Thank you Andrew [Manley, Director General Defence Commercial] for that introduction, and for facilitating today’s consultation conference on the Green Paper.
My thanks to your team for putting this event together so well.
My thanks also to the Royal Institution of Great Britain for being such warm hosts.
I was somewhat amused by the choice of lunch - salami - as we’ve been clear that ‘salami slicing’ is to be avoided at all costs…
I hope you have all found it a useful day.
When we launched our Green Paper in December, we said we would consult widely and make it as easy as possible for everyone to get involved - from large international companies to SMEs; from members of the Government to members of the public.
It is really heartening to see so many unfamiliar faces in the audience - as well as so many familiar ones.
So what I will now say will be new to many of you and I warmly welcome your interest and engagement.
On the other hand, the rest of you have clearly not grown bored of hearing me repeat myself - a compliment of sorts!
But seriously, it is important to canvass and communicate with as wide a spectrum as possible.
This conference is, formally, a requirement of process but it is much more than that.
The level of interest in it shows how the issues we have been discussing today matter to people, and how the consequences of our decisions will have a significant impact on the British economy and society and above all on our national security.
This is your day.
Thank you for making the effort to come along.
Of course, it is a chance as Ministers to engage with you - and I’m grateful that Baroness Neville-Jones, Mark Prisk, and Gerald Howarth could join us.
It’s about understanding the challenges we all face and making real decisions that will shape our policy for the next five years.
We started with security issues - I think that’s right - and the tremendous potential that British industry has in this evolving area.
But Defence and Security are now indivisible and everyone seems to appreciate our decision to consult on them jointly.
And as Pauline made clear, science and technology are indispensible.
I was delighted when the Royal Institution of Great Britain kindly agreed to be our hosts, and they have proved to be warm ones.
The Royal Institution reminds me, in a world where the here and now seems to absorb ever greater amounts of our energy, that it’s essential that we should also keep a keen eye on the medium and long-term challenges.
Defence Science and Technology is an integral part of that, and I couldn’t possibly hope to deliver the Equipment and Support parts of my job without it - now, or in the future.
That’s why protecting the science budget was a priority issue for me in the SDSR, and in the current Planning Round 2011 process.
I was also keen that we should reflect the prominence of SMEs in our Green Paper in today’s event - I’m glad there are many here.
They are a massive lever for recovery and growth, and are at the centre of the Government’s Growth Strategy that will lead us out of recession.
But SMEs are even more than that.
They represent a hugely important source of research and innovation, as well as offering flexibility and adaptability to us in Defence.
These qualities make small businesses particularly important suppliers for Defence and Security, where it’s vital that we respond with maximum agility to varied and often rapidly-changing threats.
I think that the message has got across that we care.
The other thing I took away from Gerald’s presentation - as well his Churchillian rhetoric on Great Britain - was his prescient remark that we must place all that we are trying to do in the context of a much more volatile world than we faced in the Cold War.
The world has changed greatly in such a short space of time.
Who would have thought a decade ago that conflict today could open, not with an artillery barrage or an air campaign, but with a cyber attack, a text, or even a tweet?
On top of this, when we arrived in Government last year, we were faced with the biggest crisis in the international system for decades, and at home a budget deficit out of control.
The current Defence Ministerial team contains some of the strongest supporters of Defence you will find anywhere in this country.
So we knew we simply could not ignore the crippling effect that a weak economy has on our national security.
And we couldn’t ignore a Defence programme with a huge black hole of £38 billion over 10 years in the Defence budget.
For example, as the Public Accounts Committee reminded us all earlier this month, in the last government’s final year in office just two programmes - I repeat two programmes - reported an increase in cost of a staggering £3.3 billion.
As Liam Fox said recently, “There has been a conspiracy of optimism across the Department, involving politicians, the civil service, the military, and industry.”
All these influences - a changing world, the changing nature of conflict, and the financial pressures we inherited - forced us to take some incredibly tough decisions.
And it’s not over yet.
We never said it would be after one SDSR or the subsequent Planning Round.
We were always clear that more tough decisions lie ahead which may take years to resolve completely.
Some of you may have read this in the newspapers as though it was news.
It was not.
We’ve known about this for many months; many of you in this room have too - and it’s been spelt out on many occasions.
That’s the unavoidable context in which the Green Paper consultation is being conducted, and in which the conclusions in our eventual White Paper will have to operate, and I can’t emphasise enough how important these things are.
Turning to the Green Paper itself, let me thank all those who have contributed so far.
At my last count, our consultation website has been visited 8,125 times, and the full Green Paper has been viewed 1,487 times directly from the website.
Now, I know the nature of a deadline is that people wait for it, but we have received only 34 formal submissions to date - 18 people have provided comments to the consultation website, and 15 detailed reports received directly from a number of companies and consultants, plus one from a member of the public.
While I know that many of our stakeholders are putting the finishing touches to their responses, I would like to see a lot more people and companies take this opportunity to influence our thinking.
This is not the first - or last - consultation event.
We have already held several events including one at the excellent Centre for Defence Enterprise - it’s a real success story - looking at SMEs and S&T specifically.
We’re running other specialist events too, such as the Home Office Scientific Development branch conference in Farnborough on 22-24 March.
And also this month we are running a workshop involving economists from other Government departments, and academics, with an interest in Defence economics.
Let me remind you about the urgency of this: the formal consultation process will end three weeks tomorrow on 31 March.
We must understand your views.
Don’t trust us to know them, we might well have misunderstood them.
