House of Commons - The Strategic Defence and Security Review

The Strategic Defence and Security Review - Defence Committee Contents

The Strategic Defence and Security Review

Background

1. On 7 July 2009, the Ministry of Defence (MoD) announced its plan for a Strategic Defence Review (SDR) to follow the 2010 General Election. This Review was to be led by the MoD but would involve other Government departments as appropriate. To start the Review process, a Green Paper would set out the key issues on defence and the questions which the Review would need to answer, combined with a broad consultation with the academic, industrial and political communities in and around defence, as well as the Armed Forces: the then Secretary of State for Defence, the Rt Hon Bob Ainsworth MP, was assisted by a specially appointed Defence Advisory Forum with a membership reflecting the breadth of this consultation.

2. The Green Paper, Adaptability and Partnership: Issues for the Strategic Defence Review, was published on 3 February 2010.[1] Alongside this, the MoD published three additional papers—The Future Character of Conflict, Global Strategic Trends—Out to 2040, and The Defence Strategy for Acquisition Reform. The first two were produced by the Development, Concepts and Doctrine Centre (DCDC) within the MoD and the last was the initial response by the then Government to the Gray Report on procurement reform.[2] These papers were intended to provide additional material in support of the SDR process.

3. Our predecessor Committee reported its views on the proposed SDR in Chapter 3 of its Fourth Report of Session 2009-10, Readiness and recuperation of the Armed Forces: looking towards the Strategic Defence Review, published on 10 February 2010.[3] It recommended that the SDR be set "in the context of a coherent UK Strategy, reflecting long-term strategic interests, encompassing UK foreign policy and the National Security Strategy". It also warned against financial constraints over-riding defence and security imperatives:

"It is easy to lose sight of the fact that one of the core businesses of Government is the defence of the country and of national interests, and that is every bit as true during difficult financial times as during more settled ones...The defence of our country must be maintained whatever the circumstances."[4]

The Government response to this Report, published on 8 April, noted that:

"The Strategic Defence Review must be based on the global role we wish to play, the relative role of the Armed Forces and the resources we are willing to dedicate to them. The wider financial context means resources will be constrained. The future Strategic Defence Review must set priorities which are affordable. The Review—which will run in parallel with the Spending Review—provides the opportunity for a comprehensive reassessment of the Armed Forces' role and structure."[5]

Before the Election our predecessor Committee also specified some areas that if felt needed to be prioritised within the SDR, with regard to national security, helicopter capability, the defence equipment, the implementation of the Comprehensive Approach and ISTAR capability.[6]

The National Security Council

4. Following the 2010 General Election, the new Government moved quickly to establish a National Security Council (NSC), based within the Cabinet Office, and to appoint a National Security Adviser, in the person of Sir Peter Ricketts, former Permanent Secretary at the Foreign and Commonwealth Office (FCO). The NSC met for the first time on 12 May 2010; its membership includes the Prime Minister, the Deputy Prime Minister, the Chancellor of the Exchequer, the Defence, Foreign, and Home Secretaries, the Secretary of State for International Development, and the Security Minister. Other Cabinet Ministers, the Chief of the Defence Staff, Heads of Intelligence Agencies and other senior officials attend as required. At that first meeting, the NSC decided to broaden the SDR into a Strategic Defence and Security Review, incorporating broader security concerns in its remit. This review would be led by the NSC, and supported by a team within its secretariat. The team—like the broader NSC secretariat—would comprise personnel from all relevant Departments. We welcome the establishment of the National Security Council and look forward to assessing its role with regard to defence over the course of this Parliament.

The Strategic Defence and Security Review

5. The Queen's Speech of 26 May 2010 set out the Government's commitment to conducting the SDSR alongside the Comprehensive Spending Review (CSR) with the strong involvement of the Treasury. The NSC would also develop a new National Security Strategy (NSS). The Review would be founded upon a foreign policy baseline and upon assessments of what comprised UK interests and the principal security threats against the UK and its interests.

