Andrew Haldenby

What you need to know ahead of the Spending Review: making the right defence cuts

What you need to know ahead of the Spending Review: making the right defence cuts
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This is the latest in our series of posts on the Spending Review with Reform. A list of previous posts can be found here.

The debate on the defence budget has become one of the most fiercely contested in recent days.  Over the weekend, editorials in both The Times and The Daily Telegraph agreed that defence was different because it wasn’t just a matter of cuts in the short term, it was also a matter of the UK’s strategic defence needs for years ahead.  Building on a report by the House of Commons Defence Select Committee, they raised concerns that the Government is forcing through the Strategic Defence and Security Review (SDSR) - and that and any cuts would be misplaced as a result.  The implication is that defence cuts should be minimised, or even postponed altogether, until a much more extensive debate has been completed.


Contrary evidence to this view was put forward at a Reform seminar on defence in the Spending Review last week.  The seminar was held under the Chatham House Rule and was attended by senior civil servants, members of the services, MPs, media and members of defence equipment manufacturers and suppliers of services.  It was sponsored by the global defence and security companies Raytheon and QinetiQ.  The seminar revealed that there are clear principles on which ministers can base both the SDSR and the defence element of the Spending Review.  Moreover, these are the same principles that apply to reform across the public sector.  In this sense defence is not different and ministers can get on with their task.


The first principle is to limit the role of government rather than pretend that government can have the same ambitions, just on a lower budget (“salami slicing”).  This can be the hardest debate for politicians to open – who wants to be the minister that admits that the NHS cannot cover every treatment, that state schools cannot afford to teach every subject?  But it is essential if the Spending Review is to deliver services that make sense in their own terms (let alone be the services that the country actually needs).


For defence this means, as one of our participants said, recognising that Britain has “come down in the world”.  Clearly, that is hardly a feeling which any Prime Minister would want to champion – Churchill (and even earlier leaders) still cast their shadow.  But the fact remains that some of the defence budget (notably the new aircraft carriers) aims at global “power projection” which is no longer the objective of UK foreign policy.  Foreign policy is now based instead on co-operation, and defence activity should follow in line.  Some commentators interpreted William Hague’s major speech on foreign policy last week as offering exactly this kind of realism. 


The second principle of public sector reform is to focus resources on what public service workers actually need.  So often politicians decide to leave their mark in the public sector via a marquee project.  The NHS, for example, is currently submerged by the ongoing costs of new hospital building in recent years.  Given their size and exotic nature, big pieces of defence equipment are particularly tempting to politicians in need of a supportive headline.  The strong view of attendees at the Reform seminar was that the unglamorous elements of defence spending – from the training of troops to information superiority to the hardening of strategic infrastructure – were far more deserving than the aircraft carriers (again).  The former SAS commanders Richard Williams and Graeme Lamb made a similar point writing last week.


The third principle is to spend government money as effectively as possible.  As Bernard Gray has shown, the opportunities to improve defence procurement are huge and savings should run into the billions of pounds (though not enough to achieve savings of 25-40 per cent).  But what underpins the quality of procurement at the Ministry of Defence is the competence and accountability of Whitehall, full stop.  The Government has soft-pedalled Whitehall reform in its early days.  It will find it difficult to make any effective savings in Whitehall budgets until it grasps this nettle.  This is a more important objective than previous debates about whether to buy domestic or foreign equipment (in fact much equipment is, in effect, jointly produced, in any case).


The practical conclusion of the seminar was that the aircraft carriers and the F-35 joint strike fighters should be the programmes to be cut.  The combined saving would be of the order of £15 billion (as General Sir Richard Dannatt has said), against an annual defence budget of around £35 billion.  The meeting confirmed that there are real savings to be made despite any costs incurred by cancelling contracts.


The future of Trident sits outside this discussion because its renewal costs would be well ahead of the current Spending Review period.  The Reform seminar was divided on the programme.  Some felt that nuclear deterrence was of little relevance to the threats currently faced by the UK.  Others noted that it could become very relevant again by 2030 or 2040.


What all this means is that pressure on the defence budget can produce the same kind of positive reforms as in the rest of the public sector.  The need to reduce spending in the right way can push politicians into the kind of choices that they should have taken long ago – to be honest about the ambitions of foreign policy, to resist marquee projects, to make Whitehall accountable for performance and value for money.  For these reasons, it is arguably a good thing that the SDSR and the Spending Review are happening together because both questions need to be asked of every public sector budget – what do we want, and what can we afford.  Neither is much use without the other.


Andrew Haldenby is Director of Reform