Examination of Witnesses (Questions 80-99)
MR MIKE
TURNER CBE, MR
IAN GODDEN,
DR SANDY
WILSON AND
MR BOB
KEEN
18 NOVEMBER 2008
Q80 Linda Gilroy: So do we need one
and what would that do to your programmes?
Mr Godden: Against the current
budget we need one. I would hope for the sake of the UK Armed
Forces and the defence industrial base and all it brings for this
country, that budget will give. If not, SDR will have to give.
I think SDR was right for this country and its role in the world
but it is in jeopardy.
Q81 Linda Gilroy: Is there a danger
if that comes about that that just parks the issues even further
and results in further uncertainty and limbo?
Mr Turner: That is where we are.
Mr Godden: We are not calling
for an SDR but in a sense we need some guidance at this point
and, as Mick Turner said, it is either budget or guidance, one
or the other.
Q82 Linda Gilroy: Do you think you
can have the guidance that you want but if the guidance then becomes
something that affects the underlying principles of the Strategic
Defence Review is there something short of a Strategic Defence
review that can give you that clarity?
Mr Godden: DISv.2 was supposed
to be that in a way, it was an interim.
Mr Keen: Just a couple of additional
comments. I am not disagreeing with anything either of my colleagues
has just said, but I do go back in relation to the DIS to the
work that is actually already taking place on a daily basis. We
are actually implementing the DIS in a number of important sectors
in the defence industry. That is not to say we are doing it everywhere
and there are key areas for the future, particularly in the air
sector, where key decisions have got to be made about the industry
and about the skills and technology that we are able to maintain
over the long term and the extent to which that will enable to
us deliver operational sovereignty, I would say it is a mixed
picture. There are some huge decisions yet to be made and the
industry really is waiting for some of those big decisions to
be made, but we are also making progress.
Q83 John Smith: The budget has come
up right throughout this session. There is much speculation in
the press about a looming fiscal stimulus to the British economy.
Where are you in the queue outside the Treasury on this point?
Mr Turner: As you would expect,
we have made a strong case to be at the top of that queue. When
you look, as I have said, at skills, technology, R&T (we represent
10% of the UK's R&T spend) apprentices, jobs in regions, high-skilled
jobs, systems jobs, exports, wealth creation, in terms of a stimulus
to the economy we should be number one. We get the feeling we
are not on the list.
Q84 Chairman: Why is that?
Mr Turner: Priorities.
Q85 Chairman: Of Government?
Mr Turner: The Government decides
where money is spent.
Q86 Chairman: But a new Strategic
Defence Review would be of no benefit if there were no extra money,
would it?
Mr Turner: A new Strategic Defence
Review might say we are not going to play the role in the world
that the SDR said. I would regret that but at least we would understand
as an industry where we needed to invest or not invest.
Q87 Chairman: If there were a new
Strategic Defence Review would you trust the result that came
out? Would you not think that any government in the future would
be buffeted by financial fortunes?
Mr Turner: We do not. The evidence
in the past, if we look at DIS which we liked (but, as I said,
any board that agrees a strategy without funding you have got
to question whether that is a way to go forward) so, yes, we would
have to test a new SDR if there was one and say do you really
mean it, do you therefore rewrite the DISv.2 sector-by-sector
onshore UK and are going to fund it? Yes, we would have to hold
people's feet to the fire to see if they really meant it.
Mr Godden: We had a debate on
this earlier this year with the Ministry of Defence and the Government
about market attractiveness and given that the defence budget
is not growing in Europe, what is the next best thing to growth.
If growth is not available, and that is what we are being told
at the time that it is not available, what is the next best thing?
The next best thing is certainty and that certainty is therefore
the thing that would be sought in a Strategic Defence Review of
equipment. Whether that means no growth, slightly higher growth
or lesser growth or decline, the next best thing is certainty.
At the moment, unfortunately, because of the uncertainty on budget
the certainty on the other matters is not coming through, so I
think that is our position and always will be. The Government
has to decide on the industry and the operational sovereignty
and the requirements for the defence industry base in this country
and we would hope, as we did with DISv.1, that we would be actively
involved in that debate, but in the end the policy on defence
is a Government policy and that then determines the certainty
of what we can invest in with shareholders' money.
Mr Turner: Very importantly the
industry has come to the view that we do not want certainty today.
It would be the wrong thing to push for a DISv.2 and sector-by-sector
certainty today because we will get what we believe is the wrong
answer for the defence industrial base of the country, for the
Armed Forces and for the country, so we would want to defer it.
Keep the principles but defer the sector-by-sector.
Q88 Chairman: Was this not the answer
last year when DISv.2 was caught up in planning round 08?
Mr Turner: Exactly the same.
Q89 Chairman: And it is exactly the
same this year?
Mr Turner: Yes.
Q90 Chairman: Might it be exactly
the same the next year?
Mr Turner: I fear the worst.
