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

Examination of Witnesses (Question Numbers 49-170)

Rt Hon Liam Fox MP, Rt Hon William Hague MP, Rt Hon Andrew Mitchell MP and Rt Hon Oliver Letwin MP

9 March 2011

Q49   Chair: Welcome, Gentlemen, to this evidence session on the Strategic Defence and Security Review and the National Security Strategy. The first thing I need to do is to reduce expectations. This is intended to be a pretty high-level examination of the Defence Review and of the National Security Strategy, working out precisely how the processes were established and what the logic is behind prioritising different threats—things like that. How did this process feed through into the various capabilities that we have now or will have? What we do when stuff happens, as it seems to be happening now? How does the process feed back into that and if the Strategic Defence and Security Review was strategic, how do you keep that strategic oversight plugged into any reforms to the Defence Review that might come through as a result of stuff happening? That is the general idea. We won't be going into things like why the carriers were kept, why the Harriers were not kept.

  Mr Hague: I am sorry. The Defence Secretary has all the wrong briefing.

Q50 Chair: We will at least have Dr Fox back. That brings me to something else. Because there are so many Secretaries of State here, we will refer to you as Mr Hague, Mr Mitchell, Dr Fox and Mr Letwin if we may, rather than Secretary of State because then we would get confused. I don't think you need to introduce yourselves because, as Ministers, you are well known.

  The National Security Council, Mr Letwin, has been broadly welcomed. What is its status; what authority does it have; and how is it working? I will give you a few moments to think about that. We have a huge number of questions and a large number of witnesses. We will try to be as tight as we can in asking our questions. Each of you does not have to answer all of the questions. In fact, I would be most upset if you did. Please try to keep your answers as tight as possible.

  Mr Letwin: Thank you, Chairman. I can certainly be brief about that question. The formal status of the National Security Council is straightforward: it is a Committee of the Cabinet and sits alongside other such Committees. Its authority derives, therefore, from the Cabinet, and, exactly as with any other Committee, its decisions are ultimately subject to being ratified by the Cabinet.

  The reason for its existence is to bring together all of the Departments that have a part to play in forming decisions of great importance in the area of security. That means not only those that deal with things abroad, but also those that deal with things domestically, and not only those that are defence-related, but also those that are not directly defence-related. It enables that collection of Ministers to hear repeatedly from the experts—the agency heads, the relevant ambassador or head of the Foreign Office, the Chief of the Defence Staff and so forth—in a continuing conversation. If you are asking for an opinion, mine is that it has fulfilled that role, and continues to do so, really rather well. It has enabled us to have a discussion that is not limited by the traditional boundaries between domestic and overseas or between one Department and another. It has created a continuing conversation.

Q51 Chair: How were its structures and support mechanisms decided upon?

  Mr Letwin: The fundamental idea dates back to Pauline Neville-Jones' report for the Conservative party in opposition, where we asked Pauline and Tom King to examine the question of how to bring national security together into a single whole. She and Tom did exactly that work, and one of their recommendations was a national security council, which was roughly structured as ours is, and inevitably, when we came to form the coalition, that had to be discussed. Danny Alexander and I had discussions about the structure of all of the Cabinet Committees in the day or two just after the Government came into existence. That was then discussed by the Prime Minister, the Deputy Prime Minister, the Foreign Secretary and the other Ministers here and decided on within two or three days of the formation of the Government.

Q52 Chair: Thank you. Dr Fox, what is the role of the Chief of Defence Staff? How does he contribute to the National Security Council? How do the other Chiefs of Staff contribute to it?

  Dr Fox: First, Ministers, who are not members of the NSC, are invited to attend for discussions that directly impact on them. That is the ministerial side. Secondly, in terms of the senior officials, the CDS attends the Committee every week. When he is not there, he is represented by his Deputy the VCDS. Were there to be a specific reason to include one of the single-Service chiefs, they might also be invited to attend. It is needless to say, however, that discussions take place prior to the NSC in my office with whatever officials or military personnel are required. As well as the CDS, the chairman of the Joint Intelligence Committee and the agency heads also attend to ensure that full and up-to-date advice is available to the Ministers on the NSC.

Q53 Chair: And the other Chiefs of Staff? Do they feel cut out?

  Dr Fox: As people say, you would have to ask them, but I doubt that very much, because we discuss, at regular NSC pre-briefs in my office, issues that are coming up. If I feel that I would be better informed by having them present, I would do so.

Q54 Chair: Right, okay. The Treasury sits on the NSC. What is its relative power?

  Mr Letwin: Well, the Treasury is represented in two people; both the Chancellor and the Chief Secretary sit on the NSC. They contribute wide-rangingly as Ministers to the collective discussion. In addition, they evidently have Treasury concerns. One purpose of having them there is to ensure that the discussions that ensue are realistic in terms of what can be afforded.

  Clearly, since the spending review and the associated Defence Review, most of the decisions about what can be afforded and what money will be spent on are there for everybody to see. Nevertheless, from time to time issues arise and there have been discussions—which I think I probably should not go into in detail—about specific issues, where specific Secretaries of State, either those who are members or those that Liam mentioned who come for a specific purpose, have made a request to consider something that might need to be done, where spending money might be involved.

Q55 Chair: Yes, okay. Overseas and homeland issues: how do you balance those within the NSC? I don't mind who answers. Mr Hague, would you like to start?

  Mr Hague: We discuss them all. They're balanced because they're all there. I would say that the majority of discussions in the NSC during the first 10 months of this Administration have been on overseas matters, if we added it up statistically. As you can imagine, issues surrounding Afghanistan are a major preoccupation for the NSC. In fact, we discuss Afghanistan on a very regular basis. We even had on one occasion an all-day meeting. That does tend to ensure that overseas issues predominate in a statistical sense. The agenda covers both areas; it is planned well ahead and is able to cover home and overseas issues.

  I would point out one thing that is connected to the role of the Treasury in the NSC, is that the NSC more than most Cabinet Committees in my experience works in a fairly non-departmental way from the point of view of Ministers and others giving their opinions, including the CDS and the heads of the intelligence agencies. Of course, we have our departmental briefs, but we have vigorous discussions that cross all those boundaries in the NSC, which is exactly what it was intended to produce. That comes from Treasury Ministers as well, not necessarily just on strict Treasury matters. On all of these issues, the strict boundaries between them are not observed as strictly as may often be the case in Government.

Q56 Chair: Okay. Can you please give us one example of a non-overseas issue that has been discussed in the NSC?

  Mr Hague: We discuss counter-terrorism strategy in the NSC. That would be top of the list. International terrorism is one of the top four, tier 1 threats identified in the National Security Strategy.

  Dr Fox: The balance between whether we are looking primarily at domestic or international issues is driven, obviously, by external events, but also the intelligence that we get from the heads of agency. For example, we might look at—depending on the information we are given—whether military assets might be moved into counter-terrorist space or operational space or training, depending on the balance between the intelligence we get for the relative requirements of them. It's one of the areas where having everybody sitting round the table with the heads of agency able to give live feeds to all Ministers simultaneously enables us, and has enabled us, to make decisions about the prepositioning of assets—where we think they might be best required—rather than wait to react to events. That's a real example.

  Mr Letwin: I wonder whether it might be possible to amplify one thing that William said. As he mentioned, we have, of course, spoken frequently about counter-terrorism, and Liam mentioned that that sometimes involved defence questions. It has also stretched to questions of inter-communal relations—the Prevent strategy—and the connections between those quite complex domestic issues and international issues about countries where understanding the relationship between parts of the British population and the population of those countries matters. It is the ability to span that whole range in one discussion that we find immensely useful as a characteristic of the NSC. It would be very difficult to imagine having those discussions in any other forum.

  Mr Hague: Threats in cyberspace is another issue. It is international and domestic, and has been on the agenda of the NSC.

Q57 Chair: My final question is, are there any thoughts of a Cabinet Minister for national security? Would that add to or detract from this process, or is it all beyond your pay grades?

  Mr Hague: Maybe it is beyond our pay grades, but it is something that we have discussed in the past. I discussed it with the Prime Minister, particularly before we came to power. We take the view that a Minister for Security in the Home Office is the right way to have a Security Minister, which is what we have, and that Minister is a member of the NSC. To operate satisfactorily, Ministers with responsibilities in these areas need the presence in a Department and the leverage and weight in Whitehall that comes from membership.

  Dr Fox: We are not in favour of a bigger Cabinet.

Q58 Mr Havard: So the NSC is a strategic body that discusses or informs the discussion elsewhere. It is not a war Cabinet in the sense that it takes executive decisions. I am interested in the decision-making process. Is it simply an advisory body or do you all sit there and say, "Yes, this is a good idea, and by the way the Treasury agree, so this is what we will now do"? That then becomes a set of actions that are put into train in all the other Departments. Where does that leave the rest of the Cabinet in the decision-making process and, more importantly, in actioning any activity that you decide upon and the money flows that go with it?

  Mr Hague: Shall I have a go at that to begin? It is an executive body in practice, although, as Oliver explained, it is a Committee of the Cabinet, so its accountability is through Cabinet and its decisions are reported to Cabinet. However, it takes many more decisions and discusses many more issues than the Cabinet would then go over in detail. The Cabinet also discusses security issues and international issues of defence and diplomacy, but not in the same detail as the NSC, which meets at least once a week to go through a range of subjects. It is the effective decision-making body on a vast range of the Government's decisions surrounding these issues. That is why it works, so far.

  We all know that having structures of government is one thing, but how you use them is another. You can set up as many structures as you like, but if you don't use them as the centre of decision-making, Whitehall does not respond to them and decisions start to be made elsewhere instead. The reason why the NSC is working in this Administration is that the majority of decisions appropriate to a national security council are made in it. Therefore, Departments have to prepare their papers and their Ministers to make those decisions. It is not just an advisory body. It is the centre of our national security discussions and decisions.

Q59 Mr Havard: And Ministers are, therefore, bound by those decisions. Decisions are actioned, and that is agreed by the Treasury. You sit there agreeing them.

  Mr Hague: It is agreed by the Treasury?

Q60 Mr Havard: Presumably, if it is part of the process. If a decision might disturb some elaborate plans on finance, the Treasury will nevertheless agree, so you can do it?

  Mr Hague: Well, no doubt it would need to be something that changed the financial plans of Government, so it would need to be discussed in the Cabinet as well. It would be of sufficient importance that it would need to be discussed there as well. Decisions do flow out from the NSC, including into the agencies.

  You asked how other Ministers are then consulted, and you have to remember that, as has already been mentioned, when the Departments of other Ministers are relevant to the decisions, as Liam has said, they're there in the NSC. The intelligence agencies are there and the Chief of the Defence Staff is there.

  Another of its advantages, although we mustn't digress too much, is that people such as the heads of the intelligence agencies come into much more contact with members of the Government other than the Foreign, Defence and Home Secretaries than they would have done under any previous arrangement.

  Mr Letwin: May I add one other important point, which we have not dwelt on yet, in answer to your question? Members of both sides of the coalition are present. The Deputy Prime Minister, very importantly, is there. So, too, are other senior Liberal Democrat Ministers. Therefore it is not just that it is formally a very important Cabinet Committee; it is also that, practically speaking, it constitutes a coalition discussion. That is a very important feature of it.

  Mr Havard: I wouldn't want to advise you, but if you are going to have an incorporation process, I would incorporate them in it.

Q61 Chair: The Vice-Chairman has reminded me of the issue of a war Cabinet. What has happened to that?

