| Summary
The mission of the MoD's (Ministry of Defence's) Defence Equipment and Support (DE&S) organisation is to equip and support our Armed Forces for operations now and in the future. Support to current operations in Afghanistan and Iraq has taken priority. Both DE&S and industry must be congratulated for their performance in providing equipment and supplies to our Armed Forces involved in these two operations.
The Urgent Operational Requirement (UOR) system remains highly effective in enabling vital equipment to be provided quickly to the two theatres to meet rapidly changing threats. However, we are concerned at the extent to which UORs represent a partial failure to equip our forces for predicted expeditionary operations, and at their effects on the core budget in future years. The procurement of 700 new armoured vehicles announced at the end of October 2008 is a welcome and clear sign of the Government's commitment to protecting our Service personnel.
The performance of DE&S in delivering equipment and supplies to the two theatres, often in very challenging environments, has been impressive. However, given the ageing transport aircraft fleet, there are pressures on the airbridge. The A400M aircraft programme—to provide new tactical and strategic airlift—is running some two years late. Once the extent of the delay to the A400M programme is confirmed, the MoD needs to decide whether it considers the programme to be so delayed that abandonment would be preferable, and to take timely decisions either to procure or lease other airlift assets so that a capability gap in air transport does not develop.
DE&S' performance in procuring longer-term equipment declined significantly in 2007-08. The forecast costs for the 20 largest defence projects increased by £205 million and the forecast delays increased by some 100 months in the year. The targets for cost and time for 2008-09 will be missed. Supporting current operations is likely to have been a factor behind the decline in procurement performance as some key DE&S staff have been transferred to work on shorter-term projects. There must also be cause for concern that the improvements promised by both the long-standing application of the principles of 'smart procurement' and the more recent formation of the DE&S organisation appear not to have materialised.
The new Secretary of State for Defence acknowledges that the MoD needs to deliver more equipment programmes to budget and on time. A new review will examine the progress in implementing procurement reforms, and make recommendations on how to secure better value for money in the delivery of equipment programmes. It will be vital for the MoD to implement the recommendations both quickly and fully and also learns the lessons from the failure of past reviews.
The Comprehensive Spending Review settlement for defence, announced on 25 July 2007, provided an additional £7.7 billion for defence by 2011, and a 1.5 per cent average annual real terms increase. Cost growth on equipment programmes has increased the pressures on the defence budget. Some commentators have suggested that an extra £1.5 billion a year is needed for the defence equipment element of the budget if the Defence Industrial Strategy is to be fully delivered. Claims by senior industry representatives that the equipment programme is in "limbo" and that the Defence Industrial Strategy is "on hold" suggest that funding issues are more acute than ever. The MoD acknowledged that Defence Inflation might be a factor and is undertaking analysis to demonstrate its impact. This analysis must be undertaken with a greater sense of urgency.
The Statement by the Secretary of State on 11 December 2008 acknowledges the pressures on the MoD's budget and the need to rebalance the equipment programme. The MoD is to delay the entry into service of the two new aircraft carriers. The future carrier programme is likely to cost more in the longer-term as a result of the delay. It is deeply disappointing that it will be some time before the Royal Navy is operating the two new carriers with their full complement of new Joint Strike Fighter aircraft. The announcements in the Statement relating to the Future Lynx and other helicopter programmes are to be welcomed provided that sufficient numbers of aircraft are procured. Additional helicopter assets are much needed by our Armed Forces on operations and these programmes must be managed in a way which avoids any delays in bringing them into service.
The FRES programme has been a fiasco. The FRES Utility Vehicle no longer appears to be a priority. The Army will certainly not be getting the vehicle "in the early part of the next decade" as the MoD informed the Defence Committee in December 2006. This programme was poorly conceived and managed from the outset. The MoD has wasted both its and industry's time and money. The MoD must decide what its requirements are for medium-weight armoured vehicles and identify lessons from the FRES Utility Vehicle programme.
Further announcements about the equipment programme may be made in spring 2009 following the completion of Planning Round 2009. Sufficient focus and funding is essential for the longer-term equipment programmes. The UK must have the equipment it requires for the types of operations it may face in 10, 15 and 20 years' time. It is also crucial that the UK has the industrial capabilities, identified in the Defence Industrial Strategy, to manufacture and support a significant proportion of such equipment onshore, thereby retaining operational sovereignty. Industry needs clarity about future equipment requirements to enable it to make the necessary investment and such clarity was to have been provided in the updated version of the Strategy, which was originally expected to be published in December 2007. As is the case with many equipment programmes, the deadline for the updated Strategy was missed. There is now some doubt as to whether the updated Defence Industrial Strategy will appear at all. We condemn the failure to date to publish an updated version of the Defence Industrial Strategy and consider that its continuing absence increases the risk that the UK Defence Industrial Base will not be able to meet the future requirements of our Armed Forces.
Finally, the UK's future military capability depends on the investment made today in Research and Development. The reduction in the amount spent on defence research was short-sighted. If the UK is to play a meaningful role in the world in the future, sufficient funding for defence research needs to be ring-fenced. The MoD must recognise the very high priority of research and reverse the cut in research spending; if not, the role which our Armed Forces can play in the future risks being substantially diminished.
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