Examination of Witnesses (Questions 1
WEDNESDAY 17 JANUARY 2001
TEBBIT CMG, MR
1. Mr Tebbit, Mr Balmer and Mr Gould, this is
becoming quite a regular performance. Thank you for coming. The
Committee was a bit sceptical about the abolition of the Defence
White Paper and I must confess that the bundle of documents that
we are now looking at may not be quite as convenient to read to
the punter outside and to Members of Parliament, but there is
a lot of good information coming out and I think we should compliment
the MoD on that.
(Mr Tebbit) Thank you, Mr Chairman.
2. As you know, we have regularly examined the
MoD and witnesses on key documents of the MoD's annual reporting
cycle, namely, the annual MoD Performance Reports, last year's
White Paper, Expenditure Plans, Appropriation Accounts. Publication
of the 1999-2000 Performance Report and the latest Investment
Strategy, published last month, provide a further opportunity
for us to examine the MoD on its progress on key aspects of its
activities and its budget and expenditures. As you know, we will
be meeting Mr Hoon on 7 February when we propose to tackle some
of the broader policy issues. In today's session we want to focus
on two of the chapters in the Performance Report, "Resources
and Management", and "Logistics and Procurement".
There is a substantial chapter in that document on "People"
but our Personnel Inquiry is dealing with this separately and
we hope to publish it in about three weeks' time. We also want
to examine the MoD's performance in the round against its Public
Service Agreement and how the Performance Report and the Investment
Strategy documents have been evolving since the Committee's examination
of these documents last year. We are also, incidentally, producing
our own report in the next few weeks on our performance, which
will show an impressive list of successes. But it does mean, having
gone through the process myself, in looking at how you put your
objectives and your success that, with our own experience, we
can approach your documentation with the degree of scepticism
that we show to our own. If we can do it in the issuance of our
performance targets, then I am sure you are able to do it even
more successfully than we can. Starting off then, Mr Tebbit, of
all the Public Service Agreements for last year, establishing
a fully capable Joint Rapid Reaction Force seems to have been
the MoD's biggest challenge. I would like to ask what is being
done to speed things up? What assurances can you give us that
the new target date for 2002-03 is likely to be met?
(Mr Tebbit) Thank you, Mr Chairman, and let me just
say I am most grateful for your words about the new format and
of our information and transparency policy because we do attach
a great deal of importance to it. It is part of the transformation
of the way we are trying to work in a much more open world. And
I just say that this will be followed up quite shortly with a
memorandum on our policy and a public version of our strategic
context to deal with that side of the business, and we are continuing
to aim to bring out individual essays on particular themes to
engage debate, as we did in December on defence diplomacy. Thank
you for that. As far as the JRRF is concerned, it is not, I think,
a serious resource problem in terms of finance. The issue is essentially
the original date for the full capability of the JRRF of 2001-02
was pushed to the right essentially by the operational pressures
of Kosovo. We found we were having to engage in major emergency
deployments with the very forces that we had sought to put in
the new formation readiness cycle to have our sixth deployable
brigade, three mechanised and three armoured, and therefore cope
with the SDR guideline of an ability to deploy one brigade level
operation continuously for 30 months for peace keeping and one
for six months for war fighting. We had the initial operating
ability of the JRRF and we declared that in 1999, but the full
capability, as I say, with this ability to deploy these two major
formations, both independently supportable, with their own logistics
and communications, has now moved to 2002-03. What assurance can
I give you? We have the six brigades formed. What we have to do
is get them through their formation readiness cycles to train,
to be ready for operations, and then to recover. That is a military
operational question rather than a financial one. Lift is associated
with this and we are now moving forward with the four C17sthey
will be available within the timescale I am talking about. We
have, as you know, launched our Ro-Ro contract which is not critical
because you can anyway get these from the spot market, but it
will give us the predictable guaranteed capability. We also have
some things to do in the communications and logistics areas but
this is not, as I say, a resource problem. It is the result of
the 18-month delay imposed by operations.
3. Thank you. Given the Department's difficulties
in maintaining forces at the required operational readiness, as
was discussed in the Performance Report, paragraph 26, you are
probably going to say that you are quite confident of meeting
the performance required under the new PSA target 1 which says
"by 2005, to ensure that a minimum of 90% of rapidly available
military units are at required states of readiness." What
are likely to be the major impediments in achieving that objective?
(Mr Tebbit) Manning is obviously the biggest difficulty
we face as a whole generically in the readiness area. As you know,
of the PSA targets, that is probably the one we worry about most
at the moment. We have still got an 8,000 shortfall in the army,
and I would say that would be the main consideration. But there
is also a technical problem about readiness, and that is to say
how do you capture the quality of the organisation, the morale
dimension of readiness as well as the straightforward measurableness?
