1Understanding the causes and consequences of shortfalls
1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Defence (the Department) on its understanding of the causes and consequences of the skill shortages in the Armed Forces, and its approach to attracting and retaining the skills that it needs.1
2.The Department is responsible for delivering the government’s defence objectives, set out most recently in the 2015 Strategic Defence and Security Review. The Review set targets to maintain the number of regulars in the Army and to make small increases in the size of the Royal Navy and Royal Air Force. However, as at January 2018, the Armed Forces had 137,300 trained regulars, 5.7% (or 8,200) below its requirement. Shortfalls have persisted for some years and the Department does not expect to close them until 2022 at the earliest. The aggregate headcount figure masks much more significant shortfalls in the number of regulars with certain critical skills, including a 23% shortfall in pilot trades; a 26% shortfall in intelligence analyst trades; and a 17% shortfall in engineers.2
3.In 2016–17 the Department spent £9.6 billion of its defence budget on military personnel (27%). It forecasts this will rise to £10.3 billion by 2020–21. At the same time, the Department faces significant financial pressures; for example, it needs to find savings of at least £8.1 billion on its Equipment Plan by 2027 and has a minimum shortfall of £8.5 billion over the next 30 years on the defence estate. It therefore faces a significant challenge in developing the skilled personnel it needs to meet the future ambitions for the Armed Forces and exploit its investment in new equipment.3
Identifying the changing skill requirements
4.In January 2018, the shortfall in the number of regulars in the Armed Forces was the largest in percentage terms since 2010. There are 22 trades in which shortfalls could have a detrimental impact on operations if the Commands were not regularly placing additional demands on regulars to maintain operations.4 The Department assured us that the skill gaps have not affected its operational capability.5 It has prioritised defence operations and moved personnel between roles as necessary; for example, some pilots have returned from staff jobs to squadrons engaged in active operations.6 The Department acknowledged, however, that it has to make choices, and that the skill shortages can at times affect its ability to undertake activities such as training.7
5.As part of the Modernising Defence Programme review currently underway, the Department is assessing the changing demands of modern warfare and the need to enhance its capabilities.8 We asked the Department how it was assessing its ability to attract the new skills it requires, particularly in specialist areas. It acknowledged the difficulties of attracting more people with, for example, cyber skills.9 It is retraining personnel already in the Armed Forces, as well as considering the best way to recruit new people with these skills.10 The Department told us that it had the flexibility it needed to pay an appropriate rate, and there were other reasons, such as the nature of its work, which influenced the willingness of some people to join the Armed Forces.11
6.The National Audit Office found that the demand for new skills is likely to add to pressures in trades which already have shortfalls. For example, in April 2017, the Department had 11 ‘pinch points’ (trades where there are not enough trained regulars to perform operational tasks without taking mitigating action) across the intelligence analyst trades, with a shortfall of 26% of the required number of regulars.12 We asked the Department how it was responding to the increasing competition for specialist skills. It recognised the changing demands and the need to move quickly to keep pace with changes in technology. The Permanent Secretary said he had not met any senior military officers who did not understand the challenges, but changing the culture of their organisations would not happen without concerted leadership. The Chief of Defence People said it would also take time to develop appropriate policies and secure funds.13 However, the Department has not undertaken a longer-term strategic analysis of the trades with shortfalls or its ability to meet the changing demands for new skills. And it has not systematically assessed whether its existing policies and structures will enable it to attract and develop the skills it needs in the future, or developed a strategy to address the shortages.14
7.Around 30% of the Armed Forces are engineers and technicians, and the Department competes with industry for engineering skills, which are in short supply. Because of this, the Government more generally has recognised the need to encourage young people to study science, technology, engineering and mathematics (STEM) subjects.15 We recently reported on the efforts of the Department for Education and the Department for Business Energy & Industrial Strategy to improve the supply of STEM skills in the workforce.16 Although the Department is involved in youth engagement, and in forming closer links with universities, we were surprised that the Department told us in oral evidence that it had not assessed the impact of leaving the European Union on its ability to recruit and retain the skills it needs. The Department subsequently wrote and informed us that a working level assessment had been undertaken of the potential impact of Brexit on Armed Forces recruitment and retention. The assessment concluded that whilst Brexit was unlikely to have a direct impact on military recruitment because of nationality requirements, it could indirectly affect Armed Forces’ recruitment and retention if it increased demand for scarce skills in the UK.17
Making informed investment decisions
