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Defence Reform

Volume 530: debated on Monday 27 June 2011

Last August I asked Lord Levene to undertake a fundamental review of the way in which the Ministry of Defence is structured and managed. Today I am publishing the independent report led by him. Copies of the report will be placed in the Library of the House. I would like to thank him and all the members of his steering group both for that excellent report and for setting us all an example by delivering it early.

Lord Levene’s group has recommended a radical new approach to the management of defence, and I am pleased to say that I agree with him, as do my ministerial colleagues, all the chiefs of staff and my permanent secretary. We have already taken forward some of the recommendations.

No one in this Government was under any illusions about the scale of the challenge that we inherited in defence, which Lord Levene’s report confirms. We have already introduced changes to budgetary control, the reform of procurement, export promotion, small and medium-sized enterprise development and changes to our armed forces. The strategic defence and security review set a clear direction for policy and will deliver coherent, efficient and cutting-edge armed forces fit for the challenges of the future. As a result, Britain will remain in the premier league of military powers.

However, the vision of the SDSR cannot be achieved without tackling the drivers of structural financial instability and the institutional lack of accountability in how defence is managed, and Lord Levene’s report provides the blueprint for the necessary transformation. Before I set out his recommendations in more detail, let me first acknowledge the great strength that resides within our people in defence. They are professional, committed and often frustrated by a system that all too frequently lets them down. Among other things, the report describes a Department bedevilled with weak decision making and poor accountability, in which there is insufficient focus on affordability and proper financial management. Lord Levene’s steering group proposes a new, simpler and more cost-effective model for departmental management, with a clear allocation of responsibility, authority and accountability. That will build on the strengths of the individual services within a single defence framework that ensures that the whole is more than the sum of its parts. It will be underpinned by a number of core themes.

First, to date individuals in defence have been asked to deliver defence outputs, but not given the means with which to do so effectively and efficiently. Authority must be aligned with responsibility, and budget holders should have the levers that they need in order to deliver. They should then be held robustly to account. In the past, the decisions that should have been made centrally have been ducked, and head office and Ministers have delved into tactical-level detail.

The defence reform unit recommends a strengthened decision-making framework for defence, centred on a new, leaner defence board based around the Defence Secretary, who will chair it and make the decisions. He will be supported by the permanent secretary and the Chief of the Defence Staff, who will bring to the meeting the views of the single service chiefs. I have already established that new board, and I chaired the first meeting last week. The new group will offer the type of decisive and focused strategic direction that has been so lacking in recent years.

Secondly, financial management must be tightened and a risk-aware and cost-conscious mentality must permeate every level of the MOD. The review recommends a new planning and financial model. Within that framework, we will empower the chiefs to run their individual services. Our single service chiefs are the custodians of their services, the fundamental building blocks of defence. Sadly, they are currently forced to devote far too much of their time to trying to influence policy and haggle over funding in London, which is a pointless waste of time and talent.

In the new model, the service chiefs will get clearer direction from the defence board, carry out the detailed military capability planning needed across equipment, manpower and training, and then propose how best to deliver that strategic direction. Once that is agreed, they will be given greater freedom to veer and haul between priorities within their own service to deliver what is needed in defence. They will enjoy long-denied freedoms, and they will be held robustly to account for doing so.

Allowing the chiefs to spend more time with their service reduces the requirement for commander-in-chief appointments, which will be phased out as part of a general reduction in senior posts. We will work closely with the Treasury on how to deliver that major change, but I am confident that when they are properly supported, trained and directed, our people at the point of delivery are best placed to run their business, not those at the centre. Micro-management must be consigned to the past.

Thirdly, the service chiefs have an established role as advocates for their service, but powerful single-service advocacy can sometimes be at the cost of joint or cross-cutting capability. The report has recommended that we create a new Joint Forces Command. It will manage and deliver specific joint enabling capabilities and set the framework for other joint enablers within the single services. It would include the permanent joint headquarters and be led by a new four-star commander. Joint Force Command will therefore be an important organisation in its own right but also have a symbolic purpose, reflecting our view of how conflict will develop, and providing a natural home for some of the capabilities of the future, such as cyber, as well as reinforcing joint thinking, joint behaviours, and the new generation of officers in defence. It offers a new opportunity for career progression right to the top and a challenging and intellectual career for those who otherwise may not have been attracted to defence. It is a fundamentally meritocratic reform. It may also be a path for service personnel who are injured on operations and unable to serve on the front line, but who are still determined to serve their country.

