UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 761-vii

HOUSE OF COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE THE

DEFENCE COMMITTEE

THE STRATEGIC DEFENCE AND SECURITY REVIEW AND THE NATIONAL SECURITY STRATEGY

WEDNESDAY 22 JUNE 2011

NICK HARVEY MP, GENERAL SIR NICHOLAS HOUGHTON, BERNARD GRAY and LIEUTENANT GENERAL SIR WILLIAM ROLLO

Evidence heard in Public

Questions 517 - 647

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Oral Evidence

Taken before the Defence Committee

on Wednesday 22 June 2011

Members present:

Mr James Arbuthnot (Chair)

Mr Julian Brazier

Thomas Docherty

John Glen

Mr Dai Havard

Bob Stewart

Examination of Witnesses

Witnesses: Nick Harvey MP, Minister for the Armed Forces, General Sir Nicholas Houghton, KCB, CBE, ADC Gen, Vice Chief of the Defence Staff, Bernard Gray, Chief of Defence Materiel, Ministry of Defence, and Lieutenant General Sir William Rollo, KCB, CBE, Deputy Chief of the Defence Staff (Personnel and Training), gave evidence.

Q517 Chair: Welcome to the final evidence session of our inquiry into the Strategic Defence and Security Review and the National Security Strategy. Minister, may I say welcome to you, for the first time. To everyone else, may I say welcome back. Before I ask you, Minister, to introduce yourself and your team, I would like to say that it is a great pleasure to have you in front of us. As you know, however, we hoped that we would have the Secretary of State in front of us. Can you tell us why he is not able to be here today?

Nick Harvey: The Secretary of State sends his apologies to the Committee. This afternoon he is engaged in a governance meeting with the Treasury, No. 10 and the Cabinet Office, relating specifically to the three-month exercise and the financial issues that the Department is confronting. That session has been scheduled for some time and he considered it in the vital interests of defence that he fulfilled that engagement and continued to fight our corner.

Q518 Chair: While the importance of governance is not to be underestimated, the importance of parliamentary scrutiny is also considerable. This meeting has been scheduled for considerably longer than the meeting with the Treasury, I suspect. If the answers that we receive this afternoon are not as adequate as the Secretary of State might have been able to give, because of his overall control of the issue, it will be the Ministry of Defence that will be to blame and it will not be satisfactory. Nevertheless, having said that, I am sure that you will make an admirable fist of it. I would be grateful if you could pass on to the Secretary of State the Committee’s disappointment that he is unable to be here, because it is one which we feel strongly. Having said that, please could you introduce yourself and your team.

Nick Harvey: Thank you, Mr Chairman. I have with me this afternoon General Sir Nicholas Houghton, Vice Chief of the Defence Staff; Bernard Gray, Chief of Defence Materiel; and Lieutenant General Sir William Rollo, Deputy Chief of the Defence Staff responsible for personnel and training.

Q519 Chair: You are all most welcome. Let us begin with the National Security Strategy, which states, "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." At a time when we are making large cuts in our defence budget, that is surely nonsense.

Nick Harvey: No, I do not believe it is. Influence is not just a question of the size of our military force. The UK exerts influence in a variety of ways: diplomatic and economic, development assistance and technological and cultural exchanges. Even in the case of our military force, size is only part of the consideration. What we do with it and our willingness to use it is part and parcel of our strategic influence. We aim, as the NSS said, to deliver a distinctive British foreign policy that extends our influence and, as I said, that covers trade, economic and all sorts of other considerations. I do not believe, taken in the round, that the NSS amounts to strategic shrinkage.

Q520 Chair: And we were not having that sort of foreign policy before?

Nick Harvey: We were, but all the different components of influence have to be taken in the round. I think that the NSS and the apparatus that lies behind it-the National Security Council-bringing together the different Departments of Government with a newer and keener focus on security issues actually enables us to pack at least as much influence in the future as we have in the past.

Q521 Chair: The evidence that we have had suggests otherwise. The evidence includes warnings of a danger that, in Washington particularly, the United Kingdom is perceived "as having decided not to be a major second-rank power". You have read that evidence, no doubt. Is it completely wrong?

Nick Harvey: Yes, I think it is completely wrong. Washington puts enormous value on our willingness to act, to participate, to use the force that we have, to sign up to coalitions of the willing and to be there when it really counts. They also put a great value on the influence that we have among other important allies, and no one should underestimate the significance of the relationship that we have with Washington. During the course of the Strategic Defence and Security Review, naturally we consulted our American allies about what aspects of our security capability they put particular value on. We took those views into consideration in arriving at the conclusions that we did. We should remember that Future Force 2020, which we have set out in the SDSR, retains an impressive array of capabilities, and the British political culture retains the willingness to use them.

Q522 Chair: We will come to whether you really believe in Future Force 2020 in a moment. When the Chief of the General Staff, the Chief of the Air Staff and the First Sea Lord were asked the question, "would you still describe our national ambition as being a full spectrum capability", they each answered no. Can you really maintain that there is no shrinkage of our influence?

Nick Harvey: Your question presupposes that we had a full spectrum of capability prior to the SDSR. I do not think there is a universal definition of full spectrum capability. If you were to take it as meaning that we were militarily capable of doing anything that we wanted in any theatre in the world while being totally self-reliant, I would suggest to you that it has been decades since we retained that sort of definition of a full spectrum of capability. If you were to ask whether our future capability across the air, maritime and land domains retains a wide spectrum of capabilities, undoubtedly it does. But I do not think that we have had a full spectrum of capability in decades.

Q523 Bob Stewart: Is the National Security Strategy a wish list rather than a harsh choice between different options?

Nick Harvey: The National Security Strategy is an assessment of the security environment in which we operate. It is an assessment of the threats, an ordering into priorities of our perception of how important those threats are, and the efforts we should make to meet each of them. The SDSR, in a sense, takes that process on. The strategic ends having been identified in the National Security Strategy, the SDSR is then a prescription of the ways in which, in the defence and security realm, we will try to achieve those ends. The comprehensive spending review, for the first four years at least, endeavours to provide the means by which we do that. You have to see the three things in conjunction. The National Security Strategy is not a wish list; it is a hard-headed appraisal of the threats we believe we will face in five and 20 years’ time.

Q524 Bob Stewart: Our problem is that we do not see it flowing well. We see the National Security Strategy put there-and then there is a break, because the SDSR does not seem to answer the exam question. You think it does, but I’m not so sure.

Nick Harvey: The SDSR, flowing from the National Security Strategy, defines military tasks that we are asked to fulfil. We then try and develop the forces and capabilities to carry out those tasks. The Vice Chief might like to comment on the extent to which the challenge we have set our military personnel is assisted by and flows from the National Security Strategy.

General Houghton: I absolutely support the Minister’s view on the three elements of the National Security Strategy in the round, which are reflected in the three documents that were published last October. The National Security Strategy, which in many respects was not a strategy within itself, set the policy ambition for the nation. The comprehensive spending review set the resource envelope-the means. From that were deduced the ways, which were in the SDSR, and a force structure.

Q525 Bob Stewart: It should be called a national security policy rather than a strategy, because a strategy implies much more link to reality, doesn’t it?

General Houghton: And as a military purist, as you are, you would make that observation.

Q526 Bob Stewart: Thank you. No one has ever called me that before-certainly not you.

General Houghton: Some esoteric arguments are going on-more widely than just defence-about who owns the definition of strategy and so on. But the important thing is to take them as a combination of an NSS, which sets the policy aspiration; a CSR, which sets the resource envelope; and an SDSR, which interprets the best force structure within it.

It is important to remember that part of the discipline of the SDSR was that it tried to keep benchmarking itself, not against the here and now, with Afghanistan and the fiscal challenge and so on, but against a force structure, posited in 2020, constructed around the three design criteria of being militarily coherent, relevant to the strategic circumstances of the time-to the extent that studies, thoughts, think-tanks and our work on global strategic trends and future character of conflict could define-and sustainably affordable.

The other thing that is perhaps worth mentioning again, but from a military purist’s somewhat esoteric view, is not to have the idea that strategy is something set in concrete. The art of strategy is to constantly and dynamically achieve coherence between the three. If you like, the work we are now embarked on, both in the capability and force structure area and in the resource challenge, is to do our absolute level best to try to make certain that the aspiration for the 2020 force structure is realised. When he presented the SDSR, the Prime Minister himself made the point at the Dispatch Box that in his judgment there will need to be a real-terms increase in the defence budget in the out-years to realise that aspiration.

Q527 Bob Stewart: As a defence purist, as you are, would you say that the word "strategy" should be taken out of the National Security Strategy and replaced with "policy" and that "strategy" should be put in the SDSR, where it properly fits? Strategy then leads to how you do the job.

General Houghton: In order properly to define strategy, you have to have three components: the policy aspiration, the resource and the defence capability.

Bob Stewart: Resource capabilities-

Chair: Might I break into this esoteric discussion? John Glen.

Q528 John Glen: I would like to get to the heart of how we get from where we are now to where we will be in Future Force 2020. As you have just said, it is reliant on a real-terms increase in the defence budget after the CSR period. The issue for a lot of people is how it is going to happen. We can accept the political reality of the CSR period and how you cannot go beyond it, but at the moment we are hearing from senior serving naval and RAF officers a lot of questions or doubts about the capacity and capabilities of personnel and assets in the Armed Forces to withstand the existing operating environment. What is very frustrating is that we hear those things just a few months after we’ve had a comprehensive settlement in the SDSR.

