Examination of Witnesses (Questions 20-39)
MR MIKE
TURNER CBE, MR
IAN GODDEN,
DR SANDY
WILSON AND
MR BOB
KEEN
18 NOVEMBER 2008
Q20 Chairman: So the Defence Industrial
Strategy is currently unaffordable?
Mr Turner: Through life capability
management depends on having sufficient money up-front. What people
do not understand is that for every pound you spend initially
buying the equipment, you spend £3 to £4 through life,
so it is very important when you design and develop these programmes
that you think of reliability and maintainability. I have been
in the defence industry 40 years. We have talked about it; we
have never done it. When I went into Airbus and regional aircraft,
when you design and develop an aircraft for civil use, you think
about reliability and maintainability through life. We have never
done that in MoD. That is why DIS was so important. It focused
on through life capability management through partnering, but
it does mean investment up-front. In the current climate, you
cannot do that. I remember in the Seventies we had a programme
called the Hawk aircraft. Because MoD did not have sufficient
money, we put £3 million of our own money, Hawker Siddeley
Aviation then, because of the export market. We wanted to export
Hawks and we did so very successfully. There are 1,000 exports
now but we realised other air forces did not have the capability
of the Royal Air Force and we had to build reliability and maintainability
in at the beginning, and we did it. That does not happen, nor
will it happen in the current climate where there is no money.
Mr Godden: If I could reinforce
that, we have seen it in the car industry with Japan; we have
seen it in the civil aircraft industry where that had to be adopted
by both Boeing and Airbus; we have seen it in the rail industry;
it used to be that trains were built, tested for 1000 miles and
then repairs for ever more. We have not fully established that
principle within this industry, and that is because of the budgetary
constraints year by year that prevent that sort of extra cost
put in to reduce that tail, which is the largest part of the expenditure.
Mr Keen: I would make a slightly
different point. You ask if the DIS is unaffordable. In many respects
the defence budget is unaffordable without the DIS. If I think
about the maritime sector, for example, where we have made good
progress in the DIS, we have established VT; we have a Terms of
Business Agreement which hopefully will be turned into a contractually-binding
document at any time. The essence of that is that in return for
an absolutely clear position from the Government about future
workload, industry has said it will transform the industry. Part
of that transformation is baking in very significant savings to
the defence budget. From my perspective, I think where the DIS
has been implemented in a number of areas, we are actually seeing
the long-term benefit of the strategy for the defence budget;
similarly in individual partnering arrangements where the sort
of transparency I was taking about earlier enables industry and
the MoD to look at particular programmes and actually drive costs
down for the programme. From my perspective it is not an either/or
choice. The DIS is absolutely essential for the future defence
budget of the UK.
Chairman: We will come back to the DIS
because it is essential to all of these issues.
Q21 Mr Jenkins: Could I recap? I
have been listening here to an interesting conversation. When
we started off with the priorities, you said that priority number
one would be the safeguarding of troops on the front line and
getting equipment that way, the welfare of the troops and personnel,
and we have a commitment to a long-term programme. That is exactly
what the MoD would say to me. That is exactly what the MoD are
doing. Do we agree that that is exactly the right approach?
Mr Turner: No, it is not. If you
read any document that MoD puts out, it talks absolutely clearly
about current operations, as you would expect, and the priority
of current operations. What it then says about the future equipment
programme is highly questionable. There is no commitment. It talks
about having to consider the future equipment programme, the equipment
examination. There is no commitment.
Q22 Mr Jenkins: I think you misunderstand
me. Priority one, priority two and priority three that you give
would be exactly the same as priority one, priority two and priority
three that the MoD would give.
Mr Turner: I am very happy with
one and two, and they recognise priority three, but it is not
being enacted. That is my problem. One and two are but three is
not.
Q23 Mr Jenkins: Because all they
want is more money?
Mr Turner: There are always savings
you can make. I think we have pointed to areas where you can do
that, and industry will, through partnership and outsourcing,
make those savings in concert with MoD, but, frankly, for the
Strategic Defence Review of 10 years ago and the UK's role in
the world, the role we hopefully want to play in five, 10 or 15
years' time, there is not enough money.
Q24 Mr Jenkins: But we now know the
short report outcome is simply going to be rebalancing the equipment
programme to better support the front line. That is what the outcome
will be. Great, that is what it is going to be. You know what
the implications are for the industry. Will you tell us exactly
what it means for our defence industry, apart from sitting there
thinking: if it pays more money, everything is going to be fine
and we will be back to the good days. I tell you, there were never
any good old days. I can go back to the legacy programmes where
things were pushed to the right and you were still sitting there
telling us: we need more cash. What will we be faced if we do
put a lot more money into the front line troops? This is not like
Keynes; in the long term we are dead and it looks as though in
the short term we are dead, so we have to make sure the troops
get the best equipment to do the job.