  Mr Hague: The NSC is the centre of decision making about, for instance, the conflict in Afghanistan. It takes those decisions on a regular basis.

Q62 Chair: Wasn't there a thought that the Opposition should be invited to take part in the war Cabinet?

  Mr Hague: The Opposition have been invited to meetings of the NSC and have attended on at least one occasion.

  Mr Mitchell: Harriet Harman, when she was leader of the Labour party, attended one in the early summer.

Q63 Chair: Is that formalised in any invitation structure, or is it just as and when the Prime Minister thinks it appropriate?

  Mr Letwin: It is as the Prime Minister decides from time to time, but he made it clear on that occasion that he would continue to invite the then acting, now actual, Leader of the Opposition if there was a particular issue on which he thought there was likely to be a huge national advantage in doing so.

  Chair: Right. Well, I'm sure we'll come on to other opportunities for invitations to the Opposition.

Q64 Thomas Docherty: One question from me on the creation of the national security adviser, the new role that Sir Peter Ricketts has. What effect has that had on the articulation of a National Security Strategy?

  Mr Letwin: I am happy to begin, but William and Liam may want to say more.

  Sir Peter Ricketts is a crucial component of the whole NSC apparatus. He and his team draw together material from a wide range of Whitehall sources and try to ensure that the agenda, the papers and so on are in good order and that the Council is considering the things it needs to consider. He is very closely linked—others may wish to speak about this—to senior Ministers present here and to the Prime Minister and Deputy Prime Minister. So it becomes possible to have a committee served not simply by one Department or another, but effectively by its own secretariat, which is what Sir Peter Ricketts is in charge of.

  Mr Hague: To add to that, we appointed the national security adviser on the first day of the new Government. We thought that was essential to start building this up and we thought a good deal about it before the election and, indeed, about who could do it. One of the ways, in addition to what Oliver has explained, in which the existence of this post improves the articulation, as you say, of the National Security Strategy is that for other countries the national security adviser is an excellent point of reference and contact. For systems such as the US system of government, which has a national security adviser to the President, and the French system of government, which has a specific adviser to the President on foreign and security policy, it provides a ready counterpart at a very senior official level.

Q65 Bob Stewart: Dr Fox, how has the NSC improved security thinking and crisis management?

  Dr Fox: It gives us an opportunity to have wider contact to get information from across the intelligence services in real time. As we have gone through what has been happening in North Africa and the Middle East, it has enabled us to get a constant feed of information, to cross-reference pretty widely and to have a breadth that perhaps would not be available in any one Department.

  Going back to the point about Peter Ricketts and a single point of contact, it is extremely useful for us all to have a point of reference—somebody we can talk to and commission work from if we require it. If we know, for example, that a specific issue is arising, we can say, "Can you go out to the range of agencies and get us reports and work brought in?" That has been very helpful. It also avoids duplication or triplication in Government, which can be expensive and time-wasting.

Q66 Bob Stewart: This is my second and last question, Mr Letwin. Are you looking at how crisis management is done within the NSC or within Whitehall and thinking of ways to improve or change it?

  Mr Letwin: The NSC was originally conceived as what its name implies—a security council. Its first and overriding task is strategic, not operational. It is not COBR, and it is important to hold that distinction between the large-scale decisions that fall to be made, which need constantly to bear in mind the widest possible set of considerations and the enormously important but separate issue of how to manage a particular situation.

Q67 Bob Stewart: So NSC is strategic and COBR is tactical in those terms?

  Mr Letwin: That is roughly how I would describe it. I don't know whether colleagues agree.

Q68 Chair: I am conscious of the fact that a large number of people in the room are standing. There is one seat over there. If someone would like to remove the seat from next to Mr Mitchell, who won't be needing it, to the back, please feel free to sit down on it. If anyone wants that seat, feel free.

  Dr Fox: On the last question, it is also worth pointing out that, as well as the NSC itself, there are also the NSC officials, who meet on a weekly basis at Permanent Secretary level, and they will often take forward work that the NSC has asked for, or may indeed prepare work for the next NSC, so they complement the work of Ministers.

Q69 Bob Stewart: COBR officials slot into that too, do they not? Do they come in on those meetings occasionally?

  Dr Fox: I couldn't—

  Mr Hague: They will overlap. Some of them will be the same officials.

Q70 John Glen: I would like to turn to some comments from the Chief of the Defence Staff, which he made to the Committee in November around the construction of strategy. He said that it had been agreed "to start constructing a mechanism to deliver a grand strategy", looking at the world as it might be in 2030 and 2040. I would like to know the Ministers' reaction as to how realistic that is. Perhaps we can start with Mr Letwin. How do you describe a grand strategy? What do you think that is meant to achieve and how is it being taken forward?

  Mr Letwin: I think I would refer you in the first place to the National Security Strategy. That sounds like a good place to be starting if you are talking about our strategy. The overwhelming point is that we made a decision, after a lot of discussion, to adopt what we called an adaptable position. We came to the view that we were not likely to be omniscient; things would happen that we had not expected. The events of the past few weeks rather bear out that line of reasoning. Therefore, the whole structure of what was decided, which other colleagues may want to go into in more detail, started from the proposition, "We don't know what will happen, so let's try to be able to respond to a whole series of different possibilities." The thinking about how things might look five, 10, 20, 30 or 40 years out is a useful exercise to engage in continuously, but we are not doing it in the spirit of imagining-we will arrive at answers that enable us to plump definitely for one thing rather than another. We will constantly try to maintain an adaptable position that allows us to respond to events as they unfold. That is quite an important position.

Q71 John Glen: To be clear, it doesn't have a practical value in the short term at all? It just provides a platform for an evolving narrative that might assist in decisions some time in the future?

  Mr Letwin: Let me mention some respects in which it might. We don't have the Energy Secretary here, although he is of course a member of the National Security Council and you might want to interview him about this. I think if he were here he would say that some of the decisions we make about our energy security—certainly a considerable thing not only in its economic impact, but in its general security impact, which is something Liam has spoken about a great deal and we have discussed quite frequently in the National Security Council, and which clearly is highly relevant at the moment—relate, for example, to the building of nuclear power stations. Clearly, that is a decision that is not very adaptable once you have made it, because you have the thing around for a long time to come.

  It helps to understand whether it's likely that we are going to face energy shortages 20, 30 or 40 years from now, or whether we might be prey to people we might not want to be prey to if we do not have enough of our own home-made energy. It might help you to make specific decisions in that sort of field. What we are not trying to do is lock ourselves into designing the whole of everything in such a way that it is based exclusively on the assumption that we know the future will be thus and so, because we know that we don't know exactly how the future will be.

  Mr Hague: I think we all want to add to that, if the Chair will allow us.

  Mr Mitchell: A grand strategy and an adaptable approach to it recognises of course that Britain's security is determined not only by ships and aircraft but by the extent to which we can train the police in Afghanistan; by the extent to which we can build up governance and accountability structures in the Yemen; and indeed by the extent to which we can ensure that we get girls into school in the Horn of Africa. That wider approach to security, tackling the problems of insecurity and the causes of poverty upstream, is of course far cheaper than having to send in the troops.

  Mr Hague: To add to this point from a Foreign Office point of view and what is decided here, looking ahead to 2030 or 2040, the NSS set out some of the changes going on that can be anticipated now in broad terms in the world, in terms of international institutions, the importance of climate change, demographic trends and so on, from which we decided that it was very important to maintain a strong global diplomatic network for the United Kingdom. This is one of the reasons why we are not shrinking the diplomatic network despite all the pressures on Government expenditure, because in a more multi-polar world, with a more complex network of alliances, we are going to need that diplomatic presence in so many different places. Across Departments, these long-term trends have informed the decisions that we have been taking.

  Dr Fox: There is an essential analysis that underpins all of this. We live in a genuinely globalised economy, where our risks are more widespread in more places and subject to more actors elsewhere than ever before. Although globalisation brings the upside of trade and prosperity, it also brings the unavoidable importation of strategic risk. We must, therefore, look very widely at where the risks lie; how best to mitigate the risks; what assets we might bring militarily to do that; and what alliances and what other structures we might involve to reduce those risks to the wider UK interest at home and abroad. That is what the CDS was talking about in terms of that wider strategy. We already have some documents. For example, the MoD's Global Strategic Trends document looks out further, makes some provisional judgments on potential scenarios and is informed by and informs other thinking—for example, the future character of conflict work done by the VCDS. If the Committee would like sight of those documents, I am sure we could make them available.

  Chair: We had the document that was produced in, I think, February of last year, which was very helpful.

Q72 Mrs Moon: I would like to ask Mr Mitchell a question. You have tied the Department for International Development in with defence and security. Do you see a risk increasing for DFID staff and staff from non-governmental organisations in being seen as so closely allied with defence and security policy? That issue has been raised a number of times in relation to Afghanistan and the risk to DFID and NGO staff. Are we, in fact, risking DFID's independence and neutrality? Is it not interested in need and good causes, rather than being an arm of Government? In fact, I think DFID was recently described by the Prime Minister as a modern equivalent of a battleship. Is there a risk to staff?

  Mr Mitchell: We never compromise on our duty of care, and the duty of care for DFID staff is precisely the same as the duty of care for Foreign Office staff. This is part of a debate which confuses securitisation with working in some of the most difficult and conflict-ridden parts of the world. We give very strong support—we have announced some today for the International Committee of the Red Cross—on humanitarian relief and that sort of work is circumstance-blind. It focuses in all circumstances on those who are caught up in combat and difficulty.

  The work of doing development, a lot of which is often very long term, is carried out from my budget. All of that budget is spent in Britain's national interest, but it is also very much in the interests of the people we are seeking to help. The confusion in the debate is that, when working in conflict states, you are addressing people in the world who are doubly wretched because not only are they extremely poor, but they are caught up in conflict and dysfunctionality. The debate sometimes gets a bit confused. Nevertheless, working in conflicted states, you're working in places where maternal mortality is highest, where children have the least chance to get in school, and where there is food insecurity and a lack of choice for women over whether and when they have children. I don't believe that there is any real confusion about the priority of Britain's development work taking place in some of the most insecure and vulnerable places in the world. When the last combat soldier has left Afghanistan, the work of development will still continue there, because it is one of the poorest countries in the world.

Q73 John Glen: I have another comment from when the CDS came before us in November. He said: "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." Do the Ministers agree with that analysis, and how is it being addressed if you believe that there is a weakness?

  Mr Hague: The National Security Strategy is an assessment, largely, of the risks, the impact and likelihood of the risks, and then in broad terms, what we need to do about it. The means were more set out in the following day's publication of the Strategic Defence and Security Review, so, whether people think that is an area of weakness depends on what they think about that review. Clearly, these are things that are being properly tied together for the first time in government. In your terms, looking today at the processes here, that assessment of risks, the overall sense of strategy, and then ensuring that the SDSR supported that is what this process is.

Q74 Chair: You said "whether people think that is an area of weakness". If the CDS thinks it's an area of weakness, does that cause you concern?

  Mr Hague: The CDS is fully participating in it and is fully committed to it. The Defence Secretary better talk about that one.

  Dr Fox: He takes part fully in the NSC itself in the formation of the Security Strategy and, of course, he was central to the SDSR itself. If you are interpreting the comment to mean that the military think that it would be nice to have an unlimited budget I am sure you are correct.

Q75 John Glen: It is clear that the national security document came out one day and the SDSR report came out the next day. The implication of what he is saying is that one did not meet the other's statement of need. Either it is agreed with or not.

