'STREAMLINING' EXERCISE
129. On 23 October 2007, the MoD announced details
of the programme to streamline its Head Office in London, the
aim of which is to "simplify the MoD's organisation and work,
ensuring the Ministry is focused on strategic tasks and better
able to respond to priorities". The outcome of the exercise
is expected to make the MoD "more agile and better able to
respond to the needs of those on operations".[160]
The 'streamlining' exercise is expected to deliver:
At least £50m of ongoing savings which can
be reinvested in operations will be released per year by reducing
the Head Office staff by 25 per cent. This means the loss of around
1,000 civilian jobs and 300 military posts. The number of military
posts being reduced will not require redundancy.[161]
130. The Secretary of State wrote to the Chairman
of the Defence Committee on 23 October 2007 and enclosed a copy
of the Streamlining a Department for the Future consultation
document. He informed the Chairman that 23 October was the start
of the six-week "formal consultation period with the Trades
Unions and staff at all levels within the Ministry".[162]
131. We sought clarification on the savings expected
from the 'streamlining' exercise. Mr Jeffrey said that the MoD's
estimate was that in "two or three years hence", there
would be savings of "more than £50 million a year".
But there would be some earlier expenditure relating to early
departures of some civil servants.[163]
132. The MoD is voted additional resources to cover
the net additional cost of operations.[164]
We asked why the MoD was planning to reinvest the annual savings
delivered from the 'streamlining' exercise in operations. Mr Jeffrey
said that the more the MoD succeeded in reducing administrative
costs the more would be "available for the front line".[165]
By front line, he was referring to "the department's ordinary
budgeted costs which are close to the front line within the services".[166]
He added that:
The costs of operations will continue, subject
to the point that the Committee is aware of, to be funded in the
usual fashion. What I am not saying is that we are saving £50
million of head office costs and it is disappearing into the Treasury
coffers. We are saving it within the context of a settlement that
is now fixed; but we will have that much more money to spend on
other things.[167]
133. We note the assurance given by the MoD that
the £50 million annual savings that are expected to be delivered
from the implementation of the 'streamlining' exercise of the
MoD Head Office will not be returned to the Treasury and used
to fund the costs of operations. We return to the issue of
the costs of operations later in this part of the report (paragraphs
147-155).
134. The MoD expects to be more agile and better
able to respond to the needs of those on operations as a result
of the 'streamlining exercise. We asked how reducing head office
staff by 25% would deliver these benefits. Mr Jeffrey said that
the MoD was looking at what the MoD Head Office currently did
and what needed "to be done at the centre of the department
and what might not". Reviews were being undertaken to identify
how processes could be simplified. He acknowledged that it was
"not straightforward" and required "above all the
involvement of staff themselves because they are the people who
know best what they are engaged on".[168]
135. In its memorandum to our inquiry, the Public
and Commercial Services Union (PCS) raised concerns about the
'streamlining' exercise:
- "To date MoD has failed
to tell staff and unions how these cuts are to be achieved, apart
from a vague commitment to "reducing unnecessary process,
cutting committees and over-briefing, removing duplication, and
building a more strategic, focused Head Office"".
- "MoD imposed the 30% target
before making any attempt to assess the viability of such cuts,
before examining the work undertaken by the business units involved,
and before assessing the impact of the work done in London to
support the frontline".
In its memorandum, PCS states that "the recently
published MoD Civilian Attitude Survey indicates the collapse
in trust and morale across MoD that should be of concern to those
at the top of the department".[169]
136. We asked when staff and Trades Unions would
be given more detailed information about the 'streamlining' exercise.
Mr Jeffrey said that discussions were "taking place with
the unions" and that the MoD was aiming to publish some "more
detail on this before Christmas [2007]".[170]
He had completed 14-15 sessions of groups of 20-30 Head Office
staff to discuss the proposals. However he acknowledged that:
The area where there is still a degree of uncertainty—and
I am conscious of it—is around exactly how we will manage
the process over the next few years for early departure and what
the terms of that will be and how we will fill posts in the meantime.[171]
137. We asked how the MoD would minimise the risk
of its best staff leaving as a result of the 'streamlining' exercise.
Mr Jeffrey said that it was his objective to "avoid losing
the people we most need". He added that the 'streamlining'
exercise:
Needs to be managed very carefully and our objective
is to manage it in such a way that we retain the people who want
to stay in the department and who we need and the skills we need,
and we lose those who are happy to go and we are happy to see
go.[172]
138. On the issue of staff morale, Mr Jeffrey did
not think that it was "changing greatly at the moment",
but did not have the figures to hand.[173]
He assured us that he took the morale issue very seriously and
recognised that the MoD needed to keep staff informed and could
not take morale for granted.[174]
Following the evidence session, the MoD provided us with details
on staff morale. The MoD's civilian staff survey showed that dissatisfaction
with the MoD as an employer had increased by about 5% over the
last year. The number of staff giving a "clear positive response"
had declined by a similar amount. The MoD recognised that the
decline "may reflect the degree of turbulence in the organisation
and concerns over pay".[175]
139. Evidence recently given to the Committee by
Prospect suggests that reductions at MoD Head Office and elsewhere
may "reduce the MoD's ability to cost and manage equipment
programmes". It further expresses the anxiety that the way
in which MoD administration costs are dealt with—which it
attributes to a change brought in by the Treasury with the 2004
CSR—could affect the inter-changeability of civilian and
military personnel and lead to the issues of the militarisation
of civilian posts and rebadging.[176]
We call on the MoD to address the concerns about the militarisation
of civilian posts and the related issues that have been raised
with us by Prospect in full in its response to this Report.
