Good morning.
My thanks to Steve Wilkinson [Director Aviation Facility Services & Head of Site, Boscombe Down] for hosting today’s event.
My thanks also to the Royal Aeronautical Society’s Weapon Systems and Technology Group Committee for inviting me to address your timely conference on weapons systems and technology - most notably Tim Marshall [Chairman] and Dr. John Walton [Member and event co-ordinator], thank you for that kind introduction.
I’m rarely in favour of acronyms, but I think that the Royal Aeronautical Society’s Weapon Systems and Technology Group Committee might be an exception…!
The Society and Boscombe Down are like radar and the Battle of Britain - it’s hard to imagine one without the other...
I know this is a Society occasion, but I was intrigued by something about the Boscombe Down branch.
According to your website, the Branch membership fee has always remained at the modest sum of 2 shillings and 6
pence, yet you still maintain a healthy financial balance.
At one time, some members felt that this low fee explained low attendance at lectures - on the basis that you got what you paid for with 2s 6d - and that a fee increase might be required.
I’m pleased to say that was overruled, though, with a fee significantly higher than half a crown, it leaves me at a loss to explain why so many of you have come today...
But I thank you for doing so.
And I still can’t work out how you account for all the half p’s in the post decimal world when 2 and 6 became 12 and a half pence!
I should also thank QinetiQ for their support too, and for arranging a site tour of the Flight Test Centre later on, which I’m looking forward to immensely.
I said this conference is timely because it comes in the aftermath of the Strategic Defence and Security Review - the SDSR - the first such Review in 12 years.
It was bound to be challenging, though I think it’s fair to say that the SDSR was one of the most difficult processes I have ever been involved in.
Some tough decisions had to be taken by people like me who are among the strongest supporters of Defence.
And it’s not over.
We never said it would be over after one SDSR.
We were always clear that more tough decisions lie ahead which may take years to resolve completely.
For instance, how we go about acquiring the equipment, support, and technology that our Armed Forces need - and we’re in the middle of a major consultation exercise on our Green Paper as I speak.
You’ve been told this recently by the media, as if it were news.
But in the MoD we’ve known about this for many months - it’s no surprise to us, as we thought we had made clear.
For example the Permanent Under Secretary spelt this out to the Public Accounts Committee last December.
So I want to say a few words this morning about the Green Paper process.
I also want to talk about the importance I place on Science and Technology, and the impact that the SDSR is likely to have on weapon systems.
But I first want to set out the scale of the challenge so there are no illusions as to what we are up against.
Since we came to power, the Government’s unavoidable and overriding priority has been deficit reduction.
Just this week, the US Treasury Secretary, Timothy Geitner, said how impressed he was with the Chancellor’s plans.
He’s not alone: the IMF and the OECD are equally strong supporters.
I think we might be on to something…
But if there was one overriding lesson from the Cold War it is that a weak economy is a national security liability.
So all of us involved in Defence should recognise better than anyone the part we have to play in getting the country back on an even keel.
You may have heard me say it before - but I make no apology for saying it again - you can’t defend a bankrupt country.
We also inherited a Defence programme with a huge black hole of £38 billion over ten years in the Defence budget.
As the Secretary of State said earlier this week, “There has been a conspiracy of optimism across the Department, involving politicians, the civil service, and the military.”
For example, as the Public Accounts Committee reminded us only this week, in the last government’s final year in office just two programmes reported an increase of cost of a staggering £3.3 billion.
On top of this, the world has changed greatly in a short time, and we must all change with it.
It’s 20 years since we and the rest of the international community liberated Kuwait in response to Saddam Hussein’s aggression.
But how long ago that now seems, not least with the turning point in history that 9/11 has come to represent, or indeed current events in the Middle East which are moving at such a pace.
These events remind us of the difficulty of predicting the future, and the folly of assuming that future wars will mirror the wars of today, though it would also be foolish to ignore the lessons of history.
Indeed, the SDSR was recognition of this constant change and future Reviews will be held every five years to help us adapt to rapidly changing global security circumstances.
These three drivers - a changing world, the changing nature of conflict, and financial pressures - have forced us to take some very painful decisions which have been felt by everyone in Defence.
Doing so requires honesty, courage, and a clear sense of direction.