  Dr Fox: He might be referring to the fact that for a very long time there has not been a tight correlation between the two and one of the changes we envisage is that we refresh the NSS and the SDSR once every Parliament so that we are constantly trying to ensure that we are matching the assets we would require to deal with any of the problems with the identification of the problems themselves. That is a constantly changing picture, as recent events have shown.

  Chair: We will come on to that.

Q76 Sandra Osborne: Can you briefly describe how the National Security Strategy is developed and how it will be delivered?

  Mr Letwin: The starting point was the consideration of the risks that the country faces. A great deal of work has been done—this was not invented under the present Government; it had already been going on under the previous Government, but it has been developed and accentuated under the present Government—in assessing the impact of different risks and the likelihood of different risks. A matrix with an X-axis and a Y-axis has therefore been developed where the Y-axis is impact and the X-axis is likelihood. The attempt in developing the strategy was to identify particularly those risks which either had very high impact or very high likelihood or, most of all, those that had both high impact and high likelihood. That was the starting point for thinking through how to develop a Security Strategy because it was intended to be a Security Strategy, the ultimate purpose of which was to provide the greatest possible security for the population of our country.

  Once you start with that and you have identified a particular array of risks that matter most to you, in some cases you can move quite rapidly to specific judgments about sorts of things you would want to do. For example, we have identified cyber attack, as William mentioned a moment ago, as a particular risk. As we made plain in the spending review, we have allocated a very considerable additional sum to protecting us against cyber attack. So that is the sort of case where you can move quite rapidly from the identification of a risk to a need and to a decision. In other cases, however, identifying a risk as important—of high likelihood and high impact—may lead you to a very considerable chain of consequences. In the Security Strategy we have tried to go through that chain of consequences, leading in some cases, for example, to the decision not to engage in strategic shrinkage, which William has referred to.

  Chair: We will come back to that.

  Mr Letwin: We will come back to that, but I hope I am giving an impression of the order of our logic—start with risk, try to work out what the consequences of trying to address the most important risks are and, where that is a long chain, trace right through; where it is a short train, make appropriate decisions quickly.

Q77 Sandra Osborne: As John says, the National Security Strategy came out on 18 October, the SDSR White Paper on the19th and the CSR on the 20th. What was the thinking behind that? Would it not have been better to have published the National Security Strategy in advance so that it could have been better taken into account in the SDSR?

  Mr Letwin: Our thinking was to develop these things in parallel so that we could understand interactions as we moved forward, but the thing that we started with was the National Security Strategy. So before we did anything else, the risk register and the analysis of the risks and what flowed from them was our thinking. We then began the work of trying to work through both the SDSR, which Liam may want to say more about, and the spending review which interacted with it. Producing all three contemporaneously was done precisely in order that people could look at the three and see how they tied together, which we believe they do.

Q78 Sandra Osborne: So the Security Strategy and the Defence Review were not at any stage one document?

  Mr Letwin: No, there was not a stage at which they were one document because we originally conceived the Security Strategy as something that we would lay out, as something separate from the SDSR, and of course the Chancellor had it in mind to produce a comprehensive spending review separately from that from the start.

  Dr Fox: On the question of the National Security Strategy and the risk assessment, there are three discrete elements in that. There is the need to reflect the changing nature of threats and any emerging threats. That is one area. The second is for us to track how successful we are in our mitigation measures in tackling threats and risks. The third is how effective our resilience and planning measures have been in reducing the potential impact. So there are a number of different elements within that. They are set out discretely, but they are, of course, overlapping in practice.

  Chair: I will come back to you in just a moment, Sandra.  

Q79 Thomas Docherty: Professor Clarke of RUSI described the National Security Strategy as a methodology towards a strategy, rather than a strategy itself. How do you respond to that suggestion and observation?

  Mr Hague: It is the outline of a strategy. It certainly is the methodology and it is very important to have the methodology. It is the clear methodology that Oliver Letwin has just been talking about. It then summarises the strategic need and the strategy. Clearly then, as we said earlier, the delivery of that is for the SDSR and how we conduct ourselves over the coming years. It is inherent in our assumption that we need an adaptable posture in military affairs that the threats will change over time and need re-evaluating. Certainly the methodology stands out particularly in it but it also contains the outline of the strategy and then the follow-on document.

  Dr Fox: The assessment that we made that, because of the nature of globalisation our risks are more widespread and therefore we have to have a range of ways of tackling things, has given rise to the development of what the Foreign Secretary and I referred to as a multi-layered approach. In other words, when we identify the range of risks, we have to have a range of ways of dealing with them, not a one-size-fits-all tool. For example, there are some things where we have to be able to act unilaterally and some areas where we might want to act bilaterally and some within smaller groups of similar nations, as we have with the Northern Group, for example. Sometimes we might want to do it through NATO. So we have a range of tools.

  One of the things that we felt at the outset of the process was that we were dealing with a very complex, interdependent and multi-polar world, but we were trying to deal with it largely with international tools designed for the post-world war two environment. So we needed to develop a wider range of potential options and tools for the UK, which is why we have been spending a lot of time developing elevated bilateral relations and getting ourselves into more groupings. One example is the FPDA, the Five Powers Defence Arrangement in South Asia—long neglected. The Foreign Secretary and I went to South Asia because clearly we have a range of interests in that part of the world and it makes sense for us to have a discrete and bespoke element of our security apparatus to deal with that. So it is building up a picture of a range of responses to a range of potential threats.

Q80 Sandra Osborne: The strategy says that the highest priority risks will not automatically have the most resources allocated to them. Does that run the risk of having the sort of league tables of risks where the highest priority might not be properly funded, which the Prime Minister states in the forward to the strategy is al-Qaeda? Who, therefore, is responsible for deciding the resourcing and co-ordinating the delivery priorities of the National Security Strategy?

  Mr Letwin: The phrase to which you are referring means something rather different from what you glean from it. Identifying a particular risk as having a particular place in the hierarchy of likelihoods and impacts tells you how much attention you ought to pay to it. However, some risks that may be very important both in impact and likelihood may nevertheless be cheaper to deal with—even if you are putting a lot of emphasis on dealing with them—than some other risks which are either less likely or would have less impact, but which are intrinsically more expensive to deal with.

  Therefore, the decision about where to place your resources is not something that you can simply read off a table of the impact and likelihoods of particular risks. Returning to the table that I am talking about for an example about cyber, we analysed cyber attack as one of enormous importance to the country. It will probably increase in importance over the near and possibly long term, but there are simply limits to the amount of money that you can spend on it, because it requires an enormous collection of incredibly clever people to do things to make an impact. You can't just go and buy things.

  Chair: Luckily, we have those enormously clever people in front of us today.

Q81 Ms Stuart: I want, in some shape or other, to address all of you, and it is around the statement in the National Security Strategy that says: "The National Security Council has reached a clear conclusion that Britain's national interest requires us to reject any notion of the shrinkage of our influence". Of course, the question arises of whether that is over-ambitious. In particular, I would like to address Mr Hague and Mr Mitchell and ask you both to explain how that foreign policy baseline interacts with, and is reflected in, the NSS in relation to your two Departments.

  Mr Hague: This is something that we feel very strongly about, and it is, of course, directly applicable to the Foreign Office to begin with. There are all the factors at work in the world that I was listing in answer to an earlier question. That means that we have to maintain or extend our influence not only in multilateral bodies—whether it be in climate change negotiations, the deliberations of the G20, at the UN Security Council or wherever—but also, given how the world is developing, in bilateral relationships.

  Indeed, one of the reasons why we are able to accomplish our objectives in many of those multilateral forums is that we have strong and appropriate bilateral relations, and the importance of those is elevated by the development of new networks of alliances and friendships in the world.

  Turkey is an example. We have given a lot of diplomatic attention in the first 10 months of the Government to the relationship with Turkey, which is obviously a country within NATO, but not within the European Union. Turkey is trebling the size of its diplomatic corps and opening dozens of new embassies and consulates, so a strong bilateral British engagement with Turkey is necessary, as well as working with it strongly round every multilateral table. To do that effectively, you need that global diplomatic presence, which needs to be beefed up in some places, and you need the right combination of—to coin phrases—hard power and soft power around the world to be able to influence events.

  That is the objective that I am sure it is right to start with. If you just left everything to itself, given the shrinking proportion of the world's economy accounted for by the United Kingdom or the European Union, our influence would naturally shrink, so we have to exert ourselves to ensure that it does not. In the case of the Foreign Office, that means changing budgetary arrangements. Under the previous Government, its protection from exchange rate movements was withdrawn with fairly disastrous effects. We have restored that protection. It is funded so that we can maintain our diplomatic network.

  In the coming weeks or months, I will announce shifts in that network, so that our network of embassies and consulates is adapting to the shifting pattern of world influence and the world economy. It is not only a matter of Foreign Office presence; it is a matter of what we are doing across the entire range of these activities, which is no doubt why you wanted Mr Mitchell to answer as well.

Q82 Chair: But before he does, I should say that we are cutting the surface fleet to 19 serious ships and getting away from aircraft carriers for 10 years. Can you really say that our influence will not shrink as a result of those decisions?

  Mr Hague: That depends on what we do in other areas.

Q83 Chair: So it is compensated for elsewhere.

  Mr Hague: It is a mix of these things. The Defence Secretary will want to talk about the strength of defences that we will have in the future, notwithstanding the fact that we have to make some painful decisions along the way.

Q84 Chair: I recognise the painfulness of the decisions. This denial of a shrinkage of influence strikes me—I don't know about the rest of the Committee—as a little unrealistic.

  Mr Hague: Colleagues will also want to speak about that. Influence does not just depend on the resources that you are devoting; it also depends on how you are using them. Clearly, one of the things we are trying to do more effectively than in the past, through the NSC structure, is to use our resources of whatever level in a more coherent and effective way.

  I was talking about Turkey and the way in which the Defence Secretary and I have worked together on Turkey in recent months, with defence and foreign policy engagement—as well as the Prime Minister visiting in a major effort to elevate commercial ties with Turkey. That is a good example. The defence treaty with France is also a good example, working together in many areas of our defences, so that we get more value from the money that we put in. That is very relevant to the Department for International Development.

Q85 Chair: I am sorry. I cut Mr Mitchell off in his prime.

  Mr Mitchell: Thank you, Chair. The Foreign Secretary referred to the projection of soft power. It is important to make it clear that one of the reasons why we have stood by our commitments on international development, increasing substantially the amount we spend, is not just that we think it is morally right—it is about the values we have as a Government and as a country. It is also because it is in our national interest to do so.

  I was recently in Somalia where I saw clear evidence on the ground of threats to Britain's interests and security: threats from piracy, migration and terrorism, as Somalia remains the number one source of terrorist threat to the UK from Africa. As I said in an earlier response, all the budget is spent in Britain's national interest—quite a lot of it is spent in Britain's national security interest, too.

  We agreed early on in the National Security Council that by 2014 we would double the element spent in conflicted states, difficult parts of the world, and increase it from £1.8 billion a year to £3.6 billion a year. I want to emphasise the fact that this is often the projection of soft power—it is aid not just from Britain, but for Britain, and strongly for Britain's interest.

Q86 Ms Stuart: I was coming to Dr Fox. Could you tell us a bit more about how this foreign policy baseline is delivered on the ground? From your point of view, given that the Foreign Office and DFID are the soft power, should they not be just one Department again?

