Sir Edward Leigh
Well, I think it is very nice that we have such an impressive Minister as the Under-Secretary of State for Defence, my right hon. Friend the Member for Bournemouth East (Mr Ellwood), sitting in front of us.
The Parliamentary Under-Secretary of State for Defence (Mr Tobias Ellwood)
On that introduction, how could I fail to get to my feet? The Defence Secretary sends his apologies. He is with the Prime Minister, telling her what he is doing, which I think is appropriate, given the challenges on finances that we face.
Sir Edward Leigh
I am grateful for that.
Given our commitment to spend 2% of GDP on defence, as is required of NATO members, which most NATO countries ignore, we will have to spend more on defence regardless, in order to keep with up that target. That is the challenge we face.
Vernon Coaker (Gedling) (Lab)
I want, first, to say something about spending and then to say a bit more about some of the points that can be made from the actual estimates. I think that that would help the defence debate. I will refer to historical defence spending but, whatever the rights and wrongs of that argument, let me say this: there is no disguising the fact that this country is not spending enough on the defence and security of the realm. I have said that before and I will say it again. That is the frank reality. That is the truth. That point has been heard—loud and clear.
My advice to the Minister is that he and the Defence Secretary use the power of this Parliament’s voice to go to the Prime Minister and tell her that we, the elected representatives, by and large do not think that we are spending enough on the defence and security of the country. As the Chair of the Defence Committee said, it is no good generals, admirals, national security people or whoever is responsible telling secret meetings that there is a real problem, and then, in three weeks’ or three months’ time, trying to tell the British public that £x million or £x billion more is needed and expecting them just to click their fingers on the basis of, “If you only knew what we knew.” It is not good enough and it is not satisfactory.
I have said at many meetings that the whole of Government need to shift their attitude and be clear what we are talking about. My hon. Friend the Member for North Durham (Mr Jones) will make this point in a different way. The tables are available from the House of Commons Library. Hon. Members can go back to when they want. One paper goes back to 1956, showing the percentage of GDP spent on defence at 6%. It is now at 2%. We can see the ups and downs within that time but, as my hon. Friend pointed out, the table is clear.
Let me give Members one stark reality. The out-turn figure for the defence budget in 2009-10 was £45 billion at 2016-17 prices. These are not my figures; they are the Library’s. If the Government think that they are wrong, they should tell the Library. The 2016-17 out-turn figures, at 2016-17 prices, were just over £35 billion. There are some notes at the bottom which, quite frankly, I do not properly understand: they talk about changes in accounting practices, and counting this or counting that. However, there can be no doubt that it is a huge reduction. I totally agree with the Chair of the Defence Committee that we are now in a position where we all need to say that more should be spent and more has to be spent. The drop in the figures in that table is frankly astonishing.
Let me ask a couple of questions of the Minister that I really want answered. One of the big things that came out of the defence debate that we had a few weeks ago was that the National Security Adviser said that anything he found—it did not matter what it was—had to be fiscally neutral. The Chair of the Defence Committee said, and I agree, that the state-on-state threats are much greater and more intensified than they were. But apparently that does not matter: it has to be fiscally neutral. Can I ask the Minister a direct question? If the modernising defence programme says that the Government should be spending billions of pounds more to secure the defence of this country, is that whole programme predicated on a fiscally neutral position, or is it predicated on the Government funding what their modernising defence programme tells them?
As the Chair of the Defence Committee said, the defence threats are not reducing but intensifying. It is not acceptable to me, or, I believe, to this House, to say that as we are now facing a greater state-on-state threat because the terrorist threat is apparently not quite as big as it was, we will take some money from this budget and move it to that budget. That is not good enough, because we do not know what will happen in three, four, five or six years’ time. We cannot take money from a capability that is not necessarily needed quite as much at this time in order to pay for something else. It is the methodology of madness.
Mr Ellwood
The hon. Gentleman will perhaps be surprised by how much I will say in my speech that—I hope—he agrees with, as I agree with him. The capability review was fiscally neutral, and we found that unacceptable. That was the first thing that the Secretary of State dealt with, perhaps breaking the trend that my right hon. Friend the Chair of the Defence Committee suggested was the case. Let me make it very clear that the study that we are doing now is not fiscally neutral, but we do have to decide what our defence posture is and how much it will cost.