6. We met as a Committee for the first time on Tuesday 13 July. This followed a debate on the Floor of the House on the SDSR on 21 June and a number of ministerial speeches, articles and written answers to Parliamentary Questions relating to the Review.[7] In April 2010, our predecessor Committee had asked the MoD to provide the new Committee with a memorandum on the SDSR for its first meeting. We are grateful to the MoD for supplying us with this memorandum, which is appended to the Report. In addition, we received a private briefing on the SDSR context and process from Sir Bill Jeffrey, Permanent Secretary at the MoD, and Tom McKane, Director General Strategy and head of the team within the MoD dealing with the Review. The SDSR was also the focus of our first evidence session with the Secretary of State for Defence, the Rt Hon Liam Fox MP, held on Wednesday 21 June.

7. The SDSR comes after many years of military activity, when the Armed Forces have been required to operate way beyond the level to which they had been configured and routinely resourced. The SDSR is being conducted some 12 years after publication of the last defence review, at a time of severe strain with regard to the nation's finances. The SDSR is likely to lead to crucial decisions about national defence and the role of the UK's Armed Forces. In view of the speed with which the SDSR is being conducted, we feel compelled to report to the House as soon as possible. This Report sets out, albeit only in summary, our understanding of the process and our anxieties about that process, and about the relationship between the SDSR and the CSR.

Policy context

8. We support the Review being broadened in scope, in order to set the country's defence needs in a stronger foreign and security policy context—as our predecessor Committee recommended. While we support the setting up of a National Security Council to oversee the Review, we do have some concerns for how effective Parliamentary scrutiny of that body will be carried out. Inclusion of broadly defined security concerns within the Review does, however, risk the dilution of the defence contribution. Immediate or short-term security issues and threats might dominate the Review to the exclusion of the medium to long-term defence assessments made by the MoD. Defence operates on a different time-scale to many other areas of Government, in terms of its development of capabilities and related equipment, and in its assessment of defence threats. Once defence capabilities are lost it takes considerable effort, in terms of both time and money, to create them again. Medium to long-term threats, and those capabilities needed to meet them, are as important to this Review as those the country faces, and requires, in the shorter term. We hope the NSC will recognise this.

9. Likewise, even before the SDR as extended into the SDSR, there were concerns that capabilities needed for current military operations might predominate to the detriment of capabilities needed in other theatres or over the medium—to long-term. The work and output of the MoD's Development, Concepts and Doctrine Centre suggests that there is a continuing likelihood of the UK's Armed Forces being involved in operations similar to those in which it is currently engaged in Afghanistan. It also points to the uncertainties of the future global security situation. It would be short-sighted to allow current operations overly to determine the nature of future capabilities, manpower levels or training needs.

10. These two concerns would stand regardless of the current financial and economic context. This context introduces its own anxiety about how the SDSR is configured and what its outcomes might be. As we have already noted, our predecessor Committee concluded that the defence of the country needed to be assured "during difficult financial times as well as during more settled ones".[8] The current state of the deficit and of government finances more particularly require savings to be made. The MoD's budget is not one of those ring-fenced beyond this Financial Year by the current administration. The presumption has to be that the MoD will need to make cuts of one sort or another and that the SDSR will presumably have to take account of that need.

11. In discussing budgets with the Treasury, the MoD is disadvantaged by long-running procurement delay and overspend and by poor financial management which recent reports have revealed only too clearly. We understand the Government's need to tackle the deficit and ensure financial soundness. One of the most important capabilities a country can possess in relation to its defence is a strong economic base. Yet we are concerned at the possible consequences of the MoD's budget not being ring-fenced for the future, unlike those of DFID and the Department of Health. We note that while expenditure on those departments, and several other government departments, has greatly expanded as a percentage of GDP, defence has continued to decline and is now down to 2.7% of GDP, compared with a mid-1980 peak of over 5% a generation ago. The Cold War is over but the pace of operations is heavier now. Setting aside what the SDSR might determine, the level of cuts demanded by the Treasury from the MoD is not as great as that demanded from other Government departments. Nonetheless, although the Reserve has funded military operations, their longevity (and concurrency, while significant forces were still deployed in Iraq) has had an attritional effect on the MoD and the Armed Forces with inevitable consequences for the core budget of the Department. In addition, there is the impact of the recent civilian manpower cuts and previous reductions in Armed Forces personnel. Thus the capacity of the country even to sustain current in-use capabilities and therefore current operations could well be put at risk by the proposed cuts of between 10% and 20%. In addition, the MoD is beginning this Financial Year with a deficit inherited from previous years, in addition to the massive funding gap in its equipment programme which our predecessor Committee—and others—reported on recently.[9]

