Examination of Witnesses (Questions 20-39)
Mr Andrew Mathewson, Professor Phil Sutton and Captain
Richard Stokes
29 NOVEMBER 2007
Q20 Lord Anderson of Swansea: We
helped to write the remit.
Mr Mathewson: Yes, indeed.
Q21 Lord Anderson of Swansea: Including
a very close link with ESDP.
Mr Mathewson: Yes, indeed.
Q22 Lord Anderson of Swansea: Have
we gone back on that?
Mr Mathewson: No, I do not think we have. I
think we are true to the remit. We see this as primarily an agency
which identifies where countries can work together, which has
a limited operational budget to spend on studies, to help countries
find where they can work together.
Q23 Lord Anderson of Swansea: Do
we measure success by the extent to which we have reduced the
budget?
Mr Mathewson: No, but I would fear that there
are some on the other side who measure success by the extent to
which they have been able to increase the budget.
Q24 Lord Anderson of Swansea: Is
there a fundamental difference in perspective between ourselves
and the French—as I have quoted the former French Defence
Minister—in that they put the emphasis on armaments whereas
we put the emphasis on capability?
Mr Mathewson: There is a difference. I think
we see this as about developing capability. You do hear French
Ministers—I certainly remember hearing Madame Alliot-Marie
speak in terms of industrial policy. We do not see the EDA as
an agent of industrial policy, but there are clearly some in France
who have seen it in that way. There are clearly some in France
who see the EDA as an aspect of building Europe and will speak
about it in those terms and are prepared to invest in it as an
aspect of building Europe at levels above which we think are justified
by the capability development requirements of the agency. So we
have, I think, an approach which is driven by value for money.
The question for us is, is investing money through the agency
going to help us develop a British capability? France has an approach
which I think is more inclined to invest in Europe as an approach
to developing the general level of European capability.
Q25 Lord Anderson of Swansea: And
we are one of the big players—
Mr Mathewson: Indeed we are.
Q26 Lord Anderson of Swansea: ...
in terms of investment in R & T and so on. To what extent
are we isolated or do we bring with us a number of other participating
countries?
Mr Mathewson: The current Chief Executive in
recent commenting on the budget characterised it as 25 against
one. I think he misleads his audience if he talks in those terms.
There is a group of countries who have similar views to us.
Q27 Lord Anderson of Swansea: Nevertheless,
as far as I am aware it has not been said of others that relations
have soured, nor have the former Chief Executive and indeed the
former Director of Science and Technology at the Ministry of Defence
shown concern. Have those views expressed been elsewhere in respect
of this minimalist position which we adopt? Are we basically on
our own?
Mr Mathewson: My Lord, I do not think we are
basically on our own. I think we attract particular attention
because of our significance. We are the biggest investor in defence
R & T in Europe, I think, and clearly because of the scale
of our investment in defence capability and in defence R &
T their frustrations with the UK, if such they are, assume a level
of significance which they might not in respect of other countries.
Chairman: Lord Crickhowell and then Lord Hannay.
Q28 Lord Crickhowell: Can I follow
up on this? We are in a rather surprising position in this Committee.
Lord Tomlinson, who is no longer a Member, at most of our meetings
would raise questions about whether the budgets were excessive
and the lack of information about budgets. I must say that I am
left a bit puzzled, having read the two letters from the Secretary
of State, one dated 11 November and the latest of 26 November.
I would find it helpful to get a clearer picture than I have of
the general scale of the budget. Here we are objecting to what
is proposed for the budget and we now know, following up the point
that Lord Anderson made, that our position was not shared by all
Member States. It would be nice to know exactly what that means.
Therefore, discussions were only able to go on the budget for
2008 and the Secretary of State said that he negotiated an agreement
of €20 million for the force functioning budget on the basis
of only two new staff, not the six requested, and €6 million
for the operational budget of which €1 million frozen, and
so on. The incoming President, on the particular issue of controlled
UAVs and so on, supported us, but I must say that compared with
the normal numbers one hears in any defence context—indeed
almost for any organisation—to a newcomer to this
game who knows absolutely nothing about it these do seem the sort
of tiny numbers which would get lost in almost any set of figures
produced in any Ministry of Defence, or indeed almost any other
departmental budget—they would disappear amid the decimal
points. Can you give us a clearer picture of what is the overall
cost and what we are getting for it and why we are making such
a fuss about whether there are two or three more staff? This seems
to me to be very unlike the normal approach to providing an effective
defence operation. Explain, please.
