CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 197-iii

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

DEFENCE COMMITTEE

TOWARDS THE NEXT DEFENCE AND SECURITY REVIEW

RT HON PHILIP HAMMOND MP, TOM MCKANE and EDWARD FERGUSON

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Defence Committee

on Wednesday 9 October 2013

Members present:

Mr James Arbuthnot (Chair)

Mr Julian Brazier

Thomas Docherty

Mr Jeffrey M. Donaldson

Mr Dai Havard

Mr Adam Holloway

Mrs Madeleine Moon

Penny Mordaunt

Sir Bob Russell

Bob Stewart

Ms Gisela Stuart

Examination of Witnesses

Witnesses: Rt Hon Philip Hammond MP, Secretary of State for Defence, Edward Ferguson, Head of Defence Strategy and Priorities, Ministry of Defence, and Tom McKane, Director General for Security Policy, Ministry of Defence, gave evidence.

Q149 Chair: This is the final evidence session for our preliminary inquiry into the next Strategic Defence and Security Review. I would like to welcome the Secretary of State, Tom McKane and Edward Ferguson to our evidence session.

Secretary of State, there is no need for you to introduce Mr McKane or Mr Ferguson, who have both given evidence to us before. Looking forward to the next Strategic Defence and Security Review, we have already received evidence from Professor Lindley-French and Lord Hennessy that the essential requirement of an SDSR is a strong view of the United Kingdom’s place in the world. Do you agree?

Mr Hammond: Yes, that is one of the essential requirements for a Strategic Defence and Security Review, and we would expect the National Security Strategy to reflect that view of the UK’s place in the world.

Q150 Chair: What should that place be?

Mr Hammond: That is a matter of opinion.

Q151 Chair: What is your opinion?

Mr Hammond: My opinion is that the UK is and should remain an outward-looking nation. We have a very large network of interests around the world. Our geography, our history and the nature of our economy-as one of the most, if not the most, open of the large economies, dependent on trade and investment for our livelihood-mean that we simply do not have the option of divorcing ourselves from the affairs of the world. We have to remain engaged in defence of our interests. We have to remain engaged to shape the international agenda. We have to remain engaged to support the international rule of law, upon which so much of our prosperity and security depends. That means being prepared to play a very active role in the world, using all the levers at our disposal, including our permanent seat on the United Nations Security Council and including our Armed Forces, which are among the most capable armed forces in the world.

Chair: Thank you.

Q152 Ms Stuart: That is all very nice, but could you put into a sentence what you think the Armed Forces are for?

Mr Hammond: It will probably be a long sentence, if you insist on a single sentence.

Ms Stuart: You can make it a German sentence, with lots of sub-clauses.

Mr Hammond: I am very fond semi-colons, so that may help in this case.

The Armed Forces are there, of course, as the ultimate guarantor of our independence and sovereignty. They are there as a tool of our international diplomacy, alongside the significant other tools that are available to the United Kingdom. Essentially, they are there as part of a raft of ways in which we deliver influence and project our power and interests in the world. Clearly, it would be disingenuous to pretend other than that for strong Armed Forces to represent a projection of the UK’s influence, there must ultimately be a willingness to use them in the last resort.

Q153 Ms Stuart: I can see a very logical case for the Navy, given that we are an island. I can see a very logical case for the Air Force, given that there is a threat from the air. Can you tell me a little more about what you think a standing Army is for?

Mr Hammond: An expeditionary land-based capability is an extension of those capabilities you have talked about in relation to the Air Force and the Navy. The history of modern warfare is that while you can do a great deal from the air and you can do quite a lot from the littoral, you cannot always deal with a threat without putting boots on the ground, to coin the expression. The ability to be able to support an expeditionary force in the field is one of the things that distinguishes the UK from many other countries of broadly comparable size and broadly comparable economic strength.

Q154 Ms Stuart: So when it comes to the next round of financial discussions with your Cabinet colleagues, will the MoD be the only voice to make that case to the Treasury? Who else would you expect to support you in that argument for financial means?

Mr Hammond: If I were conducting that argument today in the context of the present Government, the outcome of the SR 13 shows very clearly that that argument would have the support of senior colleagues around the Cabinet table-certainly the Prime Minister and the Chancellor, who understand the importance of maintaining our military capability and who I think would acknowledge the great progress that has been made in balancing the defence budget and getting us to a point where we are now delivering, very cost effectively, the military capability that we are able to offer.

Q155 Ms Stuart: But balancing the defence budget is quite different from marrying up your ambitions of what our Armed Forces should do and what amount of money that would require. It is quite a different conversation next time around, isn’t it?

Mr Hammond: It could be. We have set out in the SDSR 2010 the level of ambition that we have in terms of the size of an operation that we are able to conduct, the standing military tasks that we must deliver and the level of contingency that we need to be able to offer to the National Security Council. We are confident that within the budgets that we currently have we are able to deliver those outputs. It is tight, and there isn’t a lot of slack in there-I wouldn’t like any marauding Treasury officials reading the minutes of this meeting to misinterpret my comments-but we are clear that, after a very difficult period and having made some very difficult choices, we can deliver that capability. There will always be individual equipment programmes or capabilities that we would like to have in addition. But, in big handfuls, can we deliver Future Force 2020 and can we deliver the outputs set out in SDSR 2010 within our current budgets? The mood in the MoD and among the Chiefs of the Armed Forces is yes, we can: it is tight, but it is deliverable.

Q156 Chair: It sounds as though you are a strong supporter of expeditionary capability. Is that right?

Mr Hammond: Expeditionary capability is one of the things that distinguishes the UK and one of the things that I think enhances our influence and strategic reach.

Q157 Chair: Do you think support for expeditionary capability is shared by the public as a whole in this country?

Mr Hammond: That is a leading question, Chairman, if I may say so. Clearly public appetite for different types and levels of engagement will fluctuate based on recent experience. We have seen that in the UK and in other countries post a period of conflict. Right now, I would be happy to acknowledge that public appetite for expeditionary warfare is probably pretty low, based on the experience of 10 years of engagement in Iraq and Afghanistan. But I could easily paint a picture of a series of events that would lead to demands for an ability to go and do something-to go and sort the problem out somewhere or go and protect a community of British nationals somewhere in the world. Having that expeditionary capability to put boots on the ground-and not just to put them there, of course, but to sustain them there over a period of time-gives us enormously more reach and enormously more influence.

Q158 Mr Brazier: On that very point, polls suggest that rescuing British nationals is in fact the only expeditionary mission that would command popular support. Can I ask what we are doing to rebuild support in the community and to rebuild the basic Clausewitzian link between the people and the Armed Forces, because-dare one say it?-apart from sympathy for the wounded it is arguably at an all-time low?

Mr Hammond: I think this is a cycle and if we look at what has happened in other countries, the United States is probably the best example. After the Vietnam war, there was a clear disengagement of public opinion from the idea of being an active participant in military operations, but we saw with 9/11 what a single event can do to change the mood and the tone of public opinion. So time is a great healer. I think that once we have completed our withdrawal from Afghanistan and completed the restructuring of our forces to deliver contingent capability for the future, we will then seek to rebuild public support for-as a last resort-the ability to project expeditionary forces. And of course our reserves agenda is partly-not primarily, but partly-about rebuilding the links between the military and civil society in a way that perhaps has been lost to some extent since the end of the cold war.

Q159 Chair: But Secretary of State, the power of modern weapons is such that you may not have the time that you are looking forward to. You may not have the time to rebuild this support between the British people and the notion of expeditionary action. Is there not something you can do between now and the gradual building up of support again over the years?

Mr Hammond: I am sure there are lots of things that we can do. Public opinion is conditioned by what people hear politicians saying, by what they read in the media and by what they hear commentators saying, so there are plenty of things that we can do. But I think it would be realistic of me to say that I would not expect-except in the most extreme circumstances-to see a manifestation of great appetite for plunging into another prolonged period of expeditionary engagement any time soon.

Q160 Bob Stewart: Secretary of State, I totally agree with you and I think public opinion can be very fickle, and can change rapidly; in my experience, it can change within two or three days. So the idea of actually changing public opinion can happen very fast if there is a serious disaster.

My question is this: when we are talking about expeditionary warfare, or carrying it out, in your view how long do you think we might put a force-perhaps a brigade-level force-into a situation for? How long might that be? Clearly, it would be six months first, but are you anticipating that we might have to go beyond that, if necessary?

Mr Hammond: My colleagues will correct me if I am wrong, but the 2010 SDSR output requirement is that we would deploy a brigade-level force on a sustained basis through a full five-roulement pattern, on an indefinite basis, with the significant use of reserves as part of the model.