Vernon Coaker
There we go—that is the power of Parliament. That is the point I am making. We had the debate before and this was fiscally neutral. The original review—the national security and defence capability review, or whatever it was—was not set up by accident; the Government set it up, and defence was included in it. Parliament said that that was not acceptable, and the Government responded and took it out. We then said that it was not acceptable for that review to be fiscally neutral, and now the Government are saying that it will not be. Of course no one is saying that we should buy chariots or whatever—what we have has to be relevant to the needs that we face. Before, the process was budget-driven: it was a case of having whatever it needed to be in order to meet the budget requirement.
It is going to be difficult for the Government to do this when, for example, we are told today that, even in their response to the Select Committee’s report on the F-35 programme, they will not put a figure on what one F-35 is going to cost. Then the Government say, “We’re buying 138 F-35s—that is the current plan—and 48 will be F-35Bs, but we’re not sure what variant the other 90 are going to be.” How can the Government talk about being fiscally neutral in their plans when they could not say to the Defence Committee a couple of months ago what the cost of the F-35 is and they cannot tell us in their response published today either?
Vernon Coaker
I completely agree with my hon. Friend. That is the point of the debate on estimates days. For the Minister to be able to say that we will have the capabilities that we need to meet the threats that we will face, we need to be able to say how much those capabilities are going to cost. My hon. Friend raised the issue of frigates; I am using the example of the F-35s. Cannot the Minister go back to the people who plan this and say, “We need some detail on these costs. Otherwise, how can we project forward what the equipment plan or any other plan is going to cost us?”
Mr Ellwood
The hon. Gentleman answers his own question in a way. He asked for, and supports, a fiscally open defence modernisation programme. That will pose the question as to whether we want A variants or B variants of the F-35s. The study needs to be done. On the individual cost, he knows from his own experience that it will vary, as the cost of prototypes does. There was not a unit cost for the F-16 because it was a prototype. It is very difficult to pinpoint the exact cost because the life cycles, the upgrades and the weapons systems that would be put on board vary. That is why we cannot provide the exact figure that he is seeking.
Vernon Coaker
I will leave it there, but the Government need to have a better idea, and make it public to the Select Committee and Parliament, of the individual costs. I say gently to the Minister that, otherwise, in a year’s time or two years’ time, he will find himself in exactly the same place that the Government find themselves now, where the National Audit Office is pointing to various gaps in the affordability of the equipment programme.
Let me give another example of where the Government need to be clearer with regard to their estimates. I again say this as something that the Minister and the Government should be saying to the Treasury and to the Prime Minister. The hon. Member for Belfast East (Gavin Robinson) mentioned this point. As the Minister knows, the Government have had to bring forward £300 million to pay for some more up-front costs with regard to the deterrent programme. When they were asked where that money has been taken from, there was a very vague answer, to put it mildly. In essence, therefore, it is an IOU for future programmes. I think that between 2006 and 2007—certainly in the last few years of the Labour Government—where there was an up-front cost that perhaps needed to be taken from future programmes, the Treasury came forward with an uplift to the defence budget to pay for it. That then gave some certainty to future programmes.
Because the Treasury has not uplifted the Ministry of Defence figure by that £300 million, there is already a potential £300 million gap in the future—next year or the year after. I say this to the Government, again trying to be helpful: the Ministry of Defence should go to No. 10 and say, “We believe that where there are additional costs with regard to our deterrent programme that were unforeseen, or there was a growth in those costs, the Treasury should fund that uplift in costs, as was previous practice”—for example, the £300 million. I use that as just one example.
The Parliamentary Under-Secretary of State for Defence (Mr Tobias Ellwood)
It is a pleasure to respond to this debate. As others have done, I thank my hon. Friend the Member for Gainsborough (Sir Edward Leigh) and my right hon. Friend the Member for New Forest East (Dr Lewis) for securing the debate. I believe the Procedure Committee and the Liaison Committee were both involved in setting this new precedent for discussing estimates.
It is interesting that this debate was preceded by an urgent question on the situation in Syria. A number of options, ideas and proposals were put forward by Members on both sides of the House, and we should remind ourselves that we are able to make such proposals only because we have the hard power that allows us to stand up in this world. There is a question as to whether we use that hard power, but it does allow us to affect the world around us as a force for good.
