarter of the defence budget. Successive governments consistently spent far more on health and social care than on national defence, at 11% of GDP. Indeed, there is a direct correlation between declining defence and increased welfare spending.
There has long been a tradition in the United Kingdom (UK) that the costs of defence should be kept to a minimum in peacetime, on the understanding that it would be possible to convert national revenue into military capabilities in the period before the onset of war. This policy makes sense. There is little point in maintaining a vast military which cannot generate wealth, and which can act as a burden on growth.
However, it has often been pointed out that it costs far more to put together adequate defences in a crisis than it does to deter threats over the long term. That’s the price a nation pays.
Governments have chosen to raid defence budgets over several decades with the result – as the National Audit Office and the Office of Budget Responsibility point out – that the British Armed Forces are hollowed out. In the Iraq and Afghanistan conflicts, the rush to convert wealth into urgent capability requirements and the resulting costs prompted Lord Levene to conclude that over centralisation of defence budgeting had been detrimental to the procurement of necessary equipment for the frontline commands. His solution was to devolve responsibility for equipment programmes to the armed services’ chiefs. However, the depth of the cuts to defence from the ‘Options for Change’ review (1990) through to the severe reductions of the Strategic Defence and Security Review (2010), created such restrictions on spending that the Levene reforms became meaningless.
After the Cold War, the running down of the defence-industrial base created diseconomies of scale. Annual budgeting also created unrealistic short term investment timeframes. The pressures of a limited budget led to the overloading of the responsibilities of the Permanent Secretary of the Ministry of Defence (MOD), the malpractice of ‘entryism’ (making unrealistic estimates of an equipment programme by not including sustainment or on-costs), and repeated searches for the lowest possible costs at the expense of quality in the tendering process by a poorly qualified collection of Senior Responsible Officers (SROs).
The Defence Committee in the House of Commons identified that the MOD needed a dedicated cadre of trained contracting and programme personnel. They recommended that SROs remain in post for a period of five years with a package of incentives to do so. The MOD would benefit from seeking early expert advice in specialist areas of budgeting, cost estimating programmes, scientific developments, and emerging technology. The MOD knows that it needs to seek ‘spiral’ or iterative options and look for 80% solutions which can be developed and adapted as required. Ukraine has been compelled to make significant changes to its armaments and equipment every few months, sometimes weeks, as drone technologies and fires changed rapidly. In the UK, this needs to be done as a partnership between uniformed armed services personnel, academics in specialist fields and industry, including small and medium enterprises (SMEs) which have a tradition of rapid evolution.
The MOD needs to develop a more frequent reporting of programme performance, including to ministers, as the system is not always as transparent as it should be. It needs to develop a robust culture of contract termination where companies do not perform, and it requires a system of payment -for-performance to incentivise operational value and utility over costly maintenance routines.
The MOD can build on best practice. The Defence Supply Chain Capability Programme is a good initiative, but this should be developed as a strategic requirement to ensure that supply chain data and intelligence, and then subsequent acquisition or purchasing, is done strategically well ahead of any potential crisis. This will also avoid the embarrassing situation where there are dependencies on hostile states.
Britain should develop a wartime industrial strategy and plan for its procurement needs during mobilisation. It should identify its likely procurement requirements, resources, their location, the likely effects of inflation, shipping, personnel needs, and organisational implications.
Accountability and safety are crucial in peacetime, but in a period of crisis or transition to war, time becomes a far greater factor. The MOD should therefore create a set of wartime procurement procedures alongside its current peacetime regulations. Responsibility should be allocated accordingly as a set of wartime priorities.
Future procurement plans should be realistic and fully costed, including the increased prices of a skilled workforce and of the supporting infrastructure. A professional cadre of accountants is a necessary guard against optimism over future costs. There should be a streamlined system of requirements, with tight intellectual property security considerations for the higher end technologies.
The centralisation of defence procurement, a process which has begun well under a reformed Defence Equipment and Support (DE&S), needs to be carried through the entire department. This would reduce the inefficiencies that cost so much, speed up delivery, and encourage the formula for victory, namely adaptation.
Prioritisation in line with UK strategy, and a closer alignment of force design with operational design (how the armed forces would actually fight), would reveal that budgetary ‘salami slicing’ for the sake of equity between the armed services is a luxury Britain can no longer afford. The solution is to focus on a rank order of priorities ruthlessly rather than a balance of investments.
This would give a greater share of the defence budget to the Royal Air Force for strike platforms, uncrewed systems, space defence, air surveillance, integrated air missile defence, and air-sea corporation, and to the Royal Navy as a priority with its budget dedicated to the expansion of the submarine fleet, a greater emphasis on submarine launched missile technologies and various payloads, greater lethality for its surface vessels and its sea launched drone technology. Next would come the joint enablers which would make possible the aspiration for multi-domain operations. Finally, the army’s adoption of a joint fires, and dispersed fighting mobility approach would make them a far cheaper element of the integrated force.
Ultimately, greater investment in defence at the political level, and an increase of production, would reduce unit price and make available equipment and armaments for sales overseas. Defence exports are an important element in offsetting the costs of future procurement. Most importantly, it would make available a greater mass of assets to the armed forces which in itself would act as a deterrent. Long term, the steady costs of adequate defence are the smallest price to pay.
Dr Rob Johnson is Director of the Strategy, Statecraft, and Technology (Changing Character of War) Centre at the University of Oxford. Previously, he was Director of the Secretary of State’s Office of Net Assessment and Challenge in the Ministry of Defence.
To stay up to date with Britain’s World, please subscribe or pledge your support!
What do you think about this Memorandum? Why not leave a comment below?