  Dr Fox: I will not be beguiled, even by Ms Stuart, into such heresy. The whole question of influence is multifaceted, and we exercise our influence in many ways: bilaterally; through NATO, the UN and the EU; through our economic relationships in the G8 and G20; through our relationship with the Commonwealth; and through the influence that we have as a result of our intelligence relationships with other countries. There are ways of effecting influence.

  The one asset that has not been discussed sufficiently, in terms of influence, is time—the time that Ministers are willing to spend working on those relationships themselves. That is hugely underestimated. For example, when we set up the new Northern Group, about which I have spoken to the Committee before, there were a number of reasons. It was to improve our bilateral relationship with Norway, a key energy-security partner for the UK, but a country where no British Prime Minister has been for 26 years. It was to provide a better vehicle for Sweden and Finland to deal with the security apparatus of the region, to give reassurance to the Baltic states, and so on. That didn't cost us more than the price of the airline tickets to the meeting, but it did increase our influence in an area where we had been absent for too long.

  I think that there is an undervaluing of the incredible influence you can get simply by having the right personal chemistry and investing the time in getting those relationships going. Other countries have been doing that better than we have; we have had long absences.

  When the Foreign Secretary and I went to Australia, I visited one of the defence establishments and there were no records of a Defence Secretary and Foreign Secretary ever having been in Australia together. On the page of British visitors, below my latest signature, were George Younger, Prince Philip and Montgomery; that is the historical scale of the frequency of the visits. We need to understand better how frequency of contact and influence can be brought to bear in ways other than hard power. That is not to say that hard power projection is not an important adjunct, but it is not in itself the only way to have influence.

Q87 Ms Stuart: But surely it must be the starting point. If you put a ship along someone's coast, it is a projection of power; if you haven't now got the ship, you cannot do that. Just visiting them will not be enough.

  Dr Fox: As I say, to repeat the well used phrase, soft power without hard power is music without instruments.

Q88 Mr Brazier: On that very point, Mr Mitchell, it is a laudable intention to double the amount of our aid that goes to areas of conflict, but how is that going to be squared with the very tight—almost uniquely tight—rules that we have on duty of care for our employees, which you mentioned earlier?

  Mr Mitchell: You are quite right that the duty of care must always be paramount. It is the same for the employees of DFID as it is for those at the Foreign Office. It is always kept under review and it is, I hope, appropriate.

  It is important to emphasise that in some of the most difficult parts of the world we work bilaterally and multilaterally. The point of these very detailed reviews of the multilateral aid and bilateral aid—the country-to-country programme—that Britain gives, about which I wrote to members of the Committee last week, is that it should be appropriate to the results that we wish to achieve. We are working out where we want to be, where we should be—those decisions are informed by cross-Government discussions—and what is the best way to achieve those results. As I said earlier, I believe those results are strongly in Britain's interests, as well as the interests of the countries that we are seeking to help.

Q89 Mr Brazier: We have already had considerable difficulties in protecting the DFID effort in Afghanistan. If we are thinking more widely and doubling our commitment to what would normally be called war zones—the word "conflicts" is a sort of happy cover for it—without strong partnership with the Armed Forces, it is rather hard to see how it can be achieved.

  The Americans have a view on that, which involves both more military partnership and a lower requirement on the duty of care for their civilian personnel. How do you see squaring that circle within a smaller defence budget and having twice as many people, effectively civilians, deployed in war zones?

  Mr Mitchell: It might not be twice as many people deployed. As I said, there are different ways of doing it. But I should emphasise to Mr Brazier that in some of the most difficult and dangerous parts of the world, brilliant civilians and brilliant NGOs do quite extraordinary business very bravely and very effectively.

Q90 Mr Donaldson: Conflict prevention is a key element of the NSS, yet we have heard already that there are limitations to resolving conflicts if you reduce your capacity to provide hard power in areas of conflict. How does the NSS contribute to conflict prevention and the resolution of other crises? I would like to hear from any of you about that.

  Mr Hague: Shall I start? It contributes a great deal. It is clearly identified in the NSS as something to which we want to devote more resources and attention. The upstream effort to prevent conflict, if successful, is cheaper than engaging in conflict. It is also dramatically less expensive in human life, so it is identified as an important priority for this country. The range of assets and resources that it needs differs from one situation to another.

  One area where, I think, we have been working successfully over recent months on conflict prevention is Sudan, where DFID is highly active. Foreign Office and DFID Ministers and officials work very closely together, so not only has DFID been putting its resources and effort in, but, as Foreign Secretary, I called a special meeting of the UN Security Council in November when we had the chairmanship. Since we both know some of the leaders on both sides in Sudan, at crucial times during the referendum in January we made regular calls to the people on both sides to ask them to act with restraint. Whenever a violent incident occurred, we asked them not to respond to it. Many other countries have been doing the same, and Britain is part of that effort.

  That is an area of conflict prevention that does not require—and we haven't deployed—hard power in the sense we have just talked about. Our effort is diplomatic and humanitarian. The incentives we provide to people in that situation to prevent conflict are economic and diplomatic. We assure both sides that, provided they can behave in a peaceful manner towards each other, they have a future relationship with Western nations.

Q91 Mr Donaldson: Secretary of State, are you saying that with the reduction in the capacity of the UK to, for example, send taskforces across the world—we heard from the Royal Navy that that capacity is reduced—you will rely more on diplomatic skills and prowess than we have in the past? I am thinking, for example, about the sending of a taskforce somewhere where there is a risk of conflict.

  Mr Hague: There will still be instances where we have to rely on the Royal Navy's being able to deploy, but I am pointing out that some of the major risks of potential conflict in the world are dealt with most effectively by a combination of development and diplomatic, political and economic resources, particularly in partnership with other countries. It does not always follow, so I am not saying, that there will not be circumstances where we need a military presence as well, but our experience so far is that the majority of our conflict prevention work is in that soft power area.

Q92 Mr Donaldson: Mr Mitchell, in your comments could you reflect on the statement you made last week on aid priorities and how that fits in with the delivery of the NSS and the SDSR?

  Mr Mitchell: The conflict prevention point you raised and the statement I made last week are about focusing much more on conflict prevention for the reasons that the Foreign Secretary set out. I want to emphasise that that is a humanitarian concern as well because some of the most wretched people in the world live in conflict zones, where they lose out twice over as I described earlier.

  In my Department's work on conflict prevention, whether that is trying to build the capacity of revenue-raising authorities to raise their own taxes, addressing accountability in governance—how people hold their leaders to account—and addressing such civil society structures, or whether it is trying to build up work opportunities and jobs, particularly for women, or trying to build accountability structures, or training the police, we are very heavily engaged.

  In the papers that we circulated last week, you can see precisely what results we will seek to buy over the next four years in the more conflicted areas of the world. Within a month, you will see the operationalised plans for each of those countries for the work that we are doing. We will be training 3,000 police in Somaliland—

Q93 Chair: I am sure that we will be doing some very good things.

  Mr Mitchell: Thank you, Mr Chairman.

Q94 Mr Havard: Can I get to the question on North Africa and Libya? I will address it in this way: we asked the MoD, "How will the UK adapt to changing threats/unforeseen circumstances?" and we put in brackets "bearing in mind capability gaps." We got a lovely answer about how the NSC works and how Liam's Department works, with all sorts of stuff about bi-annual reviews, an annual mandate to do horizon scanning, and new threats and co-operating—we had all that. It didn't answer the question, essentially, about what is happening now. How do we respond? What does the NSC now do, given that it may well have a capability gap where there is not a ship of the appropriate type to send in future in similar circumstances?

  Dr Fox: I can answer that by rolling back to the assumptions, first of all. The question is really whether we should be revising our assumptions in the light of the experience in North Africa.

  Mr Havard: Yes. That is where I'm going.

  Dr Fox: My answer to that would be broadly no, because we specifically set out in the SDSR—as Oliver said—to have an adaptable posture. There were two other postures quite strongly advocated by some. One was that we should invest in what you might call "Fortress Britain", withdrawing back closer to home and investing in the appropriate assets in that direction. There were others who said to go exactly the other way, and that we should have a highly committed posture. Assume that the conflicts of the future would be like the ones we face in Afghanistan now, and there would be no requirement for widespread maritime capabilities, for example.

  We purposely chose an adaptable posture, recognising that there are always limitations on the amount of money we have available. What posture would give us the best capability to respond to the lack of predictability that exists out there?

  When it comes to looking at some of the areas that we chose to prioritise in the SDSR, we had, for example, to upgrade our lift capability and we decided that that would be an area. We decided that C-130s would have to come out over the decade and we would have to invest in A400M and C-17 to give us the sort of lift capability that we have seen recently was all too necessary. Likewise with an investment in Special Forces.

  I think that the broad decision to go for an adaptable posture was correct. Will we have to keep that constantly reviewed as the risk assessment is done every two years, and as the NSS and the SDSR are done every four years? Of course we will, but I don't see any reason, in light of experience, to change the assumptions on which the SDSR is undertaken.

Q95 Mr Havard: Can I go at it another way, then? In what you see currently, and in what you see going forward about the whole of the instability in North Africa and potentially elsewhere, what lessons are you now learning and taking into the NSC about how you respond? For example, are you going to defer the pace at which you make some changes in particular capabilities, because that is thought to be necessary for the immediate term of, say, the next two or three years, as opposed to making a fundamental revision of the policy for up to 2020 that you decided earlier? Would, for example, the NSC be able to agree that, and say, "Well, we have just put HMS Albion up against the dock in Plymouth. It might be a better idea not to do that, because it is an amphibious ship that might well be the very sort of asset that we require in the North Africa area over the immediate period." Can the NSC decide that? Will the money flow from that? Will you be cut slack to do it?

  Dr Fox: It is entirely open to us to go to the NSC with any changes that we want, but at the moment we don't intend to do that. There is one element that above all we think needs to be put right. Tomorrow NATO Ministers are meeting in Brussels, and there has to be a proper balance between what we, in terms of international obligations, are willing to do and capable of doing unilaterally as the United Kingdom, and what we're doing in terms of our wider alliances.

  I think there are very key questions here, and more will be emerging in the coming weeks for NATO. As a defence organisation, is it operating successfully? In particular, where it has assets, does it have the political will to deploy them? That is a crucial question in terms of the wider capability that we are able to get through the alliances that we are trying to develop.

  We do not run the world; we are not its policeman, but in partnership with other countries we should be able to have greater effect than we do. That is not because Britain is unwilling to deploy its assets.

Q96 Mr Havard: So we rely on bilateral arrangements with the French, or multilateral arrangements, then—is that it? One of your colleagues is saying that we should just run extra guns to them, that's another way of doing it. Those are hard assets that you can use, but they would be used by someone else. Who is actually controlling this decision making process? What I'm really trying to drive at is: is this the NSC—is this the war cabinet? Are you in charge of it, Secretary of State for Foreign Affairs, or if not who is? What is the joined-up policy? Should you decide that change and deferment of a particular capability was necessary, is the authority there to do it, and is that a Foreign Office or Ministry of Defence decision?

  Mr Hague: That is what the National Security Council is for. Theoretically, the answer to your question as to whether the NSC could change those things if it wished is yes, with the agreement of the Cabinet in the way we described earlier. Of course, the existence of the NSC in a case like this allows all the relevant Ministers to consider all the ramifications of a situation together on a regular basis, chaired by the Prime Minister. For instance, NSC meetings we have had in recent weeks were able to look at the deployment of our military assets in the region, but were also able to hear the intelligence reports and think about the diplomatic response. In the next two days the Prime Minister and I will be going to European meetings where we are looking for a more bold and ambitious European approach to the region in the future, looking not only at Libya but at the future of Egypt and Tunisia. Through the NSC structure, it is possible to integrate our thinking on diplomatic and economic needs with what we are doing now militarily and intelligence-wise.

