[Relevant Documents: First Report of the Defence Committee, Gambling on ‘Efficiency’: Defence Acquisition and Procurement, HC 431; Second Report of the Defence Committee, Session 2017-19, Unclear for take-off? F-35 Procurement, HC 326; Oral evidence taken before the Defence Committee on 21 February 2018, on Departmental Priorities, HC 814; Written evidence to the Defence Committee, on the Ministry of Defence Supplementary Estimates 2017–18, reported to the House and published on 20 February 2018; Written evidence to the Defence Committee, on the Armed Forces Pension and Compensation Schemes 2017/18 Supplementary Estimates, reported to the House and published on 20 February 2018.]
I should inform colleagues that, following recommendations by the Procedure Committee, this year the subjects for the estimates debate have been chosen by the Backbench Business Committee based on bids from Members. The subjects chosen by the Backbench Business Committee were then recommended to the Liaison Committee, which in turn, under Standing Order No. 145, recommended them to the House, which agreed to them on 22 February. Needless to say, I am sure that all colleagues present are intimately conscious of this chronology of events, of which I am merely serving to remind them. We will start with the motion on the supplementary estimate for the Ministry of Defence and the debate on the spending of the Ministry of Defence. This debate will be led by a notable knight of the Lincolnshire shires, namely Sir Edward Leigh.
Motion made, and Question proposed,
That, for the year ending with 31 March 2018, for expenditure by the Ministry of Defence:
(1) further resources, not exceeding £8,852,638,000, be authorised for use for current purposes as set out in HC 808,
(2) further resources, not exceeding £1,363,500,000, be authorised for use for capital purposes as so set out, and
(3) a further sum, not exceeding £1,703,385,000, be granted to Her Majesty to be issued by the Treasury out of the Consolidated Fund and applied for expenditure on the use of resources authorised by Parliament.—(Mr Ellwood.)
This is the first proper departmental estimates debate, thanks to the Procedure Committee and the Backbench Business Committee. In our 2012 report to the then Chancellor of the Exchequer, “Options to Improve Parliamentary Scrutiny of Government Expenditure”, Dr John Pugh, who was then a Member of Parliament, and I included a recommendation to introduce additional estimates days on subjects to be suggested by a budget committee that we also proposed to create. Dr Pugh decided to test this matter by trying to talk on the subject of estimates on estimates days. He was ruled out of order by your Deputy Speaker, Mr Speaker, despite speaking about estimates on estimates days.
The reason we are here today is thanks to the work of the Procedure Committee, which I had the privilege of serving on in the previous Parliament.
Of which the hon. Gentleman was, I think I can fairly say, a distinguished ornament.
I put it to the Procedure Committee, and it recommended to the Backbench Business Committee, that we take on the role of determining estimates to be debated on estimates days. Scrutiny of the Government’s supply estimates was listed under “unfinished business” at the end of the previous Parliament. It is thanks to the current Committee and its Chairman, my hon. Friend the Member for Broxbourne (Mr Walker), that this business is no longer unfinished and we have now decided to debate estimates on estimates days. It is quite shocking how little power or influence the House of Commons has over spending in the estimates procedure, with a budget of some £800 billion a year. We have one of the best post hoc systems in the world, through the Public Accounts Committee. We have one of the weakest systems in the world in terms of parliamentary scrutiny of what we are planning to spend, not of what we have spent.
Estimates days, as they have existed, have borne little relation to the actual content of the departmental estimates. Let me give a little bit of history, which is always interesting. This debate has gone on for quite a long time. In 1911, the then Clerk of the House, Sir Courtenay Ilbert, said:
“The sittings of the committee of supply continue through the greater part of the session, and, under existing standing orders, at least twenty days must be set apart for this purpose” .
Already, estimates days were just being used as a kind of general critique of government rather than actually to deal with what we were going to spend. Another report, in 1981, said:
“By 1966 there was a considerable discrepancy between the theory of supply procedure, under which individual estimates were put down for detailed consideration at regular intervals, and the practice, under which supply days were used by the opposition to discuss topics of their choice”,
which often had little, if anything, to do with the votes concerned. Indeed, the Clerk Assistant told the House that by the 1960s more and more supply day procedures had gone through which were “Little short of farcical”. I am glad that thanks to the Procedure Committee, and all the work that has been done and the debates that we have had, we are now going to talk about money.
However, given that the Government intend this parliamentary Session to last for two years, the already insufficient allocation of days for estimates days is doubly inadequate. Overall, in the past 100 years the House of Commons has delegated its role to the Treasury. We in this Chamber should be doing more. Why should we leave it just to unelected civil servants to debate what we spend and how we allocate spending among Government Departments? This House is asked to approve Executive spending even though we are not given much clarity about what that spending is expected to deliver, nor indeed the means to influence spending levels or priorities. As long ago as 1999, the Procedure Committee said that
“when motions are directed to future plans, motions recommending that ‘in the opinion of the House’ increases in expenditure or transfers between certain budgets are desirable, should be permissible.”