12. The memorandum from the MoD states explicitly that the SDSR is led by the Treasury and the Cabinet Office (within which sits the secretariat of the National Security Council):

"[T]he Review is being led from the centre of Government, the Cabinet Office working with the Treasury. Defence capabilities and resources are accordingly being considered alongside all other security capabilities in order to measure the relative cost effectiveness of each."[10]

Our predecessor Committee was worried that the new financial settlements might precede and therefore appear to prejudge the outcome of the planned SDR. However, the SDSR is running in parallel to the Comprehensive Spending Review. The Treasury is monitoring and guiding the processes of the SDSR to ensure that it properly reflects not only the foreign policy and national security baselines established by the NSC but also the Treasury's thinking as to the likely financial constraints within which most departments involved will have to operate. The Government should reassure us that this symbiosis will have the positive result that the outcomes of the SDSR will be fully funded, even when translated into more detailed programmes, including the issue of Trident, by the departments involved.

Timetable

13. These positive outcomes will of course necessarily depend on the decisions made by the NSC. The processes and timetable leading up to their decisions about the final form of the SDSR are still not clear to us, nor is the relationship between the Treasury's internal time-table for the CSR and the NSC's timetable for the SDSR. This is the first time that a Review of this sort has followed this particular path through Government in parallel with the CSR. Clearly, many of the Departments involved in the SDSR had some participation in the work leading up to the Green Paper in February 2010 and were possibly involved in strands of work which followed on from that. The MoD clearly had a particular head-start as the Review was originally expected to be run by that Department with cooperation from others.

14. The NSC is a new body: it was only set up on 12 May 2010, its Secretariat, and SDSR team within it, formed afterwards from military personnel and civil servants drafted in from the MoD, FCO, DFID, the Treasury and the security and intelligence services: from a standing start only so much can be expected in such a short time. Given this novelty, and the inevitable complexities of the Review's pan-Departmental nature, and its coincidence in time with the CSR, the rapidity with which the SDSR process is being undertaken is quite startling. A process which was not tried and tested is being expected to deliver radical outcomes within a highly concentrated time-frame. We conclude that mistakes will be made and some of them may be serious.

The National Security Strategy and MoD studies

15. From the briefings we received from the MoD's Permanent Secretary, it is clear that the new National Security Strategy already exists in substantial outline. We believe that the original intention of Government was for the Strategy to be published before the summer, which would have helped establish a degree of discussion and public engagement that is otherwise lacking. We regret that the Strategy is still not a public document. This outline is informing the work of relevant Departments. These Departments have also been given indicative financial envelopes by the Treasury in which to carry out their separate studies to feed into the NSC secretariat and its SDSR team.[11]

16. The MoD has just completed approximately 40 individual studies (the deadline was 16 July) which have been tailored to three scenarios—of zero real growth and of cuts of 10% and 20% real respectively. These studies are described in the MoD memorandum appended to this Report.[12] The Director General Strategy in the MoD, who is the Programme Director for the SDSR under oversight from the Defence Strategy Group (chaired by the Secretary of State for Defence), is now considering these studies. The scope of these studies, which are intended for the NSC's SDSR team, was agreed between the MoD and the National Security Adviser, acting as head of the NSC secretariat.

17. Clearly some of the work included in these studies may have been developed prior to the establishment of the NSC, or may have drawn on previous work. However, the period between the approval of these studies (and the application to them of the Treasury's requirements for possible cuts) and their deadline cannot have been more than two months. Whether this has allowed sufficient time for the work included in these studies to be thoroughly assessed and checked prior to deadline, and for the costings—an area where the MoD has not shown great capability in the past—to be made robust and accurate has to be doubted. Further parts of the time-line leading to decisions on these studies and the final outcome for defence in the SDSR may likewise be very constrained in time. We appreciate that holding the Review after the CSR would have been unsatisfactory, but the brevity of the SDSR as a result of its running in parallel with the CSR means that it will not be as comprehensive and considered a Review as would otherwise have been the case.