Fourthly, the report rightly challenges us to consider whether we maximise talent across defence. Be it in promotion, the development of key skills, or helping our people choose the right career path, more can and should be done. The report has concluded that we must pursue more vigorously the principle that posts be filled by the right person, with the right skills, for the right length of time. Buggins’s turn must not interfere with the promotion of the right person for the job. Nor can we have the sort of musical chairs that occurred in the past.

Lord Levene has therefore recommended that we move to a system whereby most senior civilian and military individuals stay in post for longer than at present, as a rule for up to five years. That will allow our people to establish themselves in their roles, and invest the time they need to make a real difference to defence and be held to account for their performance.

To ensure that we maximise delivery on the front line, Lord Levene has recommended that we review all non-front-line posts across defence, beginning at the senior and management levels, including an assessment of the most cost-effective balance of regular military, reservists, civil servants and contractors. We are top heavy and that must end.

Most significantly, Lord Levene recommends that we adopt a new, more “joint” model for the management of senior military personnel to make the promotion and appointment processes more transparent and standardised, and to encourage the development of officers with strong joint credentials.

Lord Levene’s report covers far more than I have been able to address here. It is a thorough and compelling analysis that deserves close attention. I am confident that when the people in defence review the recommendations, they will recognise this work not as a criticism, but as a constructive critique of a Department in need of reform, and that they will relish, as I do, the challenges that it represents.

I thank the Secretary of State for his statement and Lord Levene and his team for their work in recent months.

It is right to start by paying tribute again to our armed forces. They defend our values and secure our interests. Today, in Afghanistan, Libya and around the world brave men and women are doing just that: protecting our national security and that of others. With armed forces day still in mind, we must all reflect on and give thanks for their patriotism and sacrifice. We all have a responsibility to ensure that they have the support and equipment they need to do their job.

Reform of the Ministry of Defence is a vital element of that. Successful reform should strengthen the bottom line and bolster the front line, enhancing Britain’s ability to project force and tackle new threats, and to do so cost-effectively. It is important that efficiencies are sought for that purpose and not for reasons of strategic shrinkage by stealth.

Based on the limited details in the Secretary of State’s statement—we look forward to debating them at a later date—we welcome the focus on cyber, widening the pool of promotion, making chiefs more accountable for spending and, in principle, some of the changes in MOD structure.

On streamlining in the senior ranks, Labour Members agree with measures to balance the higher levels of the military. Of course, no two situations are the same, but as our force numbers continue to fall, it cannot be right that the US Marine corps, which is 15% larger than all our armed forces put together, has five times fewer senior officers. Efficiency must run from top to bottom. The difficulty will be in the implementation, but we support the introduction of a Joint Forces Command. A joint approach to structures is welcome as that reflects how operations are now routinely conducted.

Let me consider the changes to the defence board. Single service orientation must not be an impediment to decisions about equipment and acquisition programmes, which must be tied solely to defence policy objectives. However, does not the fact that the Secretary of State has chosen to act on inter-service rivalry after the strategic defence and security review demonstrate, at least in part, the problem of that inter-service rivalry?

Of course, there are strong arguments in favour of the reform of the defence board, but last week, unfortunately, the Prime Minister told service chiefs:

“I’ll do the talking…you do the fighting”.

Unfortunately, today’s announcement of the removal of the three service chiefs from the defence board will be seen by some as a structural confirmation of that strident sentiment. It is beyond doubt that there is now at least a partial fracture in the relationship between Ministers and service chiefs, and the Secretary of State must make the case more carefully in the next few months than his boss has done in the past few days. Will the Secretary of State therefore confirm that service chiefs were wrong when they said that services are running hot and will be unable to sustain the current tempo of operations in Libya beyond September? Will he tell us how he will better incorporate military advice into those new decision-making procedures?

On MOD finances, I agree with the Secretary of State when he says that successful MOD operations are dependent on the defence budget being on a stable footing. However, today in the media, for hours on end, the Secretary of State blamed the previous Administration for the cuts that he has chosen to make. Let me remind the House that he agreed with each of our spending decisions on defence, and called for even greater spending on a bigger Army, Navy and Air Force, and more equipment for all three services. Is not the truth that, owing to the rushed and arbitrary decisions taken in the defence review, the Government have created their own black hole? They saw efficiency savings where they could not find them, and are engaged in events that they did not foresee.