Bob Stewart: Thank you. I thought that I would get that answer, which is just what I wanted to put on record.

Q161 Mr Brazier: Secretary of State, how will lessons from recent military operations play into the next SDSR?

Mr Hammond: I think perhaps I will just answer that briefly at high level, and then invite Edward or Tom to talk about what we are actually doing on the ground.

We recognise that we are better at learning lessons at the operational level than we are perhaps at the strategic level, and there is some effort going into making sure that we focus on strategic-level lessons as well as operational-level lessons, something that the Army does almost in real time. If you look at the evolution of operations in Afghanistan, you can see the effects-the benefits-of the learning process in recent years, and you can trace them back directly to events-sometimes very painful events-that occurred in the early years. We have to be able to do the same at a strategic level.

Tom McKane: I would just add to that, Secretary of State. I would say that the Ministry of Defence has a more developed lessons process than most other arms of Government although, as the Secretary of State has said, we have been conscious that we could do more in absorbing strategic lessons, so we have consciously tried to put more effort behind that. The Defence Strategy Group, which is chaired jointly by the Permanent Secretary and the Chief of the Defence Staff, has discussed strategic lessons recently. The process is owned by the commander of Joint Forces Command, the new command that was created as a result of the recent reforms. He brings together all the operational lessons that are examined in the Permanent Joint Headquarters and the lessons processes that are run by the three Single Services so that they can be brought to the top of the Department. I am sure that, as we get closer to the next review, these will be presented to the Secretary of State and Ministers.

Q162 Mr Brazier: Forgive my breaking in but, inevitably, as in every part, people will change over fairly quickly in that. Do we still have designated historical branches whose job it is to provide continuity and look back?

Tom McKane: We do have dedicated historical branches-one for each service. They continue the process of writing and storing history, and that is available.

Q163 Mr Brazier: They are consulted as part of this process.

Tom McKane: Absolutely.

Mr Hammond: You might be interested to know that-it says here-in each of the services there is also something called a lessons board. We have a land environment lessons board in the Army and a defence operational lessons board, which meets twice a year in PJHQ to gather the information that has been sucked up through the lessons learned process and formalise the learning process into our doctrine and concepts.

Q164 Mr Brazier: That is very encouraging to hear, but forgive my pressing one point further. In the 19th and 20th centuries, absolutely central to the whole concept of building a body of knowledge was detailed recordkeeping by the people on the ground. It is the feeding back of diaries, thoughts and so on that one again and again finds influences doctrine. We are hearing from people on the ground that they are afraid to keep records because of the danger of legal action at a later stage. Is that something that has entered into the thinking at all?

Mr Hammond: We move on to a different subject about the intrusion of law into people’s behaviour on the battlefield-perhaps we might touch on that later. Obviously, I cannot answer for the actions of individuals who are personally recording thoughts but, in terms of the official recording of events, we are clear that that is an important part of the process. After a review of how historical records are maintained, a decision was taken to keep that as it is on a single-service basis, and the system remains unchanged.

Q165 Chair: We will not get on to the law question that you have just raised during this sitting because we are conducting a separate inquiry into that.

Mr Hammond: I look forward to coming back and talking to you about it in due course. It is a subject that is very close to my heart.

Q166 Chair: We look forward to all manner of thoughts from the Ministry of Defence on this matter.

Before you go off this subject entirely, you said that each service maintains an historical branch. Does that include Joint Forces Command?

Tom McKane: No, these are Single Service historical branches.

Q167 Chair: Because it seems to me that we have been talking so far about historical ways of waging war, and it is something to bear in mind that we need to learn strategic lessons about the future ways of waging war based on the past, as well as the use of tanks, bayonets and bows and arrows.

Mr Hammond: A decision was made when Joint Forces Command was stood up not to create a Joint Forces Command historical branch.

Q168 Chair: Why?

Mr Hammond: I suspect primarily resource constraints. We are trying not to replicate structures when we can avoid it.

Chair: Do you think that learning lessons from history-

Mr Hammond: Let me finish. Joint Forces Command specifically is able to call on the most relevant historical branch of the other three single services when required.

Q169 Chair: What on earth is the point of an independent Joint Forces Command that recognises the fact that the other services do not really cover that Joint Force if you do not have a separate historical branch?

Mr Hammond: There was a choice to be made: as we stand up a fourth command-Joint Forces Command-should we merge all the historical branches and create a single historical entity covering the entire forces? The decision was made that if it ain’t obviously broke, don’t fix it. The historical branches in the Navy, the Army and the Air Force were working well, so the decision was taken to leave them in place, with some slight modifications to the way the Army historical branch worked, and to give Joint Forces Command the freedom to call on any one of those historical branches as appropriate and necessary. The range of activities by Joint Forces Command is very wide, and it is quite obvious in some cases that bits of the work would fall naturally to one or other of the single service historical branches to support.

Q170 Mr Havard: We visited Joint Forces Command some time ago. Can we have a description from you, or through you from them, of how that process works from their point of view? How do they actually enact the capability that they have? Do they have to request, for example, or is it a regular process whereby they talk to the others about what needs to be collected from them, as opposed to what they feel they need to give over? Could we have a description of that process, as it is ongoing, so that that we understand it better?

Mr Hammond: I suspect that we are far too early in the life of JFC to be able to give a definitive answer to that, because typically the historical process is some way behind the action on the ground.

Q171 Mr Havard: The history was last week. These will be current. They are historical, but they also need to be current.

Tom McKane: I think we are in danger of confusing the role of the historical branches and the lessons process. Obviously, the historical branches contribute to the lessons process, but the lessons process as I described it certainly involves single service activity, but it also involves activity by the Permanent Joint Headquarters to look at operational lessons. Now, sitting above that, Joint Forces Command brings together the lessons so that the strategic lessons can be extracted from that activity. In doing so, where they need to draw on history, they have access to the three historical branches, and they can go to them. But it would be wrong to give the impression that it is the historical branches themselves that are the sole, or even the main, feedstock for the lessons-learned process.

Chair: That is a fair point well made.

Q172 Mrs Moon: In terms of lessons learned, last week the US released a report that was reclassified from "secret" to "open" in relation to the attack on Camp Bastion. One summing up of the report was that the British screwed up. Is that something that will be re-examined by the lessons board? Is that something that we have dusted up and put in a cupboard? How will we learn lessons as a result of the release of that US report?

Mr Hammond: I think I can answer that. When we receive the full, unredacted version of the US report, we will conduct our own review of it. That will be conducted by the Chief of the Defence Staff.

Q173 Mrs Moon: Will the response to that also be put into the public domain, as the Americans have done?

Mr Hammond: I do not expect so, no.

Q174 Mrs Moon: It will not be put in the public domain.

Mr Hammond: I do not expect so.

Q175 Mrs Moon: Why not?

Mr Hammond: I would not expect it, in the normal course, to be put into the public domain. This is a review conducted by another nation about an incident, the consequences of which were primarily borne by that nation. It may have implications for us, and we will therefore look at it to see whether there are lessons that we should draw from it and, if so, what those lessons are.

Q176 Mrs Moon: I have seen the report, and it is largely in the public domain-there is a very small amount of redaction. Basically, the great line is that the British screwed up. Are we going to learn lessons from that, and will the lessons we learn be put in the public domain?

Mr Hammond: That is not our interpretation of the report, and it is not the message that we are getting from the US.

Q177 Chair: But on the issue of whether it is put in the public domain, you answered "I do not expect so, no" as though the default position is to keep something secret. Would you recognise that?

Mr Hammond: I would not describe it as secret, but I think this is going off course, here. The Chief of the Defence Staff would, I hope, routinely be conscious of information that was coming from other sources. Where it has any implications for what we are doing, I would hope and expect that he would routinely review it to see if anything needs to be looked at more deeply and if any lessons need to be drawn for the UK. There may or may not be.

Q178 Chair: Don’t you think he might be helped by public comment on that?

Mr Hammond: I do not see a process that would lead to a public review of a US report by a UK agency.

Q179 Mr Donaldson: Secretary of State, there is a growing narrative here. On one hand, we have the Afghan President making very critical comments. We have this report by the Americans. Surely we have done our review of the incident already; we are not waiting until the Americans do a review, and then we will review their review. I am just concerned that if all this is kept in secret, the narrative becomes very negative, and we do not have the UK Government, the MoD, or defence forces coming out and countering the narrative that is beginning to develop that paints the Afghan war and our involvement in it in a very negative light.

