Towards #SDSR18 – Breaking the Cycle of Perpetual Crisis
It is easy to advance a case for more defence funding and in our echo chambers, we would all agree, with the only dissent being about what to spend the extra money on. Instead, I am going to make a case for a series of difficult choices that avoid the tired old tropes of moving Trident out of the MoD’s budget, raiding the DFiD budget and sacking pen pushers.
If the MoD does get an increase in budget, great, all power to those that campaign for it, but unless that increase is sustained and significant I suspect in a couple of years’ time there will be another funding crisis and we will all be back to arguing about the same things.
The reason for this is because of three things;
1. A fundamental delusion about defence exceptionalism
2. A lack of resilience in the forward programme
3. An inability to make the really hard choices because we cannot prioritise
The cycle has to be broken and the only way we can do it is to address those three.
If there is to be a more honest and realistic appraisal of UK defence needs and futures, the absolute first thing that must happen is honesty with the country and those in the MoD and Armed Services about extents and expectations. There is absolutely nothing wrong with doing less with less but saying we can do the same or more with less is fundamentally dishonest and dangerous.
Defence Exceptionalism – Or Maybe Not
Listen to many defence commentators, evidence sessions to the Defence Select Committee or statements and speeches by Lords and MP’s and one could easily come away with the impression that defence is somehow different to the NHS or Education or Transport budgets. They believe in defence exceptionalism, that the MoD should have first dibs on the public purse and take as much as it thinks it needs but the graph below should dispel that myth.
Yes, we all know this includes pensions, Trident and costs of operations but is it clear the MoD has enjoyed a declining share of national wealth since the end of WWII and more recently, other instruments of soft power and influence have seen an increase.
Even though 2% is an arbitrary NATO target and it is undoubtedly the case that it should be more but here is the thing, it is not going to happen, at least in any significant manner. Yes, we can cast a covetous eye at the DFiD budget but the simple reality is that isn’t going anywhere either. Look at shared funding for certain capabilities, yes, but wholesale changes are not going to happen. Borrow more, the UK’s debt is already too high and debt servicing payments are a significant percentage of current spending, about £50b per year. How about cutting health or welfare budgets, good luck with that.
It is a tradition now that at this point in the proceedings I invite the reader to watch this clip from Bad Santa.
The evidence would suggest those wishing for greater defence funding are going to be disappointed.
DEFENCE SPENDING IS UNLIKELY TO SIGNIFICANTLY INCREASE ANYTIME SOON
A Lack of Resilience in the Forward Programme
Despite the best efforts of many, the National Security Strategy Review (SDSR 2018) may well come down to a rebalancing of resources away from the MoD towards GCHQ, policing and the security services in response to the returning Jihadi and increasing cyber-attack threats. Combined with growing costs in some equipment programmes, the implications for the MoD don’t look good.
Plus ça change.
There are teams of people in the MoD working on options right now, they are wrestling with huge spreadsheets and unpalatable choices. It is an unenviable task but they will be doing their level best to come up with the least bad options. This may well be a gross oversimplification but one gets the impression that when service chiefs and ministers agree on a force structure and equipment plan it is more than the available budget. There then follows a number of iterations where trade-offs and contingencies agreed but also an element of future efficiency savings included. Those efficiency savings seem to be banked to their fullest extent because when they inevitably fail to materialise and/or something else happens that uses the contingency, the whole force design has to be revisited, at great expense and disruption.
Don’t take this diagram too literally but it would seem this is how it works.
A recent evidence session for the Defence Select Committee was quite illuminating in this regard, with Stephen Lovegrove (MoD Permanent Secretary), Cat Little (MoD Director General Finance) and Lieutenant General Mark Poffley OB (MoD Deputy Chief of Staff for Military Capability).
The MP, Ruth Smeeth asked a question about budget and cash forecasting, Cat Little responded;
After decades of defence reform, it seems the MoD is still guilty of over-optimism and suffering from a lack evidence on which to make decisions that feed into this over-optimism. This confirms my suggestion that the programme is pushed right to the line and is not resilient, but the information on which the MoD uses to get to that line is incomplete.
And yet each year we are surprised when there are problems.
Many of the winds the buffet the MoD are not of their making but it is hard to avoid a conclusion that each defence review is based on a force design and equipment programme that has little resilience. It goes right up to the line so that disruption or flawed expectations means the whole thing has to be revisited soon after; followed by a cut here and a cut there, adjustments to specifications and quantities, elongated deliveries and another set of assumptions about yet more future efficiencies.
Whilst it may be unpalatable, there needs to be less reliance on efficiency savings.
By aiming for a smaller committed programme spend it becomes achievable and stable.
There are all sorts of reasons why this is not as simplistic as the diagrams above would suggest but there is a fundamental point, unless the MoD gets much better at predictions and invests more money into the people and systems that can reduce the risk of predictions being incorrect, it needs to err on the side of caution. There may be Treasury rules about recycling unspent budget into future years and the avoidance of negative incentive but unless the overall ‘tightness’ in the forward programme, every year there will be the same problems. A procedure that drives negative behaviours needs to be rooted out.
This means an overall smaller forward programme but one that is much more likely to be delivered as planned.
TO ACHIEVE SOME MEASURE OF RESILIENCE, THE MOD MUST RECOGNISE A NEED FOR A COMBINATION OF LARGER CONTINGENCY PROVISION AND LESS RELIANCE ON ACHIEVING PROJECTED EFFICIENCY SAVINGS.
An Inability to Prioritise
Absolutely essential to future success is an ability to prioritise and live with the consequences, no more can the UK get by with defining vague notions of ‘interest’ and pretend we can address them all.
The National Security Strategy and National Security Strategy and Strategic Defence and Security Review 2015 and National Security Strategy and Strategic Defence and Security Review 2015 First Annual Report 2016 describe in some detail the range of threats and risks faced by the UK, they are both very comprehensive documents.
Both define three core security objectives; Protect Our People, Project Our Global Influence and Promote Our Prosperity. The problem with these is they are so vague, one could justify almost any capability or activity with any combination of the three. There is also no means of describing priorities which would influence investment decisions.
This is arguably the toughest of the three challenges because it means giving up some of our sacred cows, accepting that Global Britain might not be that global and instead of pruning here and there, re-shaping the whole tree.
THE UK SHOULD DEFINE PRIORITIES BASED ON RISK AND OPPORTUNITY, THEN ALLOCATE RESOURCES AND MAKES CHANGES ON THAT BASIS. NO LONGER CAN THE UK GET AWAY WITH SPREADING ITS DEFENCE AND SECURITY JAM EVER THINNER
The full series