Mr Turner: I think in Iraq and
Afghanistan what the Government has done over the last few years
is good. The problem we have is looking this five, 10, 15 years
out. They were the good old days actually. We were able to play
a role in Iraq and Afghanistan because of the good old days. Frankly,
with the money that is now being given to MoD at the present time,
in our view, we will not be able to play that role in five, 10
or 15 years' time. If you look at 12 Type 45s, now six; if you
look at 21 Nimrods, now maybe nine; future frigate programme,
Typhoons, FRES—how are we going to play that role in the
world?
Q25 Mr Jenkins: It is going to be
difficult but there would be a repositioning of our programme
and our equipment. I was in a ship a couple of years ago that
had more fire power than the British Navy in the Second World
War—one ship—so we have moved on a little bit; the
equipment is much more impressive.
Mr Turner: Absolutely, and that
is why six Type 45s are very capable but they do not cover the
globe like 12 Type 45s.
Q26 Mr Jenkins: One of the things
that I am getting the feeling for is that as an industry you would
prefer the Government or the MoD, and they have to face up to
this, rather than to delay a programme and push it back with continued
uncertainty, to cancel—cut, cut, cut—and then concentrate
on the programmes we have left to work with. Am I getting the
right message?
Mr Turner: We do not want that
to happen.
Mr Godden: If that is done, I
can see a time in five to 10 years when we will sit back and we
say, "We regret getting rid of that operational sovereignty",
be that in rotacraft, in military aircraft or naval. We will sit
down 10 years from now and say, "We exited that capability".
That is what we are facing. If you do not want a broad capability,
fine, cut the programmes, cut any of those programmes but you
will remove the capability in that sector for ever from this country.
That is what we are facing.
Q27 Mr Jenkins: Some of the legacy
projects which I remember looking at years ago were so old that
they were planned for my grandfather to fight or fly in. They
were still in a box to be delivered in X years' time. What is
the point of buying this old technology when there is no demand
and it is no longer needed and keeping it in the box? If they
are going to rebalance this programme, what are you as an industry
going to do get rebalanced to meet this front-line capability?
Mr Turner: Industry will respond
to what MoD wants in terms of the future equipment programme.
You talk about Nimrod, Astute and Typhoon; yes, they were conceived
many, many years ago, if not decades ago, but they are still relevant
today and they are weapon system platforms, highly capable of
being developed, spiral development, and we are getting something
in DIS that we need to be doing. Ian's point is well made. Once
you stop doing these things onshore, you become dependent on foreign
powers; you lose operational sovereignty and that has gone. By
the way, we lose the capability to export; there were £7
billion of exports last year, highly successful, and we now face
the prospect of losing all of that. That is why we are speaking
out.
Q28 Mr Hamilton: I am puzzled. I
picked up on your opening remarks about the relationship between
Lord Drayson and John Reid and I think that is really important;
it is important you understand who you are talking to and get
a feel for what going to happen in the future. The two you missed
out of course are Trident to which the Government have committed
to and the aircraft carriers. If you go back to the point that
you are making, how many Typhoons can you have alongside our Trident
programme? A balancing act has to be done. If the Government is
not going to increase the budget for the MoD, with the long-term
problems that we face and the problems this country is facing
with the pound, is it not the case that it might be better looking
at some of the major projects which are going to cost of billions
of pounds and as an alternative where we can have what you are
looking at?
Mr Turner: I do not think so.
I think we all believe in this country that we need a nuclear
deterrent and we need capability to play a role in the world.
We do not want to see the United States as the only country left
in the world able to play a role. We think it is very good to
have UK Armed Forces. It is all very well having diplomatic skills
but without the big stick, who takes any notice? If it is only
the United States that has the diplomacy and the big stick, what
role do we have in the world? I think that is bad for the world
going forward, and it is certainly bad of the defence industrial
base; it is bad for the UK Armed Forces and we need to point that
out to people. You cannot have UK Armed Forces without a UK defence
industrial base. There is a lot of nonsense talked about buying
off the shelf. Remember that £1 to £4: £1 off the
shelf, £4 through life. Once it is gone, as Ian has said,
it has gone. I believe across the piece you need the nuclear deterrent,
but then you need the conventional forces to play a role in the
world. We face losing that.
Mr Godden: I have a very simple
view that in traditional terms we require land, air and sea if
we have a full capability. Off the shelf, as we have discovered
in certain areas, means very often more expensive without the
capability to twist it into the type of equipment that our forces
need. There is an idea that off the shelf is cheaper. I have not
seen any evidence of that in my 15 years working in the US, in
the UK and in France. It just does not happen that way. With the
idea that you can remove one segment, say land or sea or air,
and then buy off the shelf from France or the US, I just think
we are deluding ourselves.