Mr Hammond: There are two separate things there. Although it is tangential to the SDSR 2015, I am happy to comment on the Afghan President’s comments. But on the operational review of the attack on Camp Bastion, of course, there would have been a review immediately, as soon as it happened. That would have been conducted as a matter of course. The results of that would routinely not have been published. They are operationally sensitive. Actions will have been taken. It would be a very rare occasion when, following a successful attack, a review would take place and the conclusion would be that there is nothing we could do better as a consequence of what we have learned from the attack. So practical actions will have been taken, just as there are after almost every attack that occurs in Afghanistan-whether it is an attack on a vehicle or an attack on a base, there is always a review. There are always lessons learned, and there are almost always instructions given for things to be done differently immediately thereafter. For very good reasons, those are not routinely published.

Q180 Thomas Docherty: First, this attack led to the deaths of, as I recall, two US personnel. Eight were seriously wounded and there was the loss of half a dozen of their Harriers. I appreciate that this occurred last year-this is not a criticism of you, Secretary of State, in any way-but it was on the back of what is perceived as the debacle in southern Iraq, where the Americans had to ride in, as it is perceived, to our rescue. It goes back to Mr Brazier’s point earlier that-I think we are trying to be genuinely helpful-if you think what has been reported at the weekend is not a fair assessment, I hope you would take it as helpful of us to be saying, "We think you have to be going out there, saying, ‘This is our version. This is why it is not our fault that two Americans are dead and half a dozen Harriers have been destroyed. We are not actually incompetent, as the Americans are claiming we are.’"

Mr Hammond: If the conclusion of the report was that it was our fault, it is not obvious why two US Marine generals would get fired as a consequence. Faults and failures were identified. Significant failures were identified within the US Marine Corps chain of command. One thing that the Chief of the Defence Staff will want to look at carefully is whether, as well as discharging their obligations within the combined chain of command-because ISAF, obviously, is a combined operation; the regional commander south-west was a US Marine Corps general-UK personnel properly reported any concerns that they had to the National Component Commander’s chain of command, so that we have, as it were, a dual chain for looking at these things.

At the moment, our understanding of the incident, on the basis of our own review and on the basis of the published version of the US report, is that we do not believe that there is a systemic UK failure that we need to address. But we will certainly review that further when we have the unredacted account. We may have it by now; I last discussed this on Monday afternoon and at that stage we did not yet have an unredacted copy of the report.

Ms Stuart: Secretary of State, we are politicians. We know that this is not a rational game. The perception out there is that the headline is "The Brits screwed up over Bastion". I don’t think you can you just sit there and say, "That is not our understanding and we will wait for it."

Q181 Chair: The overall point we would like to make is that if you learn lessons from something it is probably best to make those lessons public. In the end, it helps both with the narrative and because there are a lot of experienced and-even more important-independent people out there who might be able to confirm what you say. At the moment there is not that support.

Mr Hammond: I appreciate that the Committee is trying to be helpful on this.

Chair: I know it doesn’t sound like it.

Mr Hammond: I must let the CDS conduct his own review and talk to people within the chain of command, but when we get the report we will look at what it is useful or possible to say. I will conclude by saying this: I have asked whether we have probed, on our military-to-military networks, US counterparts as to whether there is any hint of blame being cast in our direction and I am told that there is no hint in the military-to-military conversations that we should be looking at our operations. As far as the US Marine Corps are concerned, they have identified what went wrong, they have delivered very harsh but appropriate consequences to those concerned and they regard the incident as closed. That is what I am being told.

Bob Stewart: I am going back, Chairman. I was about to agree totally with what Mr McKane said in his last comments. The Army historical branch, Air Force historical branch and Navy historical branch are useful. If you require Joint Force lessons learnt, or something like that, historically people from those branches, in my experience-albeit that that was a long time ago-are pulled out and told to write the Joint Force lessons. That is the way it worked in the past, and I presume it hasn’t changed much. I wanted to cut in there.

Chair: We are now getting back to the thing that you were going to ask anyway.

Q182 Bob Stewart: Oh yes, sorry-I am on for my proper question. Secretary of State, how much work has been done to determine just how much money we really need for defence? Has that work been done, and are you content? I would rather like to hear the answer: have we done work as to how much money we really need for defence?

Mr Hammond: The problem with that question is that defence is an elastic term.

Q183 Bob Stewart: Yes, but based on SDSR 2010?

Mr Hammond: Based on SDSR 2010 and based on the budget that we have at the moment, and on the assumption we have made of flat real into the future-that is our budgeting assumption inside the Department-plus 1% real-terms increase per annum on the equipment plan from 2015 through to 2020, we are confident and the Armed Forces Chiefs are confident that we can deliver the required output.

That is not to say that there aren’t some tough prioritisation decisions to be made. We have made a decision to spend significantly more money on cyber. That money is not a free good: we have to reduce spending in other areas in order to meet that. But across the piece, I think I could fairly characterise my colleagues, senior officials and military personnel as thinking that if we are left alone, in peace, with the budget that we have assumed, we will manage to deliver the output, thank you very much. That is where we would like to be.

Q184 Thomas Docherty: What happens if the money doesn’t go up?

Mr Hammond: In other words, if the assumption proves false? Clearly, if the equipment plan real-terms increase doesn’t occur, the equipment plan will be squeezed by 1% per annum over five years, so at the end of it we will have an equipment plan that is 5% smaller than we would ideally have liked.

Q185 Thomas Docherty: What happens if the money decreases in the next Parliament?

Mr Hammond: In my judgment, if the amount of money available for the defence budget decreased significantly, we would reach the end of the process by which we can simply take salami slices off. We would have to ask some serious structural questions about the type of forces that we were able to maintain.

Q186 Thomas Docherty: So this is about hollowing out versus taking out whole capabilities.

Mr Hammond: Versus a much more fundamental piece of surgery. My view is that we are close to the point where continuing to shave amounts off budgets without fundamentally restructuring what we do is probably getting into diminishing returns, where for every pound saved, you lose more and more effective capability. If we were confronted at a future point with a significant further reduction in budget, it might be more sensible to stand back and rethink the structure of our forces.

Q187 Thomas Docherty: Have you got a team working within those who are working on the NSS and the SDSR to look at that contingency?

Mr Hammond: No, because we have a budget assumption, which is flat real, with plus 1% on the equipment plan. I have heard nothing to suggest otherwise than that for future settlements. If another political party in the run-up to the election were to publish a proposal to reduce radically the defence budget, we would have to start doing that work.

Q188 Chair: In view of what you have just said about being close to the point where we will have to change our military objectives, would it be fair to characterise that as being close to a loss of critical mass?

Mr Hammond: I did not say that we would change our military objectives; I said we would change our force structure. The point about critical mass is exactly that. When you are operating a broad spectrum capability within a constrained budget, there is clearly a critical mass point in each of the areas that you are operating in. If you have to keep reducing the budget, there will come a point when, rather than slipping below critical mass in a number of areas, it might be more sensible to ask whether you need to maintain the breadth of spectrum and whether you would be better to focus capabilities. The Dutch, for example, have recently taken the decision to scrap some of their amphibious capability.

Tom McKane: They are scrapping their new large amphibious vessel, but retaining their smaller vessels.

Mr Hammond: So they have made a conscious decision that rather than trying to spread the jam thinner, they will take a hit in that area to protect other areas. Fortunately, we in the UK are not yet at that point. I believe that there are further efficiencies that we can still drive out that will give us some flexibility within the budgets that we have. If further significant reductions in budget were proposed, it would make sense to think about the overall structure.

Q189 Chair: A couple of years ago, we had in front of this Committee the Chiefs of each of the three Armed Services-the Chief of the Air Staff, the Chief of the General Staff and the Chief of the Naval Staff-and Gisela Stuart asked them whether we still have a full spectrum capability. The Chief of the Air Staff said no, as did the First Sea Lord and the Chief of the General Staff. Were they right?

Mr Hammond: I think I used the term broad spectrum capability. We clearly do not have a full spectrum capability in the sense that the United States does, but we have a broad spectrum capability that is much broader than most other nations in the world.

Q190 Chair: I put that series of questions and answers to the Prime Minister, and he said that he disagreed with them and that we did have that full or broad spectrum capability, whichever it was. Which do you think is closer to the truth?

Mr Hammond: That depends whether you are saying full spectrum or broad spectrum. We have a broad spectrum capability, but I do not think that we have every single part of the spectrum covered as the US does. Even if somebody gave us an extra £10 billion on the defence budget, it probably would not make sense for us to try to cover every part of the spectrum.

Tom McKane: There are a couple of good examples. We have never had a ballistic missile defence system, for example, and we have never had in recent years a full suppression of enemy air defence system.

Q191 Mr Havard: When is full complete, and when is complete broad? In terms of the language and people understanding, can I just be very clear? What you are saying is that we have a spectrum of capabilities and that, should the finances reduce even further, we would have to look again at possibly reducing that range of capabilities-the spectrum of things that we can do with the capabilities that we have. Is that essentially what you are saying?

