The Strategic Defence and Security Review and the National Security Strategy - Defence Committee Contents

Examination of Witnesses (Question Numbers 1-48)

James Blitz, Professor Malcolm Chalmers, Professor Michael Clarke and Professor Strachan

16 February 2011

Q1 Chair: Sorry to have kept you waiting, but welcome to our first session on the National Security Strategy and the Strategic Defence and Security Review. Unusually, today we are taking evidence from Professor Michael Clarke, who is one of our specialist advisers, but I have checked beforehand that you have not been involved, Professor Clarke, in drafting questions to yourself.

  Professor Clarke: I have not.

Q2 Chair: Welcome to this inquiry. Please would you be kind enough to introduce yourselves for the record?

  Professor Chalmers: I am Professor Malcolm Chalmers from the Royal United Services Institute.

  Professor Clarke: I am Professor Michael Clarke, director of the Royal United Services Institute.

  Professor Strachan: I am Hew Strachan, Professor of the History of War at Oxford.

  James Blitz: I am James Blitz, Financial Times defence and diplomatic editor.

Q3 Chair: Thank you, and thank you all very much for coming to give evidence. We are expecting a vote at 4 pm. After that, there will be a debate in the Chamber on the military covenant, and several members of this Committee would like to take part in it. That means that we will finish by 4 o'clock, so we have a lot of material to get through. Please do not feel that you each have to answer every question; you do not. Please make your answers as pithy and snappy as you possibly can. To the Committee, please make your questions as pithy as you can.

  Can we start with the National Security Council? Its creation has been pretty much welcomed. What impact, though, do you think it had on the National Security Strategy, and on the Strategic Defence and Security Review? Who would like to begin?

  Professor Clarke: I will happily start on that, very briefly. Remember that the NSC came about, in a sense, because of the NSS. The NSS goes back to 2008, and it was the attempt to think more holistically about security that popularised an idea, which had been around for a long time, that we should also have a National Security Council. So one predicts the other. If you are talking directly about the NSC, I would say that that encapsulated quite a lot of good thinking in the NSS. It certainly was relevant to the SDSR, but the SDSR itself had to be handled in such a truncated way because of the time problem that I am not convinced that the NSC had the sort of input to the SDSR that it would have wanted, or that certainly the Ministry of Defence would have wanted it to have. The NSC and the NSS are very closely connected, but the NSC and the Defence Review are less connected than they should have been.

  James Blitz: My view of the NSC, having covered it as a journalist since its inception in June last year, is that in a number of areas it has had a very important impact. It has, first, given the Government a far more holistic and co-ordinated approach in Afghanistan, moving away from a lot of the divisions you saw between the Service Chiefs and the Executive under the Brown Government. I think it has also had a very important impact in resolving some difficult cross-departmental issues. Most notably, one of its big successes is getting the package of compensation for Guantanamo detainees last year and the setting up of the Gibson inquiry.

  On the NSS, I think it played an important role last June and July in agreeing the adaptability concept and moving away from the possibility, in some people's minds, of moving towards vigilant Britain—the more defensive crouch. I agree with Professor Clarke on the SDSR that it was basically a body that gave an imprimatur to decisions that were taken, given the circumstances that we were in last October and November, by a smaller coterie of senior Ministers—the Prime Minister, Chancellor, Foreign Secretary and Defence Secretary.

  Professor Strachan: I would agree with everything that the previous two witnesses said. All I would add is that, because the Defence Review process began so much more in advance of the creation of the NSC and the NSS, at one level what was extraordinary was the convergence between the two, which was better than you might possibly have hoped for in the circumstances. On another level, I am, in a way, struck by the amount of misplaced effort that occurred because the NSC was not able to produce a National Security Strategy in enough time to co-ordinate what was happening in the defence review process. As the defence review process had begun so much earlier, it was driven from the bottom up by a series of independent studies.   

  Professor Chalmers: One thing I would add to what the previous witnesses have said is that I think the jury is still out as to whether what we have seen here is more a structural change than a political change. Clearly, there have been NSC meetings on a very regular basis and the relevant Ministers have been very engaged in discussion of security issues collectively in a way that did not occur under the previous Government. I am not entirely convinced that that is because this particular committee was set up; it is more the way in which it has been organised, and I think that has been very helpful.

  It will be interesting, now that we are past the honeymoon period of the Government and people are getting really stuck into their ministerial briefs, to see whether there continues to be that engagement across departmental boundaries. I hope that will be the case. The footnote to that is that it is an interesting question as to whether that greater ministerial engagement across the piece is in part a result of coalition government and whether having two parties in a Government—unusually in our country—has forced them to engage in wider discussion than the rather smaller groups that decided these things in the past.

Q4 Chair: The Ministry of Defence said that "the new NSC provides high-level strategic guidance to Departments, co-ordinates responses to the dangers we face, and identifies priorities." Does it? Do the outcomes of the NSS and the SDSR support that? Would you say that it was a more strategic and coherent outcome than we have seen in previous defence reviews?

  Professor Clarke: I think the framework of thinking was more coherent than in previous defence reviews, but I don't think the outcome was necessarily more coherent, because there was this mismatch between the security strategy and the SDSR, the defence part of it. Undoubtedly, the NSC and the NSS provided a coherent framework, but it is not yet clear whether that has enough traction within Whitehall, because it's quite radical. What the NSS says is a pretty radical re-thinking of the way we should discuss security for a country like Britain in the 21st century. That is easy to say for a group of clever people writing a good essay on it, but it's much harder to push through Whitehall, which is stovepiped for a different sort of security environment. In the next few years, I think we in the analytical community will be looking at how far the NSC and the NSS are able to gain real traction within Whitehall.

  The NSC has provided a customer for a lot of inputs—it is the customer for the Joint Intelligence Committee's material and a lot of what Whitehall does—which is good. That's a benefit, but it is undecided whether the conception of national security that the NSC has helped to create through the NSS is really our strategic framework for the future.

  Professor Strachan: I would not stray from anything that's been said, but I would go further and say that the NSS very clearly sets out the need for priorities in the way a national security strategy might be put together, but it doesn't move on to what that strategy might be and how it might be shaped. It seems stronger on the processes, which in itself is a massive step forward, and rather less secure about what that strategy might be and how it might be shaped. In the end, it lacks the willingness to make choices and prioritise, despite the determination to use that sort of phraseology throughout its content.

Q5 Mr Hancock: On that point, it is not a very pretty picture that you paint, it is? We get halfway there, but not one of you suggested a way forward. What needs to be done to combine the coherence of putting the thing together with the coherence within Government to implement it properly, effectively and to cost?

  Professor Strachan: If I may answer that, you need to realise that this is work in progress. We are almost going from a standing start, given where we were. As successive Chiefs of the Defence Staff have said, there isn't—and hasn't been—much strategic thinking in this country, so there hasn't been a bottom to support the top.

  You can think about the composition of the NSC, but I think the crucial question is the composition of the Secretariat and how you wish to put it together. Professor Clarke has just spoken about the inputs and the way the Secretariat can draw things together, but we should think about how it can generate its own inputs if there are areas it feels it should look at, rather than be reactive to things that have been put into it. How far can it create a demand? How far can it generate its own demands? We've got to wait and see. You're getting an optimistic mood from the group here because, as the Chairman says, we see it as a step forward, but that doesn't mean we've got there.

  Professor Chalmers: It is very important to make the point that there wasn't a direct read-on from the NSS to the force structure decisions we're taking for defence and the SDSR. You cannot trace the particular decisions taken within that, or even the budgeting priorities, back to the NSS, except in the critical respect that the Government committed itself to an adaptable approach, which was essentially a compromise between the polar extremes of focusing on stabilisation or on intervention. That was a critical discussion at the NSC, but even that was pre-packaged—it would have been very surprising had the Government made a decision to focus on one particular sort of capability or another.