Would you care to comment, sir, on what is the critical mass of the Armed Forces’ capabilities? How near are we to those capabilities falling below that critical mass? Will you paint a picture of what needs to happen from 2015 to 2020 in real terms if we are to achieve the aspiration of Future Force 2020? What gaps and risks are inherent if we do not?

General Houghton: That’s quite a big question. If I may start off with the business of critical mass within the Armed Forces, you can probably treat it on at least three levels. One would be, as it were, the institutional critical mass of an armed service. Whether it is the Navy, the Army or the Air Force, the critical mass is borne on the ability of a service as an institution to be of sufficient scale to generate the seed corn to maintain it at a professional level of excellence and to grow its future leaders.

If you take the Royal Navy, it needs to have a finite number of frigates and destroyers. I think the First Sea Lord would say that the 19 frigates and destroyers that are posited for the 2020 force structure are at about the critical mass of that element of the Navy. You would say the same for the amphibious capability, the carrier strike and the strategic submarine force.

Similarly, the Army would probably speak to a critical mass of being able to conduct combined arms manoeuvres at brigade level and being able to sustain that brigade level over time on a long-term operation. The RAF, as well, will have its own sense of what the critical mass of its service is institutionally. It would speak to that better than I can, but I give you a flavour of it. The number of fast jets posited for the 2024 structure is close to what that institutional sense of the critical mass would be.

Then there is the critical mass of the combined Armed Forces-the combination of all the Armed Forces of the country-in meeting what is expected of them in terms of the military tasks. Here, you can sensibly break out critical mass between those things which, if you like, are nationally non-discretionary, which relate to the committed force-the security of the United Kingdom, the security of the overseas territories, the maintenance of the nuclear deterrent and a whole range of standing commitments-and those things that, on a wholly national basis and on a non-discretionary footing, we would need to do. Some of those relate to the security of people overseas-the ability to conduct an evacuation operation, to do strategic raiding, to maybe launch a small-scale focused intervention to take out a terrorist plot in the act of being generated, which might relate to a CBRN-type device. There you therefore have a critical mass of the combined force within the standing commitments in the non-discretionary area.

Within the adaptive element of the force in the 2020 outcome is where you potentially have some trade space, because you are talking about things that you will do not wholly nationally, but in coalition. There you can become more selective about what you have to nationally own, and what you need to have a pretty strong sense of conviction that you can share within an alliance.

Q529 Chair: Could I ask you to come down to the precise? Do you think we are below the critical mass?

General Houghton: No, not at the moment, because in many respects we are drawing down elements of the force to the 2024 structure in terms of numbers of destroyers, the size of the Army and those sorts of things.

Q530 John Glen: Excuse me for interrupting, but presumably there comes a point where the use of discretionary activities-the call to do things that you did not anticipate were going to be called for at the start of the process-will mean that you will fall below that critical mass, because you will not have that capacity. It is obvious: if you keep doing more and more activities and you have only a finite amount of resources-

General Houghton: Correct, and that is why I have talked to that.

Q531 John Glen: When are we going to get to that point? We are hearing from some of your senior colleagues in the services that they are pretty concerned that we are at that point, or will be in a few weeks’ time, if we do not have more resources ploughed into the MOD.

General Houghton: The issue of resources and the sustainment of current operations does not, in my view, relate to the force structure itself; it is the ability to finance the operating of that force structure. What I mean by that is that the core MOD budget buys a force structure. It is the Treasury that funds the cost of contingent operations, so if you look at something like Libya-

Q532 John Glen: I understand that. Forgive me, but if you are doing multiple non-discretionary activities that are outside the original plan, yes, you have the get-out of saying that the Treasury will fund them, but you also use your assets in a different way than you had planned to, because you have got to-you are forced to-because of the sense responsibility or duty. You do what you are asked to do, but you are distorting your planned attrition rates and the way that you organise yourselves. That is the key point, you see: people are concerned that, because of this extra call, yes, the money can be found in the short term, but you are going to distort the priorities and impact on notional aspirations towards Future Force 2020.

General Houghton: Yes, and ultimately that is a decision that is made politically. We can inform Ministers of the degree to which running two operations hot over a period of time would stress the force structure.

Q533 John Glen: That is what I am trying to ask you. How is that impacting on things now, because we are getting to that point? We need from a service perspective-not from the politicians; from your perspective-to know what is happening on this, and is it getting to a critical stage?

General Houghton: No, I do not think it is. It does involve the requirement to run elements of the services hot for a sustained period of time, but the force structure is sufficiently resilient to do that.

Q534 Chair: You said that the Treasury covered the contingency costs of operations. How much has the Treasury paid out of the contingency reserve to the costs of recovery from, for example, Iraq?

General Houghton: At the moment, I am pretty confident that the absolute negotiation on the maths of reconstitution has not been completed. To my certain knowledge-I do not want to go outside my certain knowledge-the Treasury has paid for the attrition to major capital equipments. So if we have lost a Chinook helicopter and a C-130, it has paid for the replacement of those. But there has not yet been, as it were, the balancing of the books in quite what degree of detriment to the sustainability of the force structure in resource terms-capital platform terms-the two back-to-back series of operations have brought, and therefore the degree of additional money we need from the Treasury to effect reconstitution.

Q535 Chair: Mr Gray, is that a question that I should have put to you: the amount of money that the Treasury has applied towards the recovery from Iraq?

Bernard Gray: The reconstitution-it has not yet. That amount of money is not yet settled and therefore has not yet been paid, so that leaves the cost of the operation and the cost of the capital replacement. The question is then about the restatement of the Armed Forces back to a conditioned precedent, as it were. That discussion is still going on. So it has not been paid yet.

Q536 Chair: So far, the answer is nothing.

Bernard Gray: Yes.

Q537 Mr Havard: Can I step back a little? It was a big question and it was a big answer. There is a lot in what you said. You ended up talking about coalition-type activity. This is not a debate that we are having in the UK alone. I have been watching very carefully the debate over the last two weeks in the United States of America, and that plays very heavily in terms of what we are going to do here and how we configure because of this coalition relationship.

It was very, very clear last week: Bob Gates is saying, "We are paying for 75% of NATO now, not 50%. We cannot keep paying this money because our allies are not pulling their weight." There is a reassessment of whether they look east rather than west, in terms of their foreign policy and how they’ll deploy their forces. All of those big strategic questions colour this as well, but back to the point that John is trying to make: when we are therefore doing the things that we want to do about a sustained force against our ambitions, we have a declared plan that we are going to move in a particular way to 2015. Then we have some sort of aspirational plan to move to somewhere else by 2020, but no mechanism has been described clearly to me about how you get from one to the other, and that is the point we are trying to get at.

Just like the debate in America, our fear is that you will get to the interim point and will have hollowed out your forces. That is the language that they use in the United States of America. This is about critical mass. You will not be able to respond in the way in which you planned to respond because you will have failed to do it. Stemming from that, who is actually doing this plan? The information that we have is that no one in the Ministry of Defence is actually planning to get to 2020, because, given the way in which the processes are currently run with budgets, nobody can plan beyond 2015 because they are not certain about what money they’ll get. Who, then, is actually trying to prepare for 2030?

Chair: Minister, would you like to take us through this?

Nick Harvey: This is very much cutting to the heart of the three-month exercise which the Ministry of Defence is involved with in discussion with the Treasury, the Cabinet Office and No. 10. The SDSR, as we have acknowledged, is a 10-year programme. It is aiming for a strategic end point of what we want the force to look like in 2020. But the CSR is a four-year funding settlement, and the Prime Minister observed on the day he made the statement about the SDSR that, in order to achieve the end point we want to in 2020, there will need to be real-terms increases in the defence budget between 2015 and 2020.

Q538 Chair: Do you support him in that?

Nick Harvey: I do. Clearly, because the mechanisms do not exist in Whitehall for setting budgets for that length, these are political voices giving political opinions. We are unique as a Department in having the sort of lead times on our projects that we do, and that is why we are now in dialogue with the Treasury to see what undertakings they can give about the out-years that will then enable Chief of Defence Materiel and the Permanent Under-Secretary to make rational decisions about, for example, equipment purchase where if we signed contracts now, the financial impact of those would be felt in those latter years for which, at the moment, we do not have a clear picture of what our available resources would be. It is precisely the question that you raised, which is at the heart of the three-month exercise.

Q539 Chair: Am I wrong in thinking that the issue is actually that the increase in spending from 2015 is an aspiration by the Prime Minister rather than Government policy? Is not that one of the problems for the Ministry of Defence?

Nick Harvey: At the moment, that is the case.

Q540 Chair: Why is it not Government policy?

Nick Harvey: Because, by traditional Whitehall financial architecture, we only set budgets four years in advance, but because of the unique problems-

Q541 Chair: Then how can we ever buy railways?

Nick Harvey: Clearly, all Departments make commitments that run into the future, but they do not know precisely what resources they will have in the future to pay for them, so they negotiate them with the Treasury, and that is exactly what we are now doing in the three-month exercise. We are asking what the Treasury can do for us that will give us the certainty to enable us to make decisions now, the spending implications of which will be felt in the out-years.

Chair: We will come back to that.

Mr Havard: I would like to come back to that too, but Mr Gray wanted to say something.