Mr Hammond: Not "We would have to," but, "We could."

Q192 Mr Havard: In plain English-but you would.

Mr Hammond: But it might make sense if the choice is: do we take another slice off everything and operate a smaller force of this capability and a smaller force of that capability? The critical point is the Chairman’s point about critical mass. There is a minimum effective scale of operation. If I can use an analogy from the Scotland debate, I made the point yesterday that it is difficult to see how you could operate 10 Typhoons as an effective force. The cost of maintenance and support capability for a fleet 10 fast jets would simply be disproportionate. As you head to that sort of territory, with smaller fleets needing the same kind of fixed overheads, it may make more sense to take the hit-to take a bold decision to lose a bit of capability to ensure that you retain critical mass in other areas.

Q193 Thomas Docherty: Secretary of State, you keep using a future tense as if we would lose capabilities, but isn’t the reality that we already have lost two capabilities? We have lost Carrier Strike and we have lost maritime surveillance. There is an intention, with a timeline, hopefully to restore Carrier Strike. I think you were on record just last week as saying that you hoped that Carrier Strike would be there 365 days of the year, but we do not have a timeline for maritime surveillance. Again, I am not trying to criticise, but we have made capability cuts already, so do you envisage that we would not be able to restore one or both of those, or are you talking about other capabilities that would be cut?

Mr Hammond: I am talking about future capability losses. In Carrier Strike, we’ve gapped the capability. We are spending billions of pounds to recreate it, an initial operating capability will be delivered in 2018. What I am on record as saying last week is about my own personal view on whether, having spent £5.5 billion on carriers, it makes sense to operate both of them or only one of them.

On maritime patrol, that is a capability that we had to take a decision to lose. In SDSR 2015, one of the specific issues that we will need to consider is whether, based on our experience since 2010 of managing this risk-largely by working with allies-it is a capability that we need to regenerate and, if so, how we would most efficiently regenerate it. There is growing evidence that evolving technology, particularly in relation to unmanned aerial systems, may make at least some of the functions of maritime surveillance deliverable at rather lower cost than might have seemed possible even four or five years ago.

Edward Ferguson: Just to clarify, you said we had taken out maritime surveillance. We still have a range of maritime surveillance assets; maritime patrol aircraft is a specific point.

Q194 Mrs Moon: Secretary of State, how do you distinguish between strategy and policy?

Mr Hammond: Policy is the set of objectives that we need to get to, and the strategy is about how we get there. Strategy is how we deliver the policy, and the policy is the agenda that we have set ourselves at the end of the game.

Q195 Mrs Moon: The Committee works on the basis that strategy is a course of action integrating ends, ways and means to get to the policy objectives.

Mr Hammond: Excellent.

Mrs Moon: I take it you agree with that.

Mr Hammond: I agree with that entirely, yes.

Q196 Mrs Moon: So will the next review be ends-based rather than means-based?

Mr Hammond: It has got to be both. If I may say so, this is a very popular question: what comes first-the budget envelope or the capability requirement? It’s a bit like saying to a man outside a car showroom, "Decide which car you like and we’ll look at the budget afterwards." It doesn’t make any sense to go into the Ferrari showroom if you’ve only got a budget for a Volkswagen. You have to do both together to be doing anything sensible and useful, so I would expect to address the two issues in tandem. We need a broad sense of the resource envelope so that we can set a National Security Strategy. Once we have gone down that process, there needs to be a refining of the precise level of resources that would be needed.

Q197 Chair: So a reiterative process of building up a National Security Strategy and then a Defence and Security Review in the context of a comprehensive spending review going round and round until we eventually get to a sensible answer.

Mr Hammond: I do not know whether I would want to go round and round too many times, but if I was asked to review the National Security Strategy and set out our ambitions for the nation in the context of the security environment that we face, I would want to ask within what sort of resource envelope before I answered that question, otherwise the answer would be meaningless. I need a sense of whether you are giving me the UK defence budget, Monaco’s defence budget or the United States’ defence budget before I can begin to answer the question about level of ambition and how I see our strategic position. Later on, there will be a more refined and granular process about what specific resources will be needed to pay for the capabilities we have identified as being appropriate.

Q198 Thomas Docherty: I think, Secretary of State, you were supplied this morning with a transcript from the NSA’s session with us in which he was asked about the running order and said-in case you have not seen it-that he felt the correct order was NSS, CSR and SDSR. Do you agree that that is probably now the correct order for 2015-16?

Mr Hammond: I am interested to know how you know what I was supplied with this morning, but you are correct-I was supplied with a copy of the NSA’s transcript. Broadly, I think that is right, although the NSA said that the Prime Minister has not yet defined the process. We are, in a sense, ahead of the game here. Broadly, we need to establish a commonly recognised picture of the environment that we face and some common threads of understanding about the role that we want to play within that environment, and then we need to have a sense of the resource envelope. The resource envelope comes in two parts. It comes first as a broad understanding-are we talking about the same sort of level of resource, a significant increase in resource or a significant decrease-which allows us to shape the options and then perhaps look at the potential outputs that we could deliver.

Q199 Thomas Docherty: Just so that I have this correct, because I do not want to misquote or misunderstand what you have said, you would do the NSS and say that these are the absolute things that we must do, and these are the things that we want to do. You would have a CSR and negotiate with the Treasury, which would give you a figure, but you would expect to have the ability both to ask for a bit more or, if subsequently you did not need it all, to hand it back.

Mr Hammond: No, that is not what I am saying. When you undertake the process of the NSS, there has to be an assumption about the broad level of resource available. It could make sense to go into the NSS process saying that it is on the basis that the budgets available will be broadly those currently assumed. That is a sensible process. You could have an assumption about a higher budget or a lower budget. It does not make any sense to go in completely resource-blind. It does not make any sense to say, "Please produce a National Security Strategy without any reference to the amount of resource that might be available to deliver it."

Q200 Thomas Docherty: That was not what I was saying. What I was saying is that you would do it saying that these are the absolute core functions. We agree that an expeditionary force is something that we would like to have, but it is not absolutely needed. So you do your NSS, and then the CSR. You negotiate with the Treasury a framework. Then you talk to the Service Chiefs and the Permanent Secretary to say, "Is that the right amount of money? Do I need to ask for some more?" Or, do you say, "The Chancellor’s been phenomenally generous, as he always is. I can now give him back some money"? Is that wrong?

Mr Hammond: The timing sequence between the NSS, the SDSR and any CSR is not yet defined, and it is clearly not in my gift to define it. That will be defined partly by the Cabinet Office and partly by the Treasury, so I cannot say that this is the sequence we should follow, or that this is not the sequence we should follow. I shall repeat the same thing: you cannot have a sensible NSS process without a broad order of magnitude resource availability envelope. From that NSS, you could produce potential alternative outcomes, which might then inform a CSR process that defined more precisely the resource that was available.

Q201 Mr Havard: So that process colours the discussion for the review for those at the foothills, and then the review comes after.

Mr Hammond: Yes. I hope-I have to repeat this-that the process will be defined by the Cabinet Office in due course. It has not been defined yet, but I hope that in the pre-general election period we will establish a good degree of consensus around what the strategic picture is, what the core objectives of the UK are and what the core capabilities to deliver those objectives are. Without nailing anything down at that stage-clearly it would be absurd to try to nail things down before a general election-I hope that we will have a wide degree of consensus on a cross-party basis as well as beyond the political village consensus about what is reasonable and what is required to-

Q202 Mr Havard: Some of my colleagues will ask you about who can be involved in that process and when they can be involved in all those different stages of the discussion-including ourselves because, as you know, we are structuring our work to try and make a contribution to that process itself. We were told by the National Security Adviser-it was him who told me and it wasn’t this morning-that there was no firm timetable for all this, which is consistent with what you say, but a proposition for a timetable would be put to the Prime Minister at the end of this year so that from then we would begin to see exactly what the time process for those stages is. Is that correct or not? How are you operating? What are the MoD’s assumptions in terms of the timetable process?

Mr Hammond: It is correct by definition, because it will be the National Security Adviser who puts the advice to the Prime Minister. If he said he is going to do it at the end of the year, that is what will happen.

Q203 Mr Havard: He says "not by" but "at" the end of the year, so there we are-happy new year!