  Mr Havard: But a personal chemistry and charm offensive have to be backed up with something at the end of the day. Otherwise, it is just music without instruments.

Q97 Chair: Dr Fox, may I just make a comment on what you have just said? To the extent that we are not able to deploy British assets, can I suggest that we reduce our rhetoric to those assets that we personally can deploy?

  Dr Fox: Ambitions and deployments should always be very closely titrated.

Q98 Thomas Docherty: Following on from the comment you made a few moments ago, on the wider question of North Africa and the Gulf—I draw your attention, Mr Chairman, to my entry in the register of interests in the Gulf—do we now have a concrete strategy for that region, given where we are today? We were clearly not in this position six months ago, and no one could criticise you for not having one—none of us could have foreseen that, and if we could we'd be hugely rich—but do we now have a concrete strategy for that region, and if so could you articulate it for the benefit of the Committee?

  Mr Hague: We have to do it with our international partners to be effective. This is therefore very much at the top of the agenda, for instance, at the European Foreign Ministers meeting tomorrow in Brussels and the European Council the next day. However, we do think that recent events in North Africa and the Middle East require a major change in how Europe works with that region, and we would ask other international partners to do the same—to act as a magnet for positive change in those countries, without being patronising towards other societies and nations and while respecting their different cultures and traditions.

  Although it is not the same, we need to create the equivalent of what we did for Eastern and Central Europe after the end of the Cold War. Clearly they aspired to membership of the European Union, and that was a magnet that drew them in the direction of things that we regarded as very positive—greater economic openness, political freedom, and democracy. This is different, but it needs the equivalent European strategy, backed by other nations across the world, particularly when it comes to the work of international finance institutions like the World Bank, that helps to encourage reforms that will open those economies and political systems; by setting conditions for European funding—the EU already devotes vast resources to its neighbourhood, but not in a very coherent way; and by offering market access to and more formal relationships with the EU. For the region and its development, that is what we are looking for, believing as we do that we should be optimistic about the opening up of greater democracy and political freedom, as the Prime Minister set out in his speech to the Kuwaiti Parliament, but conscious as we are, too, that there are great risks and that this can still go wrong. If these countries turn into stable, moderate democracies, it will be a great advance in world affairs. If they don't, the adaptable posture we chose in the National Security Strategy will be even more essential.

Q99 Mrs Moon: Dr Fox, as a member of the NATO Parliamentary Assembly, I have to say I am incredibly impressed at the speed you think NATO is able to make decisions, especially at times of crisis—

  Dr Fox: We will see tomorrow.

Q100 Mrs Moon: Perhaps it is different in the committees that you sit on from those that I sit on. I can't say that I am impressed by the speed of decision making.

  One of the things that I should like to talk about in terms of the NSS and the SDSR is how much time you spent reviewing previous documentation. I am intrigued because everybody has said that nobody saw what was going to happen in the Middle East and the use of social networking, yet I was looking at the Strategic Trends Programme report "Future Character of Conflict" that came out in 2009. It says: "Social networks will become an important feature of future conflict, and conflict in one area may more easily ignite conflict in another, in effect creating a 'Global Joint Operational Area'." We knew that social networking and that capacity to communicate was a risk, so why was it not built into the National Security Strategy? Why was that not a component part?

  Dr Fox: I think it has been clear in "Future Character of Conflict". I looked at that and it made that, as you say, very correct assumption. The trouble is that that is, as you say, a global network. That it would appear first of all in Tunisia or Egypt was very difficult to predict. Even now, looking at it with the intelligence that we had in hindsight, it is still difficult to see what were the particular pointers. I think what we can do is look at the analysis that you mention and look in the areas where we have seen this become a real phenomenon, and ask: what are the demographics that might give us a pointer to where it might happen again? What do we know about the age of the population and their access to these networks? What do we know about their income and their levels of education that might give us a pattern and some pointers to where it might be likely to happen in the future? That is why it is being currently undertaken.

Q101 Mrs Moon: You told the Committee last year: "I say almost every single day in the Ministry of Defence...that we have a very poor record in predicting where conflict will occur and what that conflict will look like."

  Dr Fox: And I think that is repeated in probably every capital in the world.

Q102 Mrs Moon: It has certainly been right here over Tunisia, Egypt and Libya.

  Dr Fox: It was also true in Paris, Rome and Washington—virtually every other major country failed to spot that that was going to happen in exactly the places it did when it did. Were I able to predict conflict to the precise date, times and places, I would be doing the national lottery a lot more often than I do.

Q103 Mrs Moon: We also failed to predict it in the Falklands and in Bosnia—

  Dr Fox: Afghanistan.

Q104 Mrs Moon: How can we be confident that the correct decisions have been made this time round? What gives you the confidence that the National Security Strategy, the defence and security review and the arms you have put in place and the capacity and facility and platforms you have put in place will ensure that we are safe and secure?

  Dr Fox: Because I think we chose the correct posture. Had we within the budgetary envelope available at any one time—that will change over the time periods that we look at—decided to go for a "Fortress Britain" policy and pretend that we would not be affected by events elsewhere and therefore we could retreat into our shell, we would not have had the appropriate responses to what we have seen. Had we decided that we no longer required a Navy of the size that we have but should be investing far more in land forces able to become increasingly involved in operations that we currently face in Afghanistan, that again would have been the wrong choice. To decide that we do need to have land, sea and air assets that are widely deployable, given whatever financial envelope we have the time, is the correct decision. I still think that the essential judgment of the SDSR was therefore correct.

Q105 John Glen: Given the financial constraints that led to the SDSR—we are where we are with that—to what extent do you think there is a greater inclination, given what is happening in North Africa and Libya, to go in a more painstaking way through the channels of NATO and the EU? Do you think Britain would have adopted a different position, a different posture, a different leadership role if the constraints of the SDSR had not been in place, or the financial constraints that Liam Fox described as a primary national security consideration? How do you think we would have behaved differently, if we weren't in the situation we are in now?

  Dr Fox: The assets we required were available. We were actually well ahead of many other countries. I know that it is fashionable in the UK to say how far behind other countries we were, but we have been evacuating hundreds of foreign nationals—in many cases with each movement of our assets many more foreign nationals than British citizens. We have been doing a lot of the heavy lifting for other countries in this operation.

Q106 John Glen: That is about the evacuation, not about the situation from now on. Now our people are largely home, the concern is about future conflict in Libya.

  Dr Fox: I understand that, but I wanted to make the point. When people say that the UK is not capable of doing things, not only were we capable of getting our citizens out, but we were getting many other foreign nationals out as well. The way in which the UK effort is viewed increasingly in the foreign press is rather different from the way it is viewed in the UK press. Our action was something we should be proud of as a country. When it comes to the events of the future, as I said, NATO Defence Ministers are meeting tomorrow. We will want to evaluate all the options. We have asked through SHAPE that all those contingency measures are looked at.

Q107 John Glen: So our position would not have been any different, had we not had the decisions made in the SDSR in the way they were?

  Dr Fox: We are acting within what we believe are the correct political constraints for us. To act alongside our allies is the way we would want to deal with any international security picture. That is why the Prime Minister insisted so early that NATO did the scoping for us. In fact, had the Prime Minister not pushed, I am not sure that NATO would have been at this position in terms of contingency planning. Tomorrow we will look as a grouping. The key for NATO is, if the scoping is done and it is clear what assets need to be used, what is the political appetite across the NATO members for the deployment of those assets? It is a serious question that I go back to about NATO. Having the assets is not sufficient; if the political will is not there to use them, it leaves NATO collectively disadvantaged.

Q108 Mr Brazier: May I take you back to process on the SDSR for a moment? Having made that very strong and accurate statement that we have a long history of being unable to predict in any meaningful way what conflicts are coming up, do you think, Dr Fox, that there is a case for reviewing the firmly entrenched system of working on defence planning assumptions, and perhaps looking at a more old-fashioned balanced capabilities model of the kind that I get the impression that the Americans are in the process of looking towards—clearly they are on a different scale—against trying to tie in very detailed DPAs as a basis for decision making against the background of persistent failure to see what the problem was.

  Dr Fox: Defence planning assumptions are effectively the guidelines that we use for force generation and what we think we need in terms of broad shape and size of forces. Clearly, in taking on the adaptive posture, we have in fact said we need a balance of capabilities in the UK, because we decided not to go to one extreme or the other in terms of the shape of the Armed Forces that we have. The size and the equipping are largely budgetary issues within those parameters set by that posture.

  Chair: We will now turn to alliances and such matters.

Q109 Sandra Osborne: The Chief of the Defence Staff told us that the National Security Strategy was the Commander's intent, and the Strategic Defence and Security Review provided the detailed orders. How do each of your Departments ensure that you co-ordinate your actions to be consistent with that—if you agree with it?

  Mr Hague: The National Security Council is partly there so we co-ordinate such things effectively. Clearly, in the meetings that we have every week—and sometimes more than once a week—many of these subjects come round for discussion very regularly. So, co-ordination between Departments is focused, but it is also very strong outside the NSC on an interdepartmental basis.

   One of my colleagues referred earlier to the weekly meeting of NSC officials. The fact that Ministers work productively together has certainly encouraged senior officials to do so, and it has encouraged Departments to do so on a bilateral basis, too. I think, for instance, that the International Development Secretary and I can fairly claim that relations and working between the Foreign Office and DFID—despite mischievous questions such as the one from the hon. Member for Birmingham, Edgbaston—have become better than they have ever been, in the history of the existence of the Department for International Development. I don't think it's too much of a hostage to fortune to say that the officials would say that as well.

  That co-ordination across Departments and between Ministers has helped a lot, but it is also our responsibility within each Department to ensure that we are supporting this overall strategy. I think you can tell from the answers we have been giving to questions that that is what is happening in each of these Departments.

  Dr Fox: It is a source of shock in Whitehall that we do speak to one another at Cabinet level.

  Mr Letwin: May I add something as the outsider, observing the various Departments? What has really struck me is that we have gone through many discussions in the National Security Council on a wide range of issues and you cannot predict in advance "the Foreign Office view", or "the Defence view", or whatever. This is not operating as a series of departmental silos with their own views. We genuinely have a discussion about how we want to move forward on any given question and what resources we have available to us. At that stage, people talk in terms of what their Department can contribute. Without you being there, I can't adequately convey this to you, but I have been enormously impressed by the extent to which simply having this form of meeting, the fact that it is continuous—as well as having the meeting discuss many things, rather than just one set of things—makes it the case that people stop thinking of themselves simply as departmental Ministers. They don't come and read out briefs from their Department. They really engage together—we engage together—as a manifestation of the Government trying to solve a national problem.

Q110 Sandra Osborne: You have put that across very well, but what about at a lower level within each Department? Is that commitment still there, or is it just at the top? That's what we want to know.

  Mr Mitchell: I think it is getting better all the time. At the top, it probably helps that the three of us worked together so closely in opposition for nearly five years, running up to the election. There is no doubt at all that in terms of DFID's role, the National Security Council has made it much clearer to my Department why they should be so well joined up in Whitehall and, on the humanitarian issues in Libya, for example, which my Department has been leading on over the past couple of weeks, how the work that we do and the way that we are joined together with the Ministry of Defence and the Foreign Office is extremely important for getting across Britain's aims in that respect.