Bernard Gray: I just wanted to add to what the Minister said, and to address your question: are people doing strategic work inside the Ministry of Defence? There are a lot of people doing strategic work inside the Ministry of Defence around the generation of Future Force 2020, so I do not recognise the description that you give. One can argue that there are rather too many people inside the Ministry of Defence doing strategic work.

Q542 Mr Havard: So you can give us a description of who these people are, the projects they are working on, and what the time lines are.

Bernard Gray: I can.

Mr Havard: Good. Thank you.

Bernard Gray: The strategy director, the finance director, the capability director, the chiefs of staff, myself, Ministers and others are all involved in exercises in fleshing out Future Force 2020-taking it below the high-level statements about five multi-role brigades. We are cascading down to the detail of what all that means, what needs to be done by when, what capabilities need to be fielded and the financial requirements for all those kind of things. All that work is going on and has been going on throughout the period since the election. At the same time, mapping that against the financial envelope is also an exercise that is going on and to which we have just referred. I absolutely do not recognise a picture that says there is no work on what Future Force 2020 is. That is not the case.

Q543 Mr Havard: I was saying what had been reported to us, so if you could explain, perhaps by writing to us, what the individual projects are, what they are called, what the structure you have outlined is and the time frames, it will be very useful to us. Thank you very much.

Q544 John Glen: There is a general understanding of the limitations of the Treasury’s cycle. There is also a general understanding of the critical needs of the Armed Forces between 2015 and 2020, and what needs to increase. We need to know and understand what the nature of that increase-although not backed yet by a firm commitment and political will from 2015-needs to look like in percentage terms and capability growth, so that you have something out there to handle the political debate that will go on about the allocation of resources in the next CSR. That must exist. That is objectively identifiable, notwithstanding the lack of bite behind it in terms of money.

General Houghton: Again, you have referred back to the point of the three-month exercise. In the absence of any other financial direction from the Treasury, we could only plan on an increase-a flat real-from 2015 onwards. Patently, SDSR force structure 2020 is not affordable on a flat real profile.

Q545 John Glen: What is the irreducible minimum that the armed services need?

General Houghton: The Prime Minister has accepted the fact that it is not affordable, therefore, in the process of the three-month exercise, we are trying to absolutely understand what that delta is to inform the debate. Hopefully, we can then get the planning authority from the Treasury to plan with confidence against those out-years.

Q546 Mr Havard: In all this, we have heard talk about revisions to the yellow book. I have been trying to decide-some of this stuff is a pretty esoteric exercise for me-whether that is important in real terms, or whether it is some sort of side-show in how the money works. We have talked before about 10-year planning horizons. Was it a horizon or an assumption? What will the mechanisms be and will they be different from what we have seen before? Will the Ministry of Defence have a 10-year planning horizon in future to be able to deal with some of these things?

Q547 Chair: Mr Gray, in a previous incarnation you were in front of the Committee and expressed some mocking doubt about the difference between a 10-year planning horizon and a 10-year budget.

Bernard Gray: I do recall.

Q548 Chair: You do recall. Have you changed your view?

Bernard Gray: Not really.

Q549 Chair: You would prefer to see a 10-year budget?

Bernard Gray: Personally, my view is that Defence is significantly different from many other Departments, most of which exist with their cash flowing within a year or thereabouts. If they have capital programmes, they are relatively small compared with ours-notwithstanding Transport, which is still significantly smaller than the MOD for these purposes.

My personal view is that it would give greater stability to the planning of defence if we were able to give the long-term certainty that we are-kind of-discussing here. We could then say, "Okay, what is the financial planning horizon and how do we map against it?" That would allow us to plan, and indeed order, with greater certainty than the current Whitehall structure gives us. You must ask the Treasury for their opinion, but clearly they tend to be reluctant to have their hands tied in such matters.

Q550 Chair: Do you think it would save money to have such a 10-year budget?

Bernard Gray: On the assumption that it was used wisely, yes.

Q551 Chair: So the Treasury should be pleased about it.

Bernard Gray: I suppose, to argue their case for them, they might say, "Well, economic conditions could be significantly different in 2015 and we should respond to those circumstances at the time. It might create unfortunate precedents, with everyone else arguing that we should be setting 10-year budgets." There are arguments on their side, but my personal view is that it would be an advantage and a useful discipline on all sides. But I am one individual.

Q552 Chair: One further question. Will Future Force 2020 be a full spectrum capability future force?

Nick Harvey: I would not want to add to what I have already said. I believe it will have a wide spectrum of capability. The Vice Chief may want to say more.

General Houghton: If it is positive, made affordable and delivered, you can have a dance about full spectrum. I read what Sir Rupert Smith said, and spectrum is, in many respects, relative to one’s enemy, not to the universe. You have to constrain your boundaries.

It meets the National Security Council’s adaptive posture in its considerations of the time. So it still has the ability to project power in all three environments at a strategic distance, and the ability to commit to a sustained operation on the land in the messy environment as depicted in our "Future Character of Conflict". In that respect, it would be full spectrum within sensible bounds; it must be bounded in the reality of national ambition.

Q553 Chair: Mr Gray, without a major increase in the Defence budget, can we afford the Future Force 2020?

Bernard Gray: I am tempted to agree with the Prime Minister. It will require a real-terms increase beyond 2015, and we are in the process of calculating precisely what that would be.

Q554 Chair: But you haven’t yet calculated it?

Bernard Gray: No, because we are working through all the exercises, not only on the underlying funding assumptions, but on the equipment structure possibilities and the real cost of equipment. I have been conducting an exercise to re-test the costing proposals for each of the individual programmes from the bottom up, for example. I have been looking at what we might do through efficiency savings, what the Reserves review might generate and so on. A bunch of moving parts within this are being brought together as part of the three-month exercise to determine what it would be. As the Secretary of State and the Prime Minister have said, it will require significant real-terms increases.

Q555 Mr Havard: May I ask you the plan B question? With the Treasury we are not supposed to be talking about plan B, but what happens if you don’t get it? I know you will tell me that you are not going to plan for failure, but what about planning for expediency? What happens if the United States of America, for example, takes a very different position on NATO? Is there a way of building that into a process from 2015 onwards? If America reduces its expenditure and its attitude towards the European theatre, would that have implications for the UK? How would you address such implications? What happens if you don’t get this money? What happens if the economy does not take off and you don’t get the expenditure?

Bernard Gray: That is why we are doing this work now. Bearing in mind that we’re talking about generating a force structure build-up beyond 2015 towards 2020, we are doing the work today, in discussion with colleagues from other Departments, precisely to determine what the art of the possible is and what the frame will look like. When we get to the end of that process, I hope that we will know clearly what the frame will be-and, therefore, we will be able to plan accordingly either to achieve our aims or not to achieve our aims.

If you say that we can only plan on the basis of the known world as it is today, and if you say that in 2015 the US takes a different position on NATO or someone, clearly we would have to come back and revisit the assumptions on which we were planning. We would inevitably ask, "What is the state of the UK’s economy, the UK’s aspirations and global strategic threats, as well as the position of the US?" We would have to make some revised plan based on those changed facts.

Q556 Mr Havard: Is all that packaged in the various elements of the work that is taking place, which you were about to describe to us and which I would be interested to see? With all the questions about coalitions and bilateral arrangements-with the French, for example, because it’s not only the Americans-is there a view of what things will look like and how you position yourself?

Bernard Gray: To be clear, we are not in a situation in which the Americans are strategically withdrawing from Europe.

Mr Havard: Yet.

Bernard Gray: We are not in a situation in which they are doing that. So, to be clear, we are planning on the basis of what is in the National Security Strategy, which is based on the facts as we know them today. There are many opinions about things that could happen in the world over the course of the next 10 years, and some things that none of us expect to happen doubtless will.

All we can do is act on the basis of the information we have today. If at some point in the future, in one year’s time, two years’ time or five years’ time, those facts are materially different for some reason, we will need to reappraise it, but that is not the case today. We have to plan on the best information we have today.

Q557 Mr Havard: You don’t think that the financial architecture helps you in that at the moment? In the process would you rather have a more certain period in which to plan?

Bernard Gray: In any situation you have to have a central assumption, your best estimate about what you think the future is going to look like. So we have to use our best estimate. From my perspective, and I am at the capital end of the process, the greater the certainty, the better able I am to plan for the future and decide whether or not to commit to various different capabilities. If in the event something different happens, clearly we would have to re-plan. But one can either withdraw and pull the duvet over one’s head or plan on the best information available today. That is what we are trying to do.

Mr Havard: From your point of view, will some of that be in the White Paper or Green Paper on the industrial side of the DIS, as I used to call it-there isn’t going to be any industrial strategy any more-that is due out in the autumn? So the industry will be able to understand better how it might sequence with you.

Bernard Gray: There are various different dimensions to this. What is the strategic framework in which we are operating? What is the proposed force structure? How do we plan to equip that force structure? And what is our policy for approaching the marketplace to equip that force structure? That logic hangs together.

Q558 Bob Stewart: I think you have answered this, General Houghton. Do Afghanistan and Libya fit into the defence planning assumptions or are the costs of those operations outside the Ministry of Defence?

General Houghton: The contingent costs of the operation are met by the contingency from the Treasury. We provide the force elements of readiness: everything to do with consumables, infrastructure, fuel and munitions. The defence planning assumptions do not prescribe how we use the force structure; they are simply the maths that inform the construction of the force structure. How they are then used is a matter of real-world events and political choice.