Mr Hammond: Okay, and we are happy with that timetable. The MoD has its own process within the Department of preparing for the SDSR. It is fair to say that we probably got off the mark ahead of the game across Whitehall with our Defence Strategy Group, which pretty much started looking at the next Strategic Defence and Security Review as soon as the dust had settled from the last one. But we are very conscious of the Prime Minister’s injunction not to allow this thinking about the next SDSR to distract us from delivering the conclusions of the last SDSR, so there is a twin track here. We still have a lot of delivery left to do, and it will be well into the next Parliament before the final pieces of the jigsaw arising from the decisions in the last SDSR are in place. In parallel, we are already identifying things that will have to be done and decisions that will have to be made in the 2015 SDSR, and we are starting internally to debate the options with the Armed Forces and other stakeholders in the Department, but we are only one Department in a cross-Whitehall process.

Edward Ferguson: I think that that is absolutely right. In the cross-Whitehall sense, the process is in its fairly early stages, and we are working out and trying to support the advice for the Prime Minister towards the end of the year. The Defence Strategy Group has been under way for about 18 months. It has met 13 times and taken a pretty broad agenda of issues. We are starting to think through the process but, as the Secretary of State says, this is very early, sensibly-paced preparatory activity. We are not trying to get ahead of the game; we are not trying to pre-cook an SDSR. We still have two years to go to play with. At this stage, we can afford to take a bit of time to think relatively deeply about some of the questions we may have to answer and some of the options that may be available to us. We are trying to make best use of that time.

Q204 Sir Bob Russell: Secretary of State, as Dai Havard has very kindly set the ball rolling on SDSR, I will continue with the group of questions I have on that subject. How is it going to differ from its predecessor-you indicate that we have still got it-and what will be the major challenges?

Mr Hammond: There are some specific decisions that we have already identified and the appropriate time frame for decision making is the 2015 SDSR. For example, there is the decision about what we do with the second carrier-whether we bring it into operation or whether we mothball it. There is the decision on the balance of future air capability between manned and unmanned air platforms, and consequently the size of F-35 follow-up buy beyond what is required for the carriers. There are decisions about future maritime patrol capability-whether we need to have it and, if so, how best to deliver it. There are decisions about the level of future investment in cyber-capability, both defensive and offensive. Is there anything else?

Edward Ferguson: I think that captures a number of the capability questions. Importantly, of course, our combat troops will be out of Afghanistan by the end of 2014, which will change the strategic environment within which we are operating-2010 was heavily conditioned by that commitment. So we are able and we are doing some early conceptual thinking about what that might mean and how we might want to reposition the Armed Forces post Afghanistan for contingency and wider activities.

Q205 Sir Bob Russell: While we cannot foresee the future in that sense, how do you see Service-with a capital "S"-priorities shifting after Afghanistan as the UK moves towards Future Force 2020 and the "Adaptable Britain" stance, and with that, of course, the Army reserve? Are you able to put a bit of flesh on those bones?

Mr Hammond: Yes. If I hesitate for a moment, it is because although operations in Afghanistan, of course, remain our No. 1 priority, intellectually it is fair to say that the Service Chiefs have already moved on to thinking about how we return to contingency. They are already there in the post-Afghanistan era, reconstructing their contingent capability, building the Future Force 2020, which will have a greater reliance on reserves and will build on the whole-force concept, using civilians and contractors in a different way from how we have used them in the past. It will be focused on international defence engagement as well as contingent intervention capability. All this is well under way in MoD terms; it is absolutely already banked in the DNA of the Armed Forces Chiefs.

Q206 Sir Bob Russell: Thank you for that. Following on from your earlier answers to Gisela Stuart, the Chair and Julian Brazier, will your ability to justify sustaining defence spending to your Cabinet colleagues be reduced when the profile of the Armed Forces is reduced following the withdrawal from Afghanistan?

Mr Hammond: I don’t think so. There is a good understanding of the concept of defence across Government and across the political centre ground, if I can put it that way. It is not only when we are deployed on operations that we are delivering defence effect, but when we are providing deterrents, when we are engaged in capability building, when we are projecting influence and when we are delivering a defence engagement strategy. The military capability that we have can be used in many ways. We have been through a period when it has been used kinetically and in support of a broader reconstruction effort in Afghanistan. We would expect-but, as somebody said a moment ago, who knows what the future will bring?-to be moving into a period, from 2015, when it will be used somewhat differently.

Q207 Sir Bob Russell: Satisfying your Cabinet colleagues and justifying this to them may be the easy bit. Can you now answer that question in the context of public opinion?

Mr Hammond: We have to explain to public opinion continuously what the value of defence is to the United Kingdom-what it buys us in terms of our role and influence in the world. We have to make the connection between the prosperity agenda and the UK’s ability to influence world events. As I said at the beginning, we are a nation-probably more than any other large economy-dependent on the functioning of an open global trading and investment system, and we need to be clear, lest anyone forgets, that the survival and prosperity of that system is not a given. There are emerging powers in the world, as the balance of economic power shifts, that do not have the same commitment to the rule of law, the openness of the trading system and the democratic principles that have served us so well. Being able to shape that agenda as the balance of power-particularly economic power-in the world changes is crucial to the UK, and it is important to our future prosperity.

Q208 Sir Bob Russell: So keeping public opinion onside is obviously a major issue.

Mr Hammond: And if you listened to my party conference speech, which I am confident you will have done-

Sir Bob Russell: It was stimulating.

Mr Hammond: For all the right reasons, I hope. You will have noticed that I went out of my way to link the defence agenda with the prosperity agenda and to make the point that the quality of our Armed Forces and our ability to project military force is one of the things that gives us a voice in the regulation of the world’s affairs.

Sir Bob Russell: There may actually be more on which we are in agreement than separates us. Us Essex boys need to stick together on these occasions.

Mr Hammond: We do indeed.

Q209 Sir Bob Russell: Earlier you talked about-I think I am quoting you correctly-rebuilding links between the military and the civil community, and I suggest that the basing plan and the closure of Territorial Army bases has made that more difficult. I come from a garrison town where that is not an issue, but it is an issue across the United Kingdom. May I suggest that one way of making sure that the public are aware of what is going on and that the military have not just a military role, but a role of peace at home, is through the military bands, which have taken a major hit? I say that because they are very much part of the PR profile of Her Majesty’s Armed Forces.

Mr Hammond: You have raised this issue with me before. I have raised it with the Chief of the Defence Staff, and I am well aware of the importance of military bands to the way in which the military engage with the wider community.

I do understand your concerns about TA base closures. In terms of the decisions that we had to make about future TA basing lay-down, there is clearly a tension. It is not about money-unusually-in this case; it is about the ability to deliver the quality of training and the real participation in the whole force that we have offered to reservists. We cannot do that at TA centres where we are routinely getting only 12 people parading; that is not the basis on which we can offer a real experience. So we have had to take some tough decisions. But, equally, in some areas of the country where we looked at the map and we saw that there would be no military presence for miles and miles around, we have retained a TA base that, frankly, on a completely objective view of recruited strength, would not justify retention. So we have tried to strike a balance.

Q210 Chair: The point Sir Bob makes about military bands is one that would be supported by the entire Committee, because it is very difficult to put a monetary value on the power of inspiration, but that is what military bands provide.

Mr Hammond: Mr McKane has just reminded me that there were no reductions in military bands as a result of the 2010 SDSR, unlike in previous rounds of defence cuts.

Sir Bob Russell: They have taken a huge hit over the years.

Q211 Chair: We look forward to seeing the expansion of military bands as and when funds allow.

Mr Hammond: Chairman, I hear that but as I constantly remind the Department, there are no free lunches. If we expand one thing, we cut something else. We must focus very much on the delivery of military effect. I completely understand that things that support the moral component, raise the spirit of the Armed Forces and build our connection with civil society are important in delivering military effect. We must keep things in balance.

Q212 Mr Brazier: Who within the MoD looks across Whitehall at functions that could be better done by the MoD? To give one example, across government, there are half a dozen private navies, one of which is run by the Treasury. There could well be savings and better delivery. Who, if anyone, is looking at functions outside the MoD that could be run effectively from inside?

Mr Hammond: I do not think we have a systematic approach to that. I would expect to find a little bit of caution in the Department. Because of the way government works in practice, it is quite easy to acquire new responsibilities; it is less easy to acquire the budget to go with them. The MoD may have had a not entirely positive experience in the past of taking on additional roles on behalf of other Departments, and then finding that it is not funded for them.

Q213 Mr Brazier: May I throw in a point, Chairman, because people were talking about bands at some length? When visiting Australia I was struck by the fact that it has what before the second world war was very common here. Most TA units have their own little band with absolutely tiny, almost non-existent resourcing, but it is a significant component in the local community. Just a thought-not a fully resourced separate one, but a group of bands within the existing unit.

Mr Hammond: And the obvious place to push this agenda is with cadets. Anecdotally, I have been dismayed to find that in Weybridge it is impossible to find a bugler for the Remembrance day service in the local church from any of the cadet units in the surrounding area.