Just because you’ve heard things you like or dislike, don’t assume it will be policy.
If you disagree, give us the evidence for your point of view.
If you agree with us, reinforce it.
And the more specific you are, the happier I will be - we need to hear about things that you would like us to do differently, better, or not at all.
The details matter - especially, I suppose, in SMEs.
This is ‘make your mind up time’ - or more precisely, help us to make up our minds time.
I know that the bottom line for business has to be profitability.
The bottom line for us is getting the right equipment, support, and technology at the right time, and at a reasonable cost to the taxpayer.
These two aims are obviously not the same, but these two aims are far from mutually exclusive.
We cannot allow them to be - Parliament, the media, and the public expect nothing less for our Armed Forces.
And they question - rightly so - our ability to do this when they hear about the reality of the conspiracy of optimism: massive cost increases, aborted projects, lengthy delays.
But 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, and I speak from personal experience from my last nine months in the MoD.
But even the best people can’t make flawed processes produce the best outcomes.
Earlier this month, the Secretary of State announced several measures to address these obstacles.
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.
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.
And the Secretary of State announced the establishment of a new Defence Suppliers Forum, that he will chair, and which will include -unlike the current NDIC - representatives of the full range of the Department’s domestic and overseas suppliers including the many thousands of SMEs that we and our prime contractors rely on.
All of this is as much for industry’s benefit as it is for the taxpayer.
But there’s still much more to resolve through our Green Paper.
Fundamentally, we need a new approach.
In Government, we need an approach to Science and Technology that is innovative and leverages wider investment to help meet our S&T requirements.
That’s why sometimes we have to admit - or rather welcome - the fact that we cannot often match the private sector’s investment.
That’s why I’m a supporter of the Niteworks partnership which helps to improve requirements, reduce risk, and enhance value for money.
We need an approach in acquisition that is ‘good enough, as fast as possible’, and capable of improvement when and where possible, not ‘perfect, eventually, if ever’ - our Urgent Operational Requirements system shows us one way of doing it differently and successfully.
And we need an approach that gives our exporters a fighting chance in a fiercely competitive global market.
That’s why we’re committed to acquisition reform and why we’re proud to back exports.
But we also need an approach that offers greater transparency, which brings greater legitimacy to our endeavours.
That’s why we have launched an independent review into the pricing mechanism - commonly called the Yellow Book - which the MoD uses for single-source, non-competitive contracts.
But it’s not an attack on profits.
And it’s not just about primes.
So the long-term prosperity of the British Defence and Security industry depends on its doing three things:
- Investing wisely and effectively in R&D - which is not just solely government’s responsibility;
- Offering the right equipment while delivering better value for money to the British taxpayer;
- And, as Gerald also said earlier, being competitive and market sensitive so that the prospects for successful exports are maximised.
Now, I recognise that this is not easy, and that industry yearns for greater clarity.
But industrial policies and strategies; decisions behind closed doors; and unrealistic promises have been tried and failed because they failed to reflect the realities of the current business environment.
Today’s reality is that there simply isn’t the money there was before.
Take alliances and partnerships with other nations.
The financial pressures facing all countries - even the US - require us to intensify our co-operation still further.
It’s been said that the challenge we face is: “share it or lose it”!
That’s why our Treaty with France last year calls for, among other things, an intensification of the work on industrial and armament co-operation.
Or take the issue which I know has caused most debate - our default position of using open competition in the global market place, and to buy off-the-shelf, or as close to it as possible, whenever we can.
We are urging our allies to do the same and our commitment to acquisition reform should make the path smoother, but I think Gerald framed the terms of that debate rather well in terms of industry having options to ensure that it’s a shelf stocked with British goods.
We are committed to making it easier for overseas companies to invest in the UK and to engage formally with the MoD on a more level basis with UK companies.
But there is a quid pro quo.
It is difficult to justify this domestically if there’s a perception that decisions elsewhere are protectionist.
Topical examples in the US include cancelling the second JSF engine, and the saga of the Tanker aircraft competition.
And our European friends are also not immune: it’s amazing how flexible the definitions can be when we really seek to distort open competitions.
We know there are other factors to weigh when spending nearly £20 billion across Defence each year on UK-based industry.
As the Prime Minister has emphasised, our approach is not laissez-faire.
Sometimes we in Government will indeed act to protect underpinning technologies and skills.
But we will only do so where having a domestic capability gives us the ability to protect our operational advantage and/or freedom of action - and where these are essential for national security.
All too often, the visible hand of Government - to misquote Adam Smith - has distorted the Defence market in cases where open markets should have been allowed to thrive.
Ultimately, it’s the taxpayer and the Armed Forces who suffer.
This cannot, and will not continue.
We are clear that the Defence budget should only be used for Defence purposes, and for which we can demonstrate a real need.
The question that I and Ministers like Pauline and Mark have to address - and I’d welcome your views on this in the open forum - 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?
And in which internationally mobile organisations choose to invest in the Defence and Security of the UK?
However, the time for talking is fast drawing to a close.
We’re committed to giving industry every chance of success.
We are committed to listening to your ideas.
But you must share them and in as much detail as you can manage.
Please don’t keep them to yourselves and then carp from the sidelines if they never see the light of day.
Please don’t give us grand philosophical statements which we can’t translate into practical action.
Readers of The Sun will know light bulbs are a sensitive subject but, as Thomas Edison once said, “Nearly every man who develops an idea works it up to the point where it looks impossible, and then gets discouraged. That’s not the place to become discouraged.”