8.We asked the Department whether it had sufficient funding to close the shortfall of regulars. It told us that it faces a tight financial position and must make trade-offs within the £36 billion a year defence budget to deliver the operational capability that it requires.18 For example, in considering the case for a pay increase for personnel, the Department will assess the adjustments needed elsewhere in its budget against factors such as the morale of the Forces and the potential impact on the recruitment and retention of personnel.19 However, the Department’s 2017 survey of regulars showed that satisfaction with pay and pension benefits was at an all-time low.20
9.Under the Department’s delegated model, the Commands can make choices over the use of their workforce budgets—including funding for pay, recruitment and training—to deliver agreed defence tasks.21 The Defence Board monitors Commands’ expenditure and performance each month, and considers the risks across defence operations. Commands are required to operate within their budgets, balancing areas of over-spend and under-spend. However, in 2017–18, the Commands did not spend £261 million of funding that was originally allocated for personnel. We asked specifically what else these funds had been spent on but the Department was unable to tell us how it had been re-allocated.22 We were concerned that, without a clear view on the use of this funding, the Department is not able to assess the value-for-money of investment decisions made to address skills gaps; for example, the rationale for spending more on recruitment or training regulars. The Department accepted the need to improve its financial management, and is seeking to strengthen the role of its Head Office in this area.23
Understanding the causes of skill gaps
10.In April 2017, the Department identified 102 trade groups in which it had insufficient trained regulars to perform operational tasks without taking mitigating actions. These are known as ‘pinch points’. Between them, these trades had a shortfall of 7,700 regulars, 18% below the required number. As a result, the Commands have regularly cancelled leave or training to maintain operations.24 Half of the pinch points are in senior ranks and it takes the Armed Forces many years to develop the experienced military personnel they need.25
11.The shortfalls result from a combination of lower than expected recruitment, and the rate at which regulars leave the Armed Forces.26 The Commands have missed their recruitment targets for the last three years. In September 2017, the Army was 31% below its target, the Navy 16% below and the RAF 8% below.27 The proportion of people leaving the Armed Forces voluntarily has increased from 3.8% in March 2010 to 5.6% in December 2017. The level of ‘voluntary outflow’ in some of the pinch-point trades was much higher, with the figure above 15% in five of the trades.28 The numbers of personnel leaving can be affected by the availability of external job opportunities, and the Department told us it felt that it was doing well to restrict outflow to this level, given the strength of the economy.29 The retention of regulars is, though, also affected by their satisfaction with their terms and conditions. The Department’s survey of Armed Forces personnel in 2017 showed that satisfaction with pay, service life and accommodation had all declined since 2010 and were at their lowest recorded levels.30 In addition, 67% of regulars rated morale as ‘low’in 2018, compared with 33% in 2010.31
12.The Department told us that the low unemployment rate for 16–24 year olds and the increasing number of people staying in full-time education has reduced the size of the pool from which the Armed Forces traditionally recruit. The changing expectations among younger people about their careers can also make them less willing to commit to a life in the Armed Forces. There are also national skill shortages in some trades from which the Department is seeking to recruit, such as engineering.32
13.The Department understands the types of skills where it has shortages.33 It also collects data to understand the causes of shortfalls, and why people want to join or leave the Armed Forces, including through exit interviews and its annual Armed Forces Continuous Attitude Survey. It draws on this data to make policy decisions and design change programmes to drive improvements in the recruitment and retention of regulars. However, the Department accepted that much of this data is of a general nature and it needs to improve its data analysis, including that related to the particular challenges around specialist skills.34 It also told us that it needed to consolidate data from the Commands and make greater use of data analytics to assess future skill shortages.35 It aims to ensure its Head Office has the ability to identify and respond quickly to address cross-Command capability and recruitment problems.36
1 C&AG’s Report, Ensuring sufficient skilled military personnel, Session 2017–19, HC 947, 18 April 2018
2 C&AG’s Report, paras 1, 2, 2.5
3 C&AG’s Report, para 3
4 C&AG’s Report, paras 12, 1.8
5 Qq 42, 44
6 Q 112
7 Q 44
8 Q 58; C&AG’s Report, para 2.8
9 Qq 58–60
10 Q 61
11 Qq 35, 59
12 C&AG’s Report, para 11
13 Qq 151–153
14 C&AG’s Report, para 14
15 C&AG’s Report, Figure 19
16 Committee of Public Accounts, Delivering STEM skills for the economy, Session 2017–19, HC 691, 22 June 2018
17 Qq 37–41; 130; Letter from Stephen Lovegrove, 15 June 2018
18 Q 74
19 Q 2
20 C&AG’s Report, para 3.9
21 C&AG’s Report, para 3.10
22 Qq 76–79, 81
23 Qq 81; 83–85
24 C&AG’s Report, paras 2.2–2.4, 2.15
25 Q 104
26 Q 15; C&AG’s Report, para 2.10
27 C&AG’s Report, para 16, 2.10
28 Q 103; C&AG’s Report, Paras 1.10, 3.14
29 Q103
30 C&AG’s Report, Figure 16
31 C&AG’s Report, para 2.18 and UK Armed Forces Continuous Attidtude Survey Results, published 24 May 2018
32 Qq 15, 108
33 Q 25
34 Qq 51–52
35 Q 25, 52
36 Q 53
Published: 12 September 2018