Mr Mathewson: Gladly. There are two dimensions
to this, I am afraid. The Agency normally tries to set a three-year
financial framework, looking three years ahead, and that is the
basis on which each year's annual budget is set. This year, as
we did the last two years, we failed to set the three-year financial
framework. I would say that the reason for that is the Agency's
inclusion in their projected budget over three years of this novel
device of asking for €10 million for—the term is "earmarked
funds", but they were unable to tell us what the funds were
earmarked for. We and several other countries regarded this as
an extension of the budget by stealth; that this device is supposed
to be used only for a specific project, and we regarded it as
rather improper to ask for money in the three-year framework for
a particular project when in fact there was no particular project
and it was a general contingency that they would expect to call
on later. So we again failed to set the three-year financial framework
and the Council of Ministers last week therefore again looked
at setting the budget on an annual basis. There are three elements
of the budget. The first element is the functioning budget, that
which pays for its staff, its rent, its rates, its heat and light,
and that was set at €20 million for the year 2008. Within
that there was a discussion about how many additional staff the
Agency required. The Agency asked for six additional staff; we
saw no justification for increasing by six additional staff. We
were eventually persuaded to compromise at two additional staff.
I think there are those, as I mentioned earlier, who do see constant
staff and budget growth as a measure of the Agency's vitality
and we simply do not see that as a measure of the Agency's vitality.
The second element of the budget is the operational budget, i.e.
that element of the budget which is available to the Agency to
spend on studies, technical examinations and the like. We agreed
that that budget would be €5 million with the option of a
further one million justified at the midpoint of the year. I agree
with you small sums, but these are all small sums which have to
come from someone's budget in the MOD and they are small sums
which would not be available to that person to spend on capability
through another route in the MOD. So there are always opportunity
costs, even for small sums. The third element of the budget this
year was this novel introduction of using earmarked funds and
they asked us for €8 million next year for a project to examine
the EDA's role in inserting UAVs—Unmanned Aerial Vehicles—into
controlled airspace, and we regard this as a very serious priority
indeed; it will be a real step forward if we can have UAVs flying
in controlled airspace. We are not yet clear what the Agency's
role in that might be; we think it is more likely to be in the
area of certification, standards, regulation than in the area
of technical examination, and we agreed to allow them to plan
on €6 million for that if they come to us during the course
of the year with a convincing business case as to why the Agency
can spend this money wisely. The overall point is that these are
small sums of money but these are small sums of money, all of
which have an opportunity cost and the Agency needs to work with
us to identify how it can add value to what we are doing because
that is the way to persuade us to invest, rather than running
the argument that this is about building European capability or
building Europe.
Chairman: Lord Hannay.
Q29 Lord Hannay of Chiswick: Firstly,
could I follow up the budgetary implications of what I think Captain
Stokes said was a Franco-German initiative with regard to the
A400M, which they had suggested led to some EDA activity. You
did not say what our reaction was likely to be to this proposal
and it would be interesting to know whether we think it is something
we would wish, since we are going to be a purchaser of A400Ms,
to participate in. Secondly, would that then mean a substantial
increase in the EDA budget or would it be done entirely on the
basis of national buy-in to the cooperation? So that is the first
question. The second question is the matter of budgetary technique,
which has come home to me with considerable pain when I heard
it being explained because most of my life dealing with the EU
was dogged by Her Majesty's Treasury's insistence that 18% of
every penny that was spent in Brussels had to be docked from somebody's
budget here. No doubt the percentage figure has changed as the
European Union has got bigger but the principle has not. This
is one way of looking at budgeting and control of public expenditure,
but it does become uniquely damaging to us when it turns out that
26 other Member States do not do the same thing: that is to say,
could you tell us does the French government insist that every
penny spent by the EDA has a percentage of it docked from the
French defence budget? Does the German, Italian, Romanian—I
do not mind who it is? But if the answer is, as I suspect it is,
that they do not then you have an answer to your problem as to
why we have a difference in approach. We have it built-in not
at the demand of the Ministry of Defence but at the demand of
Her Majesty's Treasury, who certainly have not abandoned an interesting
candle end since Mr Gladstone was there.
Mr Mathewson: Shall I take that question whilst
Captain Stokes gathers his thoughts on A400s? No, I am afraid
you have not accurately captured the position there, my Lord.