I do not pretend that it is a straightforward issue to make sure
we know exactly what we mean by this. That is one of the reasons
why we find it quite difficult to give you or the Treasury or
anybody else simple figures which say this is a measure of fighting
power and military capability. But I think the equipment problems
are going to be less significant than the issue of making sure
that we have got the right level of people trained to cope. Most
of the equipment issues are being dealt with and I would not see
them as a particular impediment by 2005 here.
4. We will be coming on quite soon to budgetary
issues, but is the problem largely budgetary? The manning problem
would be partly resolved financially, and certainly the equipment
problems could be enhanced if more equipment is bought and if
it is more speedily delivered. Is training partly a financial
problem as well?
(Mr Tebbit) We would all like more money obviously,
but I would say that is not the only factor. Some of the difficulties
we have in delivering equipment, for example, are more to do with
the capacity of industry to deliver than simply a question of
throwing money at it. Some of the accommodation problems that
we have are also to do with the ability in the construction industry
to turn round projects fast enough.
5. There is a little bit of MoD responsibility
(Mr Tebbit) Some of it. I would like to wave a magic
wand and get things done overnightof course I wouldbut
it does take time to correct some of the long-term bits of under-investment
in our estate, for example. You cannot do that absolutely overnight.
Time to initiate and then to complete a project can often be long
term. There are some other things as well. Recruitment is to do
with the condition of the labour market, not just a question of
money. Retention is one of the big problems in the Armed Forces.
Again, not just a question of pay but how we treat people, and
how much disruption and dislocation they have to undergo. It is
not just a question of money; it is also a question of prioritisation
and making sure we are focused on the right things according to
the needs of the moment, which is certainly something we are trying
to do more through our performance management system being in
place so that we move our resources to meet the key priority areas
in year rather than simply waiting for difficulties to build up
before we do anything about them. It is not just money; it is
about the efficiency and the processes we apply to prioritise
6. When we took evidence a year ago Mr Balmer
referred to the previous investment strategy as "work in
progress". Does the latest Strategy bring that work in progress
to a conclusion, or are there further improvements that you have
in mind as a Department?
(Mr Tebbit) I hope you feel it is a much more thorough
one than before. The last one was the first one and it tended
to be a bit descriptive of where we are. This one tries to get
a bit more into how we are utilising our assets and our disposal
processes rather than just the processes themselves. The need
to invest is obviously a general theme across government and the
MoD now, as you see, has got a capital base of £67 billion
and therefore for us as a Department, with so much asset by way
of fighting equipment or estate, we have, in a sense, a big opportunity
but also a big challenge to make sure we use that estate and the
overall investment potential well. It is much more about utilisation
of the asset base and how we make it work effectively rather than
a description. There is a change, I hope you will see that, in
this report as compared with the last few years.
7. What aspects of the Strategy, do you think,
have seen the biggest improvements as you describe?
(Mr Tebbit) "Improvements" is probably the
wrong word. I think certainly the way in which we need to invest
in order to deliver greater performance in the future is absolutely
critical, and that covers the whole field of defence across the
whole spectrum, for example, the systems we need to drive our
logistics organisation better, so we have got a much more effective
supply system. That needs up-front investment and it is a very
important area. The way we are looking at our estate so as to
concentrate on a smaller number of core sites and move to dispose
of ones that are less important to us or can generate greater
revenue. We have put a great deal of effort into making the estate
work more effectively. I suspect there is a long-term trend that
we are looking for of moving increasingly away, where we can,
from the south and south west of the country increasingly closer
to the traditional recruiting areas of the Armed Forces, which
is good for stability and retention, and also enables us to make
some economies of scale. For example, we are concentrating our
training organisations more. We have Tri-Service training where
we can whereas we had three separate establishments in the past.
Those sorts of measures are very important and come through from
some of the Investment Strategy here. Above all, now we have capital
charging and now we have depreciation, we have to pay much more
attention to making it work for us.
8. Why will the Investment Strategy now be produced
only every other year.
(Mr Tebbit) It is not something that is going to change
quite as quickly as some areas. One gets locked into investments
rather firmly so it is a less rapidly moving area than some. We
are committed to our Investment Strategy over a long period of
(Mr Balmer) I think it is fair to say that we have
not concluded that it will only be produced every other year.
It so happens that there was a 18-month gap between the first
and the second in publication, but we will keep under review how
frequently it would be helpful to publish future versions.
9. The previous Performance Report for 1998-99
said hardly anything about the objectives or your achievements
against them, whereas the latest report sets out your Public Service
Agreement targets. Do you think more could be done to explain
in the Report the link between inputs, activities and outputs?