Q559 Chair: Are they of any use?

General Houghton: Like a different version of Bernard’s answer, you have to start from somewhere. Therefore you start with an idea of what the policy ambition for the force structure is. Then you have an idea about how many operations you want to do concurrently and at what scale and for what duration. When you put your people and equipment in, you consider the tour lengths and tour intervals. This is no more than informed mathematics to give you a force structure with a set of capabilities. How they are then used in the real world and the degree to which they can be stressed is a matter of political choice, and in some ways it is a matter of the essential nature of the mission on which you have embarked.

Q560 Bob Stewart: I accept that. So, at what point does the Libyan operation change from, say, a non-enduring complex intervention to an enduring stabilisation operation? At what point does that happen? How long is a piece of string?

General Houghton: You have described quite a big change there, which would have to be justified by a change in the UNSCR, which was the legal framework under which we were conducting the operation. At the moment, it remains primarily a humanitarian mission to protect.

Q561 Bob Stewart: An enduring humanitarian operation to protect.

General Houghton: By the rules of our mathematics-actually, we have changed the mathematics in terms of what was six months but in future will be 90 days, which then changes it into an enduring operation. Within the tolerances of the force structure over time, you can stress it for quite long periods. It does not suddenly succumb to critical failure.

Q562 Bob Stewart: It’s a bit elastic, then. It’s flexible.

General Houghton: Indeed.

Q563 Mr Havard: But you can’t use it in two places at the same time.

General Houghton: You can’t use the same things in two places, albeit there is flexibility there and power is one of its primary characteristics.

Q564 Thomas Docherty: In a written answer, the MOD said that it had received 2,295 valid applications for the compulsory Armed Forces redundancy programme. That was straight across the three services. Can you update us on how that splits into each branch?

Lieutenant General Rollo: Certainly. For the Navy, it was 806. For the Army, it was 869. For the Royal Air Force, it was 620. I think that should come to 2,295. That is out of a requirement to find 1,600 people from the Royal Navy, roughly 1,987 from the Army and roughly 1,000 or 1,200 from the Royal Air Force in the first tranche of redundancies.

Q565 Thomas Docherty: Maths is not my strongest point, but I suspect that means that you are still required to find some redundancies in some areas. Is that correct?

Lieutenant General Rollo: That is certainly so. We never anticipated that we would get all volunteers in any of the tranches of redundancy. The aim of the redundancy programme is to make sure that at the end of the process of reduction we have the right mix of skills, experience and numbers to man the future force structure, otherwise we would simply have stopped recruiting, which, in a bottom-fed organisation, is not a sensible thing to do. Clearly, we will take volunteers wherever we can-it is a common-sense thing to do-but if the number of volunteers in the right bracket do not come forward, I am afraid that we will have to make people redundant.

Q566 Thomas Docherty: In my experience, when you have voluntary redundancy programmes, one of the great challenges is that you do not necessarily get the people that you want to step forward, and the people that you desperately want to keep hold of often come forward.

Lieutenant General Rollo: Yes.

Q567 Thomas Docherty: From your answer, that is obviously partially the case in this case as well. What proportion is the right number of people at this stage?

Lieutenant General Rollo: The answer is I don’t know.

Q568 Thomas Docherty: When do you think you will know?

Lieutenant General Rollo: The single services are going through the selection process at the moment and they will come to conclusions in early September, which is when announcements will be made.

Q569 Thomas Docherty: One point, for clarification perhaps, that has been concerning the House for some time is about the Secretary of State’s announcement in the House on redundancies a few months ago. Minister, was it in March that he came to the House?

Nick Harvey: Yes.

Q570 Thomas Docherty: He gave an undertaking that no personnel who were on operational duty in Afghanistan would be selected for compulsory redundancy. It is I am sure an entirely accidental event, but there is some concern that the Secretary of State might have misspoken to the House. Can you confirm whether somebody who was on service at the time the Secretary of State made his announcement is exempted from that process?

Nick Harvey: The critical word is "current". If the Secretary of State had meant now, he would have used the word "now". He used the word "current" because what he meant, and he went on at considerable length to explain his usage of the word "current", is that at any given point in time, when any of the tranches of redundancies that are anticipated over the next couple of years are made, nobody who at that time is currently serving, is in the work-up to a tour of duty or is in the recuperation period after it-nobody in the circumstances current at that time-would be selected for redundancy. I regret the fact that it seemed to have been misunderstood.

Q571 Thomas Docherty: You are saying that the three words that were missing were "at that time".

Nick Harvey: Yes, but the word "current" means at that time. If he had meant now, he would have said "now". He did not say "now"; he said "current", because at the point that these redundancies are made no one currently serving will be selected. He did not misspeak; he just meant it rather more literally than some of those listening perhaps understood.

Q572 Thomas Docherty: Clearly, Hansard, the Speaker, the House and the wider public.

Nick Harvey: He went on to explain exactly what he meant.

Q573 Bob Stewart: I understand that. Of course, it is grossly unfair. Just because you are on operations and your number comes up, you have a get-out-of-jail card, haven’t you? If you are preparing for an operation or you happen to be in Afghanistan, the MS branches or whoever it is makes the choice across the whole spectrum, saying, "That one, that one and that one have got to go, and that one happens to be in Afghanistan, so he or she gets a free out-of-jail card." It is difficult-I know it is difficult-but it is actually unfair, isn’t it? It is fair, but unfair.

Lieutenant General Rollo: Let me try to qualify that a little. First, there are four tranches.

Q574 Bob Stewart: So you can get them the next time round, you mean?

Lieutenant General Rollo: Well, these are people’s careers. What the service has to do is to try to make sure that within the inevitable constraints of people’s individual wishes, as Mr Docherty pointed out, they end up with the right mix. From a technical point of view, you want to have as wide a field as possible, and you want to minimise the number of people you cannot consider for redundancy within the chosen areas. But there is a reason why we do this: we do not want to break up teams in the six months before they deploy, we do not want somebody who is actually on operations to have to be worrying that he is going to be hauled in and given bad news and it seems at least reasonable that if somebody happens to be in the 30 days after their period of service, they should not do so either. That is why we have done it in the way we have.

Q575 Bob Stewart: You will know, General, why I asked that; I had to make four officers redundant in the middle of a battle, when they were fighting. At a certain time, at a certain place I had to tell them, which was not exactly great for morale.

Lieutenant General Rollo: In that case, you will understand why we have done it in the way we have.

Bob Stewart: I totally understand.

Q576 Thomas Docherty: Turning to the issue of the Reserves, the Prime Minister announced in October that a six-month review was to be carried out on the role of Reservists. Can you update us when that will be published?

General Houghton: It is planned to publish this side of the parliamentary recess, so hopefully in mid-July.

Q577 Thomas Docherty: General Rollo, the Ministry of Defence Votes A were qualified by the Comptroller and Auditor General in respect of Reservists. What improvements have you made to make sure that does not happen again?

Lieutenant General Rollo: We have changed the system for collating the data to make a single organisation responsible. One of the reasons why they were qualified was that different bits of the defence organisations were collecting data, or not collecting data, in different ways. I understand that the NAO is likely to remove that qualification. The straight answer to your question is that we have changed the way that we collate it.

Q578 Chair: On the regeneration of capabilities, the SDSR states that "we will maintain the ability to regenerate capabilities that we plan not to hold for the immediate future." How is progress on the regeneration of capabilities going? How are those capabilities being prioritised?

General Houghton: Primarily, I think the carriers and carrier strike is the thing that we are thinking about in the regeneration, particularly the second carrier. At the moment, we proceed with the build of both carriers. We proceed to abide by the SDSR outcome that one will be in operational use and a second at extended readiness. But we sensibly delayed till 2015 a decision on whether or not to keep it in extended readiness in perpetuity or actually to use the existence of the second carrier in the context of what might be a different financial situation, whether or not we want to make operational use of it. Therefore, we give ourselves the ability to have a carrier available 100% of the time rather than just what would be five years out of seven.

Q579 Chair: Do you agree with the proposition that if you have only one aircraft carrier, every time it goes into refit you are proving to the Treasury that you do not need it?

General Houghton: Um.

Chair: You are allowed to say yes.

General Houghton: That is palpably a serious risk. That is one of the areas where, as it were, in international collaboration, it would make sense-would it not?-between, for example, ourselves and the French, that we made certain, in terms of the availability of our single carriers, that we so rostered them that there was a seamless availability between the two nations.

Q580 Chair: Are you suggesting that we would use the Charles de Gaulle to fight from?

General Houghton: No, but what I am saying is that, patently, we have a defence co-operation treaty with France. Patently, between the UK and France, we are the two leading defence nations of the European pillar of NATO. There will be many occasions on which our security interests absolutely coincide. Therefore, would it not absolutely make sense that if we both as nations happen to be in possession of solely one carrier, we so rostered their availability to make certain that one of them was available at all times and that we did not make the period of two-year refit the same two years? To me, that would make absolute common sense.

Q581 Chair: On a technical issue, do you accept that the joint strike fighter could not land fully laden on the Charles de Gaulle?

General Houghton: My understanding is that the stresses on the deck of the Charles de Gaulle would mean that the joint strike fighter could not, under the current physics and dynamics of what we know, land. The reverse is not true.