The contribution to the EDA budget comes from the Ministry of
Defence and the consideration is simply whether it is good value
for money in terms of MOD budget holders to invest in the EDA
rather than spending that money in developing capability down
another route. So it is a question of affordability and opportunity
costs within the MOD. There is no real engagement with the Treasury
in the terms which you have described. My understanding is—and
I think in answer to a question from this Committee about a year
ago we did a call around other MODs and we basically funded the
same way—all participating Member States are essentially
funded from the general defence budget and are all, therefore,
considering their own value for money considerations. But I think
in some cases those value for money considerations are overlaid
by the issues of the principle of building European capability,
and I think that is the issue that separates us and France rather
than the one you described, my Lord.
Chairman: Lord Boyce.
Lord Boyce: This is a follow-on. If the
MOD budget is stretched across the board then clearly Lord Hannay's
point is especially relevant. If the Treasury is not going to
allow room for the defence budget to meet its own programme then
the EDA is likely to be the first casualty in any savings exercise.
Q30 Chairman: I am sorry, Captain
Stokes, you were not given the chance to answer. This topic of
this idea of pooling in this sort of way is something which we
have been interested in before and indeed one of our colleagues,
not on the Committee, the late Lord Gardiner, always took a particular
interest in this as a way forward.
Captain Stokes: The French-German initiative
is broadly aimed at those smaller nations who might perhaps want
to buy a smaller number of A400s for which it would not make sense
for them to procure their own support and training infrastructure.
The UK approach at the moment to A400s on the basis of investment
appraisal is that it is more cost effective to deliver the through-life
support in the UK, although we are aware of the French-German
proposal. One area that we are also considering away from the
support area is in training and we are considering the possibility
of sharing simulator facilities with France, possibly either in
France or the UK. So the whole principle of sharing support services
or training facilities where it is cost effective to do so is
something that is very much considered as part of the procurement
process. A good example of where we are doing something fairly
similar is in our procurement of C17s, the fifth and possibly
the sixth C17, where there is another initiative, the strategic
airlift capability, a NATO-EDA initiative to look at sharing a
number of C17s with other European nations, and we are considering
the possibility of using the UK facilities at Brize Norton as
a means of supporting those additional aircraft where it is cost
effective to do so.
Chairman: Lord Truscott.
Q31 Lord Truscott: Just to focus
on capabilities are you satisfied with the progress achieved since
the last Steering Board meeting in the area of capabilities development?
Particularly bearing in mind that the MOD is regarded as focusing
on the need to develop capabilities rather than EU institutions.
I notice that the Secretary of State refers to that in his letter
of 26 November, where he says that the long term strategy and
objectives will add value to European capabilities, and is this
perhaps where some of the strain is between the UK focusing on
the capabilities and some other EU Member States focusing on long
term objectives, strategies and institution building?
Captain Stokes: The strand of work that I have
been most closely involved with is the whole area of capability
planning. When the Agency was first started there was little in
the way of a structured approach to capability planning and over
the last 18 months a substantial amount of work has been done,
led by the Agency but strongly supported by the UK in developing
their capability development plan. This takes work from the headline
goal 2010 exercise in identifying the relatively near term European
capability shortfalls. It also identifies the long term shortfalls
and long term priorities, looking out to 2020, and we have used
a lot of UK resources to support that development work and we
are getting to the stage now where we have a much, much clearer
picture of the longer term shortfalls, the longer term requirements
to meet the headline goal requirements. So in terms of process
we have done a lot with them. How are we involved? The UK is involved
in about one-third of the EDA project teams. We have very clear
criteria about those that we wish to be involved with. In the
key areas of shortfall that have been previously identified, force
protection, the probability and information superiority, we are
moving on much further than originally anticipated. Deployability
we have already spoken about at some length but I can talk about
force protection and information superiority.
Q32 Lord Truscott: It is a point
though that it still seems to be focusing on the process rather
than the actual development of the capabilities themselves.
Captain Stokes: I think we are taking both strands
in parallel. There needs to be a long term process to identify
where the effort should be focused and without that process the
opportunity was just focused on individuals and specific items
that did not fall into the strategy. So I think the approach the
Agency has taken and we have supported is absolutely the right
one—we take both strands as of equal importance.
Chairman: Lord Jones.
Q33 Lord Jones: What action is being
taken by us as a government and in Europe to address the three
critical capability shortfalls in force protection, deployability
and information superiority?