I believe that Select Committees should have stronger powers to investigate and scrutinise public spending. In Australia, Select Committees also sit as estimates committees, with Ministers and departmental body heads appearing before MPs or Senators to justify their spending. In other Commonwealth countries, quite a lot of work has been done on this. For instance, in several other countries with public financial management systems that are based on the British system, estimates include spending information at a programme level, with past spending information for each programme and medium-term estimates of the cost of the programme covering the Budget year and at least two further years. Good estimates help us to understand the link between Government priorities, desired impacts and the contribution of programmes to them.
There is still a lot of work to do. I would have thought that parliamentary scrutiny of the Budget was at the very heart of this body’s raison d’être. We have fought wars on this very subject yet are not particularly bothered by the comparatively little scrutiny we have of Government spending. Debates such as this one will, I hope, encourage broader participation of Members of this House in the formal budgetary process. We have a range of experience and points of view. I hope that this use of the debate to look at the Ministry of Defence estimates might also encourage us to have a more substantial debate on defence in general.
When I saw that at last we were going to get this estimates day debate, I approached my right hon. Friend the Member for New Forest East (Dr Lewis), the Chair of the Defence Committee, because I thought there was no better subject than defence to lead off on in discussing Government spending on an estimates day. That is why we are here, and this is a real opportunity. I will now talk a little bit about defence, although I recognise that there are people who are far more expert than me in this Chamber.
I am grateful to the hon. Gentleman for giving way and thank him for achieving this debate. Is he surprised and disappointed that the Secretary of State is not here to respond? We are very much aware, through the press, that the Secretary of State appears to be pushing for greater budgets for the armed forces. It would have been nice if he had been here today to tell us all about the work he is doing.
Well, I think it is very nice that we have such an impressive Minister as the Under-Secretary of State for Defence, my right hon. Friend the Member for Bournemouth East (Mr Ellwood), sitting in front of us.
On that introduction, how could I fail to get to my feet? The Defence Secretary sends his apologies. He is with the Prime Minister, telling her what he is doing, which I think is appropriate, given the challenges on finances that we face.
I am grateful for that.
Given our commitment to spend 2% of GDP on defence, as is required of NATO members, which most NATO countries ignore, we will have to spend more on defence regardless, in order to keep with up that target. That is the challenge we face.
I am grateful to the hon. Gentleman for giving way and for the way he has introduced the debate. Of course it is important that we scrutinise the estimates, but we need substantial amounts of money to consider. Does he share my concern about a lack of amphibious capacity, which could reduce our capacity to carry out humanitarian missions, for example?
That is an extremely good point, and if I have time I will deal with amphibious capacity later in my speech.
This is a real challenge. As Professor Malcolm Chalmers, deputy director-general of the Royal United Services Institute, pointed out in his evidence to the Defence Committee:
“While the MoD budget is set to grow by 0.5 per cent per annum over the next five years, national income (GDP) is projected to grow by an average of 2.4 per cent per annum over the same period.”
That means that the current Government commitments to defence spending imply that UK defence expenditure will fall from 2.8% of GDP in 2015-16 to 1.85% in 2020-21. I believe that Ministers need to come clean and make it clear whether they intend to abandon the 2% commitment, as seems to be the case.
I am grateful to the hon. Gentleman for giving way. He says that the Government are committed to a 0.5% increase, but does he agree that that is just on equipment, not personnel? Something like 55% of the budget goes on daily running costs and people, and that will be completely constrained if no new cash is put into the people side of the budget.
That is an extremely good point, and I will come on to deal with the people side.
As the Defence Committee has pointed out, there appear to be some shenanigans going on in relation to how we reach the 2% target, and this is a really good opportunity for us to discuss money in detail and for the Minister to reply to these points. The criteria seem to change from year to year, with new bits—war pensions and other expenditure—qualifying when they have not previously done so. NATO is apparently satisfied, but this rather gives the impression that we are meeting our targets only by means of creative accounting, and when it comes to the defence of the realm, surely creative accounting is not good enough.
Let me say a word about procurement. What are our procurement procedures, and are we getting value for money? Professor Julian Lindley French testified, again to the Defence Committee:
“If you look at the $90 billion being spent by the Russians as part of their modernisation programme, the $150 billion or so being spent by the Chinese and what other countries around the world are doing, what strikes me is how few assets—both platforms and systems—the UK gets for its money.”
As a former Chairman of the Public Accounts Committee, I am talking not just about more money for the MOD, but about spending the money more wisely.