(Mr Tebbit) You are absolutely right, and that is
where it needs to go. We have not managed yet to link outputs
more closely to resources as we should. I would like to do so.
I would like to have done so much more quickly. I think the problem
has been that we have been going through the most fundamental
restructuring of our finances over the last four years with the
transition to resource accounts and operating by resource rather
than cash. As you know, as from the beginning of the next financial
year all of our accounts and our plans will be on a resource basis.
That has been such a massive change in the Department I did not
feel we could do at the same time a rebasing of our finances around
output costing. The system that we now have (called Capital) has
the potential to do that and we will be moving towards output
costing over the next two or three years. We had to do it in phases.
There was quite a transformation underway. We could not do it
all at once. There are some areas where we are specifically bringing
in output costing earlier. I do not know if you would like to
say something about that.
(Mr Gould) The Defence Logistics Organisation started
a project to produce output costs on an RAB basis round about
this time last year. If you look at the target to reduce output
costs by 20% by 2005, you have got to have a system for measuring
that and planning that. Albeit on a high level of aggregation,
that system will be in place on 1 April this year. That needs
to be refined and improved as time goes on, but that will start
enabling the DLO to account for its costs against the outputs
set out in the customer service agreements with the front-line
commands (which are their major customers) which gives you something
you can begin to link into the cost of readiness. I do not want
to over-stress the sophistication of that at this stage but that
is actually going to happen.
(Mr Tebbit) That is an example of how we are moving.
10. Many of last year's Public Service Agreement
targets were concerned with implementing reorganisations introduced
with the Strategic Defence Review, and very little to do with
delivering defence capabilities. Should the Public Service Agreements
not reflect these crucial services rather than internal reorganisations?
(Mr Tebbit) You are quite right and, of course, they
do and will. If you compare last year year's Public Service Agreement
with this year's, following the 2000 Spending Review, you will
see that a number of the SDR-related items have been dropped now
and there is a greater focus on the military capability issues,
and I think that is right. We were going through a major process
change with the SDR. We still have not completed it but we are
moving very much to looking at front-line capabilities. I would
not want you to think that that did not drive the whole of the
Department's work. Perhaps I should say that this is the financial
statement but the management plans within the Department are very
much based on delivering military capability and military output
as the number one priority. We use the balanced scorecard approach,
a technique from the Americans.
Mr Hancock: What does that mean?
11. Paragraphs 119 to 122 describe the MoD's
trial with the balanced scorecard approach. What benefits do you
see from restructuring the report to reflect this so-called balanced
(Mr Tebbit) It is based on the proposition
that there is no single, simple measure that enables you to drive
performance. The first thing it begins by saying is what is the
strategic intent of the organisation, and so it is based very
much on our key strategic principles. It is then taken and communicated
throughout the organisation so the board of management (which
we now have in the MoD) has a high level scorecard with 17 different
measures and that is cascaded throughout the organisation so that
everybody knows what they are doing is feeding into one or a number
of those 17 elements in their own area. It also aligns management
effort much more clearly to the key priorities and how we are
performing in the year. We plan to, and we are already looking
at this on a three-monthly basis in the Board with these colour
codingsred, amber, greenso where we see areas that
are red we consciously have to take a decision as to whether there
is anything we could or should do about it, whether by moving
resources or better management focus. It gives us, therefore,
a more rigorous assessment of performance because we are looking
at this each year and it focuses the Department quite sharply
on results. It is not a simplistic tool; it has four different
axes which look at the total performance of the organisation.
12. Is the emphasis in your Performance on being
ruthlessly honest and analytically accurate in your appraisal?
I will tell you why I ask the question. I have some specialist
knowledge of medical support and Defence Medical Services and
I can scarcely recognise, as related to Defence Medical Services,
the paragraphs on logistics and medical support which appear on
pages 33 and 34 of your Performance Report. It simply does not
reflect what is happening in Defence Medical Services, where deployable
consultants in the key grades of surgeon and anaesthetist and
general medicine are now running at a level of about a quarter
or a third of what they should do. Is your instruction to your
Department to be accurate or to whistle to keep your spirits up?
(Mr Tebbit) Leadership takes many forms, but it is
certainly not our intention to mislead. The whole purpose of this
is to be transparent. You are putting your finger on probably
the most serious area of weakness because we are competing with
the Health Service to keep numbers up and that makes it very difficult.
There are some positive signs there. For the first time we have
got increases in in the Territorial Army element of our medical
services and recruiting is up for the first time, quite significantly.
We are putting a lot of resources into it£120 million
over the three-year period of the settlement. But it is a long
haul. I think we are going in the right direction by linking up
more fully with the National Health Service so that we can help
them and they can help us, as it were, but, you are absolutely
right, we cannot deploy as much medical capability in the field
as we would need in order to sustain two simultaneous operations.