In praising our armed forces, it is important that we pay tribute not only to those in uniform but to those who support them: the wives, the partners, the husbands, the children and the entire armed forces community. We, Parliament and the nation, pride ourselves on their incredible professionalism and sense of duty. They are among the best in the world—disciplined, reliable, committed, brave and very well equipped and trained—and we thank them for their incredible service.
The majority of people come out of the armed forces better for it, and our nation is certainly better for their service and for what they do in civilian life once their work is complete. It has been mentioned that we perhaps do not pay tribute to or acknowledge the work that is done across the world. Operations are taking place not just in the obvious—Iraq and Syria—but in Afghanistan and Africa. We are helping to stabilise nations, and we are helping those nations to become strong so that they can make a mark on their own future.
As we have heard today, the MOD budget sits at about £36 billion this year, and it will increase by 0.5% above inflation each year. We have the largest defence budget in Europe and the second largest in NATO, and we should remind ourselves that not all NATO countries are meeting the target. Fifteen out of 29 NATO members spend only 1.5% of their GDP on defence.
Toby Perkins
The Minister is right in what he says, so what pressure is the UK putting on those other NATO nations, both diplomatically and publicly, to get them up to the 2%? I would like to see a lot more done, when the Prime Minister is stood with other leaders, to put pressure on them to achieve that.
Mr Ellwood
I am pleased the Defence Secretary is in his place, because this is very much of concern to him, as it is to all of us in the House, and it gets raised regularly. The last time he was in Brussels he raised it, and our allies in the United States are concerned about it too. The hon. Gentleman raises a very important point. Let us be honest: we know that, for varying reasons, the financial year has been tough. We are grateful to the Treasury for recognising the fiscal pressures the MOD is under and providing an extra £200 million window to allow us to close the books on the financial year 2017-18. I make it clear that this is new money; it is different from the £300 million that has been brought forward to assist with the continuous at-sea deterrence programme.
Looking ahead, there continues to be a lot of debate, as has been expressed today, about the pressures on and size of the armed forces, their annual budget and the 10-year spending plan. I thought it would be helpful to place things into context following the defence and security capability review and the defence modernisation programme, and to flag up some realities that are not for this budget, but which are coming around the corner. The Defence Secretary has spoken of the need to look at outputs, rather than inputs. We must not just set out the number of tanks, ships or personnel that we need; we must first ask ourselves what we actually want to achieve. That leads us to determine the size of our armed forces and the defence posture we wish to show. This should reflect our duties, both domestic and overseas; our ambitions as a force for good; and our international responsibilities as a permanent member of the UN Security Council and lead member of NATO.
We also need to adapt to the changing circumstances, as the threats we face become complex and intertwined. We must recognise that the world has become more dangerous since the publication of the 2015 SDSR. The risks and threats we face are intensifying and diversifying faster than expected, hence the purpose of the defence modernisation programme. It will allow more time to carefully consider how defence works, as well as what defence needs; it will aim to improve how defence operates; and it will focus on achievable efficiency and create different arrangements with suppliers. This modernisation will allow us to take the necessary long-term decisions about our military capability.
For clarity, let me say that the defence modernisation programme consists of four workstreams: the delivery of a robust MOD operating model, creating a leaner and more efficient MOD; a clear plan for efficiencies and business modernisation; a study of how we improve our commercial and industrial strategy, building on, for example, the shipbuilding strategy and the recently announced combat air strategy; and a focus on our defence policy outputs and our military capability—arguably the most important of the four.
John Spellar
That is all well and good, and all long term. Given that, why are the Government not sorting out the Capita contract on recruitment, which is clearly, visibly, obviously and lamentably failing the country, our armed forces and the recruits?
Mr Ellwood
The right hon. Gentleman touches on something that I am not going to disagree with, but it is pertinent to and included in the workstreams I have just mentioned; we will be seeking more efficiencies and business modernisation. That means looking at our relationship with the contractors we work with, in order to improve the service we need to provide for our service personnel.
The work I have described will be led by the MOD, working closely with the National Security Secretariat and the Treasury, and engaging widely with Parliament, think-tanks, academics, defence experts, international allies, the media, devolved Administrations, the defence industry and, of course, the public.