Mr Mathewson: Can I ask Captain Stokes to take
that question, but if I may may I add a little in response to
Lord Hannay? I think there is a point which Lord Hannay raised
which Captain Stokes did not properly answer. It was the question
that if there is a cooperative approach agreed to support within
the European Defence Agency supporting A400s, would that money
come from the Agency itself or from national budgets? The answer
is that it would come from national budgets and I think the answer
to Lord Truscott's question about why is progress so slow actually
comes down to national budgets as well. The Agency's role is to
find the areas where the nations want to come together and spend
their money. If their money is tight and they are not prepared
to invest in these capabilities then the Agency can only lead
the horse to water.
Q34 Lord Jones: Question 5 formally!
Captain Stokes: I can talk about the UK's position
and how we have moved forward in those areas, and also the work
that the European Defence Agency is doing in each of those capability
areas, but I cannot really speak about the progress each individual
EU nation is making in those areas. Taking the first one, force
protection, the UK has done a lot of work obviously to support
current operations in the area of force protection. A lot of that
which has been done over the last four years has been through
urgent operational requirements. You will be aware that some £2.3
billion from the Conflict Prevention Fund has been spent on urgent
operational requirements and around 60% of that is on force protection
of all kinds, both individual force protection, collective force
protection in the air, the land and the sea environments. That
is supported by a long term programme for force protection across
all of the environments and the Research and Technology Programme
which supports it as well. So there are comprehensive programmes
there. Then just a few examples of those—patrol vehicles,
Osprey and Kestrel, body armour, infrared cameras for aircraft
and a very large number of classified programmes to protect individuals
on operations currently in Iraq and Afghanistan. The European
Defence Agency has also commissioned a major research programme
into force protection, in which 20 of the 26 Member States are
participating. The UK made a judgment not to participate in that
particular programme and the principal reason for that is because
of the amount of work that we are already doing nationally and
we consider ourselves very much at the leading edge of a lot of
the force protection work. We are keeping a watching eye on that
work, however, and subject to security constraints we will be
prepared to share some of our experiences with the Agency as their
work goes forward.
Q35 Lord Jones: In terms of sharing,
do you have confidence now that we are a bigger outfit in Europe
that you can share?
Captain Stokes: Force protection is a particularly
problematic area because of security constraints, but as a matter
of principle, sharing our experience is something we would be
willing to do with the Agency.
Q36 Chairman: Various people have
supplementaries but are you going to say something about deployability
and information superiority?
Captain Stokes: I could talk about deployability.
We have mentioned already the 25 A400 aircraft. The other area
where we have moved forward substantially is on rotary wing helicopter
lift, in particular the announcement to convert the eight Mark
3 Chinook aircraft to operational standard but also the purpose
of six Danish Merlin helicopters is about to make a substantial
improvement in our availability of medium and heavy lift helicopters.
On information superiority, again a large amount of work in progress;
it is a massive area that covers everything from intelligence
collection and surveillance all the way through to processing
and dissemination of that information and sharing it at the tactical,
operational and strategic levels. One particularly important issue
for us is our policy requirement to be able to lead an operation,
either in an EU Battlegroup or in a NATO context, and ensuring
that we place sufficient priority on having the ability to communicate
interoperability between participating nations, which is something
that we are currently addressing.
Q37 Chairman: With respect to Captain
Stokes, could you just say something about what the EDA has done
in that area?
Captain Stokes: The EDA has a number of project
teams working in the information superiority area, of which we
belong to seven or eight of them, looking at communications and
information systems, information exchange requirements, which
is not just about technology but is also about process and procedures
as well, and making some large improvements there. Satellite communications,
network enabled capability, we have made some substantial contributions
into a major EDA study into what NEC means across the participating
nations. And the final one is radio spectrum and frequency management.
Q38 Chairman: Are most of these projects
being participated in by the majority of EDA members?
Captain Stokes: I cannot give you the exact
numbers, my Lord, but the majority have at least eight to ten
members and some substantially more.
Chairman: Lord Anderson.
Lord Anderson of Swansea: Before I come
to helicopters, you mentioned, I think, that we are disengaging
from force protection. From how many other EDA initiatives have
we in the UK disengaged?
Chairman: Not engaged; we were never in it.
Q39 Lord Anderson of Swansea: Not
engaged is probably better than disengaged, yes.
Captain Stokes: If we look at it from the number
of project teams that are commissioned we are involved with about
one-third of the project teams. The different project teams are
very much at different stages—some are in very, very early
conceptual work and some of them much later. But we make a very
conscious decision to look at the potential benefits to the UK
of each of these project teams, both in terms of potential projects
and in terms of what we can contribute.
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