  Dr Fox: We should also point out that there is a huge amount of engagement around the NSC and around this process. For example, the CDS has a Chiefs meeting, which other Departments attend, and that informs the military's thinking ahead of the NSC. Other Departments attend what is called OPMIN, which is the meeting we have in the MoD on a Monday evening to look at current operations, threats and risks. That is also attended by all other Departments. There are a number of other bodies cross-referencing and feeding into the process on a real-time basis. It is not just the NSC meeting or the NSC officials; you also have the CDS meeting and OPMIN. There are a whole range of meetings feeding in, and they are all cross-departmental.

Q111 Chair: This is a process question, and it is addressed to you, Mr Letwin, as an outsider in relation to the Cabinet. The NSC meets for an hour after the Cabinet meeting on a Tuesday morning. Is that usually the case?

  Mr Letwin: Usually.

Q112 Chair: Presumably the things that it is dealing with are important issues, which need good buy-in from the rest of the Cabinet. Why does it not meet for an hour before the Cabinet meeting?

  Mr Letwin: The NSC does not only meet then. On occasions, it has also met, as I think William was saying earlier, more frequently than each week precisely to consider things that might then need to be referred to the Cabinet. There have been quite frequent occasions—I would not like to try to recall the exact number—on which a set of decisions arrived at in the NSC have been discussed by the Cabinet the following week, which, depending on the circumstances, is normally quite soon enough.

Q113 Chair: That is a week later. I just put that to you as a thought for further consideration.

  Mr Letwin: I have actually given some thought to this, and, indeed, we thought about it quite a long while back. It is quite frequently useful for the results of one meeting to be aired around Whitehall before there is a further discussion of it. If you move directly from one to the other, you find that some Secretaries of State who attend our Cabinet meetings, but who are not present at the NSC, have not had the opportunity to take briefing from their Departments and so on. If you were to seek to persuade us to move it back, you would have to seek to persuade us to move it some way back. I am not sure that it would ultimately make very much difference from it being a week back.

  Chair: A fair point.

Q114 Mrs Moon: Dr Fox, can you tell me what key capabilities are actually needed to deliver the NSS in relation to strategic deterrents, cyber-security, homeland defence and armed intervention overseas? I am not necessarily talking platforms.

  Dr Fox: We need to have balanced forces, as Mr Brazier said, across all environments. We have to have land forces capable of expeditionary capability. We must have sufficient maritime capability to deter in areas such as piracy, to evacuate where necessary and to take part in training and in wider maritime missions. We must have the ability to support those missions. We have to have sufficient air assets to give us lift capability when required and to support expeditionary and other missions. We must have a sufficient number and range of fast jets for either the defence of our own airspace or, should we require it, the protection of ground forces or, indeed, air-to-ground attack. We need a wide balance across them all.

  Again, I will reiterate the point until it is tedious. That is why we went for an adaptive posture. That is why we did not lean too heavily towards land forces or towards any other type of asset: it was precisely because we believed that we may be required to do a range of things, including, against the ultimate threat, the maintenance of nuclear deterrents.

Q115 Mrs Moon: Did you lean at all towards sovereign capability and the Defence Industry Strategy? Did you look at that? Did you take it in as part of your considerations?

  Dr Fox: Of course, the Green Paper that we have just published, which looks at—

Q116 Mrs Moon: But that is after. What about before?

  Dr Fox: For example, we had decided that it was essential to maintain our nuclear deterrent. Therefore, in terms of industrial policy, we had to have the submarine technology to back it up. We need to have encryption, which is clearly a sovereign capability. But I think there is a growing global debate about how internationalised we are becoming, not least because of the expense of defence and the expense of new technology.

  Mr Letwin: I should perhaps add that, as Liam's Department and my own have worked together on the question of the Green Paper and now the forthcoming White Paper, we have been enormously clear that it is defence requirements that should drive this process and not an industrial requirement. If there is a defence reason for a sovereign capability, we should invest, but we are not allowing ourselves to be driven by the concerns of shareholders, however valid in their own right, or national economic considerations. Those are considerations that BIS and the Chancellor may entertain in thinking about the growth review, for example, but in dealing with defence contracting and procurement we have been very clear minded that this is driven by defence requirements.

Q117 Mrs Moon: Do you have a set of criteria, a methodology and an overarching risk assumption on which capability decisions are being made?

  Dr Fox: As I explained to the Committee before, we effectively had a single tool that we looked at when making decisions about assets in general during the SDSR. As I explained, we had a single sheet in front of us. The first column had the proposal itself and the second column had the cost of years nothing to five, five to 10 and 10 plus. The third column was the capability implications of the decision: what capabilities did we currently have that would have been diminished or lost as a result of the changes being proposed, and what other assets might we have to fill the gap?

  We then looked at operational implications: what operations are we currently involved in that, again, we might not be able to do if we took that decision? We looked at the regeneration requirements: if we were going to delete or diminish any capability, how quickly and at what expense could we regenerate a capability? That remains a key element.

  We also looked at real world risk—this is the direct answer to your question—because we cannot have a balance of forces on an abstract basis. There simply is not the budget to buy everything that you could possibly need; therefore we had to be informed on real world risk. That is one of the areas in which the NSC is a very useful tool, because it gives us changes in real time against which to measure and change anything that we might need to do in the future.

Q118 Chair: You are quite right. Now I remember it, you gave us that evidence in some detail in, I think, June of last year.

  Dr Fox: I am so glad you remembered.

  Chair: I am trying to pick up a bit of speed because I know that people have a lot of things to get through. So could both members of the Committee and witnesses pick up a bit of speed?

Q119 Mrs Moon: In that case I would just like some clarification. In November, the Chief of the Defence Staff told the Committee that capability decisions were based on acceptable risk. How is "acceptable risk" defined, and who defines it? Perhaps Mr Letwin, given his involvement in many of these decisions, and you, Dr Fox, could answer that question if we are going to focus it on two people.

  Dr Fox: We looked at the evidence that exists about the capabilities possessed by those who might threaten the UK's interests or the UK, what we need to counter them and where we need to deter potential action against ourselves or our interests. There are some countries with some capabilities that do not threaten us, and there are other countries with emerging capabilities that might. That is why, for example—I apologise, because I gave the example before—if we look at our mine countermeasure vessels in the Gulf, it would not have been possible to take them out because the real world risk was too great. That real world risk might change. Iran might become a benign paradise, but it might continue to threaten our vital interests, in which case we need those ships in the Gulf.

Q120 Penny Mordaunt: My questions are to Mr Hague and Dr Fox. Could you tell us what the main driving force is behind our alliances with other countries? Is it primarily diplomacy, or is it getting access to a military or training capability? Could you also clarify which one of your Departments takes the lead on establishing such alliances?

  Mr Hague: The main factors—the driving factors—behind alliances are national prosperity and national security. They are, of course, both present in a different combination in different alliances. If we are talking about the NATO alliance, it is a national security alliance. The European Union is more directed at maintaining our national prosperity. Our relationship with the United States is a powerful mixture of the two. The elevation of our relations now with countries of Latin America and South East Asia is more directed at prosperity, but it can lead to defence co-operation and it already incorporates elements of defence co-operation. Of course, those factors vary from one case to another.

  One thing to note on this in your examination of the work of the National Security Council is that one of its Sub-Committees—the National Security Council Emerging Powers Sub-Committee—is quite heavily prosperity-focused, even though it comes under the ambit of the National Security Council. A great deal of the council's work is pure security—it is defensive in the sense that we have been discussing for most of this discussion—but it is important to be developing national and international relationships, which are, of course, improving our prosperity, but which may be key to our security 10, 20 or 30 years from now. So we oversee those relationships, including collaboration in higher education, culture and diplomacy, as well as in business department relationships, through the NSCEP Committee. All of those things are factors in creating alliances and international relationships.

  Dr Fox: The whole approach to alliances has been to create a multilayered approach. As I described, we have bilateral relations with France and the United States that are political, military and economic. We have tried to develop new elevated bilateral relations with countries with which we feel we should have a stronger relationship, such as Turkey and India, for different reasons—Turkey because it has a very important strategic geographical position. It is important in energy security. We see it as being a key NATO partner that is a bit alienated by the current EU approach to its membership. There are a whole range of different reasons for wanting to elevate those.

  We have sought to improve some of the areas, such as NATO, which we think—I agree with Mrs Moon, who has just left—moves too slowly on occasions. Effectively, we want to have has many levers that Government can pull as possible, including getting some life back into some of the very neglected relationships and alliances that we had—for example, in South East Asia. The effective mechanics are there, but no one has been maintaining them.

Q121 Penny Mordaunt: In terms of which Department takes the lead, how does that work?

  Mr Hague: On these international alliances and relationships, day-to-day diplomacy is, of course, primarily a matter for the Foreign Office, but, again, one of the advantages of our National Security Council approach is that we are able to discuss these things together. We are, therefore, able to say that, with a given bilateral relationship, we are going to aim to work with them on development aid together, that we are going to extend our defence co-operation, that we are going to upgrade our diplomatic commitment and, indeed, with other colleagues who are not here today, that we are going to have a stronger collaboration between education institutions or whatever it may be. As I have always stated, our objective has been that, for foreign policy to run through the veins of the entire Government, that means those Departments all executing that themselves, not just the Foreign Office being in the lead.

  Dr Fox: In fact, we are creating new structures to enable this to happen. The Foreign Secretary wants to say something about what's happening between FCO and MoD, but we are actually creating new ways and new structures to make sure that we are maximising for our foreign policy aims what can be provided through defence relationships.

  Mr Hague: Yes. For instance, a more integrated and systematic use of our defence assets to support the Government's international security and prosperity agenda is very important. So we are working now in the Foreign Office and the Ministry of Defence to develop a defence engagement strategy, which recognises that our defence capabilities have influence far beyond their core military tasks. We have to ensure that we maximise the effect that they can have in support of the Government's international priorities. That is something that the MoD and the FCO will be doing from now on.

  Mr Letwin: May I add one thing to enlarge the picture and illustrate how related these things are to one another? We mentioned earlier the relationship that has been developed with Norway, and it might seem that that relationship has nothing in particular to do with what is going on in the Middle East and North Africa. Of course it does, from our point of view, because deepening the relationships with Norway, and securing our energy better as a result, may have a direct bearing on the extent to which we are vulnerable to activities going on in the Middle East and North Africa. The ability of the NSC to look at that kind of question in the round is invaluable.

Q122 Penny Mordaunt: Turning to the bilateral alliance with France, how will the effectiveness of that alliance be assessed?

  Dr Fox: That operates on a number of levels. Obviously, there is the nuclear co-operation, which was a real step change in our relationship with France. There is closer and closer military-to-military working. We have a number of joint exercises, such as Exercise Southern Mistral, which will begin later this month or next month. We are getting a gradual working through of some of the differences that we have in military approaches, not least in logistics, and there is a gradual build-up of this on both sides. We purposely wanted it to be incremental. We wanted it to be an organic change in the relationship, rather than some big bang that we announced, and I think that is operating well.

  We have a range of discussions on procurement; on where we have duplication of research at the moment, which we might, in tight financial times, be able to reduce; and on areas such as military planning, doctrine, training, exercising and future procurement. All those areas are being looked at.

  Mr Hague: And in terms of assessment, the review in future years of the NSS that we have committed ourselves to is an ideal vehicle to review the effectiveness of the defence treaty with France, for instance.

