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 progress in developing Carrier Strike and the steps it still needs to take to achieve its full operating capabilities and deliver value for money from its investment to date.
2.The Department told us that Carrier Strike provides an immensely flexible capability able to undertake a range of military tasks and is central to the government’s ambition to be able to respond at short notice to conflicts and humanitarian relief efforts anywhere in the world. It is based around two Queen Elizabeth Class aircraft carriers, Lightning II jets and a new radar system called Crowsnest. The deployment of a carrier strike group will involve a significant proportion of the Navy’s fleet, including destroyers and frigates, and is dependent on auxiliary ships to support and resupply the carriers.
3.As at October 2020, the Department had built two new aircraft carriers, brought 18 Lightning II jets into service and completed the infrastructure works to berth the carriers in Portsmouth and operate the jets from RAF Marham. It said it is very likely to declare initial operating capability for Carrier Strike in December 2020 and will undertake its first operational deployment in 2021 with the US Marine Corps. The Department will then work towards full operating capability by 2023, at which point it will be able to support two UK Lightning squadrons (up to 24 jets) from one of the carriers. Its longer-term aim is that by 2026 the carriers can undertake a wide range of air operations and support amphibious operations worldwide, which it calls Carrier Enabled Power Projection.
4.The aircraft carriers are the largest warships ever built in the UK and have been in development since 2007. The Department accepted HMS Queen Elizabeth into service in February 2018 and HMS Prince of Wales in March 2020. As at April 2020, it forecast a final construction cost of £6.4 billion for the carriers, an increase of £0.2 billion (3%) from the revised budget of £6.2 billion agreed in 2013. The level of outstanding works was in line with the Department’s expectations.
5.The Department attributed its success in delivering such a complex project on this timeline and for this amount to a change of approach in 2013. It told us that the traditional contractual model of relying on a competitive market to deliver value for money had not been working. In response, it created the Aircraft Carrier Alliance, which was a partnership with its main contractors—BAE, Babcock and Thales. The Department explained that this had enabled it to align its interests with those of its contractors, establish a closer, more constructive working relationship, and focus resources more directly on addressing the project risks. The Department said it had also set clearer expectations and accountabilities, shared information on progress towards the programme’s milestones and implemented pain-share and gain-share mechanisms. For example, it had included a 50:50 pain-share agreement on cost increases above a target price and reviewed contract expenditure regularly.
6.The Department told us it had already applied the lessons from the carriers’ project to other defence contracts and had replicated this approach when it created the Dreadnought Alliance. It said that, despite it being considerably more complicated to build a nuclear submarine than an aircraft carrier, it had already seen the benefits of a more mature working relationship. The Department suggested that the reality of the defence sector—in which there are monopoly suppliers—meant that instead of always trying to replicate the functioning of a competitive market, different contractual models were sometimes needed to get best value.
7.The government is re-assessing its defence priorities in the Integrated Review of Security, Defence, Development and Foreign Policy (the Review), which, when we took evidence at the end of September, the Department expected would be published in November 2020. As part of the Review, government will re-assess its ambition for Carrier Strike. The Department acknowledged that any changes to this ambition, including how the carriers will be used and their deployment patterns, will affect the extent and type of supporting capabilities required, and the level of future investment needed. For example, the 2015 Strategic Defence and Security Review changed the policy ambition from deploying both carriers at the same time to having only one out at a time, with the other in dock. This reduced the number of operational squadrons required. The Department emphasised, however, that even without a full complement of planes or ships to support it, Carrier Strike would still be able to undertake a variety of tasks, from war fighting to humanitarian assistance, and that this would project Britain’s power in the world.
8.The Department told us that a key factor in its thinking going into the Review had been to ensure Carrier Strike has appropriate support to operate on a global scale. It said that the Prime Minister has given it a clear instruction that he expects defence to be actively deployed in a greater number of situations around the world to promote British values, and that Carrier Strike would be an important part of that. However, we remain very frustrated that the Department has been left with an overall budget that is under significant pressure and an equipment programme that is unaffordable because of the government’s continued delays in conducting a strategic review of funding.