We quickly settled upon an ‘Adaptive Posture’ for Britain - neither some sort of mythological Fortress Britain, nor overcommitted expeditionary forces - which will make our Armed Forces among the most versatile in the world.
In turn, that helped to shape the two main priorities for Defence:
- first, protecting the mission in Afghanistan - and I am grateful, on behalf of the Armed Forces, for the efforts that many of you and your teams have made;
- and, second, setting a path to a coherent and affordable Defence capability in 2020 and beyond.
But we have had to cut back in some areas: because a particular threat is no longer as great; because technology has moved on; or because, as we address our budget deficit, resources that by definition are finite were needed elsewhere.
And it doesn’t make taking unwelcome decisions - like retiring the magnificent Harrier - any easier.
Our efforts must now turn to the transformation of Defence.
I’m passionate about getting the right equipment at the right time and a reasonable cost to the taxpayer, and I know that all of you share that common cause.
Most of what we buy is delivered on time, and to cost, as this year’s Major Projects Report acknowledged.
And our people are outstanding.
But even the best people can’t make flawed processes and behaviours produce the best outcomes.
At present, the system is tailored more to procure the highest specification kit, and to over commit our budget.
For too many years, projects have been included in the future Defence programme without a proper appreciation of the risks or costs.
As this week’s PAC report acknowledged, “the scale of problems created by this financial imbalance masks the improved performance of the majority of projects against cost and budget.”
We need a new approach.
Our Urgent Operational Requirements system has shown that we can do things differently and still get what we need for our Armed Forces when they need it.
37 per cent are actually being delivered early.
As DE&S said to me recently, we are seeking ‘good enough, as fast as possible’ not ‘perfect, eventually, if ever.’
That means months, not years or decades.
And there’s a trade-off between the gold-plated solution - often admired but rarely competitive even when it does at last hit the market - and what we can get quickly and at better value for money.
That’s why I’m a supporter of the Niteworks Partnership which helps to improve requirements, reduce risk, and enhance value for money.
Niteworks is one of our best kept secrets and deserves to be much better known.
For example, the Land Integration Feasibility Study provides the processes and tools to manage the interdependencies between acquisition projects better, by applying industrial best-practice to DE&S approaches within the Weapons Operating Centre.
And this study involves SMEs that are not traditional Defence suppliers.
So there is a golden opportunity genuinely to transform Defence which is what the Ministerial team, Lord Levene and Bernard Gray, among others, have been tasked with doing.
From now on, future programmes should not be included unless there is a clear budgetary line for development, procurement and deployment.
We have entered into a period of intense negotiation with a number of our major industrial suppliers.
And we have established the Major Projects Review Board which will provide a quarterly report on our major projects, naming and shaming those that are not on time and within budget.
This is as much for industry’s benefit as it is for the taxpayer.
That said, our Armed Forces today have the best equipment they have ever had - that’s their view too not just mine.
And I am sure that those who serve in our Armed Forces after 2020 will be grateful for the investment we are making today in cyber operations, ISTAR, and remote technology such as UAVs.
Future Force 2020 will also maintain significant, more traditional, but hi-tech warfighting capabilities across all three Services.
Typhoon, JSF, and an updated Strategic Lift fleet for the RAF. Carrier Strike, Astute, Type 45 Destroyers, and soon after 2020, the Type 26 Global Combat Ship for the Royal Navy.
All of these platforms will of course need effective, affordable weapons.
The Army will retain the mass, the equipment, and the human skills that will continue to be so critical to the future character of warfare.
This provides everyone involved in Advanced Weapon Systems and Technologies with numerous opportunities.
When all is said and done, we will still be spending around £50 billion on equipment and support over the next four years, which is small change only by US standards.
But in these financially challenging times we cannot spend taxpayers’ money on things for which we cannot demonstrate a real need.
So the long-term prosperity of the British Defence industry depends on it doing three things:
- investing wisely and effectively in R&D - which cannot solely be a government responsibility;
- offering the right equipment while delivering better value for money to the British taxpayer;
- and being competitive and market sensitive so that the prospects for successful exports are maximised.
- Of course, Government has a role to play which is why we’re committed to acquisition reform, and why we’re proud to back the biggest export drive in decades.
It’s also why the Secretary of State announced the establishment of a new Defence Suppliers Forum that he will chair, which will include representatives of the full range of the Department’s domestic and overseas suppliers, including the many thousands of SMEs that we and prime contractors rely on.