Q123 Penny Mordaunt: You have mentioned Norway, but what progress has been made on further alliances, for example with Germany? There were some reports that those were on ice until the French alliance had been evaluated.

  Dr Fox: I had discussions with the then German Defence Minister just a few weeks ago to see whether there were discrete areas where we could work more closely together. We didn't have a treaty with France just because we thought it would be good to have an Anglo-French treaty. There were strong reasons in terms of capabilities and complementarity that we thought made it a natural partnership. We wouldn't want to seek to have treaties of that bilateral nature with other countries just to have them, not least because that would undermine the value of the Anglo-French treaty at the present time. That doesn't mean that we can't scope co-operation on a bilateral basis with other countries.

  We were accused, at one of the summits we attended, of bilateralising defence relationships, as though having stronger bilateral relationships inside a grouping were some sort of crime. Nobody ever thought that a strong Anglo-American relationship weakened NATO, so why should stronger bilateral relations with other countries weaken other organisations?

Q124 Penny Mordaunt: Finally, how do the more long-established alliances fit in with the NSS and the SDSR? What are the implications of new alliances for them, I guess particularly with respect to the United States?

  Mr Hague: Long-established relations fit in very well to this adaptable posture and to meeting the range of threats that we have identified in the NSS. The Defence Secretary was talking earlier about the meetings that we had in Australia, for instance. We think that that relationship has not been given enough attention by Governments in recent times. We agreed to have, for the first time, the AUKMIN meeting—the meeting of the Defence and Foreign Ministers of the UK and Australia—in Australia. We did that in January, and it allowed us to discuss the entire global picture together and identify certain areas on which we can intensify co-operation. For instance, defending ourselves in cyberspace is an area of great importance to us and to Australia. These are two countries with the capabilities to do a great deal together. I think the refreshing of some old alliances fits very well into this strategy, just as the building up of new stronger alliances such as with Turkey—an existing NATO ally, but we are intensifying that—also fits the range of threats we face, for the reasons the Defence Secretary gave.

  Dr Fox: Also, groupings within alliances have an ability to provide us with some synergy. For example, the Northern Group enables us to have the Baltic states, Norway, Sweden and Finland, Poland and Germany. That is another area where we will focus on particular areas of concern to us that might not be of concern to the wider grouping inside NATO, the EU or whatever. That allows us to have a focus recognising that we have a certain geographical position in the world that needs to be attended to. We sometimes forget to look after own back yard, and in some cases that has led to a diminution of influence when it shouldn't.

  Chair: Our final batch of questions relates to money.

Q125 Bob Stewart: I shall be as brief as I can. Dr Fox, there is so much happening at the moment. We are trying to deliver on the SDSR. Is the reorganisation within the Ministry of Defence being hampered for delivery of SDSR?

  Dr Fox: No, we have to have reorganisation if we are to get value for money. Within whatever budget is set, we have to get better structures, we have to have better management, we have to have better real-time control of defence budgets.

Q126 Bob Stewart: You are trying to do change at the same time as changing the organisation that will deliver change. Is there a paradox there?

  Dr Fox: I am not a natural Maoist for permanent revolution, but a certain amount of change is required to be undertaken. In a country where you can't even find out if someone calls himself a socialist, to be a Maoist revolutionary is quite difficult.

  We do require change to be undertaken. If I may give one example, the fact that there is no real accountability for our 20 major programmes, which are 80% of the programme budget, is incredible. We set out two weeks ago the programme to have quarterly reviews, where they have to be certified on time and on budget, or we bring in the programme team, and if we are not happy we will publish the programme, so the stock market and shareholders can see which programmes might be at risk in future. It was very interesting to see the stock market movements that day. It is essential that we get that real-time control of budget.

  To talk about the other changes we are making, not to have real-time budgetary control would mean that the waters would close over us again quite quickly. If we are to keep the ground that we take in terms of getting increased efficiency in the Department, we must bring in the changes—they are not optional.

Q127 Bob Stewart: That leads nicely into the second question. As a revolutionary, you would of course want some motor for your revolution. Who in the Ministry of Defence is going to make sure of those programmes? Which particular part of the Ministry of Defence is going to drive it through hard?

  Dr Fox: In terms of the major projects board, I am going to do that. That is going to be my responsibility. There are some things in the Ministry of Defence that are devolved that should be controlled centrally, and there are some things controlled centrally that should be devolved. That is part of the reform process. The one thing that needs to be controlled is the real-time budget. That has to be gripped right at the centre. That is why that will become the Secretary of State's responsibility.

  Bob Stewart: Seriously good luck.

Q128 Ms Stuart: Dr Fox, in the past the Government have asserted there was around a £38 billion over-commitment in the defence programme. Will you clarify whether that was real commitment or was that £38 billion an aspirational commitment of the MoD?

  Dr Fox: The £38 billion was the difference between what the Department had planned to procure and what the Department would have in resources if you assumed flat real growth between 2010 and 2020.

Q129 Ms Stuart: So, this was planned procurement?

  Dr Fox: Yes.

Q130 Ms Stuart: And how much of that would you have already entered on a contractual basis?

  Dr Fox: The way that previous procurement worked meant that a greater and greater proportion of each year's budget was committed, and therefore there was a smaller and smaller proportion left for what we might choose to do. In this financial year, that stands at about 90%, so 90% of the budget is committed before we can look at the planning round. A number of the projects have begun. There is scoping for some projects, such as the deterrent. They will come and pass through that number and out the other side, because they are of such long scope. In the current planning round and in the SDSR, we've stripped out a large proportion of that, but, of course, we are still involved in Planning Round 11, and I would not wish to say anything to the Committee that might tie my hands in the next two weeks.

Q131 Ms Stuart: However, I will try to tempt you to do so in a moment. Let me try to understand this. You say that 90% of the £38 billion is committed.

  Dr Fox: Of our programme budget. It is very heavily committed.

Q132 Ms Stuart: So that allowed you about 10%.

  Dr Fox: There is a limit to what we have in terms of discretionary spend in the year.

Q133 Chair: I'm sorry, but was that really what you were saying? I don't think it was what you said. Were you saying that 90% of that £38 billion—

  Dr Fox: Of this year's budget is already committed. I am sorry; that is not the same £38 billion. I'm talking about this year's MoD budget, so 90% is already committed.

  Ms Stuart: All right.

  Mr Letwin: They happen to be similar figures, but they're different items.

Q134 Ms Stuart: It was the £38 billion that was over-committed in the defence programme I was after.

  Dr Fox: It's £42 billion if you include the deterrent.

Q135 Chair: I am sorry, but how much of that £38 billion was contractually committed?

  Dr Fox: Offhand, I couldn't give an actual figure, but I will get it for the Committee.

Q136 Ms Stuart: Is it a third, a quarter, two-thirds?

  Dr Fox: There is a huge ability to reduce a very large proportion of that. My guess is that of that £38 billion we are talking of something like £8 billion to £9 billion, and that is a ballpark figure.

Q137 Ms Stuart: But you will do us a proper note on that?

  Dr Fox: Yes, and we have taken a huge proportion of that £38 billion out as a result of the current spending round and SDSR. When we are through PR 11 and have it agreed, I'll make it available to the Committee because those numbers will become apparent quite quickly.[1]

Q138 Ms Stuart: On the current spending round and a commitment by the MoD to agree to cuts, but not-yet-specified cuts, I gather that you have committed to something like £4.7 billion over the next four years in as yet unapportioned savings.

  Dr Fox: Through the rest of the planning rounds, yes. It was always going to be extremely difficult to deal with the planned overspend very quickly, and we will have to work our way through that. As the Committee knows, there are areas on which we haven't finalised our decision-making—the reserves versus the regular forces, the basing review and what we do with Germany, which is a consequence of that. A lot of those things will follow through in the planning rounds.

Q139 Ms Stuart: Just to be clear, if it is £4.7 billion of unapportioned savings over the next four years, in the current spending round that means you still have about £1 billion in cuts to apportion, doesn't it?

  Dr Fox: That is, of course, dependent on the resources that we're discussing at the moment with the Treasury. For example, about £500 million or so of that money would be the money that we might have expected from previous sales receipts of Typhoon, which are not available, but which we might have expected. As part of PR 11, we are, therefore, in those discussions.

Q140 Ms Stuart: But if I were to say that as part of PR 11 there is £1 billion around and you still have to look at it before the end of March, you wouldn't say, "Don't be so ridiculous, it's nothing like that"?

  Dr Fox: That depends on the finance that is available on the other side. Are you saying that we would have to close a gap entirely? If you look at the variance in the missing receipts, plus increased costs caused by fuel and currency movements and so on, there has been quite a variance. That is something that we will take through with the Treasury over the next two weeks.

Q141 Chair: Just to be clear, you haven't told Gisela Stuart that she's ridiculous?

  Dr Fox: I would never dream of doing such a thing.

Q142 Mr Havard: Planning round 11 will come out at a particular time, and the Defence Industrial Strategy, which we are clearly interested in, runs alongside it. There is talk about the spring. I don't know whether spring in Treasury terms is something that does this so it's July rather than March. We are in March. Are there any projected dates for when these things will fall to us so that we can assess them?

  Dr Fox: We think it is late June, early July.

Q143 Mr Havard: So that is spring.

  Dr Fox: It is a long spring.

  Mr Havard: I thought so.

Q144 Mrs Moon: Perhaps it is my simplicity over what is a planned procurement and what is a commitment, but I have a plan to procure a conservatory on my house. I have not talked to a builder yet, but I have a plan. It is in my head. I am a woman and I plan all the time. I have a plan to buy a new car at some point. How much of these planned procurements are actually signed contracts? Are you are coming back to tell us what you have signed up to and what are aspirational, as a lot of my planning procurements are? It would be really helpful to see the difference between those. Can we have a commitment to that?

  Dr Fox: Yes, absolutely. That is one of the things that I have been very keen to ask Bernard Gray to do. It seems to me to be exactly in line with the implication of your question. There are projects begun, where money goes into a line without there being a proper full budgetary line. For example, are we starting lots of projects in the hope that money will become available? Is that what the Department means by it? What I want to ensure is that we do not begin to spend money on any programme unless we are quite sure that the budgetary line will be there for development, procurement and deployment because it seems—and the work we are doing now is really drilling into this—that is where the MoD begins to spend money in the hope that it will be able to continue the programme and that money will become available in later years. That inevitably leads to the sort of bow wave that we have been seeing and an over-commitment of the annual budget. That leads us to the point we are at now where the wave is starting to break.

Q145 Chair: But the problem, I think, is that you have been using this figure of £38 billion without there being any great degree of clarity as to what is this Ferrari that Madeleine Moon would like to buy and what is something that has been committed under a PFI. Do you feel that you should now be able to produce that clarity in public?

  Dr Fox: What we intend to do is to be able to set out at the end of this process what it is we are actually committed to over this SDR period and right through to 2020. And it will be substantially less than that figure because we are looking to see where we can pull out of future planned expenditure areas that we do not believe will ultimately get to fruition.

Q146 Chair: Are you not able now to give any answers in relation to that £38 billion figure?

  Dr Fox: In terms of how much we have stripped out of it, Chairman?

Q147 Chair: No, in terms of how much of it is committed and how much is aspirational.

  Dr Fox: I think it is difficult in the current definitions that the Department uses to do that because there are programmes begun and there is no real money in future programmes to pay for them. That is what we have to ensure that we strip out. We have to make sure that where we have an aspiration, there is a real budgetary line or it is simply a wish list and we should take it out.