9.The Department assured us that Carrier Strike remains a vital component of the UK’s military capability and power, and that it is working hard to ensure that its plans are fully understood in No10, the Cabinet Office and HM Treasury. However, it explained that any changes to the role and use of Carrier Strike, including the extent of co-operation with allies, will affect the supporting capabilities that it needs and the future size of the Royal Navy’s fleet. Carrier Strike’s first operational deployment in 2021 is with the US Marine Corps, when it will endeavour to learn from their longer experience of deploying this type of aircraft on carriers. The Department told us that developing the ability to work with allies was vital in deterring aggression around the world. However, it assured us it was committed to building Carrier Strike’s capabilities so that it could operate as a sovereign capability able to deploy up to 24 UK Lightning II jets by December 2023, and that it would maintain and develop those capabilities well into the 2050s.
10.In 2018, this Committee recommended that the Department develop more detailed estimates of the costs of supporting and operating Carrier Strike. This is even more important now given the pressure on the defence budget, as illustrated by funding shortfalls of up to £13 billion on the Department’s Equipment Plan. The Department expressed its hope that the Review will result in a more balanced, affordable equipment programme.
11.Support costs include the cost of maintaining, repairing and upgrading equipment. Operating costs include items like fuel, port fees and stock. The Department is developing its understanding of the requirements of a carrier strike group when on deployment, and believes that its cost estimates are beginning to mature. It has used the sea trials to improve its understanding of what it takes to operate Carrier Strike, and collect more information on the associated costs. However, the Department told us that these trials are not representative of routine operations and that it would not develop a fuller understanding of future support and operating costs until 2022. The first operational deployment in 2021 will therefore provide the Department with a crucial opportunity to understand what operating a carrier strike group costs.
12.The Department assured us that it did not have major concerns over its budget for sustaining a carrier strike group and that it could place the support contracts it needs. However, it admitted that it does not yet fully understand the maintenance requirements and told us that the budget for spare parts is tight. The Department acknowledged that it has not prioritised investment in support activities—including spares and weapons stockpiles—in the way that it should have done. This has meant that maintenance periods for the carriers have occasionally been delayed. The Comptroller and Auditor General identified examples where the Department had scaled back investment on support activities on affordability grounds, such as postponing the purchase of a second Lightning II spares pack. As a result, there is a risk that the Department may not have sufficient provision in later years’ budgets to reflect the full costs of operating Carrier Strike. The Department acknowledged that it must make sure it had appropriate support to operate Carrier Strike on a global scale and meet the Government’s aims.
1 Report by the Comptroller and Auditor General, Carrier Strike – Preparing for deployment, Session 2019–2021, HC 374, 26 June 2020
2 Q 19; C&AG’s Report, paras 1–2
3 Q 59; C&AG’s Report, para 3
4 Q 15; C&AG’s Report, para 1.2
5 C&AG’s Report, para 1.9
6 C&AG’s Report, para 1.9 and 1.11
7 Qq 13,15
8 C&AG’s Report, para 1.9
9 Qq 13, 15
10 C&AG’s Report para 1.12
11 Qq 13–14
12 Q 14
13 Q 6
14 Q 49
15 Q 49
16 Qq 50–51
17 Q 76
18 Q 77
19 Qq 6, 58, 75
20 Qq 6, 17, 72
21 Q 17
22 Q 20
23 Qq 19–21
24 HC Committee of Public Accounts, Delivering Carrier Strike, Fourteenth Report of Session 2017–2019, HC 394, January 2018
25 Q 75; Comptroller and Auditor General: Ministry of Defence: The Equipment Plan 2019 to 2029, Session 2019–20, HC 111, National Audit Office, February 2020
26 Q 75
27 C&AG’s Report, paras 3.15and 3.16
28 C&AG’s Report, para 15
29 Letter from Stephen Lovegrove, 20 August 2020
30 Qq 69, 70
31 Q 74
32 Qq 69, 76
33 Qq 16, 76
34 Q76, C&AG’s Report para 3.7
35 C&AG’s Report para 16
36 Q 76
Published: 13 November 2020