  In the general terms in which we are looking at an uncertain world with many threats and the difficulties of balancing the long and short terms—and therefore you need adaptable forces—the NSS clearly had a critical role. In cyber, there is a case to be made that the NSS changed priorities across Government, but in relation to defence I am less clear.

Q6 Chair: I think we will go into this in the course of the afternoon. Do any of you have any concerns about the transparency of the National Security Council? There is a Joint Committee of the Lords and Commons that can hold it to account, but do you have concerns about that?

  James Blitz: I have two things to say on that point. First, I have one concern about transparency in the whole process. The key meeting that set out the adaptability approach took place in June or July of last year, and the NSS was being forged around that time. It wasn't actually until the very eve of the SDSR that the "Age of Uncertainty" document was finally published. From the Government's point of view, that was very unfortunate. They had some kind of strategic approach, but because they published it right on the eve of the SDSR, they lost the opportunity, so they were unable to fend off constant criticism in that whole period that this was a cuts and Treasury-driven approach. I also think that there was a lost opportunity for Parliament and the wider public to have a debate about the NSS.

  At the same time, however, I don't basically have concerns about the transparency of the NSC as a body. I think it is an ad hoc enabling body that brings together the main pillars of Government. It is the individual Cabinet Ministers who are responsible for what they do. In that sense, it is a little bit like, although it is obviously different, the United Nations Security Council, as that is a body that brings together the major countries and the P5. You look at those. To understand how that body works, you have to understand the individual representation. It meets on an ad hoc basis and therefore has a smaller Secretariat, so I don't think there is a transparency issue about the way it operates.

Q7 Chair: But do you think that the document was published so late because of last-minute horse-trading, rather than the strategic overview?

  James Blitz: I don't know why the NSS document was published so late. I certainly think it would have benefited Government and the wider process if it had been published a few weeks or months before it was.

  Professor Clarke: The story of the two documents, as I understand it, is that it was intended that there would be only one document, and that the SDSR would encompass the framework of the NSS. However, quite late on, for reasons that we can speculate about, it was decided to separate one document into two and publish them a day apart, so I think what James said is very interesting. If they had decided to publish the strategy some time before, that would have given some time for reflection before the defence part of it, but it was one document split into two at quite a late stage.

Q8 John Glen: Is it not reasonable to infer that, given the lack of the clear relationship between the two documents, bigger pressures—Treasury pressures on the SDSR, as we have discussed—made that relationship far less clear, and that it was not desirable to have scrutiny? Professor Chalmers, I think you just said that the correlation between what the NSS document says and the SDSR is difficult to surmise. I mean—

  Chair: That's the question.

  Professor Chalmers: To be fair, it would be hard to write an NSS document that then produced a clear read-across to specific defence capabilities, because all sorts of other things come into the picture. That is important in a sense. We will no doubt come later to defence planning assumptions, but even there it is often difficult to see the relationship in relation to force structures.

  Where I think more work needs to be done on the NSS is thinking through what it has already said on prioritisation and how this relates to the link between short, medium and long-term concerns. That, I think, would provide more clarity for force structure decisions later on. One example is that, in the discussion of the aircraft carrier decision, there was an explicit difference drawn out between the threat environment that we face in the next 10 years, which doesn't require carrier-based aircraft, and what we anticipate after that, which does. But that isn't related back to the analysis in the NSS.

Q9 Mr Havard: On the NSC as a body, the Foreign Office declaimed that they are demonstrating "FCO leadership in the NSC through strong FCO representation and input into all its decisions". They have written over half the documents, they "advised" the Departments before they submitted their documents and they had a Foreign Office Pravda brief before they had written them. Is this a Foreign Office-dominated body and what does that say about the position of the Ministry of Defence in any discussions?

  Professor Strachan: Before answering that question, can I raise an issue the Chairman raised in relation to your question—that of transparency? I realise it is our job as witnesses to try to give answers rather than raise questions, but one of the issues in my mind in relation to transparency is the constitutional status of the NSC.

  James Blitz described the NSC as ad hoc, and there are elements of it that seem to be very ad hoc. Is it a Cabinet Committee? I assume it is, in which case, does the Cabinet have a controlling function in relation to the NSC? Is it an executive Committee of the Cabinet, which would explain why the professional heads of the intelligence services and the CDS are there as advisers, rather than as full members?

  If the NSC is all those things, that probably helps to answer some of my concerns about transparency. It also clarifies how it is working and how it should work, which still assumes that, in the event of a major national crisis, although the NSC might function as "a war cabinet", it would normally act in a subordinate fashion to the Cabinet. In reality, however, the processes we have just been talking about in the NSS and SDSR eventually came straight out from the NSC itself, and I am not sure they were referred to the Cabinet at all. I may be corrected on that point.

Q10 Chair: You should read the transcript of the interview of the Prime Minister in December, or maybe late November, by the Liaison Committee. The answer is it is a work in progress.

  Professor Strachan: Right, so it is part of the same agenda. Forgive me for that preamble when you asked me to be precise, but the reason I raise all those issues is that we are unclear as to the relative weights of the inputting Ministries. It is also interesting that we flag up the Foreign Office when one of the great strengths of the NSC was meant to be the incorporation of domestic security and international security. In other words, you would expect the domestic agencies to be as important in this relationship as the Foreign Office itself.

  Personally, I would have no objection to the Foreign Office being the lead, but the issue is one of clarification. I know one of the issues you want to raise later is whether there is a role for a Cabinet Minister responsible for national security. Is the Foreign Secretary that figure and, if so, does that help explain why the Foreign Office should have a predominant role? Is that going to be difficult for the Foreign Office if it is not accustomed to thinking strategically, to go back to the phrase of fashion at the moment, in the way that the Ministry of Defence perhaps feels it ought to be?

  Mr Havard: You have anticipated a couple of my supplementary questions, but I will come to that in a minute.

  James Blitz: In answer to Mr. Havard's question on the weight of the Foreign Office, I do not think that thus far in the workings of the NSC, the Foreign Office has had significant extra weight. Two things have been important in shifting balances. First, the Department for International Development is now much more incorporated into the wider thinking about security. That is seen in a lot of the policies coming out of DFID. Secondly, the intelligence services have had far greater weight in thinking than was the case in the past.

  The heads of MI5, MI6 and GCHQ attend in an advisory role but you can see areas where their additional weight is coming through, such as the decision on the extra £650 million for cyber and also the current urgency on Afghanistan policy. That reflects to some degree the sense that there are new agencies but the external threats facing the United Kingdom are shifting away to a certain extent away from the Af-Pak region towards other areas—Somalia, Yemen, the Maghreb—and there needs to be a greater emphasis in policy to look at that. That is where interdepartmental shifts have been important over the last six months.

  Professor Clarke: The Foreign Office always has a big influence in these sorts of Committees, but if anything, the Home Office has a lot of influence. The Home Secretary sits on the Committee, as does the Minister of Security, who is in the Home Office, and as do the intelligence agencies. The Secretary of State for Defence sits on that Committee, along with the CDS. So there are two representatives from the MoD, and three or four representatives from the Home Office. Only the Foreign Secretary directly represents the Foreign Office, and there is now a group of Permanent Secretaries who have started to meet regularly. The Permanent Secretaries of all the ministries involved have started weekly meetings, but that is at a lower level. In terms of membership, it is hard to believe that the Foreign Office could somehow dominate this body, even if it feeds in quite a lot of policy papers.