18. We have no clear sense of how the coherence of the MoD studies has been assured, as they were developed largely in isolation from each other. Clearly, by the July deadline the studies would need to have been pulled together. The short timescale permitted for this process presumably allowed little leeway for any internal dissonance to be resolved. We understand from the Secretary of State that these studies will be used to inform a 'posture' to be determined by the NSC:[13] this 'posture' will then in turn determine further work on taking forward these studies and on MoD decision-making in the next stage, preparatory to final submission to the NSC (and presumably to the CSR). It appeared from the Secretary of State's evidence that this work to determine the posture would occur by the end of July. Further MoD work would follow in August and decisions would be made for the final stages of the relevant processes in September.

19. When the NSC has considered which 'posture' to adopt, and the MoD has responded by further defining its work, a process of force-testing will be carried out within the MoD. This will involve the use of Military Judgement Panels and a Senior Judgement Panel (the latter comprising 4-Star, 3-Star and 2-Star officers) to test different force packages under a range of scenarios. This process is intended to assess the robustness of the capabilities newly configured within the financial envelopes set down by the Treasury.[14]

20. One aspect of the SDSR timetable and process which also concerns us relates to the Strategic Deterrent. It is not yet clear when the value for money study of the Trident successor programme (completed by the end of July) will be made public—although the Secretary of State suggested there may be an announcement in September. Press reports also suggest that there is continuing disagreement between the MoD and the Treasury about how the new programme should be funded. The successor programme itself does not form part of the SDSR although associated capabilities necessary for effective use of deterrent presumably do.[15] It seems increasingly likely that the MoD will have to shoulder more than the running costs of the successor programme to Trident. The implications of this for the MoD's budget would be very significant. In practice, this decision seems to put the issue of Trident renewal into the SDSR without making this explicit, which unhelpfully reduces the transparency of the process.

21. The speed and intensity of the Review means that other vital areas of MoD reform will need to follow rather than accompany it. We were advised that the process of defence acquisition reform—beyond the programme proposed by Lord Drayson, the then Minister of State for Strategic Defence Acquisition Reform, and subsequently endorsed by the new Government—will halt until the Review is completed.[16] While the SDSR will have to deal in some respects with industrial issues and procurement reform more generally, and may signal greater certainty for the defence industry about which capabilities are to be maintained or developed, it will not say where these capabilities should be produced or supported. Current expectations are for a Green Paper on a new Defence Industrial Strategy to be produced by the end of 2010 for consultation, leading to a White Paper and new Industrial Strategy in Spring 2011.

Costing and industry involvement

22. We are concerned that the MoD costings for the studies used in the Review have been established before there has been an opportunity fully to explore the possible extent of financial benefits from procurement or acquisition reform. Assumptions are being made about the cost of acquiring or maintaining and supporting capabilities which may later prove to be far from robust The danger exists that capabilities within the SDSR may be reduced more than they need to be or dropped altogether on the grounds of perceived excessive cost. There is also the danger that the MoD underestimates the cost of capabilities and the opposite occurs. The importance of the costing of these studies being rigorous cannot be underestimated.

23. There is a proposal for the equipment programme to move towards 'a ten-year planning horizon' for the purposes of funding. This horizon is an attempt to give greater transparency to equipment costs, to enable greater control, to prevent the concealment of moving of programmes 'to the right' (i.e. being deferred in time), and also to provide industry with some certainty as to funding timescales. It is not clear how well this would fit in with the more short-term CSR process, or with the possibility that SDSRs or similar defence reviews might recur every four or five years. Both the CSR and possible SDSR timetables in future might undermine the very sense of predictability the planning horizon is intended to provide. In this context we request the views of the Government on the regularity with which it intends to undertake such Reviews in the future. We support the proposal contained in Bernard Gray's report of ten year budgets for the MoD, but ask the Government to explain how longer term funding would work in practice. We also consider that it should involve greater flexibility in transferring money between budgetary years and that the existing limited degree of flexibility should be devolved further within the Ministry.

24. An SDSR that takes no account of what the defence industries can provide in this country, in terms of skills and capacity, and which does not explore fully what sovereign industrial capabilities are required, would be a folly. However, engagement with industry during the SDSR process so far appears to have been limited. Those running individual MoD studies have been permitted to engage with whomsoever they choose. However, we have serious concerns that the defence industry has only been formally consulted in very few areas. There is a very real danger that the examination of which capabilities are required for the UK's security and defence needs is disconnected from the examination of how, when and at what cost those capabilities can be provided and sustained, and the vital skills base retained. Treating defence industrial capacity and capability as an after-thought risks reducing the robustness of what the SDSR will propose.