The Secretary of State has his own financial legacy to deal with. In opposition, he spent just as much time demanding more as he has spent in government providing less. Will he therefore answer the following questions? First, will he tell the House whether there is any truth to reports that the mismatch between the MOD’s assumptions and the spending settlement is up to £10 billion, which would be a greater overall cut than was made in the SDSR? Secondly, will he confirm that there are to be further cuts to the size of the Army in this Parliament? Thirdly, will he say what work will cease within the MOD in order to cut the number of civil servants by 25,000?

On procurement, the positions that the Government currently hold of using open competition on the open market, buying off the shelf and promoting exports, are inconsistent. Will the major projects board have as its remit the maintenance of a competitive, highly skilled UK defence industry? In that spirit, what sovereign capabilities does he believe the UK should maintain and promote over the longer term?

In conclusion, the Opposition welcome much of today’s statement, and we look forward to scrutinising it in detail and discussing it in the House. However, the Secretary of State must know that there is real disappointment not about what is in the statement, but about something that is not in it. On this, the 100th day of operations in Libya, in which forces are using equipment that the Government had previously planned to scrap, it is surely now time once and for all to have a new, post-Arab spring chapter of the defence review. Such an announcement would be welcomed on both sides of the House and throughout the country.

I am grateful to the right hon. Gentleman for his broad welcome of the report and its contents. It is an important report and it is very detailed, and there will be opportunities for the House to debate it more fully, not least because the Government will want to look at some of the report’s more detailed recommendations and tell the House how we intend to implement them.

I was particularly keen that the shadow Defence Secretary accept the proposal for the Joint Force Command, which he has done. The command is a good way forward for our armed forces, and represents a strong consensual basis for moving forward on defence policy in the UK. Of course, we are all aware of the contribution of our armed forces—today, many of us would like in particular to pay tribute to the RAF Regiment and its contribution.

On the right hon. Gentleman’s specific questions, the defence board proposal is not a reaction to anything that has happened in the short term. This has been 10 months in gestation. Lord Levene and his team, including the vice-chief of the defence staff and the second permanent under-secretary, were very clear that we needed a simpler, more manageable defence board. It is of course fed by both the ministerial committee and the chief of staff committee, through the Chief of the Defence Staff and the Minister for the Armed Forces, into the committee representing other ministerial and the chiefs’ views.

When it comes to plans for the Army, we have no plans to reduce its size in this Parliament. On the 25,000 cut in the civil service, I regret that we are having to make reductions of that size, but we recognise that we have to do it to deal with the financial legacy that we inherited from the previous Government. However, we believe that we can make the cut while maintaining our full function. We believe that the best way to help the British defence industry is to support British defence exports.

Finally, on the question of Libya, when we make statements about Libya we must be careful about the messages. Colonel Gaddafi and his cronies will be listening to the messages we send, and the only message that we should send is that we have the military capability and the political and moral resolve to see through the task that the international community has begun. Anything else would risk civilian lives in Libya.

Order. Understandably, there is intense interest in this statement, but I have also to protect time for the heavily subscribed debate that is to follow. Therefore I must insist on brief questions and brief answers.

I congratulate my right hon. Friend on what is a truly radical shake-up of the Ministry of Defence, which it has needed for decades. I am delighted especially to hear that the chiefs of the armed forces will get more control over their budgets. Will my right hon. Friend assure me that the Treasury shares my delight and will honour this promise?

Whether or not the Treasury is delighted by the proposals that I have put forward, it has certainly given its agreement. Therefore, the spirit in which it has done so is not really my concern.

I congratulate the Secretary of State and Lord Levene, and I welcome the broad thrust of what is proposed. The Green Paper that we produced in the winter of 2009-10 flagged up the need for a joint command of the type that will now be introduced, and it is the right thing to do. How real and how deep will that jointery be? It is no good if it is not real and people’s allegiances belong entirely and exclusively to the single services.

The other thing that is needed is transparency. How can we have the kind of reforms that will be necessary in order to put the Ministry of Defence where it needs to be if we do not have transparency? The Secretary of State effectively abolished 3 Commando Brigade without ever admitting having done so. How can we introduce real transparency?