Q11 Mr Havard: One of the criticisms made about the SD and SR is that there should have been a clearer Foreign Office declaration as to what you want everyone to do in the first place, and what is in Britain's interest, from which the document is written. Is that the NSS? Is that the security strategy? It has the word "security" in it, and that is what I want to get to. Where is the security bit? If it is the defence and security review, clearly the security bit is missing from the current description of defence and security. That seems to have been an MoD-led defence reform document, rather than incorporating security. In all the different initials and declarations, where is the overarching policy process that leads to a framework for a proper SD and SR that delivers your strategic view?

  Professor Chalmers: If you compare it with the 1997-98 defence review—

Q12 Mr Havard: It might be better than it was, but is it good enough and where are we going?

  Professor Chalmers: That had a foreign policy baseline, which then fed into the defence review. This time there is a security policy baseline in the NSS that covers issues that cross the domestic foreign boundary, such as terrorism, cybercrime and national disasters. Those are the priority risks in the NSS. The SDSR is not only a defence review but also talks about what is happening in wider security, development and diplomacy with counter-terrorism and natural disasters and so on. There is a congruence between the coverage of issue areas in the NSS on the one hand, and the SDSR on the other. Those are the issues covered in the NSC.

Q13 Mr Havard: So, is the NSC the body that should be incorporating all of these things. Effectively, the SD and SR should be coming out of that. Are they able to co-ordinate that process?

  Professor Chalmers: That indeed is what happened.

  Chair: Professor Clarke and Professor Strachan, you have nodded, which is a perfect answer and it is now recorded.

Q14 Mr Hancock: Following on from that, the NSS has said that as far as it is concerned, the National Security Council has reached a clear conclusion that the national interest requires us to reject any notion of shrinking our persona around the world. Isn't that overambitious? Where will that lead us and who is going to take responsibility for the direction? Do you agree with the assumption that the NSS has made, that this now gives us a clear image of what we can't and can do?

  Professor Clarke: A very quick answer. The thrust of your question is one I entirely agree with. That is why there is a mismatch between the defence review that talks about cuts and the NSS that continues to sustain a global aspiration. There is no congruence there. I entirely agree.

Q15 Mr Hancock: But why is it that nobody is getting to grips with that? How can you have an agreed, supposedly clear policy that takes no account of what you are doing with your other hand in reducing your capabilities?

  Professor Clarke: Because the NSS and, if I may say so, the Foreign Secretary in his speeches last summer when he was taking over the job, gave a useful series of shopping lists saying that we should do lots of things, and do everything better in a more co-ordinated, efficient way. Those things are easy to say, but the bottom line is about where the resources are to make those things happen. What we have at the moment is an NSS of no strategic shrinkage which, I have to say, is fairly aspirational. Some part of those aspirations can be met, but probably not all of them. What we are engaged in, I guess, between now and 2014-15, is having to make some pretty hard choices as to which of those aspirations we are prepared to fund. At the moment, the NSS would have us do a little bit more of everything with rather less resource.

  Professor Strachan: Crucial to this is the SDSR's point, which is essentially that any decision that potentially affects that global aspiration has been postponed as far into the future as possible. I have overstated the argument to make the point, which is that, of course, there had to be some hard decisions in relation to the SDSR, but not as many as one would have anticipated. There is essentially a reasonable range of core capabilities seen to be left intact, thus encouraging the aspiration—to pick up Mike Clarke's word—that at some point they might be restored. There is a never-never world there fed by the hope that it might all come back into shape again.

Q16 Mr Hancock: You have stated, professor, on more than one occasion that there is a hole in the heart of this organisation. How do we deal with that? What needs to happen?

  Professor Strachan: Are you asking that question of me? Hole in the heart? I am not a medical man.

Q17 Mr Hancock: You did actually use that word.

  Professor Strachan: Did I? It is obviously essential, and I come back to the point that the function of the Secretariat at the NSC seems to be to bring together the inputs in relation to the potential output. How the different Government Departments create inputs—we have already touched on this, and you raised the issue of Foreign Office input—and how those things are put together seems to be an essential part of how this is done. There is also a recognition that if you are developing a strategy it is not simply a top-down process that says, "This is what we aspire to do." It is also something that reflects what your means are, so that your means are adapted to your ends. We don't seem to be very good at it.

Q18 Mr Hancock: But it also leads you to believe that you need to know when and how you are going to use your armed forces. It does not tell us that, does it?

  Professor Strachan: No, it doesn't. That is also part of it. You can defend the silence on grounds of national security—on the grounds that if you are too specific about your scenarios, you offend those you do not wish to offend immediately, or you tie up resources in a conflict or crisis that may never occur. In that case, I think you have quoted back at me a phrase that I used. What I meant to convey by that goes to the heart of your point about global commitment—global aspiration—as opposed to thinking, maybe, regionally.

  The structure of the alliances we are now pursuing is very interesting: the relationships with France and with the Scandinavian countries make entirely coherent regional sense, but we haven't articulated that as policy in quite those words. It seems in that respect that we are thinking about the "where" a bit more. We are thinking about which patch of the world we are in and which patch we are interested in. The "how" is in part the strategy question, which we have just been talking about. How do we have a concept in relation to the use of armed force that matches our capabilities and our realistic aspirations, as opposed to our unrealistic aspirations, in a credible way? I don't think we have got our heads round that one.

  Chair: I want to move on.

  Professor Strachan: Can I finish the last point? You asked about how, where and when. The other issue—timing—is also very ambiguous, for entirely understandable reasons, because we don't know whether this process is predicated above all on the immediate assumption of Afghanistan and current commitments, or beyond.

Q19 Mr Hancock: The classic example is what has happened recently. The documents talk about our commitment to fighting drugs and terrorism around the world, yet at the same time we are saying that we are taking the drug-busting ship out of the Caribbean, which has been one of the most effective vehicles that this nation has had to demonstrate its commitment to that. How do you square the circle on that?

  Professor Clarke: The strategic answer to that is that you find other ways of fighting drugs and narcotics.

Q20 Mr Hancock: Once they have come here?

  Professor Clarke: Maybe you could fight them through border policing or financial mechanisms and so on. There are usually alternatives to doing things the military way. I am not arguing that that is right or wrong. When you say as a matter of national strategy, "We want to fight narcotics and international crime around the world," that does not automatically mean that we have to do it through military means.

Q21 John Glen: I would like to ask Professor Clarke about something you said about the NSS, which was published. You said, "It is an honest attempt to think afresh about British security…The problem with it, as it presently exists, is that it is not really a strategy as such, but a methodology for a strategy. It does not make hard choices between real things—which is what strategists have to do". Would you care to clarify what you meant by that? In particular, what hard choices do you think the NSC will have to make now and going forward?

  Professor Clarke: One thing that was assumed in the NSS and not really tested was that because we are a globalised player, we have to play a global role in a fairly tangible way. But Japan is a globalised player, yet doesn't play in the globalised way that we do. It answered the question differently.

  Our relationship with the US is taken as a given, which may be a perfectly sensible thing to do. But our relationship with the US in the world has been predicated on our ability to project force as much as anything else. The SDSR seems to run the risk of having us fall below what I would call the threshold of strategic significance, whereby our forces can be perfectly global and well respected for what they do, but not large enough to make a strategically significant difference to the operations in which they become involved. We haven't taken on those questions or questions of transformative forces.

  If we want to keep as much alive as possible in our force structure, it must be able to transform itself. That probably means far fewer platforms and much greater investment in C4ISTAR and in personnel issues, training and exercising. You need the command and control at the top end and the skills of people at the bottom end to be able to adapt quickly—within a three or four-year time scale—to do something perhaps completely different. Those are the sort of questions that we probably face. A lot of answers were implicit in the NSS and the SDSR, but no one yet wants to spell them out, because they are very difficult questions.