Q582 Chair: The reverse would clearly be not true. Rafale could land on our aircraft carriers, but not ours on theirs.

General Houghton: Yes. But again, within an overall coalition force mix, it is not ridiculous to suggest that the French might generate the carrier strike capability, and that some of our ships would be used as escorts. We might use an Ocean and fly attack helicopters on them. There are some wholly sensible joint capability agreements that we could reach with a coalition partner, which keep carrier strike capability an option for coalition operations.

Q583 Chair: In view of all our recent memories of the Falklands and Iraq, one cannot really see the French alongside us for such an operation. So do you think it is okay to take such a risk?

General Houghton: This, to me, is in the political space.

Q584 Chair: You would need to give some military advice on that, wouldn’t you?

General Houghton: I am not certain that it takes military advice; it is a pretty pragmatic statement. If there is a political agreement that there will be defence co-operation and political decision making about the commitment of a coalition force, everything flows from that. We cannot just say, "I’m not certain that we get on with the French." There will be issues of interoperability, but if the political will is there to make the defence co-operation treaty a reality of political will in real-time scenarios, we would salute, turn to the right and match our capabilities accordingly.

Q585 Thomas Docherty: I will come back to Harriers in more detail shortly. Two things, first to the General: I think you might have misspoken-HMS Ocean is coming out of service in 2016 according to the Secretary of State’s most recent statement, so we will not have an Ocean-it is QE or nothing for the Royal Navy.

General Houghton: Yes, but we still have another LPH.

Thomas Docherty: But we would not have Ocean.

General Houghton: Not Ocean, but another LPH. I was just picking Ocean as a current-day example.

Q586 Thomas Docherty: On extended readiness, it occurs to most people that there will be a problem if you do not fit cats and traps to both carriers. For argument’s sake, let us say that Queen Elizabeth does not have cats and traps fitted by its entry date and you tie it against a wall at Portsmouth. If you wanted to get it out into service, you could not then fly the Rafale or the joint strike fighter-either our version or the American one. Am I right in saying that extended readiness means that you must put cats and traps on both of them, or they will be one, big, glorified pile of scrap?

General Houghton: It depends how extended your readiness is.

Q587 Thomas Docherty: In that case, General, do you accept that if you took a carrier into either Brest or Rosyth, stripped its deck off and tried to put cats and traps on, even working 24 hours a day, you would be looking at many months, if not a full year?

General Houghton: That is not to say that a carrier without cats and traps has no utility.

Q588 Thomas Docherty: As a fighter jet carrier?

General Houghton: Yes. What I am trying to stress more publicly is that carriers are associated purely with strike. But they are a sovereign air base that can, with relative security, go to strategic distances-you can fly attack helicopters off them and you can use them as a platform for amphibiosity. In future-these things will last 40 years-one would hope that they will have UAVs, UCAVs, Cruise missiles and all sorts of things. So it is not right to narrowly say, "If you can’t fly those jets off in that time frame these things have no utility." All I am saying is that we can afford to wait for a 2015 SDSR to say, "Okay, what do we want to do with that second carrier? Is it extended readiness? Is it to fill it with cats and traps? Is it to use it as an LPH?" There is a range of options.

Q589 Thomas Docherty: But do you accept that although the SDSR and the Government refer to extended readiness, when the wider defence community refers to it, it means an ability to fly fast jets off carriers? You have already said that we will have an LPH in addition. And would the Minister like to comment?

Nick Harvey: I do not think that we would accept that definition. It would be one option to take the carrier away and work 24/7 to put cats and traps on it, as you say. But as the Vice Chief has laid out, there will be a variety of other uses to which it could be put that would help plug the gap that would need to be filled if the first carrier was not in operation at that time.

Q590 Chair: The Vice Chief suggested that it was a relatively well defended piece of real estate. But one of the main defences of an aircraft carrier is the fast jets that it has on it, which it would not have on it in such circumstances.

General Houghton: No, but it does not deploy in isolation; it deploys within a maritime task group.

Q591 Chair: Assuming we have them.

Q592 John Glen: May I come back to the explanation about the nature of the relationship with France on aircraft carrier use? If I understood you, there is scope for realising the synergies and creating a sort of co-dependent military solution in which they could help us and we could help them. The Chairman suggested that, from recent history, we could see a divergence in terms of political aspirations and how to use those military assets.

So what you are really saying is that, in order to make that military solution work, you need a pretty robust set of protocols for politicians to work out how they could be used. If you disagreed, you would still want to have that sovereign capability at your disposal, and vice versa. So you are saying that we would need to have an arrangement by which we would have rights over those in circumstances where we wanted to use them, even if the French did not. Is that realistic, given your experience and the way you have seen political power working over the last generation?

General Houghton: I think you are being slightly over-prescriptive in the nature of the detail. It almost becomes legalistic. I would rather say that the strength of the political agreement indicates the extent to which you can surrender wholly national capability to become a more shared capability. You can do without a national capability in the knowledge that the strength of the political relationship will mean that your partner nation will fill that gap for you. But I would not want to be able to say, "We have now got a 20% share of a particular platform of yours."

Bernard Gray: Can I add something that might be helpful? One of the key things is to recognise that one is piling a number of lower-probability events on one another to generate this scenario. The situation that you are discussing assumes that you happen to be at a period of time in the two years out of seven in which the UK carrier is in refit and therefore not available; that circumstances required us in this particular mission to have fast air delivered from a non-land air base somewhere; and that the French and US were unwilling to participate in that mission.

Q593 John Glen: So if Obama won the presidency, Sarkozy lost the presidency and all four of those conditions-

Bernard Gray: I am not saying that it is unrealistic; I am saying it is a relatively low-probability event that you are describing. The issue always is how much money one puts against a set of probabilities. The reality of the situation is that in most of the operational circumstances that we would face, we are able to cover that gap for most of the time.

Q594 John Glen: So there is an element of risk in this strategy.

Bernard Gray: There is an element of risk in anything.

Q595 John Glen: So you think it is acceptable given the configuration-

Bernard Gray: The Government have made that judgment.

Q596 Chair: What other capabilities should this apply to, if this is relatively unthreatening? Apart from carrier strike, what other capabilities would you say we could take this sort of risk with?

Bernard Gray: Carrier strike-

General Houghton: Strategic air transport. In many respects, the further it is from the point of the bayonet, the easier it is to share national capabilities: strategic air transport, ISTAR, slow air movers-

Chair: Nimrods.

Q597 Bob Stewart: Let us turn to the decision to remove Nimrod MR4, its consistency with supporting a nuclear deterrent and its other roles, such as obtaining strategic intelligence, and its involvement in stabilisation operations, such as anti-piracy patrols. Do you agree with the decision? I know that we’ve done it and it must have been one of the most difficult decisions of all, but it seems that we’ve put a bit of a hole in the strategic nuclear deterrent for example-a bit of a hole.

General Houghton: It would be fair to say that among the chiefs of staff and in the military advice, it was one of the most difficult decisions to come to terms with, because it has multiple uses. It was made easier by the fact that there were still some residual challenges-there is still a bit of a debate about that-so it was not a capability in hand but one that was promised downstream. There was still a significant amount of money involved in bringing it into service and then running it. It was a difficult decision for the chiefs of staff to support because of its multiple uses, but the ultimate judgment was that there was manageable risk in all those areas of use, including deterrence, where you know there are several layers to it-not within the confines of this.

Q598 Bob Stewart: And to take it away from the front edge, this is something that the French might help us with-he says wryly.

General Houghton: I would not want to comment in this forum.

Bob Stewart: I am sure. The intention is that perhaps the French could help us or we will have alternative ways of doing it. I know we cannot go further here.

Chair: The Vice Chief does not want to comment in this forum on that issue. I think we will move on.

Q599 Thomas Docherty: A thing that concerns us is the regeneration of our carrier capability. It is obviously easy to focus on the aircrews, but let’s start there. Minister, how many aircrews trained in carrier landings and takeoffs do you believe we will require?

Nick Harvey: It is too early to calculate at this stage how many we will need, and it is a good many years off in any case. At the moment, we have Navy and RAF personnel in the United States who are working up skills in carrier strike and all aspects of it, which will help us to bring in our capability when we are able to do so. You talk about "regenerating" carrier strike, and literally you are right, but the scale of the carrier strike capability we will build with the Queen Elizabeth carrier and the JCA aircraft is of a wholly different order and league from anything we have had in the past. The reality is that we will be generating from scratch a capability on that scale. Bluntly, we are only able to do that with the assistance of the United States, and that is already, as I have described, well under way.

Q600 Thomas Docherty: We would probably agree, Mr Chairman, with some of that analysis. Please tell me if you think my assumptions are incorrect at any point, but in terms of it being a great many years away, if we make an assumption about having an operational aircraft carrier in 2020, as the document states, with some strike fighters, hopefully-you might want to update us on that as we go along-we will need at least one squadron of fighters in 2020 on the Queen Elizabeth or the Prince of Wales and a ship’s crew of about 800 on the naval side plus an air element.

But we do not have a ship beyond 2014 that comes anywhere near that. For us to train the air side-having visited the US very briefly-we would have to have that squadron or squadron-plus with the Americans no later than 2014-15. Mr Gray shakes his head. It takes five years from scratch to train a fast-jet pilot to fly off the deck of an aircraft carrier. Do you disagree with that, Mr Gray?