The first meeting will take place in just a few weeks’ time, but I would welcome your views on what the best structure might be for this new forum.
The Government also has a crucial role when it comes to Science and Technology.
We will need to be innovative in our approach, and leverage wider investment to help meet our S&T requirements.
For example, initiatives such as the Weapons Technology Centre show that working with the wider supply base enables coherent planning and delivery of S&T, allowing industry to influence technology investment at an early stage of acquisition.
We’re looking for suppliers who can offer solutions which are more effective and efficient in meeting our weapons’ research, equipment, and support requirements, and who can contribute to the flexible and agile capabilities we will need in the future.
Approaches such as open systems architectures, modular design, spiral development, and technology insertion all have the potential to contribute towards achieving this.
But sometimes we have to admit - or rather, welcome - the fact that we cannot match the private sector’s investment.
For example, simulation.
This does not just mean the flight simulators or urban combat games that our kids have on their consoles - software we buy off the shelf for Defence use.
It can also help with logistics deliveries and the complex battlefield traumas that our medical teams have to deal with.
Or take Complex Weapons.
I am a strong supporter of the innovative Team Complex Weapons model which has been developed between industry and the Government over the last few years.
It’s delivering significant savings to the MoD.
And I am impressed by the visible and effective way that MBDA, the MoD, and UKTI DSO are working closely together to ensure that the concepts underpinning our thinking on the next generation of complex weapons takes the needs of export customers fully into account.
This is ground breaking work, and we will learn the many new lessons - for example, new industrial (including international) business models, and joint exports.
There are some areas in which policy decisions have already been taken - for example, flowing from our recent Treaty with France.
More than ever, we need Defence capabilities that are affordable and robust, can be rapidly deployed, and are interoperable - with each other and with a range of allies.
So we can increase the range and ambition of our joint Defence equipment programmes if we foster closer industrial co-operation, despite the economic context.
As part of this, we have developed a 10 year strategic plan for the British and French CW sector, where our goals are a single European prime contractor and a target of up to 30 per cent efficiency savings.
We must also have a relationship with industry that is open, transparent, and reflects the realities of the current business environment.
That’s why, for instance, we’ve launched an independent review into the pricing mechanism - commonly called the Yellow Book - which the MoD uses for singe source contracts.
We currently place around 40 per cent of our contracts, by value, on a non-competitive basis, worth around £9 billion annually.
This will affect all future non-competitive contracts and is intended to save the taxpayer hundreds of millions of pounds.
And that that is why we are consulting widely with industry through the Green Paper - and today is another opportunity to do just that.
The consultation period runs until 31 March and I urge you all to take part.
We will publish our White Paper later in the year which will formalise our approach until the next SDSR.
One of the other key features of the Green Paper is that it asks questions, as well as offering a few early answers.
We are clear that the Defence budget should only be used for Defence purposes, and for which we can demonstrate a real need.
Our default position is to use open competition in the global market, and to buy off-the-shelf, or as close to it as possible, whenever we can.
Sometimes, but only where essential, we will act to protect underpinning technologies and skills.
We will only do so where having a domestic capability gives us the ability to protect our operational advantage and freedom of action - and where these are essential for national security.
But there are other factors to weigh when spending nearly £20 billion across Defence each year on UK-based industry.
We know that a healthy industry, including SMEs, also brings wider economic benefits in terms of jobs, skills, and the balance of payments.
These are not easy issues - that’s why we’ve got a Green Paper to debate.
As the Prime Minister has emphasised, our approach is not laissez-faire.
There are things Government must do better to help secure the future of the British Defence industry.
We must, for example, consider export related issues early in an acquisition programme’s life cycle.
But neither are we picking winners.
So the question that I and government Ministers in other Departments have to address (and I’d welcome your views too) is this: how do we foster a climate in which Defence and Security companies are resilient, and can flourish, without using the Defence budget to subsidise industry?
The future of Defence following the SDSR - including Advanced Weapon Systems and Technology - is a positive but realistic one.
We have a clearly defined baseline, and a clearly articulated vision of what Defence will look like in 2020 and beyond.
But there are certainly more difficult decisions ahead, and more questions that need answers.
With that, I hope, over to you for some of the answers!