Q22 John Glen: Given how central they are to the country's security interest, and given that they are not things that should be put off—they are real decisions that are relevant today, given what is happening in US foreign policy—are you not surprised that they weren't grasped more fully within the NSS this time round?

  Professor Clarke: I have been hanging around the bazaars of Whitehall long enough not to be surprised that they haven't been grasped fully. I think it is reasonable to assume that in the next few years, those questions will recur, and they'll be coded in different ways; they will arise around different issues and there will be code words for them. I suspect that we will be discussing those sorts of questions continuously between now and probably 2020, as we react to the sort of changes in the world that we're seeing. So no, I am not surprised, and we will have to face them and lots of others.

Q23 John Glen: Thank you. Could I turn to Professor Chalmers? What is your assessment of the creation of the first-ever National Security Risk Assessment? In the written evidence, you call for a 2012 update to that assessment, for it to apply methodologies to take account of longer-term risks. How would you recommend this to happen? It seems to be one of the things where lots of variables happen. What would be your practical assessment of how that process would be implemented in a way that would be useful?

  Professor Chalmers: At present, the risk assessment looks at a whole range of risks. People throw lots of things into the pot, have a discussion about it within government and assess the likelihood and the possible impact of those risks coming to fruition and the time scale in which they might come to fruition. What the Government has done quite bravely in the document is to identify four of those risks as being tier 1 or higher priority, and they say explicitly that that informs resource allocation in the SDSR.

  My concern in the current strategic environment is that we are in an era where the level of risk is relatively low, but we have considerable uncertainty about where the world is going to be in years to come—uncertainty about what is going to happen in Libya tomorrow. Therefore, the Government are quite right to emphasise adaptability. There is a danger that if you don't think in a clear way about the long-term risks, you end up prioritising the shorter-term risks, which is indeed what the NSS says it is doing. It is prioritising those tier 1 risks because, although they may not be the most serious risks, they are the ones we are facing right now. A methodology for doing that would think through and put on paper how we deal with risks that may not arise for a long time. It may mean dividing them into those that may not arise for a long time but then might arise very quickly; and those that are more likely to emerge over time. Some of the more serious long-term risks are ones that we will see coming, and we need to think about being able to keep up with those threats, rather than prepare for them right now. That is the sort of issue.

Q24 Ms Stuart: Which serious risks in the past 10 years have we seen coming and been prepared for? It occurred to me that this sounds very good, but which serious risks have we seen coming in the recent past?

  Professor Clarke: Kosovo in 1999. The circumstances in which Kosovo occurred in 1999 were impossible to predict, but that Kosovo would be a crisis was predicted eight years before.

  Professor Chalmers: Iraq. We had been dealing with Iraq since 1990.

  Chair: We will come back to that in a second.

Q25 Ms Stuart: Professor Strachan, you have already in a sense started to answer the question. I wonder what the others have to contribute. The CDS told the Committee: "The National Security Strategy document is not a bad objective in terms of our ends, but I would say that the ways and means are an area of weakness." If I understood you rightly, Professor Strachan, you agree with that, but you said certain kinds of actions, such as strategic co-operation with some countries, start to hint at how we could implement that. What would the other witnesses say to that, about matching ends with means? We are bad at the means.

  Professor Chalmers: This was emphasised in the Green Paper before the SDSR, and in the SDSR. There was a very strong emphasis on partnership. The Anglo-French treaty is a significant political signal that partnership with others is going to be very important—and not only the partnership with the US. The statement in the Anglo-French treaty about the congruence of our strategic interests was important. One of the implications, which perhaps was not made explicit, is that in a world in which UK relative weight and European relative weight are declining, compared with emerging economies, partnership will be more important, if we want to be able to achieve our objectives.

  James Blitz: I agree. In terms of strategic shrinkage and all that, if you look at this from the perspective of the US, the view is that we have done enough not to go down below the top tier of the UK and France. In other words, we have retained commitments to 2% of GDP on spending; to the deterrent; to special forces; and we have not reduced the lay-down in Afghanistan. At the same time, there is deep concern in the US. I think the US see the UK increasingly within the wider European perspective. As they look towards strategic challenges from China and pressures on their own defence spending in the US, their increasing concern is that Europe as a whole does not play its part.

  The speech made at the Munich security conference by the NATO Secretary-General was important in that regard. He was not looking at the UK and what happened here; he was looking more widely at the fact that we have reduced as a whole in Europe to such a degree in terms of defence spending, that we have lost the equivalent of the size of the German defence budget in recent years. It is in that sense that I would answer your question.

Q26 Ms Stuart: I heard the speech. It is interesting that we are the only ones—other than the US—still sticking to the 2% target. All the others are falling below. If the only indication of direction of travel is greater partnership to provide the means to our ends, given that all our other partners, rather than stepping up to the plate are actually doing less, that is not a very credible long-term strategy, is it?

  James Blitz: No. I think it is an increasingly important issue. If you look at the speech that was made by the NATO Secretary-General, one of the big questions after the Franco-British agreement in November last year is where we now go in terms of deepening those bilateral relations with other countries.

  One of the key issues that is coming up now is what can be done with Germany. There is some speculation that the UK might try to develop bilateral relations with Germany in defence. We had at the Munich security conference the most high-level representation that we have had from the UK ever, I think. We had the Prime Minister, the Defence Secretary and the Foreign Secretary there, although the Prime Minister made a speech on multiculturalism; we didn't actually approach the bilateral relationship. One of the key questions to look for is where the UK-German relationship can go now. Some thinking is happening about that, and I think there is some interest in this country about what can be done between our two countries on cyber, for instance. That is something worth looking for in terms of increasing ways and means to improve a strategic overview.   

  Ms Stuart: I think one of my colleagues will come back to that.

Q27 Sandra Osborne: Professor Clarke, the Chief of the Defence Staff also told the Committee that he had agreed with the Prime Minister and others "to start constructing a mechanism to deliver a grand strategy" looking at the world as it will be in 2030 or 2040, and that "this will take two or three years…and then we need to get on and do the actual planning." Do you think that is adequate? Do you agree with that, and do you think it will happen?

  Professor Clarke: I very much agree with the fact that the Chief of the Defence Staff is taking that line, because I think he is living up to the promises of his predecessor, who said that we have got to be better at strategic thinking in this country. That is a matter not of trying to predict the future but of drawing sensible assumptions about the future. It goes back to what we were saying in the last answer in relation to, say, Kosovo or Iraq, that we should not be strategically surprised by many things that happen. We may be surprised by the contingencies which happen, and we are always surprised by the circumstances that may bring about a problem, but it should be no surprise to us, for instance, that societies with youth populations who are into social networking sites will create problems for autocratic Governments in the world, as they are doing at the moment. That doesn't lead us to be able to predict where these Twitter revolutions, if that's what they become, will arise next, but the strategic nature of the problem shouldn't be a surprise to us.

  I think what the CDS is speaking about is a process whereby we co-ordinate much more clearly in the way we arrive at our assumptions, and then we create much greater clarity about what we are talking about. The problem is that the word "strategy" is used at all levels, and we use it as a common word. There is grand strategy, if you like, in the Churchillian sense of what sort of nation we want to be. Do we want to be a globalised nation? Do we want to be close to the United States? Do we want to be a big trading nation? Those are grand strategic questions. Below that, however, there is the question of policy, which is what the politicians and political leaders should present, and below that is the strategy that the machinery has got to devise to deliver policy. Below that is the operational level and the tactical level. Getting clarity even on those things is easier said than done, and that's something that would have to go on throughout Whitehall.