If it came to it, we would be looking to our friends and allies
to help us in getting them and this is one of the key priorities
of the Department. So this was not intended to be simply Panglossian
overall; we are seeking to be as open as we can.
(Mr Balmer) I think it is fair to say that the final
two sentences of paragraph 73 are a fairly honest description
"recognising that although the manpower losses have been
stemmed, we do have acute shortages which have a significant impact
on the deployment capabilities." I think those are the sort
of statements you were looking for us to make.
13. What does your balanced scorecard tell you
about Defence Medical Services? It must be blood red.
(Mr Tebbit) It is an area where management action
has to be focused.
14. You have known that for the last two years,
maybe longer, and it continues to get worse, it simply haemorrhages.
(Mr Tebbit) As I say, we are putting a lot of effort
into it but, as you know, the problems of medical services are
not unique to the Ministry of Defence.
15. Do not look to me, Mr Tebbit, because my
constituency hospital did not come out too well in the survey
in The Sunday Times last week so I do empathise with the
Ministry of Defence in its problem. In addition to Mr Hancock's
question, in one of our last reports in the last Parliament we
said that the Defence Cost Study and collapse of Defence Medical
Services might well have gone too far to be recovered. Are we
going to recover? Has the progress so far helped to bring about
a degree of recovery after the failures in the last decade?
(Mr Tebbit) We are no longer going down. Manning levels
have stabilised and they are beginning to move up in some areas.
As I say, we have done particularly well in TA elements, but also
in the Regular elements as well. We have put priority funding
into the area. As you say, recruitment remains a concern, as it
does across the Health Service generally, but we are tackling
that with various focused allowances. There are no quick-fixes
in that area.
16. That is not true, is it, because you have
still got more people who have given you notice to leave the Medical
Services than you will have people recruited into the Medical
Services over the next 18 months?
(Mr Tebbit) As I say, I think the numbers have stabilised.
Mr Hancock: Because people have not left
yet but they have put their notice in.
17. To supplement that point, it is easy for
Defence Medical Services to recruit doctors and trainee doctors,
who very much appreciate the training they can get through the
Armed Forces, but they are not prepared to stay on as consultants,
so the critical question is how many deployable consultants do
you have in key areas? And that is an area where you are falling.
(Mr Tebbit) I agree, that is where we have to work
much more creatively and we have plans to do so and are doing
so with the NHS generally. The point is where we have trained
people and specialists we can help to use some of the NHS people
and they can use some of our people, so that cross-fertilisation
is one of the things we are looking at very actively. The concept
of the NHS host trust. It is, I agree, an area of serious concern.
Mr Viggers: I want to say one point finally
and that is as the former Secretary of State for Defence Lord
Healey said once, "When you are in a hole, stop digging."
18. Could you alert the Secretary of State to
the fact that Defence Medical Services will no doubt figure in
the questions. We have done a number of reports on this and we
are as concerned as we have ever been to ensure that medical services
(Mr Tebbit) You note the measures we are planning
to introduce. We are having to work flat out to get it. The plan
is there but it is proving very difficult to realise it.
Chairman: I appreciate things cannot
be turned round in a short period, but we would like to be assured
we are moving in the right direction. Mr Hancock?
19. Can I take you back to what you said about
the MoD estate and the ability of the MoD to deal with some of
those issues. You said that there was a problem in the building
industry. When you consider that just to put single persons' accommodation
right in Aldershot we have been told it will take at least ten
years and yet there are people signing on in the M3 corridor in
the building industry because of lack of work, why can you not
get to grips with the accommodation problems that you are facing
for many of the soldiers you are finding it hard to keep?
(Mr Tebbit) There are two different things here. I
am sorry if I may have misled you or mis-spoke. There are areas
in the construction industry where delivery is still difficult.
For example, we have with the DETR an initiative called Smart
Construction which is trying to pioneer the principle of prime
contracting in order to encourage standards to be raised, prime
contracting essentially within the construction industry. I am
sure you know what I mean. That was what I was referring to when
I said sometimes the ability to deliver and the quality and standards
are less than ideal. This is not supposed to be a criticism, but
we do take some satisfaction from the fact we are working very
hard with the DETR in that area. We spend an awful lot of money
on construction every year£1.2 or £1.4 billion,
so we are a serious player in that field. We have many years of
under-investment in the estate, particularly housing, and I would
like to be able to do it overnight, but we have to have an eye
to priorities. We have a programme, we have been putting a lot
of money into it. In this year of the Report I think we must have
spent about £150 or £160 million on the estate.
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