Q148 Chair: But if it is difficult to do that and this £38 billion figure has been the justification for some of the defence decisions that have been taken, how do you justify some of those defence decisions?

  Dr Fox: Had we gone ahead with all the projects that were in the pipeline on complex weapons, on other areas of projects, then had we assumed flat real growth spending between now and 2020, we would have had a budget demand over that period of £38 billion more than the budgetary allowance from the Treasury. That was clearly going to lead us every year into an ever more overcommitted budget with ever less discretionary spending.

Q149 Chair: Are you in any different position from any previous incoming Government in that respect?

  Dr Fox: We are in the same but worse. These practices have gone on for many years, pushing budgetary costs to the right. It has meant that every year, the budget is more overcommitted at the beginning of the year than the previous year. We have now got to the point where that has become unmanageable, which is why it has reached crisis point and why we had to do something about it.

  Chair: I suspect that this is an issue that we will need to return to. We will eventually need to ask you to come before us again.

  Dr Fox: It is always a pleasure, especially after PR 11, when it will be a real pleasure.

Q150 Chair: Good. Before we do, there is just one further set of questions that I would like to put to Mr Letwin. We know that Dr Fox has a strong personal view that he would like to see an increase in real terms in the defence budget as from 2015, because he said so. We know that the Prime Minister has said the same thing. Is it credible? Do you believe it? Is the NSC working on the basis that that will happen?

  Mr Letwin: It will not surprise you if I tell you that the NSC is extremely heavily influenced by the views of the Prime Minister. His views are on the record, and I happened to turn them up in anticipation that you might want to ask me that question, and he said, "My own strong view is that this structure will require year-on-year real-terms growth in the defence budget in the years beyond 2015."

Q151 Chair: And you find this credible?

  Mr Letwin: I certainly do. It's not only credible, but is something that is powerfully put by nobody less than the Prime Minister.

Q152 Chair: Is it Government policy?

  Mr Letwin: It is the view of the Prime Minister. He said, "My own strong view".

  Chair: That sounds like a no.

  Mr Letwin: Let me explain the difference.

  It is not possible for the machinery of government to set expenditure decisions across a longer range than the spending review range—that is the whole structure of our machinery of government. We set expenditures according to spending review patterns. So, SR10—spending review 2010—sets a pattern for four years. It does not stretch to 2020, and I don't know of any Government in the world who could do that.

Q153 Chair: Is it Government policy to replace Trident?

  Mr Letwin: We are engaged at the moment in replacing Trident, and that is of course our policy.

Q154 Chair: So why can it not be Government policy to increase spending on defence from 2015 onwards?

  Mr Letwin: There is a difference between the decisions you take to spend money now—the spending on Trident in part. I defer to Liam—

  Chair: The Main Gate happens after the next election.

  Mr Letwin: Understood, but there is some spending on Trident now. There are decisions, I understand—Liam would know much more—to be of great importance in spending that money now in order to maintain the capabilities that we need to maintain and do the preparatory work that we need to do. So there is a Government policy to replace. There is expenditure going on now, and that is the policy of this coalition Government.

  The Prime Minister was stating his personal view, as Prime Minister and also as leader of the Conservative party, about something that will fall to a subsequent period and the Government then in power to decide finally, and which we will begin, presumably, to have to make some decisions about at the tail-end of this Parliament.

Q155 Chair: So we have an election in 2015, say. Is it only in 2015 that we discover whether the increase in the defence budget is going to come into effect, whether it is Government policy?

  Mr Letwin: It is inevitable, isn't it, if there is an election, that whoever emerges as the Government after that election will take a view on expenditure beyond that election?

Q156 Chair: It will be a bit late for 2015, won't it?

  Mr Letwin: I fear that beyond 2015, because of our democratic process in the country, people will have to wait to know who the Government are and what decisions they will take, but the Prime Minister has taken a view about what he would wish to see if he were Prime Minister at that time. That is a matter of great concern, because it is not just anyone speaking, but the Prime Minister.

Q157 Chair: Mr Hague, do you share this personal view?

  Mr Hague: Yes.

  Chair: Mr Mitchell, do you share this personal view?

  Mr Mitchell: I do.

  Mr Letwin: I think you may have gathered that the four of us share a view.

Q158 Chair: So let us try and tease out where the problem is with this. Is there anyone in the Cabinet of whom you are aware who does not share this personal view?

  Mr Hague: I think, Chair, we had better bring the whole Cabinet before your Committee so that you can ask them one by one.

  Dr Fox: One thing is clear—if we want to get to Future Force 2020 and, as was agreed during the SDSR, we require real-terms increases in the budget in what are called the out years—

Q159 Chair: Of how much?

  Dr Fox: There are so many different assumptions and, to be fair, different figures. But if we saw the sort of economic growth that we want and, out of Afghanistan, if we were still carrying out our NATO 2% commitment on defence spending, we would get to that level.

  The exact speed at which we would get to it is part of the debate, as the Committee knows. We are effectively looking at a J-shaped curve to get from where we are today to Future Force 2020. Some of the decisions that we will take in this year's planning round, next year's and—to an extent—in the year after that, are about the depth of the downswing and, therefore, the gradient that we require in increased spending.

  To an extent, the exact figure that we will need to get from where we end up in planning year 14 to Future Force 2020 will be dependent on the decisions that we take in the first three years. Those are, as we say, live discussions.

Q160 Chair: I am sorry, but I am not entirely sure that I understood that. What would be the consequences of failing to increase the defence budget, in real terms, by some noticeable amount from 2015 onwards?

  Dr Fox: The rate of real-terms increase will determine how quickly we can get to the benchmarks that we have set out in Future Force 2020. If it is a steep increase, we will reach that point earlier.

Q161 Chair: What do you mean by "steep"—let's say, a 3% real-terms increase per year?

  Dr Fox: That would be very nice. Where we are on that curve and the gradient of the upswing also depend on the decisions that we take in the early years. If, for example, we were to take deeper savings in those years, a sharper upswing would be required in the later years to get to the same point. So the actual number in real-terms growth will depend on where we are at the beginning of the next CSR.

Q162 Chair: And you are still struggling around looking for £1 billion—you haven't told Gisela Stuart that she is ridiculous—during this current planning round?

  Dr Fox: Chairman, to be able to make a contribution to the deficit reduction, which is in itself a national security liability, and to deal with a budget that is 90% committed, was never going to be an easy exercise—none of us pretended that it would be.

Q163 Chair: Nobody has suggested that this is easy. But you are suggesting a real-terms increase, as is the Prime Minister, just at the time when we are leaving Afghanistan. How will the public wear that?

  Dr Fox: We have set out what we believe to be the correct posture and force balance for the United Kingdom going ahead. In the SDSR, we had three options: first, to salami-slice everything and try to keep our heads above water year by year; secondly, to freeze capabilities where they were and not to sign future contracts or invest in future capabilities; and thirdly, to say, "We're in a hole. Let's find a strategic aiming point," which was 2020, "Let's set out what we think is the appropriate force balance for the UK in that year and then work our way towards it." That was always going to be a difficult course to take, but I still believe it was the right one.

Q164 Thomas Docherty: Secretary of State Fox, your Permanent Secretary was in front of us a couple of weeks ago, and you have said today that, effectively, a decision on the future funding is being put off until 2015. An uncharitable observer or politician might suggest that if there were, for argument's sake, a change of Government in 2015, they would put it to you that you had left what is, I think, called a black hole in defence funding. You don't know that you are going to get a real-terms increase to meet the pledges that this Government have made for the period 2015 to 2020. Is that an unfair observation?

  Dr Fox: And a cynic might say that a Prime Minister who has already committed to a real-terms increase in the budget might have a clear plan about what a future Conservative Government might look like in terms of defence policy.

Q165 Thomas Docherty: We cannot speculate whether there would be a Conservative Government.

  Dr Fox: Nor do we know when the CSR period will be or, indeed, unless you are dealing with the Treasury and asking it, what the assumptions will be on the future budgetary out years, as we approach those years.

Q166 Mr Havard: You were going to give us some more detailed figures later—which would be very useful—but you did say that you might be able to say something about how much you had whittled down this theoretical £38 billion—current activities. Can you say that now? Is it £21 billion now?

  Dr Fox: By the time we are through our PR11 planning—incidentally, we intend to start the PR12 planning immediately after the PR11, to give the Department a bit more space to start to look at options—we will have a better idea of what those numbers are. Until we are through this planning round—I am sure the Committee understands—it is difficult for us to put exact numbers in.

  Mr Havard: We understand that you don't want to put that number of £21 billion in.

Q167 Mrs Moon: May I clarify? Are you saying that, if that is your plan, you are going to confirm planning round 12 almost immediately after you have committed to planning round 11—you are going to start working on that. So we should be able to know, really, at the start of or early into planning round 14 what your plans are for planning round 15—if you are always planning well in advance.

  Dr Fox: I think we do not plan far enough advance, and I don't think that the Department has sufficient flexibility. We have to try to get ourselves away from this level of pre-committed budget, because it means living from hand to mouth year after year.

Q168 Chair: So you would go for Bernard Gray's 10-year rolling budget?

  Dr Fox: An indicative budget would be extremely helpful.

  Chair: Indicative?

  Dr Fox: Governments cannot set 10-year budgets.

  Chair: Why not?

  Dr Fox: Because they are not going to be in office for longer than five years.

  Chair: Ah. So, Governments who might be in office over an election that is coming up cannot set budgets longer than the period of the election.

  Dr Fox: They can set indicative budgets. We can work on indicative budgets, but we cannot set—as Oliver said—real budgets.

Q169 Mrs Moon: You must be aware of the high level of concern within the Armed Forces and among the public in this country over the decisions that have come out through the SDSR. What are you doing to address those concerns? How are you reassuring people? We have seen the high turnout here today. It is possibly one of the major inputs into our mail boxes. How will you address those concerns, and reassure the Armed Forces and the public that the decisions you are making are the right ones for the country, and not the right ones for the Treasury?

  Dr Fox: We are using all the usual elements, such as internal discussion with our staff, talking to the Armed Forces, to Armed Forces' families and to think tanks. We are undertaking editors' briefings to get a better understanding of some of the issues, but no one wants to see—I certainly don't want to see and I have never wanted to—reductions in our defence budget. But there is a reason why we have to reduce the defence and other budgets and that is, as I have often said, that next year we will pay more in debt interest than the MoD, the FCO and the DFID budgets combined. It is gradually becoming a strategic liability for the United Kingdom when more and more of our money is pre-committed to creditors rather than free for Governments to use on national security or anything else that the Government of the day choose to do.

Q170 Sandra Osborne: You said that you will make a yearly progress report on the Strategic Defence and Security Review. Do you think that that is sufficient? How will you involve Parliament in the process? Would you be prepared to commit to an annual progress report to the Defence Committee?

  Dr Fox: I would go further. I would be quite happy to give an annual report to Parliament as a whole, to give Parliament as a whole a chance to comment on it. We are trying to become more transparent so that people can actually see what we are committing ourselves to, and what the future budget liabilities are. Believe me, the least of my problems and difficulties would be giving the report to Parliament.

  Chair: I think that we have finished for this high-level bit. We will ask you, Dr Fox, to come back again. I would like to express the Committee's gratitude to all of you for giving some very helpful answers, and to Mr Letwin for missing another meeting. We appreciate that and the sense of priorities that that showed. Thank you very much indeed for starting us in this extremely helpful way.

---

1   Ev 136, Ev 156 Back

---

Prepared 3 August 2011