140. In terms of staff skills, the MoD had a substantial
staff training programme and was "investing in more training
than ever before to build skills". Mr Jeffrey said that what
needed to emerge from the 'streamlining' exercise was an "organisation
that is a bit smaller, that is generally more highly skilled and
is just as committed as the people we have now".[177]
We share the Permanent Under Secretary's concern that the MoD
needs to be more highly skilled and look to the MoD to set out
in its response to our report what steps it intends to take to
achieve this.
141. We note that the MoD is to streamline its
Head Office in London with the loss of around 1,000 civilian jobs.
The aim of the 'streamlining' is to deliver savings of £50
million a year and also, we are told, to make the MoD more agile
and better able to respond to the needs of those on operations.
We remain to be convinced that improved agility and responsiveness
will follow from the reduction in staff. We look to the MoD to
keep staff fully informed as the 'streamlining' exercise is implemented
and to provide adequate support for those civilian staff who are
to lose their jobs.
142. We consider there to be a real risk that
some of the MoD's best staff will leave and look to the MoD to
identify ways to prevent this from happening. We are concerned
to learn that civilian staff dissatisfaction with the MoD as an
employer has increased over the last year. The MoD must monitor
closely staff morale during the implementation of the 'streamlining'
exercise and ensure that the Head Office continues to deliver
the services which Government, Parliament, the Armed Forces and
the public expect.
Defence Industrial Strategy
143. The Government's Defence Industrial Strategy
(DIS) was published on 15 December 2005.[178]
We have undertaken two inquiries into the DIS: our report The
Defence Industrial Strategy[179]
was published on 10 May 2006 and our report The Defence Industrial
Strategy: update[180]
was published on 30 January 2007. In our first report we congratulated
Lord Drayson, Minister for Defence Procurement[181]
and his team for producing the DIS to a tight timetable. In our
second report we concluded that good progress had been made in
implementing the DIS during 2006.
144. The 2007 Pre-Budget Report and Comprehensive
Spending Review, published in October 2007, states that the
DIS is "to be updated shortly".[182]
On 7 November 2007, the MoD announced that Lord Drayson was to
be replaced by Rt Hon Baroness Taylor of Bolton as the Minister
for Defence Equipment and Support.[183]
At our evidence session on 21 November 2007 for our inquiry into
the UK/US Defence Trade Cooperation Treaty, we asked Baroness
Taylor about the publication date for the updated version of the
DIS. She told us that she had written to our Chairman "to
say that as I have come into this position I want to review the
whole situation, so we will not be publishing anything on 13th
[December].[184] In
her letter to the Chairman of 20 November 2007, Baroness Taylor
wrote:
I am determined that DIS v2.0 should offer the
clarity on our future strategy that Industry is looking for and
that it reflects a realistic view of our assumptions and plans.
Although the original intention was for DIS v2.0 to be published
in December I am convinced that it would be more appropriate for
the strategy to be aligned to the ongoing planning round and am
therefore in the process of reviewing the publication date to
reflect this. Industry has indicated support for this approach.
This course of action meets the commitment made
by my predecessor to the Defence Committee to review the DIS in
every spending round period. Once the DIS v2.0 has been published
and presented to Parliament, I would welcome the opportunity to
update the Committee on the direction and progress of our Defence
Industrial Strategy and would expect the Committee to take evidence
around that time. To facilitate this I will ensure that I keep
you informed of the publication timetable so that a suitable session
can be scheduled in line with the launch of DIS v2.0.[185]
145. Mr Jeffrey said that the timing of the publication
of DIS 2.0 had been discussed regularly with industry, and both
the MoD and industry felt that "it would be much better to
publish a second version of this strategy when we have really
gone through the programme in the way I described and are clear
about its implications for equipment".[186]
In terms of the timing, he said that publication would be "as
early in the New Year as we are able to given that it ought to
come after we have settled the programme and the budget".[187]
We pressed further about the timing of the publication. Mr Jeffrey
considered that "it will take us into the new year—I
would guess not very far".[188]
He acknowledged that it was important for the MoD and the new
minister to take forward the work done to date on the DIS and
"to keep this momentum up and to keep improving things because
it is too important not to".[189]
146. We find it disappointing that the original
timetable for the publication of a revised version of the Defence
Industrial Strategy has slipped and is now not expected until
early in 2008. We hope that this does not indicate that the impetus
given by Lord Drayson, the former Minister for Defence Equipment
and Support, is starting to wane. It is crucial that the MoD come
to speedy decisions on the current planning round and the implications
for the equipment programme so that the revised version of the
Defence Industrial Strategy can be published and industry given
the clarity it requires about future work. In its response to
our report, we expect the MoD to inform us of the date when the
revised version of the Defence Industrial Strategy is to be published
Cost of operations
147. The additional cost of operations, including
the cost of Urgent Operational Requirements (UORs), has been met
from the reserve. On 22 November 2007, Baroness Taylor informed
Parliament that the Treasury had provided some £6.6 billion
from the reserve to support the additional cost of operations,
including some £2.3 billion for UORs.[190]
Details of the cost of UORs in each of the last five financial
years is provided in Table 9. Table
9: Spend on UORs in the last five financial years