John Spellar
Having all of those other worthy people involved does not get to grips with the problem of the here and now; it is pushing everything off to the right and over the horizon—again. Why will the Department not get a grip of just this programme and sort it out, because it is crippling to our armed forces?
Mr Ellwood
We have a programme—it is not fiscally neutral, as the last study was. This will allow us to make the changes and the recommendations that we need to take forward. I hope that the right hon. Gentleman will be able to get behind that, in order to make sure we can provide the service and the changes that we need to make, and which our armed forces deserve.
Vernon Coaker
What the Minister has just said is very important. Will he confirm what he just said: this modernisation of defence programme is not fiscally neutral?
Mr Ellwood
I can say it again and I think I am going to say it a bit later, because it is in my speech: I am happy to confirm that it is not fiscally neutral. That is exactly why we are doing this. I am not saying this just because the Defence Secretary is in his place, but the first thing he recognised was the fact that the capability review was fiscally neutral and it was prohibiting us. We saw a lot of the stuff that came out in the media and so forth. The challenges that that would have imposed on our armed forces were exactly why there was a requirement to look in more detail at what our armed forces are doing. We now have that opportunity and we have to make the case as to what changes we need, what our defence posture is and how we move forward—
Mr Ellwood
I am not going to give way again. If I may, I will make some progress.
Let me make it clear that this approach will allow us to deliver a better understanding of the implications of the new threats. It will confirm what conventional capability is critical and it will place the MOD on a more sustainable, affordable long-term footing, optimising our relationships with the private sector.
Mr Ellwood
I am not giving way at the moment. As I have said, as has the Defence Secretary, the programme is not fiscally neutral. It allows us to expand and propose changes. It will assess the capabilities and the force structure we need to deal with the threats the UK faces. We will then consider the implications for funding.
When the Prime Minister, the Chancellor and the Defence Secretary met in December to confirm a way forward on the national security capability review and the defence modernisation programme, it was agreed that no changes would be made to our capability until the modernising defence programme was complete. With one eye on next year’s 2018-19 budget, I very much hope that that is still the case. The requirement for the defence modernisation programme is making sure that we understand the financial pressures affecting defence and looking into the future. If it is not the case, there would be no requirement for a defence modernisation programme. As the Deputy Chief of the Defence Staff for Military Capability told the Defence Committee last week, we are, unfortunately, seeing cuts to training exercises and
“a general suppression of some force generation across…frontline commands”
I stress that this is being managed without affecting prioritised units which are heading on operations, but if units are not training, it builds up a backlog of diminished capability.
Another issue raised in the Defence Committee last week related to the National Audit Office report on equipment, which cited a £20 billion deficit over the next 10 years. I make it clear that that makes some significant assumptions of risk, many of which will not be realised, and does not factor in the efficiency recommendations that the defence modernisation programme might make. Nevertheless—
Mr Ellwood
I am sorry that the hon. Gentleman does not listen to what I am saying, because it is important and pertinent. Perhaps he can hold on to his seat for a second and allow me to finish this important point about the NAO report. Is that okay with him?
The NAO report does not factor in the efficiency recommendations, but nevertheless we must acknowledge the financial pressure on our equipment programme. As has been mentioned, there are also new and emerging factors, such as cyber, space and complex weapons upgrades. We must respond to them all, which of course adds to the bill.
Mr Jones
I am grateful to the Minister for giving way. He says that this is fiscally neutral. He knows what the problem is now—[Interruption.] What was agreed in 2015 was fiscally neutral. It was unachievable because the efficiencies were unachievable and the land sales were unachievable. That is not my opinion; that is what the former Secretary of State, the right hon. Member for Sevenoaks (Sir Michael Fallon), said. If we know that, we know that in reality the only way that we can fix this is with more cash.
Mr Ellwood
The hon. Gentleman should refer back to Hansard to understand what I have actually said. I shall make some progress.
Mr Ellwood
Let me finish this part of my speech, then I shall come back to the hon. Gentleman. I am surprised by the way interventions are being made, because I am going through a series of acknowledgements of where things have gone wrong, another example of which is the challenge of flexing—the spending of future defence budgets today—which should be the exception, not the norm. CASD is a £31 billion programme and it has been necessary to bring forward some of that spending, which is why the budget has been increased by £300 million this year.