Bernard Gray: I am mentally looking at the schedule. We have a schedule around all of this development. The reason why I am shaking my head is that the JSF will not be available in squadron-level training numbers in 2014.

Thomas Docherty: Absolutely.

Bernard Gray: You said that we would need a squadron in 2014. The fact of the matter is that there will not be a squadron available to the United States or us in 2014.

Q601 Thomas Docherty: We need to have a squadron size of trainee pilots.

Bernard Gray: You said a squadron of F35s; that is why I was shaking my head.

Q602 Thomas Docherty: No, sorry. Obviously, because it is not in construction. But in terms of the crew size, we will need to have those aviators-as Americans call them; pilots, as we call them-beginning their training with the Americans no later than 2014, except that it would be a long way before they would be anywhere near fast jets.

On top of that, we will need to have deck crews as well. That is a specialist skill. Given that it has been 30-something years since British vessels used cats and traps, it is a whole new skill. Thankfully, I am not in charge of the Navy, but my understanding is that handling a 60,000 tonne vessel requires some skill. Do you have a plan that gets us from where we are today-which as you say, Minister, is from a zero base-to having a fully operational aircraft carrier with a complement of 800-plus aircrew, plus the skill base, by the end of the decade?

Nick Harvey: Manpower. Yes. The Navy and the RAF in co-operation are working that up now. As I made clear, it is absolutely reliant on our partnership with the United States. Every aspect of it is being worked on with the United States and on its larger vessels so that we can bring those skills in when we need to. The details of that are being worked up, but the points you make are correct and will lead them into the process.

Q603 Thomas Docherty: When you say that it is being worked on, can I assume that that is work in progress?

Nick Harvey: Yes.

Q604 Thomas Docherty: When would you expect to be able to demonstrate to the Committee that you actually now have a plan? It strikes me that what happened last October was that a decision was made-I will not get into the details of the exact time of that-on the carriers that fundamentally altered the previous 10 years’ thinking on how we would generate the carriers, and you have been back-fitting all the way how you develop both your air and your naval crews, the aircraft that you would purchase and so on. When would you expect this Committee to be able to scrutinise your plans?

General Houghton: My personal ambition is to scrutinise the plan at the DOB carrier strike-subsequently re-titled DOB carrier enabled capability-on about 13 July, when the senior responsible officer, Rear-Admiral Amjad Hussain, is presenting his Level 0 Plan to me.

I am absolutely confident that there will be some holes in that plan; of that, I have absolutely no doubt. But I am also pretty confident that sub-strands of work will be beavering away to plug the holes in that plan. I recognise most of what you said as some of the challenges of bringing about the regeneration of this capability in a 2020 time frame. It is significant.

Q605 Thomas Docherty: I do not know whether the Minister or the General should answer; I am conscious after the Prime Minister’s comments yesterday that we need to be careful not to make Generals answer Ministers’ questions. When will the House get the opportunity to scrutinise the completed plan, because I accept that it is work in progress?

Nick Harvey: When it is ready.

Q606 Thomas Docherty: That is really not a great answer. When you do anticipate being able to say to this Defence Committee, "We have a robust plan that we are ready to share"?

General Houghton: I think that it is within the power of this Committee, is it not, to summon witnesses to brief it?

Q607 Thomas Docherty: As we have seen this afternoon, that is not always successful.

General Houghton: What I would say is that the longer you allow us, the more comprehensive and robust the plan will be. From a personal perspective, I am only seeing the Level 0 Plan-the basic building blocks of carriers and traps, vessel in-build or post-build, initial operating capability and the training seed corn.

In terms of complexity, this thing is about the size of putting on the Olympics. Do not underestimate the complexity of this thing; I am sure you do not. The closer we can get-the more time you give, the more robust the plan will be-and, therefore, please wait until the autumn at least, so that we are confidently maturing it.

Q608 Thomas Docherty: Minister, would you be very surprised and disappointed if by Christmas this Committee was not able to bring perhaps you, the General and Mr Gray before us to go through that plan in some detail?

Nick Harvey: The Committee should call us in whenever it suits the Committee to do so. Whether the plan will be in a 100% foolproof state by Christmas I could not say, but I think with the caveat that the Vice-Chief has given you-that we can give you answers on wherever we have got to at that point-to schedule something in before Christmas would not be unreasonable.

Q609 Thomas Docherty: You probably saw that Monday’s Financial Times talked about our counterparts in the United States airing some concerns about the maintenance cost of the joint strike fighter. They have estimated that the lifetime maintenance cost is now going to be $1,000 billion. Obviously, they have a slightly larger complement of them. What discussions are you having, Minister or Mr Gray, with your counterparts in the DOD about the rather large costs of the F-35?

Bernard Gray: When I was last in the United States in April, I discussed exactly this issue with my opposite number, Dr Carter. As we are, Dr Carter is concerned to drive down the cost of ownership of the F-35. He has said, I think in a public forum, that he viewed the currently quoted prices from the manufacturers as being an unacceptable number. Interestingly, in bilateral conversations with us, he was very complimentary about the progress that the UK had made towards contracting for availability and reducing the cost of ownership of fast jet fleets. He was and remains very keen to get into conversation with us about how we drive down the cost of ownership in the "sustainment" phase, as the US calls it. I anticipate that in the coming years we will have significant conversations with him about this.

It is fair to say that the Americans are in the early stages of thinking about the process, because their primary focus at the moment is both to drive forward the flight test programme, which is going ahead very well, and to drive down the cost of production of the early rate aircraft numbers. Most of their attention is going on driving down the cost of production, tooling up for mainstream production and completing the flight test programme, but they are beginning, as pressures come on the US military, to turn their attention to how they drive down the cost of ownership for them and everybody else, and we are all looking at, in the US phrase, a "global sustainment solution", which is effectively a sort of common logistics pool.

Q610 Thomas Docherty: On the issue of Apaches, do you believe, Minister, that the recent use of Apaches underlines the need to have deployable air power between now and 2020 on a continuous basis?

Nick Harvey: I believe that we will have the ability to bring some deployable air power to theatre constantly throughout this period. The addition of the Apache to what we are doing in Libya has been very useful, but I would stress again that most of what we would do we would do in coalitions with other countries and, depending on the nature of the engagement, we will all put into the mix the assets that would be appropriate in the circumstances at the time.

Q611 Thomas Docherty: From an Army point of view, General?

General Houghton: Sorry, I am not quite certain about the nature of the question. The ability to have deployable air power is a feature of our ongoing capability. I am just not certain of the twist that you are putting on the attack helicopter. Are you saying that we ought to have the ability to deploy an attack helicopter at high readiness as part of our enduring contingent suite?

Q612 Thomas Docherty: Yes.

Q613 Chair: From the sea.

General Houghton: From the sea. A marinised attack helicopter is part of the forward plan. That capability is part of the forward plan.

You would not necessarily always deploy a maritime task group with it embarked. You might just have a plan to get it embarked, and that would depend on other priorities and how you configure the fleet for other things, just as, come the day when we have JSF, we would not always embark it on the carriers. We might plan to embark it some way into a patrol or a voyage. You would always want to have the ability to embark different sorts of air power.

Q614 Thomas Docherty: I am just checking, because page 23 says we would "routinely have 12 fast jets embarked for operations while retaining the capacity to deploy up to the 36 previously planned". Just so that I am clear, did you mean that on occasion you might withdraw the 12?

General Houghton: Yes, because that says routinely for operations. Quite often, they are just going out on a work-up exercise. If they go on a work-up exercise, you might marry up the fast jets in Cyprus or Oman, as has quite often been the case historically. You do not have to embark them all the time.

Q615 Thomas Docherty: Once they have been worked up, you would routinely expect aircraft carriers to carry aircraft, but I take your point about work-up.

General Houghton: No, not at all.

Q616 Thomas Docherty: Do you mean that when she leaves Portsmouth on her regular patrols or exercises, you would expect her to have-except in special circumstances-12 JSFs on board? Or are you now saying there is a nuance that says, "We will, as we need to, routinely have the ability to put 12 on board"?

General Houghton: There is a very definite nuance there. It might well be that, if it was departing on a specific operation, which it thought was going to be a shooting war, it would almost invariably go with a tailored air package that included JSF, but it might be going on defence diplomacy or work-up training. We are not going to just keep it for contingent purposes; we are going to use it as an instrument of defence diplomacy and national power. In that circumstance, we might plan to marry up the air package en route. There is a variety of ways in which we might do that.

Bernard Gray: That is standard procedure in the United States.

Q617 Chair: Can I ask about the rising costs of the joint strike fighter? Is it right that the increase in development costs is borne largely by the United States rather than by the United Kingdom?

Bernard Gray: That is correct.

Q618 Chair: When will we have a feel for the through-life costs of these aircraft? Will it be before or after we know how many we are buying?

Bernard Gray: It is an extension of the conversation we were having a moment ago. We are at a relatively early stage of costing the logistics support for JSF, and in part that depends on what structure the United States chooses to employ. At the moment, the objective of all the partner nations in the JSF is to have a single logistics chain; the US, being the predominant buyer of that system, will therefore have a significant impact on the cost of that logistics pool as a whole, because how they choose to operate the logistics support for their aircraft will in significant measure determine how expensive it is for everybody else to maintain them as well. That is at a pretty early stage.