Q91 Linda Gilroy: You are talking
about on the one hand do you need a Strategic Defence Review to
resolve that uncertainty or do you have a sector-by-sector review
of DISv.1? Surely—and tell me if I am wrong—when DISv.2
was evolved there must have been discussions about what sovereign
capabilities needed to be included and presumably there was at
least one, if not more, programme within that that was on the
margins of whether it needed to be sovereign capability or not
sovereign capability?
Mr Turner: Exactly, and Lord Drayson
and the team in MoD sector-by-sector, complex with weapons, for
air, land and sea decided what long-term capabilities the UK Government
wished to see onshore. The wheels came off when the money was
not there to support those sector-by-sector long-term programme
assumptions. That was the fundamental problem. We travelled in
hope for some time and I know the CSR settlement last year put
an end to that. There was not sufficient money given to MoD to
implement the industrial strategy of DIS. That is the limbo land
we are in and we will stay there.
Q92 Linda Gilroy: I think what I
am saying is in that debate and discussion about what should and
should not be included in the DIS there would have been a long
list and a short list which would have been whittled down bit
by bit and at the edges there would have been one or two programmes
that just made it and presumably therefore relating to the underlying
principles of the Strategic Defence Review, the threat analysis,
et cetera, was slightly more marginal as to whether they needed
to be sovereign capability or not. Which were those programmes?
Mr Turner: I think Lord Drayson
and the team looked hard right across all sectors of what was
needed on shore and, in concert with the DTI and Treasury at the
time, they came to the view that these capabilities for operational
sovereignty reasons and security reasons were needed UK onshore
and it was believed could be funded onshore UK rather than going
to buy off-the-shelf with the long-term negative consequences
of that in terms of cost and operational sovereignty. In the event
that has not proved to be the case and for some time we did push
as an industry for a DISv.2 to reflect the reality. The situation
as of today is that we do not think that is sensible because we
will lose far too much compared to DISv.1.
Mr Godden: I think there is a
risk here in the debate about specific programmes. If you want
an industrial capability in a country there are two factors: one
is the funding of specific programmes for specific platforms for
specific services and pieces of kit; and the second is the research
and development which underlies it. I think we all regret missing
out on Stealth as an example where in a previous era we did not
invest enough. If you look behind the scenes the research and
development budget this year has been cut by 7%. To me that is
about the capability for the future as well as the current programmes
that we are all debating and to me that is as significant, if
not more significant as a signal of what the current climate is
doing to the long-term capability. It was a 7% cut and there was
a cut the year before.
Q93 Chairman: The DIS itself said
that money spent on research and development was what gave a very
strong indicator about your battle-winning capability in 25 years'
time
Mr Godden: Yes.
Q94 Chairman: You consider that the
research and development budget has been cut by 7% this last year?
Mr Godden: Yes.
Q95 Chairman: Over the last 20 years,
say, would you be able to give us an idea of what you consider
to be the level of UK MoD research and development spending?
Mr Godden: I have not got it with
me but I can certainly give it to you.
Q96 Chairman: I am not asking you
for it now. I saw a recent parliamentary answer on research (but
not research and development) which suggested that research as
such had been pretty constant, but it sounds then as though development
is the area which has dropped off. Would that be right?
Mr Godden: All I know is what
the research and development is. I cannot comment on research
but I can clarify that and I know that if you look at the research
and development budget of about £2.5 billion, and you strip
that back to take out prototyping and so on, you get down to numbers
that are closer. Do not quote me as exactly accurate because it
depends on definitions, but let us say it is half a billion, I
know that half a billion is being cut so that is what we are talking
about there, and for me that is as much an indicator of the long-term
interest in maintaining capability as the discussions about Lynx
and about future Typhoons and so on.
Chairman: I would entirely agree. I think
it is an absolutely crucial issue of capability as a country over
the coming decades.
Q97 Linda Gilroy: If you are going
to be able to offer us a note on that in relation to the protect
and prevent strands of the National Security Strategy, what else
is happening in terms of research and development and trying to
make that cross into other government departments? I guess this
will partly be resolved by the new committee on the National Security
Strategy?
Mr Godden: Yes.
Q98 Chairman: Can we get on to the
UK and the US and also exports. The Trade Co-operation Treaty
has yet to be ratified. Are you hopeful that it will be? Do you
mind whether it will be?
Mr Turner: I think it is very
important for future co-operation across the Atlantic that it
is ratified. We were disappointed, as I know the MoD and Government
were, that it was not ratified before Congress broke up this time.
We are optimistic that by the summer of next year, yes, we will
get there.
Q99 Chairman: Will it make much of
a difference to the British defence industry?
Mr Turner: A lot of difference.
The fact that companies and governments can share research and
development money across the Atlantic in an open way would be
a very good thing and there would be benefits to both taxpayers
and to the Armed Forces of both countries. Yes, it is very important.
Mr Keen: I think the benefits
will increase progressively. We may see at the outset that the
areas in which we are able to make a difference will be relatively
small because I think it just makes sense to take it in bite-sized
chunks, but ultimately, as we go forward, it will make a huge
difference.
| 