Manpower costs and the Reserve Forces

25. A major component of the MoD's budget is the cost of military pay, allowances and pensions which comprises some 27% of its total funding, without adding in additional related costs, such as accommodation. Cuts in this area will no doubt be seen as desirable and perhaps easier to accomplish than, for example, within the equipment programme. The Secretary of State told us in evidence that attention was being paid in particular to the number of senior officers and that MoD's work for the SDSR in this area was "radical".[17] We welcome the Secretary of State's radical intent and attention to the number of senior officers in the Armed Forces, an issue which has required action for some time. We hope that the Review will consider other radical ideas relating to how the burden of accommodation, medical and education costs can be born more equitably across relevant Government departments.

26. The relative costs of maintaining current capabilities within the Reserve Forces rather than the Regular Forces needs to be identified by the NSC. Cost equivalency has not been adequately measured in the past but there has to be a case for considering that the UK could in some way move closer to the US or Canadian model, where a greater proportion of capabilities and manpower sits within the Reserve Forces. We are disappointed that there has been no specific work-stream within the MoD on developing the role of the Reserve Forces, especially considering the radical intent behind the SDSR. We were assured that some of the MoD studies cover the use of Reservists, but it seems odd that there has been no discrete study dedicated to exploring this issue. We requested information concerning the relative costs of reservist and regular units—for example a Multiple Launch Rocket System (MLRS) regiment—but the MoD failed to provide comparative costings. This is unsatisfactory, and reveals MoD's failure to address seriously the option of placing capabilities into the Reserve Forces at much lower cost, as the Americans have done. We recommend that the increased use of Reservists should be properly covered by the NSC in its discussions.

Cost-cutting and reform

27. Running alongside delivering capability to the front line in Afghanistan, feeding into the SDSR and CSR, is a programme to cut 25% from the running costs of the MoD. Details of this programme are very limited, and no clear definition has yet been given of "running costs" which in the context of the MoD could cover a very wide range of areas. We acknowledge that the MoD has already undertaken significant reductions in Main Building and other personnel while managing operations at a level over and above what the Defence Planning Assumptions provided for within the 1998 Review. Running cost reductions typically bear heavily on salaries and wages. Reference was made in the evidence session with the Secretary of State to a review of the numbers of senior officers in the Armed Forces:[18] a reduction in their numbers would no doubt contribute to a reduction in running costs. But early decisions on cuts before the outcome of the SDSR is known—and before the more detailed work that will follow fleshing out the high level proposals from the SDSR—may hinder the Department in carrying out the changes required by the Review and may impede its subsequent performance.

28. If all of this activity were not already enough, the Secretary of State has also announced his intention radically to reform the structure of the Department, proposing its division into 'three pillars'—strategy and policy, the armed forces, and procurement and estates. The Defence Reform Unit (which has been formed especially to manage this process and, which we understand, will report by September 2011) will examine proposals for change which can only be provisional upon outcomes from the SDSR. We are concerned that the MoD is beginning a process of structural change, to make the Department more capable of carrying out what it is tasked to do, before it learns exactly what it will be tasked to do in future.

29. The overall sense we derive from the SDSR and associated processes is that the MoD is having to do too much too quickly. We can understand that there is an urgency to the SDSR process, both in terms of alignment with a CSR intended seriously to address the deficit, and in terms of the pressing need for a defence review a decade since the last was undertaken. However, the Department could end up with only short-term priorities, misaligned resources, a barely reformed acquisition process and a structure short of manpower to deliver good performance and improperly configured for its tasks. The quality of the inputs into the SDSR and the quality of judgement exercised by the members of the NSC will determine whether such fears are realised. We welcome the Secretary of State's determination that this should be a real review rather than just a cost-cutting exercise. However we are not convinced that the combination of a budgetary straight-jacket, the short timescale, and the apparent unwillingness by the Ministry to think outside existing structures, will deliver that end.