I do not anticipate the full logistics cost to become clear for some time. That is not an unusual situation in the introduction of a new fast jet type. At the stage where you are only beginning to do low-rate initial production on an aircraft-until you have got some significant experience of operating it-the full logistics costs are essentially a modelling exercise, both around how you do it and what the rate of arisings tends to be. It takes a significant period to determine what the real cost is going to be.

Q619 Chair: That sounds like after.

Bernard Gray: It is after, I think.

Q620 Thomas Docherty: Have you resolved the cats and traps issue yet?

Bernard Gray: In what way?

Q621 Thomas Docherty: How is the resolving of the cats and traps issue coming along?

Bernard Gray: What I am trying to ask you is what is the cats and traps issue in your mind?

Q622 Thomas Docherty: There are two parts to it, effectively, although correct me if I have got this wrong, Mr Gray. First, we are currently deciding which of the two versions of cats and traps we wish to purchase: steam or electromagnetic. Secondly, we are working out how to not get gouged by suppliers, given that if we go for the new electric version, my understanding is that the only current workable bearings are held by General Atomics. When the Secretary of State had lunch with the Press Gallery last month, he suggested that the cost of cats and traps was adding up to £2 billion. I would suggest that that was a bit of a problem.

Bernard Gray: What is the question?

Thomas Docherty: How are you getting on with driving down the £2 billion cats and traps problem?

Bernard Gray: I do not recognise that number.

Q623 Thomas Docherty: It is a number that the Secretary of State used.

Bernard Gray: You say that, but I wasn’t there, I didn’t hear it, it’s not an on-the-record conversation, so I don’t know. I am telling you that I do not recognise that number. We are doing work, which we would expect to come to a head over the course of the next three or four months, in determining what the most appropriate technology is and into which carrier it should be fitted.

Q624 Thomas Docherty: Or both? Has that decision been taken?

Bernard Gray: I believe we said in the defence review that we were intending to fit one of the carriers with cats and traps. That is reasonably clear.

Q625 Thomas Docherty: What the Prime Minister said in the House was that, as part of this process, they would review that-General Houghton is nodding. It was a minimum of one, but a decision would be taken on the cost of two.

Nick Harvey: The situation is unchanged from the SDSR.

Q626 Thomas Docherty: Is that one, or one and possibly two, or two?

Nick Harvey: A minimum of one.

Bernard Gray: If we were to go down the route that you are suggesting, which is one of the options under evaluation, to procure what is called the EMAL system, which is manufactured by General Atomics, the most probable procurement route for that would be through a foreign military sales agreement with the United States, where the United States system is responsible for handling aspects of that. I would not regard it as reasonable to describe us as "gouged" by a contractor with whom we have done some business in the past. It is as it is with references made earlier to the Yellow Book. When one gets down to the selection of a particular piece of equipment supplied by one person, you are in a negotiation with them. That would happen through FMSLs, as the acquisition of C-17s has been handled. I do not see any difference between the two. I do not see any evidence to suggest that there would be any difference.

Q627 Chair: I think we ought to move on now, but in a sense move back, as well, to the three-month review, which you, Mr Gray, are carrying out.

Bernard Gray: I think we all are, actually.

Q628 Chair: I do not know whether this is the right thing to say, but, while we are grateful that you are here, should you not be with the Secretary of State, discussing this with the Treasury?

Bernard Gray: That feels like a "Have you stopped beating your wife?" question. You’re unhappy with him for not being here and you’re unhappy with me for being here.

Q629 Chair: In a sense, I am unhappy with both, because I want to see the Secretary of State here and I want to see as good an outcome as possible from the Treasury on the three-month review. Let me put this scenario to all of you. The Strategic Defence and Security Review committed the Ministry of Defence to some £1 billion of savings that it had not identified. The Ministry of Defence has spent the past six months or so scrabbling around, trying to find £1 billion. One of the reasons for the three-month review was to see if extra money could be found. You, Mr Gray, have noticed that risk has been dangerously stripped out of a number of projects, as a result of which you have returned £6 billion of previously unidentified risk into the projects. If I may so, that was the right thing to do, if it should have been there. As a result, the Ministry of Defence is now scrabbling around, not for £1 billion but for nearer £8 billion. Is that a fair way to put it?

Nick Harvey: It is certainly the case that we were left with the need to find more savings, that we have been spending our time in recent months identifying further savings, and that we have been able to do so. However, there are many other issues that feed into the three-month exercise. One is Mr Gray’s recalculation of some of the procurement liabilities; another is the implications of Lord Hutton’s recommendations on pensions. There are many variables at large in this calculation. Those are the issues on which we are in dialogue with the Treasury, No. 10 and the Cabinet Office.

Q630 Chair: Have you put back that £6 billion of risk, Mr Gray?

Bernard Gray: I am not in a position to comment on a component of the three-month exercise. You might expect me to take a vigorous view of where our liabilities might lie and what I think are the realistic costs of the programme. As the Minister said, that is only one of a number of moving parts inside this equation; there are others of significant magnitude in that. We are putting all of these things together, and attempting to calculate, not just at a point in time in the short term. The three-month exercise is particularly aimed at understanding the situation beyond 2015 in the development of Force 2020, so that we can understand how we arrange ourselves now for the generation of Force 2020.

Q631 Chair: You may be surprised to hear that I am content with that answer. If you are, for the first time, bringing a degree of honesty to the Ministry of Defence procurement budget-a degree of honesty that never existed when I was in charge of it-you are to be commended. I hope you do not back down from it, whatever the Treasury might tell you to do. However, it is going to leave the Ministry of Defence in real difficulty, isn’t it?

Bernard Gray: The facts are what the facts are, regardless of whether one chooses to look at them. If there were any difficulty, it would exist, whether or not one chose to recognise it.

Chair: Okay. Fair enough. Moving on to the £38 billion black hole.

Q632 Thomas Docherty: Page 31 of the SDSR states that there is a £38 billion over-commitment, sometimes described as a black hole. Can you tell us, Minister and Mr Gray, whether your programmes have now put the procurement budget back into balance? Can you afford everything that you currently have? I don’t know if the Generals would also wish to answer that. What is your estimate of the remaining gap that you currently have?

Nick Harvey: Clearly, we have not yet put the budget back into balance. The purpose of the three-month exercise is precisely to address that issue. The gap between the programme and the budget cannot be calculated clearly. I cannot answer your question of what it is right now, because of all the moving parts to which Mr Gray referred. When we have bottomed out the moving parts and when we have concluded our dialogue with the Treasury about the sort of funding that can be guaranteed in the later years, I will be in a position to hazard a figure. The SDSR is a 10-year programme and the CSR is a four-year one, so we only know what the available resources are for the first four years; we do not know what they are from 2015 to 2020.

Mr Gray can take on the issue of the equipment programme, however, because we are committed to resolving those issues. We will issue a statement on that in due course.

Bernard Gray: The £38 billion is composed of both a current force structure, personnel and estates component and an equipment component both for new equipment and the support of existing equipment. In the order of £20 billion of the £38 billion is associated with equipment. Some significant measures were taken in the defence review on forward equipment. We are having discussions and, under the Vice Chief’s direction, the Chiefs are considering the most coherent package of force elements going forward. We are conducting the three-month exercise, and I have also conducted an exercise to drill into the costs in the way we have just described. When we then try to settle down on the base-line comparator in terms of an agreement on funding, we should, after the conclusion of that exercise, be able to publish. The NAO can then audit the forward equipment programme for us to determine its affordability.

Q633 Thomas Docherty: Forgive this question, but it is one that the Committee has tackled a few times. It goes back to the answer you gave, Minister, about spending up to 2015. Understandably, by its very nature, it might appear that procurement takes longer than the current spending round, because we are buying equipment in the long-term future. The Prime Minister, although he has an aspiration, cannot guarantee it. Doesn’t that always lead, or almost always lead-to give you more wriggle room-to a situation in which you set a series of spending plans with the Chiefs, both for current use and future use, but you don’t necessarily have the money from HMT to meet those spending needs? Isn’t that built into the structure of Defence spending?

General Houghton: In normal times it would be, because in normal times you would be able to plan on flat real. The Treasury would be perfectly happy to plan on flat real, but we are not in normal times. There has been a 7.5% reduction in the defence burden. It is not only the £38 billion debt, therefore, but the 7.5% reduction in the CSR settlement. That effectively makes the provision in the out-year subject to a certain amount of negotiation. The prime ministerial statement agreed intuitively that the SDSR 2020 force structure is not affordable without a real uplift. Part of what we’re trying to establish here are the ground rules against which we can financially plan in the out-years. The conventional flat real isn’t sufficient for our purpose.

Q634 Chair: When will we hear the details on planning round 11?

Nick Harvey: When this is resolved.

Q635 Chair: Has planning round 11 not been resolved?

Nick Harvey: The three-month exercise is, in a sense, the tail end of planning round 11 because it’s the 2011 plan ahead.

Q636 Chair: When will planning round 12 start?

Nick Harvey: Pretty much as soon as the three-month exercise finishes.

Q637 Chair: When exactly does the three-month exercise finish?

Nick Harvey: If one was to take the three months, it would be up at the end of June. If you are asking me whether I can guarantee with certainty that all the issues will have been resolved precisely by the end of June, then, no, I can’t. All concerned are determined to bring matters to a conclusion as swiftly as humanly possible.