  When the CDS said that this might take two to three years, I take it that he is referring to the issue of vocabulary and understanding what we are trying to do within Whitehall. I take it that he means we should then throw out this intellectual net 20 or 30 years ahead, not to predict what the world would look like but to make sensible assumptions about the trends that will allow us not to be strategically surprised, and therefore create a better framework in which we can react to the contingent things that will surprise us—the Kosovos and the Iraqs—in the way that they actually happen.

  Chair: Madeleine, does that pretty much answer your question?

Q28 Mrs Moon: It does. I would just like to make the point that as the Select Committee on Defence we are taking particular delight, having got three academics and a journalist, at throwing your own words back at you, given that that happens to us all the time. We appreciate the way it's going.

  Professor Clarke: I only wish we could remember saying those things.

  Professor Strachan: Can I say this on grand strategy, and on the 2030 or 2040 issue, that not becoming a prisoner of your own prediction is a very important part of this process? There is a danger of reverse engineering, because of what you do. In CDS's defence—I am in danger of putting words in his mouth, which I have no intention of doing—we are surely talking about the process by which strategy is done and the way in which contingency is thought about, rather than about an attempt to pluck a number of highly questionable futuristic scenarios and to try to think through what our possible solutions would be.

  Grand strategy is essentially pragmatic. It responds to what is happening, as much as predicting in advance what is about to happen. It seems that in many ways we have assumed that the capacity to predict is necessarily the same as having a lot of what we have already spent this afternoon talking about—the mechanisms for dealing with current and imminent crises, being sensible about how we do those, and mechanisms within Government that enable us to do that. I'm not saying you don't try to predict or think through the future, but we need to realise that producing something that says what the world might look like in 2030 or 2040 is not quite the same as doing grand strategy.

Q29 Mr Donaldson: In forward planning, one of the key elements in both the security strategy and the SDSR has been conflict prevention. To what extent do you think that is translated into what is contained in the SDSR? I see very little of it. I know that DFID has had its budget ring-fenced, but where is the strategic approach to conflict prevention in either document?

  Professor Strachan: There is greater emphasis in both documents on deterrence than there has been in perhaps the previous four or five years. I entirely accept that that is not the same thing as conflict prevention as understood by DFID or within the security community. Of course, one of the points about thinking through to 2030 and 2040 is imagining scenarios that might generate conflict that we might want to prevent. That is precisely where the shift comes from what you might see as MoD business to the wider areas of Government responsibility.

  Part of the problem is that conflict prevention has the word "conflict" in front of it. That is something that the MoD has been trying to get its head round. For the MoD, that means deterrence. It can be anticipatory intervention, pre-emptive or preventive action—all the things that have got us into rather a muddle over the past 10 years—but that doesn't seem to be quite where we want to be going.

  I also think that there is an illusion that this sort of preventive thinking is in itself cost-effective. If it is done through military agency, the argument that deterrence, as it was carried out during the Cold War, was cost-effective—it may well have been cost-effective, and if we averted the third world war, it certainly was—is not quite the same as saying that it was cheap. We need to recognise that, if we are thinking about prevention in a more military sense than I suspect you are expecting me to address, we may be chasing a false target.

  Professor Chalmers: Perhaps I could add to that. One good example of conflict prevention that has not involved large-scale forcible intervention, or indeed deterrence in the way that Professor Strachan is talking about, is what we have been doing in Darfur and Southern Sudan. One can be cautiously optimistic that we have moved the process forward in recent months. That has taken a significant investment of resources—some of them military, some UN peacekeeping and some economic assistance. A lot of work was done by the UK in building capacity of security forces in Southern Sudan, which also plays a role. Of course, there has been a conflict there. There are not many examples of conflict prevention in places that have never had a conflict, but it is certainly a lot cheaper than the alternative of large-scale armed intervention.

  The heading of what I would call capacity building is absolutely critical in preventing internal conflicts. The reason why most civil wars happen in low-income countries is that they typically have much less Government capacity, or any sort of capacity, to prevent conflict. That doesn't happen in the same way in middle-income or high-income countries. So, building that capacity—which is partly about security capacity, but also about general governmental capacity—is important. The fact that more money is being spent on conflict prevention, a lot of which goes into security sector reform, is a welcome step in that direction. I hope that, as we transition out of Afghanistan, some of the things that our forces have learnt about developing effective and accountable security forces in Iraq and Afghanistan can be used elsewhere.

    Professor Clarke: There aren't many examples of acknowledged successful conflict preventions in the world, but there are more than people think. Macedonia would be a good example of a militarily-led conflict prevention operation, which avoided a civil war in Macedonia. The Baltic states at the end of the Cold War would be an example of a potential series of inter-ethnic conflicts that was avoided by political means, so there are recent accepted examples. There ought to be more, but there are some—it is not a complete pipe dream.

  On the other hand, the commitment to conflict prevention in the SDSR is potentially a huge change and a huge commitment. If we argued that through, it would suggest that we might use the armed forces much more in terms of the soft power that they can deliver; the armed forces are not only concerned with hard power. It suggests that we might use them in different ways and it also implies that we should think of conflict prevention in places that matter to us strategically—not necessarily where conflicts are at their nastiest, but in places that make a strategic difference to the United Kingdom, such as the Gulf or the Indian subcontinent.

Q30 Mr Hancock: Can I turn to where we go with shared capabilities, bilateral relations and how that is going to work? How do you see it working and were you rather surprised by the comment in the FT that suggested that we were reluctant to do a deal with Germany until we assessed what was happening about a deal with France?

  Chair: Did you write that, Mr Blitz?

  James Blitz: I can't remember.

  Mr Hancock: So what's your view?

  Professor Chalmers: For a country of the size of Britain or France, it is hard to go down a route where we will become significantly more dependent on others for front-line capability. We may have to in some instances, but it will be difficult. There is a lot of discussion about pooling capabilities and pools from which countries can draw. There is some potential there, but I am at the sceptical end of the spectrum for the UK getting a lot of extra military value out of pooling capabilities in a way that means we cannot use them nationally.

  What we can do a lot more of—perhaps particularly in relation to France, but maybe, in time, to others as well—is get much more into the mindset of Europeans normally working together when there are threats that we face together and helping each other when one of us perhaps has a particular concern and the other helps them out on a reciprocal basis. That is where we can have a force multiplier for national efforts in those scenarios where the United States is less likely to be involved.

Q31 Mr Hancock: The last Secretary of State is a great believer in bilateral arrangements—he is a convert to the idea that this can best be done by bilateral arrangements—but if you look at the high north, for example, the Nordic countries are very concerned about the implications of energy extraction and of conflict arising there. It would be better if we were locked into a relationship with a group of countries—Norway, Sweden and Finland, for example. The Secretary of State seemed not to want to engage there and that cannot be right.

  Professor Clarke: It may not be wrong in the sense that we are moving into an era of intensive bilateralism and trilateralism, so the alliance structures and organisational structures will still exist, but the dynamism within those institutional relationships will come from cross-cutting bilateral and trilateral initiatives. In that respect, he may be chiming in with the times, but that also allows any Secretary of State quite a lot of elbow room.

  James Blitz: I agree with that. It is not just that the Secretary of State is committed to bilateralism as a way of bypassing a kind of federal European approach to military co-operation. What is also happening is that multilateralism, especially on the procurement side, has got itself a bad name in the last few years. This is one of the reasons why you are seeing much more attention to this sort of bilateral process.

  One of the big questions ahead is about the Germans, who are going through a defence reform, which is very much appreciated in the MoD. They are doing a lot on conscription and so on, and there is a good relationship between the Defence Secretary and his German counterpart, Karl Guttenberg. The question is whether Germany can now be moved towards thinking in those terms as well, because the Germans, as the third biggest defence player in Europe, are just not as keen on this kind of co-operation as the French and British have been. I think the Germans are still very much looking inwards. For example, they have been a bit stung, not only by some of the multilateral problems they've had on procurement, but they also haven't seen the Franco-German battle group being deployed in an effective way and that has put them off the idea. So there are a lot of hurdles to overcome on that if we are to have another big step towards bilateralism in the next few years.