One of the reasons why I was keen that we should have the Joint Forces Command with its own four-star at the top was that I believe that people who are involved in defence at any level—in logistics, in ISTAR, in defence intelligence or in defence medical—should have a chance to rise to the top of the tree, if they have the talents to do so. I want to create a fourth pillar precisely to create a more meritocratic structure. That will be much more transparent than what we had before, because we will not be able to have the stovepiping that gives primary allegiance to single services rather than defence as a whole.

I hope that my right hon. Friend will excuse me if I sound a note of caution. I have lost track of the number of occasions on which I heard his predecessors stand at the Dispatch Box and promise us accountability, responsibility and efficiency. How can we be sure that these necessary qualities will arise as a consequence of the implementation of Levene?

To go from the abstract to the particular, when senior commanders, both in public and in private, express reservations about the sustainability of current operations, does the Secretary of State have not a scintilla of doubt about the match between commitments and resources?

We have already put in place some of the recommendations, including the defence board, and we have begun implementing some of the other changes. We have put into place the major projects board, which will give greater accountability in terms of the running of the major projects. As for Libya, I repeat the point that I made earlier. While we will constantly look at the resources available, the public message must be simply that we understand the mission that we are undertaking, its legality and its moral force, and we have the political will and military wherewithal to see it through.

I welcome many of the proposals in the report, but should not the reorganisations announced today and the forthcoming review of reserve forces have been conducted in parallel with the SDSR? This combined with the Arab spring means that the case for a new chapter is overwhelming. Does the Secretary of State agree that the world has moved on and that defence policy and resources should move with it?

The VCDS leads the reserves review and was a key member of the steering group, so there is no lack of continuity. The hon. Gentleman asked why these things were not done at the time. We had to complete the SDSR because the comprehensive spending review was running at the same time, and because we had to deal with the huge deficit left by the previous Government. I know that the Labour Benches remain populated by deficit-deniers, but that does not reduce the responsibility on the Government to deal with the problem.

As I understand it—perhaps I am wrong—service chiefs lost the right some time ago to go directly to the Prime Minister. What right does a service chief have when he or she feels strongly about something outside the normal chain of command?

There is no change in the constitutional position under which chiefs of staff—or, indeed, the CDS or VCDS —have a direct right of access to the Prime Minister of the day.

I appreciate the advance copy of the Defence Secretary’s statement, in which he said that the senior ranks are “top heavy”. That is not true in Scotland, however, where only 2.1% of the most senior ranks are stationed. Under this report and the plans that will follow it, will there be even fewer decision makers in Scotland, or will the number remain at the same derisory level?

The hon. Gentleman always fails to point out that across the piece far more people in the defence industry are based in Scotland and a disproportionate amount of defence industry spending goes to Scotland. Scotland might have fewer positions in terms of military rank, but these are Crown forces and their footprint is spread evenly, one way or another, across the United Kingdom.

May I commend my right hon. Friend for getting down to the unglamorous business of how his Department works, and may I welcome the Levene report as the kind of corporate change programme that the Public Administration Committee is seeking to recommend for every Department? Will he bear it in mind, however, that such corporate change takes years and depends on united, consistent and sustained leadership from the top and throughout the Department in order to bring about the necessary cultural change that I am sure his people want to see?

I fully accept that this is the unglamorous but no less necessary part of the business. It might mean that I have to bore the House witless—but some would say that is no break with precedent. On the corporate change programme to which my hon. Friend referred, may I specifically thank him for the encouragement he has given me through his focus on corporate change programmes? That has been instrumental in giving us the will to drive through the reforms to this point.

I was keen to discuss at length with Lord Levene how to create a structure within defence that could offer careers to those who might be attracted to the intellectual, if you like, side of defence—electronic warfare and so on—but who might not want to become commandos. We need to create a pillar inside defence that can grow as the nature of conflict changes. We want to create that expertise and attract those young minds who have a different view of what the electronic and cyberspaces look like and who are interested in a defence career. It is essential that we change how defence does business in order to reflect the genuine threats out there. As we develop that expertise, so we will have a greater ability to deter the sorts of attacks to which the hon. Gentleman referred.