Consultation and the public

30. One of the positive features of the work done in preparation for the February 2010 Green Paper was the process of consultation in which the Department engaged with its own personnel, with the Armed Forces community, with Parliament, with the defence industry and with defence academia. Not only was sufficient time allowed for such consultation but there was also a determination from the then Secretary of State for Defence, the Rt Hon Bob Ainsworth MP, to seek a broad range of views to input into departmental thinking. Central to this community of consultation was the Defence Advisory Forum which embraced experts including senior Opposition parliamentarians. There has been limited consultation this time—notwithstanding the continuing interest in the Review within the defence academic world during the hiatus created by the General Election. Engagement with Parliament has been slight, likewise engagement with this Committee. We acknowledge that this is not entirely the fault of the Government since the timetable of the House's own nomination processes and the summer recess were factors in this. It is nonetheless regrettable. The chance to look in more detail at the processes and inputs before the SDSR will be published would have been very useful.

31. We are concerned, given general public opposition to the war in Iraq, and questionable support amongst the electorate for current operations in Afghanistan (notwithstanding general support for Armed Forces personnel), that the lack of general consultation may create a greater sense of disconnection between the decisions of Government and the understanding of the people at large on defence issues. Outcomes from the SDSR, especially if they result in a notable reduction of numbers of Armed Forces personnel, may seem to strike at that part of defence policy—the welfare of those serving in the defence of our country—that is most important to those who vote. This will not assist the Department in implementing its plans to reconfigure the MoD and the Armed Forces or to engage popular support in its continuing work of defence.

32. The memorandum from the MoD, and the private briefing from the Permanent Secretary that we had prior to the 21 July evidence session with the Secretary of State, made clear that the SDSR will be a high level document that will inform more detailed departmental programmes. We do not know exactly how high level the SDSR will be, or how clear the implications for the MoD and the Armed Forces will be from the White Paper. It is important that publication of the Review is accompanied at the time of its release or as soon as possible thereafter with material that will at least allow a greater insight into what the Review means for defence manpower, capabilities and equipment. We consider that the SDSR represents a missed opportunity to reconnect the people of the country with defence issues. It will be essential whenever the successor review is conducted that this matter is addressed head on, and that in the intervening period the MoD communicates the outcome of the SDSR effectively to the wider public.

Other issues

33. The MoD's written memorandum, our private briefing and the oral evidence session with the Secretary of State all suggest that there may in future be greater flexibility within the budgets of those departments involved in defence and security. Already some pooled budgets exist for development work undertaken with Afghanistan, such as the tri-Departmental Conflict Prevention Pool shared amongst the FCO, DFID and the MoD.[19] The work of the Armed Forces in Afghanistan has a direct connection with reconstruction and stabilisation activity. The MoD often does not receive back the full cost of this activity, not just there but elsewhere (for example in some of the work of the Royal Navy in disaster relief). It seems unjust for the MoD to have its own budget cut when it bears the cost of important work carried out on behalf of other departments or helps create the context in which such work can be done. We would welcome improved financial burden-sharing that reflects the MoD's contribution to the aims and objectives of other Government departments.

34. More effective departmental burden-sharing could also be extended to other areas of defence and national security, to provide flexibility and better to reflect the cost of policy decisions which span several agencies of Government. As the Secretary of State acknowledged in evidence to us, defence research and technology is often considered an easy victim for cuts, but the health of that budget is vital for what might prove to be essential future capabilities.[20] We understand the value of departments with related research and technology budgets pooling resources so that defence and security priorities across Government can be better and more flexibly funded. In the light of our predecessor Committee's dismay at recent reductions in defence research and technology, we would be most concerned if Government support in this field were to be cut still further.

35. The MoD has a large diverse estate valued at nearly £20 billion with some 4,000 sites including airfields, naval bases and barracks. An estimated £2.9 billion per year is spent on running the estate. It is crucial that the MoD has the right systems and information in place to determine the right size of estate to meet its operational needs. It has reduced the estate by over four per cent in the ten years between 1998 and 2008 generating £3.4 billion in sale receipts. On 9 July 2010, the National Audit Office (NAO) reported that the MoD has inadequate central data and systems to assess its needs and the scope for rationalisation. The NAO study was based on plans and data held in the centre of the MoD, to inform its thinking ahead of the Strategic Defence and Security Review, and in light of the fiscal challenges ahead. The NAO said:

"In the context of the Strategic Defence and Security Review, the Department needs to consider what minimum estate will be required to meet the future needs of the reshaped Armed Forces. This requires a much more rigorous appraisal of operational needs, and associated estate costs and utilisation. The Department collectively needs a change in mindset so it gives due emphasis to reducing costs as well as meeting operational requirements."[21]

We note the NAO's implicit criticism of the work that the MoD had done on estates issues prior to the SDSR. We hope that the studies relating to estates within the SDSR process have given more focus and depth to the context within which decisions as to the size and use of the MoD estate will be made later in the year. It is unsatisfactory that the MoD has given insufficient attention to estates issues over recent years. We look to the MoD in its response to this Report, and within the SDSR, to give full and proper weight to how it might better understand and exploit its estate.

36. It is very likely that the SDSR will result in a reduction of MoD and Armed Forces establishments around the country The would be driven as much by the rationalisation of fleets as by any cuts the in the overall number of MoD and military personnel. We seek assurances that the NSC has received inputs from other Government departments, such as DWP and DCLG, about the possible implications of the closure of bases or garrisons for the Exchequer and for local economies.

37. One last area of concern, which was not covered by the MoD memorandum or in evidence with the Secretary of State, is the use of the Treasury Reserve to cover the cost of operations, and in particular to purchase new equipment and/or new capabilities by means of the Urgent Operational Requirement (UOR) process. We do not know whether the current discussions between the MoD and the Treasury in the context of both the CSR and the SDSR will cover the future use of the Reserve. There can be no doubt that the Reserve was used to fund the overwhelming majority of operational costs. However, the determination of the balance of costs for some UORs and also for elements of the recuperation programme following withdrawal from Iraq affected the MoD core budget. We wish to be informed whether, alongside the CSR settlement for the MoD and the SDSR's exploration of how operations might be funded in future, there may be some development or indeed restriction placed upon access to the Reserve. We will watch this aspect of the relationship between the Treasury and the MoD with close attention.

38. We hope that the SDSR will make clear not only how it will be implemented, and by whom, but what the relevant timetables are and who will be asked to monitor or assure compliance. Presumably smaller and more detailed levels of monitoring implementation will be undertaken by the individual departments concerned. We expect the NSC will consider implementation not as an afterthought to the Review but as an integral part of it. Experience has shown that a programme which establishes its own timetable for implementation and its own processes for monitoring stands a better chance of successful implementation than one for which such things are afterthoughts. In this respect we are concerned that there will be significant changes to the most senior levels of personnel as the SDSR process ends, which means that key members of the new defence team will be implementing the results of a process which they did not lead.

39. Until the SDSR is published and we have sight of the more detailed MoD programmes that will accompany or follow it, we cannot plan our own role in the scrutiny of the Review and its implications for the MoD and the Armed Forces. However, we expect our scrutiny of the SDSR to be a high priority for us following our proposed inquiry into current operations in Afghanistan. We will wish not only to examine the implementation of the Review but also where necessary to challenge its conclusions.

1 Ministry of Defence, Adaptability and Partnership: Issues for the Strategic Defence Review, February 2010, Cm 7794 Back

2 Ministry of Defence, The Defence Strategy for Acquisition Reform, February 2010, Cm 7796 Back

3 Defence Committee, Fourth Report of Session 2009-10, Readiness and recuperation of the Armed Forces: looking towards the Strategic Defence Review, HC 53 Back

4 HC (2009-10) 53, para 63 Back

5 Defence Committee, Fifth Special Report of Session 2009-10, Readiness and recuperation of the Armed Forces: looking towards the Strategic Defence Review: Government response to the Committee's Fourth Report of Session 2009-10, HC 536, response to recommendation 14 Back

6 See Defence Committee Reports on these subjects: HC (2008-09) 121, HC (2009-10) 149, HC (2008-09) 434, HC (2009-10) 99, HC (2009-10) 224, and HC (2009-10) 225 Back

7 See HC Deb, 21 June 2010, from col 52 onwards Back

8 HC (2009-10) 53, para 63 Back

9 Defence Committee, Sixth Report of Session 2009-10, Defence Equipment 2010, HC 99, paras 54-8 Back

10 Ev 13, para 2 Back

11 Q 16 Back

12 Ev 16-17, para 17 Back