Q214 Thomas Docherty: On forward planning, I am sure you have studied our report on the implications of Scottish independence. One of our concerns about the UK Government is that they do not appear to be doing any contingency planning for, however much you and I may wish it not to happen, the Scottish people choosing to become a separate nation. Is it still the MoD’s policy not to do any contingency planning?

Mr Hammond: It is.

Q215 Thomas Docherty: Do you not accept our concerns that you have a contingency plan for pretty much everything that could happen, because you are a very organised Secretary of State? Why do you not have a contingency plan for Scotland?

Mr Hammond: That isn’t the reason. The reason we have contingency plans is because that’s the way the MoD is. It has a contingency plan for everything. There will be plenty of generic contingency plans within the MoD that would be applicable to some of the issues that would arise in the unlikely event of a Scottish vote for independence.

As I have said before and I am happy to say again-I recognise that the Committee’s concern is based on the best of intentions-it is to misunderstand what the consequence of a yes vote in a referendum would be. It would signal the start of a complex process of negotiation following which a series of steps of disengagement between the two nations would take place. Some might take place over an extended period. Lack of contingency planning should not be seen as presenting a risk to defence. Any defence disengagement that was required would have to be structured over a period to allow that disengagement to take place in an orderly fashion.

We and the Scottish Government are both clear that we cannot pre-negotiate an independence settlement and therefore contingency planning is not appropriate. It would muddy the debate at this stage.

Q216 Thomas Docherty: Forgive me, Secretary of State, but we were very clear in the Report. We do not see contingency planning as discussions with the Scottish Government. We see contingency planning as discussions within the Ministry of Defence. It is nothing to do with Mr Salmond or Mr Brown. This is purely about talking to the Service Chiefs and talking to Mr Ferguson, Mr McKane and Mr Thompson, to say "What do we then have to do?"

Mr Hammond: Making certain assumptions about what we think the priorities of Scottish Government would be in those circumstances.

Q217 Chair: We have made our point in our report and we look forward to getting your response to it.

Mr Hammond: We will respond, indeed, in due course.

Q218 Thomas Docherty: On the Pacific pivot, to use the phrase popular in the United States, what are the consequences for the United Kingdom of the US reorientation towards the Pacific?

Mr Hammond: As a prominent European NATO member we clearly are affected by the change in the balance of NATO focus. We are probably less affected than many of our continental European allies, because of the nature of our military and strategic relationship with the United States, but overall there is no doubt that the consequence of a US focus on the strategic challenges of the rise of China is that the European nations will have to do more for their own defence in the future.

That can be delivered in two ways, as I have said in countless speeches across different places in Europe. It can be delivered by European nations spending a greater proportion of their GDP on defence, which they should do but which, in the short term, they are not going to do, because they are all facing the same kind of fiscal pressures that we do; and it can be delivered by ensuring that the money that is spent on defence by the European NATO nations is spent in a way that delivers effective defence outputs. Not all, by any stretch of the imagination, of the collective defence budgets of European NATO is effectively spent on deployable military capability.

Q219 Thomas Docherty: Do you think, given our trading and historical links with the far east, that we should be in the next NSS and SDSR placing a greater emphasis on a mini-pivot to the Pacific, and, if so, what would be the consequences elsewhere?

Mr Hammond: We are not a Pacific power. The US is a Pacific power, of course. In purely military terms it would be difficult for us to pivot to the Pacific region, but in strategic terms there are things that we can do, and we are in the process of strengthening our engagement with countries such as Malaysia and Indonesia, countries with which we have the opportunity to deepen our strategic relationships, to leverage our long-established relationships with Australia, New Zealand, Canada-all Pacific nations with a Pacific focus. Actually, your raised eyebrows just confirmed the insularity of our view. We think of Canada as an Atlantic nation, but of course Canada is a Pacific nation as well.

We have excellent defence relationships and, indeed, intelligence relationships, with all of those countries, which can enhance our situational awareness in the Pacific, and that is something that we are doing. As part of our defence engagement strategy I met the new New Zealand high commissioner this morning, to talk about precisely this-how we can mutually benefit from New Zealand’s geographical position and our strategic capabilities, to improve our awareness of the Pacific as a theatre.

Q220 Thomas Docherty: You also said, taking it back slightly-and, by the way, you are absolutely right; I hadn’t really thought about Canada in that way before-that you expect that the US will look to us to take greater responsibility for our own defence. I think the US NSS actually says that Europe is now no longer a consumer of international security in the same way. It also goes on to expect us to take a greater role in both the Middle East and Africa, given the Pacific pivot. Is it built in to the working on the next SDSR and NSS that there is the expectation that the UK, perhaps in partnership with other leading European nations, will be taking a greater burden share on North Africa?

Mr Hammond: The North Africa, Middle East, Horn of Africa area is certainly an area of focus for bilateral joint operations, particularly with the French, but it is also an area for European NATO to consider as, if you like, a subset of an organisation. As you will be aware, there is a tension within European NATO about the relative focus that there should be on the defence of the NATO homeland against a currently non-existent but potential future threat from Russia versus the creation of expeditionary capabilities to forward defend Europe’s interests in areas such as the Middle East and North Africa. There is a healthy debate going on within NATO about that, and, as you would probably expect, the further away you get from the Russian-European border, the stronger the inclination towards expeditionary warfare becomes.

Q221 Chair: In the context of the Pacific, you have mentioned Indonesia, Malaysia, Australia, New Zealand, Canada and America, but recently the United Kingdom has signed a strategic dialogue with Japan. Would it be possible for you to write to the Committee please to set out the significance of that strategic dialogue and how it can be deepened and broadened over the coming years?

Mr Hammond: Indeed. I would be very happy to do that. Japan is a very important example of a significant pool of defence resource that is on the right side of most arguments but is generally not seen as being deployed to maximum effect at the moment. I think I am right in saying that Japan’s defence budget is only fractionally smaller than our own, although Japan’s defence contribution is not well understood or recognised by most people.

Edward Ferguson: It might also be of interest to you in the context of the SDSR focus of this inquiry that we have now initiated a strategic exchange with the Japanese. I was over in Tokyo swapping notes on our respective strategic planning processes not long ago, and they are coming over here shortly as well. We are starting that exchange across quite a broad spectrum, including on this particular area.

Q222 Penny Mordaunt: I have a number of questions regarding risk and planning processes. First, could you tell us what work the MoD does on assessment of risks between iterations of the national risk register?

Mr Hammond: It is updated every two years, so it is pretty much continuous.

Tom McKane: The Ministry of Defence continually reassesses risk in all its forms so it would be wrong to take away the impression that assessing and managing risk is something that we do once every couple of years. It is really central to our business. We are one of the Departments that take part in the National Security Risk Assessment. The first of those was completed in the National Security Strategy in 2010. The exercise was done again in 2012, and we expect that there will be another examination of it in the run-up to the next National Security Strategy.

Q223 Penny Mordaunt: I am thinking of things like emerging threats, or changes to leadership in particular countries that might have implications.

Tom McKane: There is a cross-Whitehall process, which is led by the Cabinet Office, of looking at where the risks of instability around the world are rising and where they are falling. It is a process that the Ministry of Defence, the Foreign Office, the Department for International Development and others all contribute to, so it is a continual process, which leads to advice being brought to the attention of the National Security Council, where the risks of instability in particular countries or regions appear to be changing substantially.

Q224 Penny Mordaunt: Is that done on a regular basis, or an ad hoc basis?

Tom McKane: It is on a regular, continuous basis.

Q225 Penny Mordaunt: So in terms of reports flagging issues that are coming up, how frequently does that happen? You say it is regular, so is it a set timetable?

Mr Hammond: It depends at what level you mean. Ministers receive daily intelligence reports, which in one sense are flagging emerging risks.

Q226 Penny Mordaunt: I was thinking of things that might lead you to change things in the SDSR-assumptions and, at a very top level, emerging threats and things that would change some of the parameters in the review.

Mr Hammond: Okay. The way I see this working is that we are collecting continuously, through our intelligence networks and by other means, a hopperful of things that might change our strategic thinking-inputs to the strategic review process. As we come to do the NSS, we will process them. Some of them need a little bit of time-when you first receive them, you think that you must react, but when you look at them again a month later, you think sometimes, "I’m glad I didn’t react immediately", after setting them in a broader context. There is a continuous stream of reporting and information-some open source, some classified-which builds a picture of friends, risks and threats, and that will inform the next iteration of the National Security Strategy. That is how I see it.

Edward Ferguson: Absolutely. To add to that, there is that sort of stuff, which is focused on the short to medium term-relatively near-term risks-but at the same time, particularly from an SDSR perspective, which is important, we have a much longer term horizon-scanning process. That is owned across Government now, and Jon Day, the chairman of the JIC, recently did a review of our horizon-scanning process across Government. He established a new set of structures to bring policy and horizon-scanning more closely together.