One of the issues that needs clarification is the practice of individuals being appointed to sensitive roles in large procurement processes for just two years. Will that be reviewed, so that the period of the role suits the project, rather than an arbitrary career path?

The specific work on that is currently being done by Bernard Gray but, as I said in the statement, it is now important that we increase the length of tenure of many such posts, otherwise we are wasting talent. If the MOD were a private company, it would be number three in the FTSE. The idea of having the most senior people in the private sector stay for 18 months or two years, and then rotating them round because it is “good for their career experience” would not hold water in the private sector, and it no longer holds water in the MOD.

The Secretary of State started his statement by referring to our being in the premier league of military powers. In the view of the three chiefs of the services, we are currently not a full spectrum power. If these reforms are implemented, will we again be a full spectrum power, and if so, when?

I refute the idea that the United Kingdom is not among the leading defence powers in the world. We have the fourth biggest defence budget, and we have extraordinarily capable armed forces, which are among the most professional and best trained. If that does not put us in the premier league, I do not know what does.

I endorse the statement in the strongest possible way. In particular, I would like to pick out my right hon. Friend’s comments about the length of tenure in important jobs. It really is astonishing that we change people over every two years. If we are to make the progress that he wants to make, this will involve not just the most senior jobs, but other sensitive key positions in the organisation.

It is important, as my hon. Friend says, that all those in key positions remain there to maximise what they learn in the job and that they can therefore give back as much as they can—I will be encouraging the Prime Minister to read Hansard on that point.

The statement is welcome because it recognises the waste and inefficiencies arising from rivalries between the three services, but should the Secretary of State not take the next logical step that the realities of modern warfare demand, which is to aim to create a single, unified service?

No one can deny the intellectual logic behind the hon. Gentleman’s point, but anyone who has spoken to a Canadian Defence Minister in recent years will have got a strong message: “Whatever you try, don’t try that.” There are differences in the approach of the single services, sometimes differences in the ethos of the single services and, clearly, differences in their history too. As we are asking our servicemen and women to do so much for us, the last thing that we want to do is to destroy that important emotional attachment to their heritage.

I welcome that response from my right hon. Friend. He knows that he is assured of my personal support for the work that he is doing, but I remain convinced that there is a difference between the management of defence procurement and the formulation of military strategy at the highest level. What bothers me is that the single service chiefs are increasingly separated from the Chief of the Defence Staff, and that is no way to end inter-service rivalry. We ran the second world war with a committee of three, and we ought to be running these wars with a committee of four, not with a CDS on his own on a defence board, even if supplemented by the Minister for the Armed Forces.

But of course this is not a process that is run by the CDS. As part of the defence board, we have purposely set up the chiefs of staff committee so that the views of the chiefs of staff can be discussed collectively before the defence board and reflected to it by the CDS, not formulated unilaterally by the CDS.

The Secretary of State referred to a “radical new approach to the management of defence” and a “new, leaner defence board”. In that spirit, how many ministerial posts are going to be axed?

As my hon. Friend knows, it is not for me to determine the number of Ministers in Her Majesty’s Government. What we have said, however, is that when we have had time to address the Levene report in greater detail, we may well look at the designation of Ministers— their titles and specific roles—to see whether we can bring the organisation of the ministerial team better into line with the organisation of the Department.

I welcome the good report by Lord Levene. It is long overdue and prompts the question of what the Labour party was doing over the past 13 years. As a result of the report, a number of key figures in the Ministry of Defence are worried about the future, and there will be some uncertainty. Will the Secretary of State please let us know what time scale he envisages to put these reforms in place?

Some reforms have already been put in place; some are being put in place; and others will be put in place as quickly as possible. I hope that by the time the Department has made a full review of the report and given its full response, we will not be much past September.

Will my right hon. Friend help me to understand how this can improve our relationships and our discussions with our NATO allies?

Our discussions at both ministerial and official level are already full and fruitful. This will allow us to translate anything decided collectively into action in a much more disciplined and cost-controlled way. It is about the effective and efficient running of defence in the United Kingdom rather than any change in doctrine for dealing with our international partners.

How will these structural changes affect the role of the reserves, who are equally as professional and as committed as anyone else in the armed services?

The reserves review, which is headed by the vice-chief of the defence staff and which will report to the Prime Minister in the near future, will set out a number of options on the balance between regular forces, reserve forces, civil servants and contractors. I hope to report on that to the House at the soonest possible date.