Q32 Mr Brazier: Nevertheless, on Thursday we saw a very striking example of a small-scale collaboration. The Germans have a submarine more or less permanently lent to Plymouth, which plays a critical role in the training of our warships, for which we train theirs for free in exchange.

  Chair: You nod, Professor Chalmers and Mr Blitz, so we will move on.

Q33 Mrs Moon: As well as being a member of the Defence Committee, I am a Member of the NATO Parliamentary Assembly, so I pick up concerns about our loss of capabilities and strategic influence. The SDSR has brought numerous losses of capability, and what particularly concerned me—on a permanent basis—was the loss of the Nimrod. For 10 years we will lose carrier strike capability. What is your assessment of the capability gaps, the methodologies used to make those decisions, and the risks associated with the decisions that have been made? Starter for 10.

  Professor Clarke: For what it's worth, I don't think very much of the methodology used to arrive at some of those decisions, because we know that when it came to it, the process had to reach for those amounts of money that they could realistically control. A lot of the budget was simply beyond control. They had to find money to save, so the first requirement was to ask where you could save money, and the second was to ask what sort of capability gap this would open and whether we could live with it. That was driven by the financial situation we're in and the political timetable—that's the way it was. Is that disastrous? That depends on one's view, but for what it's worth my own take is that the national security risk is not particularly great between now and 2020. That's in a national security sense.

  However, in a foreign policy sense the risk is quite great. We have interests that we will not be able to defend so well by military means, but I don't think our national security will be threatened in a significant way, to the extent that we will not be able to cope, in the next 10 years. It's a question of the sort of risks you are prepared to run in pursuit of balancing the books, prosperity, and maintaining our triple A rating as a country.

  Professor Chalmers: I agree with that, and I'd add that this relates to what I said earlier about short-term and long-term risks. The decision was taken to prioritise Afghanistan—the short-term—and essentially ring-fence those capabilities associated with it. Given that on the one hand, and on the other the difficulty of cancelling things at short notice and the 8% reduction in the budget, the discussion of where capabilities could be cut inevitably focused on a subset of what the MoD is doing. There were choices to make within that subset, but it was relatively narrow to start with. Risks have been taken in relation to the long-term, but the view is that those are manageable over the next 10 years—we'll worry about where we go after that in 2015.

Q34 Bob Stewart: I am concerned about the Fleet Air Arm. I can't see how, with the gap, the Royal Navy will be able to maintain their expertise in flying off carriers until 2020 minimum. I know the answer is that we'll use the Americans or the French, but it seems to me that for that level of expertise it's not good enough, and frankly our pilots will go down. They used to be the best in the world in the first Gulf war—you could identify our aircraft because of the dust trails as they flew across the desert. In the second Gulf war they couldn't do that because they didn't have any training. Now where have we got to? What chances do you think we have of maintaining sufficient competence in the Fleet Air Arm?

  James Blitz: It will depend a lot on having some kind of agreement between the Navy and the RAF on how you are going to maintain the training capability of your pilots in the Fleet Air Arm using RAF facilities. That is one of the issues that needs to be looked at very closely. As you say, you cannot just rely on the Americans and the French, although there will be some arrangements with the French—

Q35 Bob Stewart: That really worries me, when you talk about an agreement between the RAF and the Navy.

  James Blitz: But that is what is involved.

Q36 Sandra Osborne: The Chief of the Defence Staff used the term "acceptable risk" as the criteria for the Nimrod decision. What is your understanding of "acceptable risk"?

  Professor Clarke: As I mentioned before, my understanding is that the risk to our national security of the Nimrod decision is manageable because we are not likely to have to defend the Trident submarines as vigorously in the next 10 years as we used to in the Cold War and as we may have to in the next 40 years.

Q37 Chair: How do you know?

  Professor Clarke: I said we are not likely to. It is an acceptable risk, looking forward from now to 2020, that the Trident submarines could be covered by other means—not as good, but they are an alternative. That risk is acceptable, but our inability to use the MRA4 capability for counter-piracy, deep-sea air sea rescue and some of the other things it might have done will undoubtedly have a profound policy cost.

  Professor Strachan: Malcolm Chalmers has already made the point about the decision to prioritise Afghanistan. In all these issues we are looking at the consequence of that and the presumption that after Afghanistan there will be a recovery of these capabilities. I realise that is in itself a questionable assumption in relation to the economic position. Coming back to the question about the Fleet Air Arm, there is also the question of whether you will retain the capacity to regenerate the capabilities because of the loss of expertise, which is a personnel question.

  What has struck me through this whole process, and particularly through the SDSR, is that the capability question has been addressed almost solely in terms of equipment, rather than of the motivation and retention of personnel. Shortly, you are going to a debate on the military covenant, which is related in part to these questions: 30% and rising of the defence budget is devoted to personnel issues. That is a core part of the capability, yet in the SDSR process—to go back to an issue we have already covered—that was not dealt with at the same time. It was seen as a follow-on issue and the implications are still being worked out.

  So the real risk lies in the issues of not just whether this is an acceptable national security risk, and I would agree that it probably is, in the circumstances; whether there is a foreign policy cost, which there is; or whether there is a recoverable capability, which is an internal domestic question for the services; but whether they can hold on to the people, even if they get the money for the kit at some point in the future.

Q38 Sandra Osborne: On personnel, are the decisions that are being taken in relation to large numbers of redundancies and closure of bases, for example, being taken in a coherent fashion or is it just ad hoc?

  Professor Strachan: It has not been ad hoc because the process has been going on for some time in the Ministry of Defence. It has not been wonderfully managed, given what has happened in the last couple of days. The unfortunate thing, going back to the SDSR process, is that the coherence of the relationship between what was happening in what we have defined as military capabilities and what that meant for personnel has not been thought through.

  In part, this relates to the fact that the Government are running several lines of defence development, defence reform and defence change simultaneously, each with overlapping consequences, so the sequencing has not been sensible. "You wouldn't start from here," may be a classic answer to any problem in Government. You would not have the Defence Reform Unit proceeding after many of the cuts had been done. You would presumably have finished the DRU's work and then thought about how you would implement cuts in the light of the recommendations that followed. There are many examples of that. If you had had that degree of coherence, rather than doing everything simultaneously, we might have seen a more coherent personnel policy.

  Part of the issue here is that, if you look at the structure of the Defence Board, which, of course, is one of the issues that the Defence Reform Unit is looking at, you see that what in many companies would be deemed to be a high priority—human resources and personnel-related issues—is not treated as a high priority in terms of representation.

  Chair: That's very helpful, thank you. I have been told that we may have a slight reprieve until about 10 past 4 due to voting, but that doesn't mean that we can let up the pressure.

Q39 John Glen: Can I ask you all about the timing of the next iteration of the SDSR and the NSS? When should it be? Should it be away from the next—as far as we can tell—general election? In terms of the process, how should it work? It seems to me that one of the issues we have covered today is the interaction between the SDSR and the NSS, and how they come together. As we become aware of missing capabilities, what processes need to be implemented to make the dialogue and outcome of one affecting the other work optimally?

  Professor Chalmers: I think that the next SDSR should be after the next general election, and should coincide with another NSS and another spending review. Politically, it would make no sense to have a major review before an election because it could be the subject of dispute between the parties in that election.

Q40 John Glen: Hasn't one of the assessments been that that is the problem this time? The proximity to the spending review has meant that the spending review has driven the SDSR, rather than everything being done dispassionately away from it.