Q29 Mr Jenkins: I do not know if
I asked a question about off the shelf. You are answering your
own question. I never posed that question. I am making the point
that there are two major projects, Trident and the aircraft carriers.
Those projects are worth billions of pounds. There is an argument
and an ongoing debate about feet on the ground. The point that
you make is that at the end of the day it is more important that
we cover air and sea and land. I think that is right. You dismiss
the fact that Trident is also important. I assume the aircraft
carriers are also important.
Mr Turner: I believe, we believe,
we need a nuclear deterrent for this country. We believe we need
the carriers to play a role in the world. Yes, then you need the
frigates to protect the carriers; you need the aircraft to go
on the carriers. All that at the moment is in jeopardy.
Q30 Chairman: Ian Godden, can I put
to you a paragraph that has been put to us in evidence and ask
you what you think about it? "In practice timely and cost-effective
means `off the peg'. Our foreign policy would be in a vastly improved
position if we had not wasted so much of our defence budgets re-inventing
the wheel. Our Service people would not recognise their improved
lot were they not forced to make do with whatever material the
British arms industry deigns to produce decades after it was first
needed". What do you say about that?
Mr Godden: Give me the evidence.
It is a very nice statement. Give me the evidence. I have not
ever seen it. Give me an aircraft that is of the capability we
require. I think this is actually an issue about Europe because
the European joint programmes such as Typhoon are an attempt to
avoid the conundrum of a low volume for a country such as ourselves,
and we all argue that at this stage we are a small country in
terms of the total capabilities. Europe does not exist in the
full sense of defence equipment in the way that Airbus and the
civil programmes have created a European defence industry. In
that period when we do not have a European scale and volume, it
is very tempting to make statements like that but all the evidence
of buying so-called off the shelf such a JSF demonstrates what
happens. It is a very interesting statement. I have yet to see
the evidence that proves it.
Q31 Chairman: Surely the number of
different armoured vehicle manufacturers in Europe suggests that
we will never actually come together as a European continent to
produce something in the cost-effective way that a single country,
the United States, is able to do. How do you solve that?
Mr Turner: It is almost impossible
with politics. I spend a lot of time in the States and they always
have a go at Europe not being able to get its act together and
some of the criticism is right about Europe; we do not spend enough
on defence in Europe to help around the world. I always say to
the Congressmen and the Senators, "Could you imagine if you
were a Senator in California agreeing that this one should go
to Michigan?" You will never agree it. I am afraid we start
with the realities of politics in Europe that each country wants
to work with other countries but they want the jobs, skills and
innovation in their own country. That is the reality. We were
very fortunate to get Typhoon coming together with the nations
that we did but it is really hard work. On FRES, on armoured fighting
vehicles, we should somehow have got Europe together; we have
failed. We failed to produce for the UK Armed Forces therefore
a new family of armoured fighting vehicles that is desperately
needed. I have said many times in Europe, "Why can we not
get industry together on the land side to produce a family of
armoured fighting vehicles?" The world is crying out for
armoured fighting vehicles. Whilst many countries will not war
fight, they will peace keep and they do need decent vehicles.
Here is a great opportunity for Europe and for the UK and we have
failed.
Q32 Chairman: Would it be right to
say that possibly the only person that could have achieved that
was you?
Mr Turner: We looked at acquiring
more companies on land in Europe. You know we bought in the UK
and in the United States, but we are very concerned about defence.
It is bad enough in the UK but you look at defence budgets across
Europe. I am afraid governments in Europe are not committed to
defence expenditure. Clearly there are no votes in defence in
countries in Europe like there is in the United States and it
was not in our economic interests to do so.
Dr Wilson: One of the reasons
that the last pan-European armoured vehicle programme came apart
was that each country demanded a different requirement within
the broad sphere that was being considered. The old MRAV programme
split up into what can now be traced to VBC1, Boxer and even Piranha
came out of that because it was postulated as an alternative to
that vehicle. Everybody came at it from a different point of view.
One of the things we currently find in operations is that working
with our closest allies is quite difficult in many respects. Logistically
we require different things. In communications, a subject close
to my heart, there is a lack of inter-operability. So things that
have been developed purely for the UK now have to be widened so
that they can actually start to work across the various countries'
indigenous systems. The great problem is fundamentally at the
country level, at their ministries of defence, at their armies
as a direct point, to start getting common requirements that we
will stick to over time. The way to enable that is to do precisely
what was said in the original Defence Industrial Strategy, which
was to have open system architectures so that at least if things
differ, you can plug and play different parts into an overarching
framework that starts to make sense. We are not there yet in the
UK, and we are certainly nowhere near it in Europe. If we want
to find commonality and we want to get the economies of scale,
we have to start at that point.