Is the Secretary of State confident that the Puma helicopter upgrade being carried out overseas is on target and on budget? Is he confident that, when upgraded, those helicopters will carry out their intended role? Does he agree that it might be a better option to scrap the upgrade and use the money to buy new state-of-the-art helicopters from AgustaWestland, which will carry out their intended role and have a service life of 40 years?

I confirm that the programme is on track after some early difficulties. Of course, while we would always like to and prefer to purchase new aircraft, using the Puma life extension programme was the most effective way of providing the capability we required.

I welcome this businesslike statement, particularly the setting up of the joint force command, but will my right hon. Friend go a little further in explaining what other capabilities, apart from cyber, might be included? For example, what is going to happen with complex weapons, which can come from different platforms but share quite a lot of capability and infrastructure?

My hon. Friend raises a good point. I have already mentioned defence intelligence as a key element within that pillar and that defence medical is being brought together for the first time. We will want to see what other elements we can introduce that fall within the broad joint arena, not least because we owe it to the younger generation of officers, who have a much more joint approach, to ensure that they have a genuine career structure and that those involved in areas such as logistics, who are invaluable to the delivery of our service, are not regarded as ineligible for some of the top posts in defence.

I share the Secretary of State’s unequivocal support for this report. Given the streamlining to which he has referred, will he take this opportunity to guarantee that defence procurement will be both more efficient and more cost-effective in the future than it has been in the past?

Inter-service rivalry and single service lobbying is a key tradition of the British armed forces. Is the Secretary of State convinced that the single service chiefs will have confidence in the CDS to represent their branches fairly, and how will he prevent noises off?

The single service chiefs will, through the chiefs of staff committee, always be able to have a robust debate among themselves and with the CDS ahead of the CDS reporting their views to the defence board. They also have access to me, as Secretary of State, if they have a particular grievance that they feel has not been listened to. My door is open to them at any time.

During the year for which I have been a member of the Public Accounts Committee, I have often been shocked by the poor management of the budget in the Ministry of Defence, so I warmly welcome the report. Will the Secretary of State explain how the new joint command will be held to account, and will he reassure me that the establishment of a new command will not reduce accountability?

All parts of the armed forces will be subject to regular and rigorous review. Although, as I have said, we are devolving power to the single service chiefs in terms of their budgets—which will allow them sometimes to exchange manpower for equipment, for example—they will be subject to quarterly review by the CDS and the PUS, who will consider both the military impact and the financial implications of any decisions that are made.

Oh, yes. I fully intend to chair both the defence board and the major projects board. I have done so once already, and on that occasion was both elated and depressed: I was depressed, because so many of my fears about poor project management were shown to be correct; and I was elated by the fact that we seemed to have identified the problem and put the appropriate solution in place.

In Macclesfield, we are fortunate enough to have many skilled engineers in the military aviation sector, which is so important in the north-west. Will my right hon. Friend assure the House that his plans will focus more on allowing them to apply their skills, and less on unnecessary layers of bureaucracy?

I want to end the presumption that those at the centre know better how to micro-manage the services than those who are trained and have spent a lifetime in those services. We need to accept that, while politicians have a particular role in policy, the application of that policy should fall to those with the real expertise, namely the armed forces chiefs themselves.

Like all Conservative Members, I welcome the statement, not least because it deals with so many of the inadequacies with which my right hon. Friend was left by the previous Administration. Does he believe that his statement, and the publication of the report in full, tell us all that we need to know about behaviour of the present Government as opposed to that of the previous Government, who tried to bury bad news in the form of the Gray report?

Perhaps the greatest difference between us is that the Labour party tried to bury the Gray report, whereas we gave Bernard Gray a leading job in the Government. That shows that we have faith in the analysis.

We will now proceed to the debate on House of Lords reform. Before I call the Deputy Prime Minister, let me inform the House that, because the debate is not only well subscribed but over-subscribed, we have introduced a seven-minute limit, which is likely to be reduced later. I ask Front Benchers to take that on board when considering the length of their speeches, and I ask for restraint in interventions, which will clearly lengthen the Front-Bench contributions. I also request that no Members approach the Chair to find out when they will be called in this over-subscribed debate.