Q227 Penny Mordaunt: This is new?

Edward Ferguson: Yes. There is a new body at the top-end level, with a board chaired by the Cabinet Secretary, which tries to shape, direct and commission horizon-scanning product from the range of futures organisations around Government. Within defence, we have the Development, Concepts and Doctrine Centre up in Shrivenham, which produces something called Global Strategic Trends every five years. It is in the process of drawing that together now, and it will be published in April next year. That is a 30-year look. So as well as that quite short-term, responsive and reactive process through intelligence and through monitoring of countries at risk of instability, essentially, we also have a much longer-term lookout, which allows us to monitor where longer-term trends-climate change, demographic expansion and all those sorts of things-might lead us, which from a defence perspective is obviously important, because the timelines on many of our capabilities are some way away and we need to ensure that our future force structures will remain relevant to future challenges, as well as to the more imminent ones.

Q228 Penny Mordaunt: What changes have you had to make to the 2010 SDSR as a result of emerging threats?

Mr Hammond: I do not think that the kind of emerging threats that we are talking about create imminent, immediate changes in the design of our force structure or the requirements of military capabilities. I am struggling to think of something that has caused us to make an immediate, short-term plan.

Tom McKane: The only thing that I can think of is what you have decided to do on cyber, although that is already something that had been identified in 2010.

Mr Hammond: We have made an announcement about a decision to invest in offensive cyber, in order to create a deterrent capability by having a cyber counter-strike ability. We are also continuously planning our deployments of assets, such as naval assets, for example, on the basis of our understanding of the level of heat in different parts of the world and of the risks emerging-but that is operational decision making, which is constantly being retuned depending on what is happening in the world. The decisions about the type of capability we need to hold and the type of weapons systems we need to be buying or developing for the future are made over longer time horizons. The quinquennial SDSR is the appropriate time frame. You need to be able to see a strand of reporting or intelligence over a period of years before you start making multi-billion pound, sometimes multi-decade decisions to invest on the back of it.

Q229 Penny Mordaunt: How far ahead will the next review look?

Mr Hammond: It immediately considers our requirements from 2015 to 2020, but it will also look formally at the context beyond 2020.

Edward Ferguson: Yes. It is yet to be determined, to an extent, but in the previous review,-the national security risk assessment,- which we anticipate will be embedded again in the national security strategy-looks at five and 20 years, so a 20-year time horizon is essentially the right-hand end. In 2010, again, we talked about Future Force 2020 from a defence perspective, in terms of where we were building, as a waypoint towards our future capability. This time we will probably be looking more at Future Force 2025, so we are taking a 10-year rolling view of the force structure.

Q230 Penny Mordaunt: How do you find the balance between the long-term planning that you describe and the necessary flexibility to respond to random events?

Mr Hammond: The military is deeply ingenious and highly flexible. Obviously, in the short term you have to operate within the capabilities that you have. I have not yet come across a situation where the military has said, "We are not able to respond to this contingency." They might say, "We are going to have to respond to this contingency in a way that is sub-optimal or using a force structure that is not the ideal one that we would have in future." We can respond to things within our force structures. The question we have to ask ourselves is whether, if such a situation were to endure or if we can envisage a certain evolution of the strategic environment, the force structure is the one we would want to have at that point in the future. Are these the weapons systems on which we would want to rely? In that context, we are able to make more strategic decisions about the shape of our forces and the shape of our investment for the future.

Q231 Penny Mordaunt: As a supplementary to that, in the past we have raised concerns with you about things being done at too high a risk. Clearly, a lot of activity is going on in the Department to improve management, procurement and so on. As of today, are you confident that the systems are now in place in the Department that historically had not been in place to ensure that kit is available, and able to get to where you need to use it, in a scenario that we might face?

Mr Hammond: If I may, there is a slight misunderstanding about the way this is done, and I shared that misunderstanding until I came into the Department. Defence is about managing risk. There is always risk in delivering military effect. It is about quantifying, identifying, managing and being comfortable with that risk, and I think we are in a good place. We have some quite sophisticated risk-management tools. Risk is routinely managed in a formal sense in the Department. Risks are assessed, identified and managed. Registers of risks are properly kept, and at its monthly meeting the Defence Board at the very top of the structure regularly reviews reports of the risks that we are carrying and how we are managing them. It is not about how we get to a world with no risks; there will always be risks. It is about making sure that we have proper systems in place to capture and manage those risks, and that we have a proper understanding of what those risks are and how they impact on the decisions that we make. Obviously, as we invest in capabilities, we would expect to see risks reducing in certain areas. Since I have been in the Department, which is almost exactly two years now, that is certainly what I have seen-reds turning to ambers and ambers turning to greens on the risk register that we regularly review.

Q232 Penny Mordaunt: My final question: how do you deal with risks that you can identify, but that are not susceptible to deterrence? Again, there is a wide spectrum-space weather might be an example, or an irrational political leadership.

Mr Hammond: That is a threat. Risks include threats, but they also include risks that we are carrying within our equipment programme or within our manning balance, for example. In terms of externally delivered threats-risks such as space weather events-we are obviously aware of a range of risks that we face in that area. There are resilience strategies that can be put in place, and which are engineered into equipment and processes not only, in the case of space weather events, to make the equipment more resistant to the impact, but also in terms of planning contingency, should we be impacted by such an event and should there be a catastrophic system failure as a consequence.

Q233 Ms Stuart: I have a quick question. When Her Majesty the Queen went to the LSE she said, in reference to the banking crisis, "Why did none of you see this coming?" The answer was, "Because we all understood only a bit of our system and had lost sight of what the whole system amounted to." In the light of new developments, such as cyber-security, that you are addressing, where is that "holding together" bit, where you see things coming in the light of various bits changing? Who is holding the threads?

Tom McKane: There are several answers to that. It comes back to bringing together a whole-of-Government view of the threats, so it is partly-

Q234 Ms Stuart: No, you misunderstand me. It is all of the existing threats as you understand them, and then the threads of the threats coming together, but who needs to spot that the sum of the individual bits is suddenly something other than what you thought it was? That is what we had with the banking crisis: they all understood the bits, and suddenly there was the most unholy of storms.

Tom McKane: I still think the way in which you try to make sure that you understand the overall impact of a series of different risks or threats is by trying to draw together the resources of the whole of Government in order to make sure that the picture that you have in your mind of the threats that you face is as rounded and complete as possible. The way we work is that the Cabinet Office, drawing on the resources of other Departments, brings it to the attention of the National Security Council.

Mr Hammond: We have in Shrivenham a capability to act, as it were, as an in-house think-tank-

Mr Brazier: I am sorry, I did not hear that.

Mr Hammond: We have an in-house think-tank in Shrivenham, in the Defence Development, Concepts and Doctrine Centre, which thinks outside the bubble-a lateral-thinking process. Sometimes, people at one remove from day-to-day operational activity are able to see some of these bigger trends developing. There is a process by which papers are produced, and thought processes are kicked off across defence on a quite cerebral basis. It really is quite a sort of think-tank operation.

There are various things across Government. For example, you mentioned cyber, and we have the centre for-

Tom McKane: Centre for the Protection of National Infrastructure.

Mr Hammond: Yes, where the impacts of cyber issues and cyber attacks on the broader national infrastructure are worked through, so that the vulnerabilities of utilities and other services that might be impacted by an attack on critical networks can be worked through and defensive strategies put in place. We have a number of mechanisms across Government that can absorb developments in one area and translate them into potential effects in other areas.

Q235 Mr Holloway: To continue Gisela’s point, if we look at the Arab Spring, we have got radically different policies towards different countries. We are selling arms to some, we are arming others, we are threatening to bomb others and we are bombing others. Who, in answer to her question, has a joined-up view of what our strategy is and what our policy is towards the Arab Spring?

Mr Hammond: That is clearly the responsibility of the National Security Council, and it regularly looks both at an operational and tactical level at individual countries and the challenges there, and at a more strategic level at an issue like "the Arab Spring" and how it impacts us more broadly.

Q236 Mr Holloway: Bringing it down a level, the Permanent Secretary told us that he has responsibility for organisational strategy in the MoD and that the CDS has that for military strategy, obviously under you. How does that work in practice?

Mr Hammond: Very well.

Mr Holloway: Excellent.

