Armed Forces Readiness and Defence Equipment

Debate between Meg Hillier and Alec Shelbrooke

Thursday 21st March 2024 Commons Chamber

[Dame Meg Hillier]

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.

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.

[Sir Alec Shelbrooke]

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.

[Dame Meg Hillier]

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.

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.