Stewart Malcolm McDonald
On the equipment plan, the Minister is right to say that the £20 billion black hole is the upper end of the estimate. He talked about taking that seriously, so what will it be this time next year?
Mr Ellwood
We have only just completed the budget for 2017-18, and I should be clear that we have yet to embark on the annual spending round for next year. Perhaps this differs from other Departments because we have an opportunity to make a case for additional spending. We have the opportunity to make the case for a defence posture and to say what is appropriate for Britain. I cannot answer the hon. Gentleman’s point at the moment, but the purpose of this entire process is for us, hopefully with the House’s support, to make the case to the Treasury and to the Prime Minister. That is what the modernisation programme is all about.
Dr Julian Lewis
I fully understand the direction of my right hon. Friend’s argument and I realise that it has been a great success for him and the new Secretary of State to regain control of the process for the MOD. If, as a result of the MOD’s examinations, the minimum recommendations on what the country needs to be able to deter threats and defend itself successfully require a significant increase in the defence budget—frankly, that is the assumption that has underlain many of today’s speeches—can we rely on the whole ministerial team to stand together as one and say to the Prime Minister, “We simply must spend more on defence”? That is what is required.
Mr Ellwood
My right hon. Friend hypothesises, but it is absolutely the case that we stand together to put forward a programme that will allow for the defence posture that we believe the country absolutely deserves. It is not just about asking for more money, which is obviously simple to do, and we will be lining up with other Departments doing exactly the same thing; we should also recognise that there are efficiencies to be found in the MOD itself. Indeed, as outlined in the 2015 SDSR, we are realising £7 billion of efficiency savings and moving to a more commercial footing, seeking to sell more of our world-class military equipment.
The most important reason for doing this now rather than waiting for the next SDSR in 2020 is that the world around us is changing fast. That raises important questions —arguably more so for Britain than for other countries—about exactly what role we aspire to play as a nation. The outcomes and recommendations of the defence modernisation programme will provide the evidence for how to answer the big questions. We are experiencing a chapter in which the conduct of war is changing at a furious pace. As the world gets more complex and unpredictable, ever fewer countries have the means, aspiration and, indeed, authority to help to shape it for the better.
As the Prime Minister said in her Mansion House speech last year, we are seeing resurgent nations ripping up the international rules-based order. Left unchecked, the growing threats could damage the free markets and open economies that have fuelled global growth for a generation, at the very time, post-Brexit, when we are seeking new trade deals around the globe. The task of a global Britain is clear: to defend that rules-based international order against irresponsible states; to support our partners in unstable regions by repelling the threats that they face; and to back visions for societies and economies that will prosper and help the world.
My concern, which I think is shared in all parts of the House, is that there is a tragic collective naivety about the durability of the relative peace that we enjoy today. That point has been repeated again and again in the debate. Our country, economy and values are vulnerable to a range of growing dangers, both state and non-state, that have no respect for our borders, including the rise of so-called sharp power—the deceptive use of information for hostile purposes and the manipulation of ideas, political perceptions and electoral processes. It is a model that is not new, but because of the speed and the low cost, which come thanks to the internet and so forth, it is far easier to procure.
My belief, which I hope is echoed around the Chamber, is that it has always been in our nation’s DNA to step forward when other nations might hesitate and to help to shape the world around us. However, to continue to do so will require investment, so I end by repeating my thanks to the Treasury for its support. It has to endure all Departments seeking to increase their budgets. We often say that it is only with a strong economy that we can consider any increase in any budget, but I politely add that without a strong defence, a strong economy cannot be guaranteed.
Last week, the Secretary of State spoke of 2% of GDP being spent on defence as a floor, not a ceiling. The message has to be clear: if we want to continue to play an influential role on the international stage, with full-spectrum capability; if we want to provide the critical security that post-Brexit trade deals will demand; and if we want to remain a leading contributor in the fight against extremism in the middle east and elsewhere, we cannot continue to do all that on a defence budget of just 2% of GDP. Two per cent. is just not enough. This is a question not just for the Government and parliamentarians, but for Britain: what status, role and responsibility do we aspire to have as we seek to trade more widely in a world that is becoming more dangerous?