Q638 Chair: Will there be a statement to the House of Commons on it?

Nick Harvey: I would hope so, but, obviously, it will depend on precisely when matters are resolved as to whether the Commons is in session.

Q639 Thomas Docherty: You have quite a lot of statements due to the House, don’t you?

Nick Harvey: We do. In a sense, this overlays most of them.

Q640 Mr Brazier: May I move on to a techie, process question for Mr Gray? In the excellent report you wrote as an independent consultant under the previous Government-

Bernard Gray: I was never a consultant. I resist the term.

Mr Brazier: An unpaid, highly qualified adviser-whatever one wants to call it.

You identified one of the key problems in the procurement process as the relationship between the organisation you now head and the lack of a defined customer in the centre. In any circumstances, that would be difficult. In the current, extremely difficult circumstances, with finances and competing pressures, the operational requirement systems-they seem to change their names every few years, but what used to be a strong centre of excellence-have got more and more watered down. Are you satisfied that you have a tri-service customer left that is capable of sorting the issues out in the round? I can give you an example: it seems rather strange that we are committed to buying a very expensive transport aircraft designed to carry armoured vehicles, when we cannot afford the new generation of armoured vehicles to go in them. Perhaps that is too specific an example, but would you like to comment on what you see from the other end of the telescope?

Bernard Gray: I would not-I don’t think I did, and I certainly wouldn’t now-describe Admiral Lambert’s organisation, which is the capability area that I think you are principally talking about now, as "watered down". My personal opinion is that Admiral Lambert and his team are doing an extremely good job, in difficult circumstances, of trying to corral all these forces. I wouldn’t recognise that point, and for my part, I would describe the relationship between myself and Admiral Lambert, and between our teams, as being extremely good and co-operative. We have worked together on looking at the cost of the programme exercise, in recent times, along with the finance director.

I think they are doing a good job, but what they are trying to do is balance very difficult sets of circumstances, where the proposed forward equipment plan, as it were, came into contact with the financial crisis; that was one thing that happened, at least. We were at a particular point when that happened, which means that, for example-to address your point-we have already contracted for air transport, by which I am assuming you mean A400M.

Mr Brazier: Yes.

Bernard Gray: We have already contracted for A400M, but we have not yet contracted for some of the medium-weight armoured vehicles; I guess that you were talking about those in the FRES environment, for example. We then have to deal with the outflow of the fact that we are financially stretched, as a result of the crisis that arrived in the middle. Admiral Lambert and his team are doing a very good job to try and square that circle. It is difficult.

Q641 Mr Brazier: If you will forgive a point of granularity, you said-in fairly general terms, but it was a strongly made statement-that there was a lack of clear separation between the customer and the provider. This is just as an example, but given that the bottom tier of Admiral Lambert’s organisation have their confidential reports written by the project managers in your organisation, it is difficult to see how, even in principle, you can have an arm’s length organisation.

Bernard Gray: I am not sure that is true.

Mr Brazier: It is true.

Bernard Gray: To be honest, I’m not sure that is the principal problem they face today. What I described in my report is a potentially collusive process that might lead to requirements growth and cost underestimation. The purpose of the separation of powers, as it were, was to try to ensure that there is honesty and robustness in the costing and development of programmes. That was the strategic aim. In the intervening two years, the Department has invested significant amounts of money in the cost-estimating service, which had previously been run down, in order to regenerate that capability for costing forward programmes. The service sits within my organisation and is independent of any of the project teams or single services, to attempt to ensure that the costing of the forward programme is more accurate than it had been in the past. As always in life, it is a work in progress, but they are making significant progress with that, and I am pleased that in my absence, in a sense, the Department has made that investment.

The thing that I am pointing to is the fact that Admiral Lambert’s organisation today has to struggle with a historical situation that it has already inherited. It had to struggle with it during the defence review and also following the outflow of that three-month exercise. It is not about whether, if we were starting some new programme tomorrow, there would be an appropriate separation of powers between the person doing the specifying and the person doing the procurement. We are improving the separation of those two things and doing that better, but the real problem they face today is around handling the extant programme.

Q642 Chair: May I put two final questions to you? The first is about the airframes of the Tornados being used up at an alarming rate. Am I right to be alarmed that the rate at which those aircraft are being used over Libya means that we have less and less contingency capability? Ignoring for the moment what might be seen as a spat between the Commander-in-Chief of the Air Force and the Prime Minister, are we using up those airframes alarmingly quickly?

Bernard Gray: Not as far as I am aware.

Q643 Thomas Docherty: Fifty per cent of our fast jets are now on active duty somewhere.

Bernard Gray: The airframe of the Tornado is remarkably robust. It is, and was designed as, effectively a bomb truck, and it is not operating at anything like its maximum operating capacity in terms of the performance that one needs to drive out of it under current operational circumstances. It is a stand-off weapon. You are not making it turn and flex as fast as you could, for example. It is not in a terribly hostile aerial environment. We have had a variety of debates about the Tornado force over time and the long-term longevity of the airframe has never come up as an issue. You may be aware of something that I am not, but I am not aware of any issue.

Q644 Chair: It is very interesting that you say that, because I suspect that it might generate a fair bit of correspondence, either to you or to me, from those who say that it is an issue. I will ensure that any correspondence that comes to me is passed on.

Bernard Gray: Most grateful.

Q645 Chair: This is my final question. You will have seen the evidence that we have received on various occasions over the past few weeks from people who have commented on the SDSR using words like "incoherent". Is there anything that any of you would like to say to put right any evidence that we have received before now that you have not had the opportunity to put right during the course of this afternoon?

General Houghton: The only thing I would offer is that if you see it in the context of the aspiration towards the 2020 force structure-the design criteria of its being militarily coherent allied to the security context of the time, as best as we can judge it, and of its being sustainably affordable, I actually think that the strategic defence review did a good job. You must also, however, put that in the context of, as it were, the wider grand strategic challenge of closing the fiscal gap and ensuring, therefore, that we have a sufficiently resilient economy to pay for our defence into the future, which is why there are some rocky financial waters between now and 2020. That is actually what the whole of this three-month exercise is all about.

Q646 Chair: I have to say that I have been, and no doubt will continue to be, extremely critical of the military result of the Strategic Defence and Security Review, which I am able to be, but I haven’t yet come up with any brilliant solutions to close that fiscal gap. Minister?

Nick Harvey: The Government made it perfectly clear when we published the Strategic Defence and Security Review that it involved painful decisions that in an ideal world we would not have wished to take. We have to view this in the financial climate of the day and, as the Secretary of State and others have said, Britain’s economic stability is an essential prerequisite of its overall security, and in that context we have had to play our part in it. In common with the Vice Chief, I genuinely believe that the Future Force 2020 strategic end point of the SDSR is a coherent force, but we have acknowledged that the route to 2020 will not be without its bumps and we are taking capability gaps, which we acknowledge and about which we have answered your questions this afternoon, that in an ideal world we would not have wished to do. At every point, this has been on the basis of calculation of risk and with the firm belief that taking some pain in the short term is worth it for landing that strategically coherent end point.

Q647 Chair: Okay. This may sound a rather odd question, but when do you genuinely think we will reach 2020?

Nick Harvey: The strategic end point is the target towards which we are aiming. Between now and 2020, there will be at least two, maybe even three, comprehensive spending reviews; there will be a 2015 Strategic Defence and Security Review, which will update the thinking and probably update what the Future Force for 2025 should look like. This will be a constantly evolving process, but there is a planning methodology for looking 10 years hence and trying to aim where you want to be then. I think it has been a useful exercise.

I noted your criticisms as a Committee that it was conducted too fast. Frankly, I have acknowledged that on the Floor of the House; it would be preferable to do this at a slower pace and I very much hope that the next SDSR is able to take it at a more gradual pace. We will have further revisions to the financial and strategic calculations along the way.

Bernard Gray: Could I echo and add to the points made by the Vice Chief and the Minister? There are two competing imperatives. There is the imperative for sound public finances within the UK. We have seen on a number of occasions over the course of the last 12 months what the lack of sound finances looks like and that is not a recipe for security in defence stability. Therefore, both the requirement and desire for a coherent force structure going forward competing with those financial imperatives is a real issue. As you have pointed out, reconciling the two is, as my maths teacher used to say, non-trivial. I noted some of the remarks made by people giving evidence; they also did not offer a significant alternative. One can’t criticise the plan unless one has another plan; simply to say, "I don’t like it" is not really a sufficient answer to the question in these circumstances.

Earlier in this session, reference was made to whether the Americans take us seriously and whether they might turn their attentions elsewhere, partly predicated on Secretary Gates’s speech at NATO. My experience of going to the United States and talking to our colleagues there is that they understand the nature of this binary problem and, indeed, experience it to a significant degree themselves. They value our contribution and they understand the difficulties through which we are going. They would clearly like us to end up in a more robust 2020 force structure state and they look forward to us doing that, but they take us seriously along the way and they understand the problems that we face. I do not think we have lost credibility with them as a result. That’s certainly not what they say to me.

Chair: Thank you. We are grateful to all four of you for coming to give evidence this afternoon. While it wasn’t, as I said at the beginning, the cast we would have chosen, it is a cast that has done, if I may say so, very well in the circumstances, which are not easy for you or for any of us. We are extremely grateful. Thank you very much indeed.

Prepared 23rd June 2011