  Professor Chalmers: The nature of strategy is deciding on your objectives and what you want within the resources available. There has to be an iterative process between them. My view on this process is that if we had delayed the SDSR until after the spending review was complete, the budgetary settlement for defence in particular would probably have been significantly worse. What happened—this is particularly true with a new Government coming in—was the fact that the two processes were in parallel meant that senior Ministers had to grapple with all the issues of what more severe cuts would have meant for the armed forces. That resulted in a budgetary settlement for defence that was more generous compared with other Departments than many of us would have anticipated. Therefore, no, I think that they should coincide. You will remember that the first NSS back in 2008 was not related to a spending review cycle, and it was a very worthy piece of paper, but how far it really had purchase on Government priorities, because it wasn't linked to spending reviews, is open to question.

  The other issue I would raise is the importance of the annual process that we are going through now—the planning round. Some of the most difficult decisions in defence will be taken over the next couple of months, filling in details from the SDSR. One thing that we have learnt, very painfully, is the cost of delaying decisions on defence until the very last minute—scrapping weapons we have just acquired, such as Nimrod and so on. It is really quite criminal in many respects. If we want to avoid that in future, I think we must have an annual process, so that when we get to 2015, we're not faced with another £30 billion overhang because we have kept it under control each year. That means an annual review of budgetary discipline—ensuring that it is maintained every year—but it also means that if things change in the geopolitical or technological environment, we do not wait until 2015 to make appropriate adjustments, but make them as we go along. Revolutionary changes are happening right now in the Middle East, and if they lead to changes that affect our strategic interests, then, of course, we should change in 2012 or 2013, not wait until 2015.

  Professor Clarke: I also think that we are almost committed to a rolling process of review, as a result of the SDSR, which left so many things unspecified and unsettled. There are processes that are ongoing in the Defence Reform Unit, reviewing stabilisation operations in the defence industrial strategy, and all that creates an imperative to keep on going. As Professor Chalmers says, in effect, we're in the middle of a continuing process. Perhaps there will be a natural tidying up in 2013 or 2014, which will look like a review. That would be rather like the 1990s, when nobody dared to talk about a defence review, but there were actually three or four rolling reviews as people got used to the implications of the end of the Cold War. In effect, we are out of the cycle now where we have a review only when we absolutely can't avoid it, and this is a process of continued rethinking.

  Professor Strachan: Can I make two quick observations? First, there is a presumption that the NSS and the SDSR should be virtually coincident, if you were to do it in 2015. We've just been hearing about the pitfalls of making them virtually coincident, and about the argument for space between the two so that there is time for debate and reflection. I would have thought that was a "lesson learned"—that, ideally, they shouldn't be coincident; they should be separated.

  Secondly, 2015 may be an election year, five years on from this defence review. Therefore, when, putatively, we are due for another defence review—but recognising that it is already in process, because of what we have already heard—the other issue to throw in will be the withdrawal from Afghanistan. That will be a moment for review and reflection and it will raise fundamental questions, which we have hedged so far, to do with the balance of capabilities. There is the very vexed and much debated question: is Afghanistan in any sense a model for application elsewhere, or is it something that needs to be avoided at all costs next time round? Or, is it a model for a balanced capability because of the need to retain flexibility and to think long-term, as we don't know where the threat is coming from? In 2015, such issues will be clearer and starker, perhaps—or perhaps not—than they are now, so, I think that there are external pressures that make it important.

  James Blitz: The general election in the UK is a movable feast, at the end of the day. It could come at any time. I don't think that we can afford to go back to a situation such as the one where there was no review between 1998 and 2010. It is essential to fix the review in 2015. I also think that 2015, as Professor Strachan was indicating, will be a good time to have one. You will have had the 2014 CSR, so you will have a financial perspective, which can inform strategic decisions. It will come before the 2016 Main Gate decision on Trident, so you will be able to lock it into that process, too. It is also at the end of the Afghanistan engagement, so, in that sense, it seems a good moment for a review. I don't see why we would want to move away from that idea.

  Chair: We have lots of questions still to ask.

Q41 Mrs Moon: There seem to be lots of figures thrown around about what the deficit is in the Ministry of Defence. There was £35 billion from the National Audit Office and £38 billion from Dr Fox. The Committee took evidence from a group of experts who said that the deficit was £1 billion or £2 billion, and the difference was between money that had been committed to be spent and aspirational spend. One of the witnesses said, "Well, aspirationally, I am several hundred thousand pounds overspent because I would love a Maserati. I haven't actually ordered one, and that's the big difference." What actually is the overspend? What is your assessment of the black hole? How big is it in terms of concrete commitments, as opposed to aspirational commitments—not just, "These are the toys the boys would like to have."? What's your estimate of the level of the gap and the reasons for it?

  Professor Chalmers: That's a straightforward question, isn't it?

  Mrs Moon: I always like to be.

Q42 Chair: What's the gap and why?

  Professor Chalmers: Right, that's where we are. I think the key thing here is that it really does depend on the assumptions you are making which, indeed, your question makes very clear. Even in a space of a few months, if the oil price goes up by $30 or $40 a barrel and everything else is left unchanged in your assumptions then you will probably have several billion pounds extra in your gap over the next 10 years.

  My plea would be that we need a lot more transparency on the assumptions being made in these numbers if we are to understand what they mean. The Government, when they came in last year, ordered a fresh look at our forward commitments and introduced what they felt to be more realistic assumptions in that forum. They came up with this £38 billion figure. It will be interesting to see what the figure is today, after a defence review, on the same assumptions.

  Clearly, the assumptions will change, as we have more information, so my assessment—I have published this—is that if you take the same assumptions that underlay the £38 billion then we probably reduce that overhang over the next decade to something of the order of £15 billion. But, of course, some of those assumptions might change—service pay or equipment costs might rise less rapidly than we anticipated—so it does depend on that.

  James Blitz: There is no question but there is a gap. There are two issues, in terms of financial pressures, that need to be looked at. I think you are aware of them, because you were asking the Permanent Under-Secretary about them last week.

  First of all, there is a gap that exists in terms of the discrepancy between now and 2014-15, and there is an assumption that there is a further gap. As you know, the front-line decisions on SDSR accounted for around half of the money that needs to be taken out in 2014-15, and then there is an assumption that the next wave of announcements on personnel cuts and so on will help meet that gap. Even when all that is taken into account, there is a gap of about £1 billion to £2 billion in 2014-15. That is a very real issue, which is occupying the minds of people in the Department.

  There is a second issue, which is that, as you know, defence will need a real-terms increase after 2015 if it is to meet the projections which are set out in SDSR for 2020—that is a separate issue which one could discuss. But the first issue clearly needs to be focused on at the moment. I think there are different voices within the Department saying different things about how this gap is going to be met.

  On the one hand, there are people saying that the gap is sufficiently big—and growing—that it will require a revisiting of SDSR and front-line commitments. Some people talk about the need perhaps to come down in frigate numbers, while others say that is not true, or to revisit Army numbers and so on. Other people say, however, that they are hoping that the Defence Reform Unit process, which is now under way, will create enough head room to meet that gap, when it comes out in June or July.

  My own view is that, although that is being said quite strongly and there is discussion about the possibility of reducing headquarters numbers in the Army, shall we say, I simply don't see how that will yield the kinds of hundreds of millions of pounds needed to fill that gap. That, if you like, is the area of debate at the moment. It is a question of whether you will end up having to revisit the front line, doing things on operations or, though I don't think it is a route we can go down, going back to the Treasury and asking for a lighter settlement. I don't think that that will happen because there is a perception that defence did reasonably well compared with other Departments. Then there is the question of whether the Defence Reform Unit process will yield enough to fill the headroom.