Q33 Linda Gilroy: The merger of DPA
and DLO is about 18 months old now and it was formed with the
objective of creating the fit-for-purpose integrated procurement
and support organisation, which underpins a lot of the goals that
you have as industry. In our earlier questions we have been exploring
how the brakes seem to have been put on things. Can you give us
a flavour of the extent to which progress and movement have been
made in the right direction?
Mr Turner: We fully supported
the coming together of DPA and DLO. It was the right thing because
of the through life capability management, thinking at day one
about through life, that £1—£3 to £4 equation.
I think MoD should be congratulated on the speed with which they
did that and brought it into effect. I think the rest speaks for
itself. We are now stuck. We have the right organisation in MoD;
we have the right principles in partnering and outsourcing and
with through-life capability management. We do not have the budget.
Q34 Linda Gilroy: Just now you were
saying this is a ball-park figure of £1.5 billion to invest
generally. How much of that would be needed to get the through
life capability management that we all want to see?
Mr Turner: In my view, that is
the amount of money per annum that the future equipment programme
needs. The organisation that the MoD now have in place, the combined
organisation of initial procurement and through life, would make
sure that that money was well spent, not only on initially getting
the equipment into service but in thinking through life on spiral
development, supporting, reliability and maintainability. I think
that would be sufficient.
Mr Godden: In terms of a merger
of interest, it takes 18 months typically in any corporate entity
or any government entity to put the two things together and develop.
I think it has made the right move; it has progressed, etc.. I
think, however, in the organisation the issue is not so much a
big budget issue but the fact that the pressure on the organisation
on the very things we have talked about earlier, which are UORs,
the whole concept of developing and revising the equipment review
and so on and the issues around government policy on skills and
technology, has acutely distracted the organisation from getting
on with that programme. I think it has done excellently; it has
worked hard at it, but it could be accelerated with a bit of stability
in terms of what is happening to the overall picture. That is
my observation of it.
Q35 Linda Gilroy: It is poised to
deliver?
Mr Godden: It is poised to deliver
and we need to encourage it to accelerate that delivery and get
on with it.
Mr Keen: I would agree with all
of that but I think it is worth saying that there is quite a lot
of work going on to embed some of the through-life capability
management principles into the way the new organisation does its
business. There has been a good lead, from our perspective as
a company, given by the capability area in MoD, the next stage
of which is the establishment of a series of programme boards
which will bring together the various stakeholders and interests
in a particular capability area. I do not think we should ignore
the work that has been going on, having established the organisation,
to embed some of those principles into the way it operates. As
Ian says, clearly that has been clouded by the general background
against which they have been operating.
Q36 Linda Gilroy: The whole point
of it presumably is to invest to save over time. Are you saying
that the invest to save bit and the horizon that you are scanning
is looking as if it is going to be put into front-line urgent
operational requirements rather than into having the complete
programme that was envisaged to get DIS to deliver on the strategic
defence role?Mr Keen: I think there is a slightly
broader issue as well, which is understanding the trade-offs between
various ways of meeting a capability. That is the sort of discipline
that the programme boards will bring. There is a long way to go
but I think it is an important development.
Q37 Linda Gilroy: Can you give us
any tangible benefits that industry has seen as opposed to these
rather broad conceptual things?
Mr Keen: I think it is the broader
stuff. In particular programmes where we have been dealing with
one IPT across both acquisition and support, I would guess we
could offer specific advantages that have accrued, but it is in
the general sense rather than the specific.
Q38 Chairman: These are benefits
that you have not seen yet?
Mr Godden: You have to watch that
you do not over-generalise here. I can point to one or two examples
where it has happened and it is happening but I am talking about
a broad summary. The danger of saying "a broad summary"
is that we will miss out the two that are happening out of 10,
or whatever. I think we have to watch that we do not over-generalise
here. There are good examples of where progress has been made
faster than others.
Mr Turner: If you take Tornado
where the long-term agreement between MoD and BAE Systems not
only to maintain but upgrade the Tornados through life, you pick
points in the life of the Tornado in future where you will have
upgrades of capability fitted into the maintenance programme.
There have been huge savings there to MoD: huge reliability savings,
maintainability savings, cost savings and also planning through
life on the Tornado programme. That is a really good example of
where it has worked.
Q39 Linda Gilroy: We saw that, Chair,
when we visited RAF Marham and there was the gain share concept
embedded in that, which seemed to be a very good incentive.
Mr Turner: Exactly.
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