Mr Hammond: If I am honest, I came into defence with warnings about non-collegiate behaviour, and I have largely found very good collegiate behaviour and very good relationships between the current senior civilian management and the current senior military management. There is an approach where in many areas things are done jointly. There are lots of committees that have military and civilian people on them and have joint decision making. At a practical level and in terms of the personal relationship involved, we have got a team at the top of defence, both civilian and military, that works together seamlessly. Whether or not someone is in uniform-most of the military people do not wear uniforms most of the time in the MoD-it works pretty well together and there is a collegiate atmosphere. I have not found very much at all of the behaviour that I might characterise as the caricature of what the MoD would be like.

Q237 Mr Holloway: What about competition between the services? Is it only on the rugby pitch?

Mr Hammond: There is an important balance to be struck. Having a combative and competitive streak is probably a positive thing in military service and we certainly want to maintain an appropriate level of competition. The emphasis that is placed on joint effect, and the clear understanding that a commitment to joint working and collaboration is a precondition for holding a senior role in any of the services, or in the joint forces area, have changed behaviours. When you talk to relatively senior officers-those just below the top cohort-the difficulty of identifying after 20 minutes of conversation whether you are talking to a soldier, a sailor or an airman, if they are in civvies and you do not know them, is very striking.

Q238 Mr Holloway: What difference has the Defence Strategy Group made?

Mr Hammond: The Defence Strategy Group is focused specifically on the preparations for SDSR 2015. Do you want to talk about that, Edward since it is your baby?

Edward Ferguson: Yes. It plays back to the first question. We shared with the Committee a paper I wrote, which is one of the first papers that the Defence Strategy Group took up. It is called "Organising Defence’s Contribution to National Strategy" and it set out how we try to-the DSG is really where this happens-fuse together the corporate strategy function that the PUS owns with the military strategy function that the Chief of the Defence Staff owns, along with the politico-military strategy function, which is the exertion of influence that is jointly owned between them, into something called defence strategy. That comes together in that group, which they jointly chair. That is important, because it is a forum where we can do the fusion of ends, ways and means, and it brings together the people who are capable of doing that. The discussions there have worked pretty well.

Q239 Mrs Moon: Secretary of State, I want to ask you a few process-orientated questions. How and when will outside influences be brought in to influence the next SDSR and to give their insight?

Mr Hammond: I cannot tell you either how or when, because, as the National Security Adviser has already told you, we have not defined the process yet. That is a Cabinet Office lead. He has indicated that he will be putting advice to the Prime Minister at the end of the year. I assume that that will include advice about the process for inclusion of cross-party political views and views from beyond the political bubble, which I would very much welcome.

Q240 Mrs Moon: So you are also not able to tell us when a Green Paper on this will be published?

Mr Hammond: I am not able to tell you when or whether a Green Paper will be published, I am afraid. As the National Security Adviser has told you, that is an issue that the Prime Minister will decide in due course, before the process kicks off. Do you want to add to that?

Edward Ferguson: I was only going to add that that is absolutely right, in that the broader cross-Government approach-the engagement approach-is yet to be determined. In the Ministry of Defence and within the early preparatory work that we have been talking about, we have been doing quite a lot of outreach and external engagement. We have run a number of conferences-most recently, at the Royal College of Defence Studies, with about 80 experts from industry, academia and other areas coming to talk about the implications of technology change, for example. One of your advisers came to a session we did on the Arctic and the Antarctic. So we are engaging pretty broadly on the subjects that we have been putting to the defence strategy group. We have been trying to make sure that we bring in a cross-section of views, but again, this is really just the in-house Ministry of Defence work. What we need to do is make sure that that fits neatly into the cross-Government piece when that becomes clearer.

Q241 Mrs Moon: Will you have a red team, and if so, who?

Edward Ferguson: The red teaming, as a function, is owned, again, by the DCDC in Shrivenham, which we have talked about a few times. What we are trying to do, in the way that we are thinking our way into the SDSR in process terms, is make sure that challenge is built into the process at an early stage. Indeed, my team has been arranging for red-teaming training to be given to more staff in the head office, so that we can get better at this. The first training session is happening shortly. We think that challenge is important, and that red teaming is important. DCDC is the centre of excellence, knowledge and expertise, and we will use them, but we will also seek to enhance our ability to challenge ourselves.

Q242 Chair: Could you bring the concept of red teaming more to the fore in the Department, run by the National Security Adviser, please?

Edward Ferguson: I will see what I can do.

Mr Brazier: Just a quick one. I was very encouraged to hear about the technology conference. I recommend that you have two-one with opinion pollsters and the other with lawyers, because between public opinion and what is going on in the courts, which we will be dealing with in another study, there is a real danger that we may end up unable to use this structure.

Q243 Ms Stuart: You mentioned a number of times that cross-party consensus is important. When do you intend to meet the new shadow Defence Secretary, Vernon Coaker?

Mr Hammond: I met him last night.

Ms Stuart: Officially?

Mr Hammond: It depends what you mean by "official". We sat in my office and talked through matters of defence.

Q244 Ms Stuart: Did you set a date for meeting again?

Mr Hammond: No. I have told him that my door is open. We can meet as often as he wants us to meet, and he has accepted my offer of an induction briefing from Ministry of Defence and military officials.

Ms Stuart: Thank you. Good.

Q245 Chair: My final question is on the Defence and Security Review that you are carrying out. How do you train people so that they have the necessary intellectual tools to carry out such a review?

Mr Hammond: Do you want to answer that, seeing as your team is responsible?

Edward Ferguson: As it happens, the Department has very kindly been supporting me through a master’s course at the LSE in strategy, which I have just completed. A number of other staff are going through that as well, including in the Cabinet Office and in the National Security Secretariat, where at least two staff have completed that course. So we are investing in some of those skills. The majority of my team are military and have been through the advanced command and staff course, which obviously includes an element of strategic training. I have now taken on a role lecturing it on an annual basis on strategy. They are trying to boost the strategic content of that course going forward.

We invest in routine training more broadly. We have good access, through the Ministry of Defence, to a range of opportunities to go to the think tanks and see what is going on. There are always things going on which we can draw on and learn from. We try to get out and about and away from our desks as much as possible, and to engage as widely as we can to build our network, so that we are not just talking among ourselves but drawing on a vast range of expertise. My team is relatively small. We certainly cannot do it all ourselves, so we need to draw on as much external expertise as we can, and we try to do that.

Q246 Chair: Are you able to say how many of the MoD people working on the review have strategy-related qualifications?

Edward Ferguson: I couldn’t tell you how many have a degree or some formal qualification with the word "strategy" in it.

Q247 Thomas Docherty: One quick question about co-operation. How much co-operation are you expecting to have with the United States as you prepare your NSS, and how much will you learn from each other? They are about to go through the same process.

Mr Hammond: Good question.

Edward Ferguson: Shall I start? I am pleased to say that I have pretty strong links into the office of the Secretary of Defence for Strategy and to my equivalent there, Dan Chiu, who is essentially running the quadrennial defence review. We meet and talk reasonably regularly. I have an American exchange officer embedded in my team, and we have a British exchange officer embedded in his team, so those links are pretty good.

I am pleased also to have a French exchange officer embedded in my team, which is a relatively new thing and really helpful. We also have a good and growing relationship with the Délégation aux Affaires Stratégiques in France, which is now taking on a central role in the strategic development and international relations piece within the French system.

So we are pretty well plugged in. We are seeking to engage with and help inform their quadrennial defence review, and we will seek to learn from their experience when they have been through it and to feed that back into our own process.

Mr Hammond: This is very important. If we are going to work closely with allies in future-principally the US and France-it is clearly vital that we have a similar strategic view of the world. As you will know, the British ambassador to France participated in the French Livre Blanc process, and we discovered, not to our surprise but to our great pleasure, that the French strategic analysis is almost identical to our own, which bodes extremely well for our ability to co-operate in future to develop joint approaches to challenges in the world and joint force responses.

Q248 Thomas Docherty: When we met your embedded personnel in the Pentagon earlier this year, we were all very impressed. My final question is this. Would you therefore expect the US and the French to be positive and confident in coming forward and saying, "We think these are the things you should concentrate on in your SDSR"? Would you welcome them coming forward proactively?

Mr Hammond: We would want to have a high level of communication with both the French and the Americans, and possibly others. The format in which we do that is something that the Prime Minister would have to decide. In terms of how they would make their contributions, I suspect they would want to take a leaf out of the book of Sir Peter Ricketts, the British ambassador to France, who, I am sure, made all his suggestions in the gentlest possible way.

Thomas Docherty: Like we do.

Mr Hammond: Exactly.

Chair: We will now bring this evidence session, although not the meeting of the Committee, to an end. Thank you very much. It has been extremely lively, interesting and helpful.

Mr Hammond: As long as you don’t say "illuminating", Chairman. Whenever I give evidence and the Chairman says it has been illuminating, that usually means trouble ahead.