  Chair: We have about six more minutes and about three more questions.

  Bob Stewart: James Blitz has just answered my question.

  Chair: Okay, then we have fewer questions.

Q43 Mr Brazier: Could I ask, especially Professor Chalmers and Mr Blitz, about the Prime Minister's statement? This Committee clearly has a long history of defending defence spending against the Treasury and a variety of other forces, but do you think that it will be very challenging to deliver on the Prime Minister's aspiration of real-terms increases in the defence budget from 2015? After all, that is the point at which the engagement in Afghanistan—at least, the sharp-end engagement—will cease.

  Professor Chalmers: The first point that I would make in relation to that commitment, which was made in the SDSR debate by the Prime Minister, is that it is very close to the wording the Government used for the national health service. The Government are committed to real-terms, year-on-year increases for the NHS which, in practice, in the spending review, is translated into real growth of about 0.2% per annum. So I think that we can take from the Prime Minister's commitment a clear statement that there will not be a real-terms reduction after 2014, but I don't think we can read anything from it about how big the real-terms growth that he is committing to is. For the MoD to be able to afford its current plans up to 2020 would, as far as I understand it, require real-terms growth after 2014 of the order of 2% per annum. I think it will be pretty difficult to reach that level of real-terms growth, but it depends on the broader geopolitical climate and on the country's economic prospects.

  James Blitz: With respect, I don't see the Prime Minister's commitment with the statement on the SDSR as a bankable commitment in any way. With respect, it is, first of all, completely dependent on the Prime Minister being there in 2015, which may or may not be the case. It is also completely dependent on the economic environment. We may well be in a more benign economic environment, but we may well not be. As Professor Chalmers has said, a real-terms increase of 1% or 2% of GDP would, historically—going back to the early 1980s—be very considerable for Defence.

  The question that I think arises, given this uncertainty, is how will Defence be able to press ahead with programming in the next year or two? That is the concern of the chiefs, because what they are saying is, "We have to know where we're going to be in 2016-17". My own view is that they are just going to have to muddle through, because I cannot imagine a situation in which the Treasury will turn around and say to Defence, "We will guarantee you a number and not do that for any other Government Department."

  I also think that there is a feeling around Whitehall that, while they understand this issue, Defence has to now get on with proving, in the first instance, that it can manage the reform process and get a handle on the equipment programme. I think that a lot of that is happening, but it needs to be proved. Until that happens, I don't think anybody within the Whitehall framework is really going to debate or discuss this issue.

  Professor Clarke: In the 10 years after the SDR in 1998, defence expenditure rose in real terms by an average of about 1% a year, which was inadequate to deliver the programme. We are now talking about twice that amount after 2015.

Q44 Chair: A sobering thought. The supplementary, which Mr Blitz has already hinted at, is, which programmes do the panel think are most at risk?

  James Blitz: I bow to Professor Chalmers on this, because he has done a lot more work on it than me, but if you do not see a real-terms increase from 2015, I think that the single operational carrier decision will have to be defended in the 2015 SDSR. I think that that is a possibility. It would be a huge sunk cost, but there would also be the significant cost of having JSF on board. That is the claim of issue that may still be live if absolutely nothing happens in terms of real-terms increases.

Q45 Chair: Professor Chalmers, is that right?

  Professor Chalmers: I think that's right. If you look at what the Government have said on the carrier, you will see that it is very lukewarm support in terms of the strategic case for the next decade. There is an assumption that the case for the carrier will be stronger after 2020, but not much explanation of why they think that that is the case. Things may look rather different in 2015. So yes, I think that is very much open for discussion, so it will be on the table in 2015.

  The other issue is Army personnel numbers. Because of the focus on Afghanistan, the Army has got off relatively lightly in terms of resource allocation in this review. If, at some stage over the next few years, we get out of Afghanistan—and provided that we do not take on a similar sort of stabilisation operation—I think there will be a lot of pressure to reduce Army numbers quite considerably in order to make a contribution to balancing the books. If that doesn't occur, we will have a very land-centric force structure, which it would be hard to make compatible with the commitment to an adaptable force posture.

  Professor Strachan: Can I add a rider to that? The thing that seems to me most undeliverable by 2020, if this uplift doesn't happen, is the commitment to bring the Army back from Germany, because the accommodation simply won't be there to enable it to return. That in itself has knock-on effects on some of the issues that I raised earlier in relation to personnel retention and so on, because many of the issues that surround the military covenant are above all issues of stability versus mobility. The notion that there is a target out there of 2020 as a date by which the forces will be predominantly back home, unless they're deployed on unaccompanied service overseas, is central to many of the other things that are happening or that might happen in relation to allowances and so on. So although this is not a big-ticket item in the way the carrier is, or as politically loaded in some ways as the carrier is, actually it has significant long-term effects.

  Chair: What's your final question, Vice-Chairman?

Q46 Mr Havard: It's not the least question, but it is the last question. It's about the reformation of the civil part of the Ministry of Defence. Essentially, it's a question that ends up by asking you what the risks are in this. It has split it into three pillars; we've had that description. We've had a written statement today, in terms of the estates division there is a plan being announced to save 2,500 jobs by 2014 through rationalisation, saving £1.2 billion over the first four years. There is a question about whether this reform can provide for other things. An implementation plan was described in September after a report in July—all to end up, again, in 2014. Are we going to prepare the Ministry of Defence and reform it in response to where we are or have been in the past, or is it going to be for the future? What are the risks?

  Professor Strachan: Sorry, but may I go first on this? It relates to the point I've just been making in relation to uniformed personnel in the armed forces. The presumption in much of the rhetoric is that the cut will take place in Main Building, when in reality most of the cuts will take place outside Main Building. The people who will be going will be the people who are doing the jobs that, say, 20 years ago were being done by people in uniform. How you're going to support your armed forces in bases round the UK—let alone outside the UK—seems to me very unclear if this is implemented.

  James Blitz: That's the point I was going to make. That is one of the key questions that arise. You're getting rid of 25,000 civilian staff and roughly 17,000 service personnel, and the net effect of that is that you're going to end up having service personnel who are generally better paid than your civilian staff doing the jobs that were done by the civilians. So one of the key questions that arise is whether actually it is a cost-effective reform programme when viewed in the round.

Q47 Chair: You saw the Permanent Under-Secretary's answer to that question last week. She said she was in the business of saving money and wouldn't do it if it resulted in more military staff doing these things more expensively. Did you believe her?

  James Blitz: Difficult to know. I think Professor Chalmers probably has a view.

  Professor Chalmers: The final bit of that jigsaw I would add is that, in so far as you reduce the number of civilians by contracting out, the saving is much less than if you take the task out altogether and therefore the contribution to resolving the budget problem is less.

  Professor Clarke: The challenge that all this poses for the Ministry of Defence ultimately is that it has to be a Department of State and a strategic military headquarters. I think there is general agreement in the MoD that it has not been a particularly effective strategic military headquarters during Iraq and Afghanistan, so there is some opportunity here, but it will require much more radical rethinking than the SDSR has indicated to date.

Q48 Mr Havard: But in terms of the indications about looking at things from the point of view of acquisition and procurement, which has been the big debate so far, and the lack of an industrial strategy as yet—apparently, there will be one sometime this spring, whatever the spring is—is that not an important risk?

  Professor Clarke: That is a very important part of a wholesale restructuring of the defence business. We'll have to see how it works out. It's a neat trick if you can do it.

  Chair: Thank you very much indeed. We've packed an enormous amount into this evidence session. I would like to thank all of you for giving such comprehensive, interesting and helpful answers to our questions. I would also like to thank the Committee, particularly those members who refrained from asking questions that had already been answered so well.

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