The MOD committed itself to new purchases arising from its 2015 strategic defence and security review before it established how they could be paid for. This requires the MOD to generate £5.8 billion of new savings from within the defence equipment plan itself, in addition to £1.5 billion from the wider defence budget, which is already under pressure. We never of course know what crisis may happen, and if a crisis happens and our troops have to be deployed, where will the money come from? In such a case, will we end up taking money from procurement that we had not expected to take?
I thank the hon. Gentleman for giving way on that very important point and for his excellent introduction to the debate. Does he recognise the issue of the defence inflation rate, which in recent years has been 3.9%, while background inflation has been just 0.8%, leading to a real depreciation in real purchasing power for defence? Is that not the root cause of the problems we are seeing with the attrition of defence capability?
That point on purchasing power is a very pertinent one. I hope that the Minister replies to it, because it is a point well made.
Uncertainties and over-optimism—there is over-optimism—in the project costs mean that the final costs of the defence equipment plan may be significantly understated. The MOD’s cost assurance and analysis service reported that the costs in the 2016 plan were understated by £4.8 billion. Over a period of years, the MOD has failed to agree a workable way forward with the prime contractor on the procurement of a Type 26 warship, which has compromised maritime capability and placed further upward pressure on costs.
My hon. Friend is being very generous in giving way. Does he see the recently announced combat air strategy as a similar sort of programme, and what might its impact be on procurement?
That is a good point. Again, I hope the Minister replies to it. It may be a case of when times change, procurement policies change, but will that result in more pressure? What I am saying—several Members, particularly my hon. Friend, have made this point in their interventions—is that the defence equipment plan has no leeway to cope with new equipment requirements resulting from emerging threats. As the National Audit Office’s investigation of the plan put it:
“The Department’s Equipment Plan is not affordable. It does not provide a realistic forecast of the costs of buying and supporting the equipment that the Armed Forces will need over the next 10 years.”
If it does not do so, then what is it for? The NAO continues:
“Unless the Department takes urgent action to close the gap in affordability, it will find that spending on equipment can only be made affordable by reducing the scope of projects”.
We have had training exercises cancelled, and we know that soldiers, sailors and airmen need to keep active so that they are fully trained and at the ready. Cancelling training exercises is short-sighted and a false economy.
Just to be fair for a moment to the MOD and the pressures it is facing, we are not the only ones having problems. Documents linked to Die Welt newspaper show that the German military has secretly admitted that it cannot fulfil its NATO obligations. The Bundeswehr was due to take over the rotating lead of NATO’s Very High Readiness Joint Task Force, but despite committing 44 Leopard 2 battle tanks to the force, it was revealed that only nine are operational. It begins to look as though the arrangements for the conventional defence of Europe are a bit of a shambles.
The reality is that we are underspending, just as we did in the lead-up to the second world war. Back then, we were capable of jump-starting and expanding our defence capabilities because we faced an existential threat. God willing, we will not face that kind of threat in the coming years, though we can never rule out the possibility.
One of the problems with being in a NATO alliance—I know this as a member of the NATO Parliamentary Assembly—is that there is nowhere to hide from our allies, and allies are noticing that Britain is withdrawing from exercises. They are concerned because they have seen Britain as an ally on which they could rely and depend. Does the hon. Gentleman agree that one of the most worrying things is the lack of credibility of our armed forces—valiant though they may be—because of the cuts we face in expenditure?
That is a very good point. With France, and after America, we are the leading military power in Europe and we have to set an example. If we withdraw from exercises, that creates a bad impression.
I am glad to see that the hon. Member for Gedling (Vernon Coaker) is here. He introduced his Backbench Business debate on defence last month and pointed out that the risks this country faces are only intensifying. If we face a multiplicity and variety of threats, surely our capabilities must reflect that. Russia is indeed a threat again, because it realised that the only way to be taken seriously is to be seen to be a threat. We treated Russia with contempt during the 1990s and it has drawn the lesson. It is a geopolitical gamble that we may not approve of, but in terms of Russian influence it has paid off. What have we been talking about for the past hour except Russia? According to some estimates, its economy’s GDP is equivalent to that of Italy or even that of Australia. Russia’s emphasis on its defence spending has made it an extremely important geopolitical player. Although we are constantly told that times have changed and that defence spending is not as important as it was, perhaps the Russian example shows that defence spending does pay off. I am not for one moment defending or approving of Russia or anything it does, but it has drawn the obvious lessons from the 1990s. There is a threat from Russia and we need to take it seriously.
Surely one lesson we can draw from the past, particularly from the lead-up to the second world war, is that, in terms of commitments, we must have a real presence. There is no point in our having a token commitment to or presence in the Baltic states; we have to have a real presence if deterrence is to work.
Many other threats are developing from Russia, the Chinese and other potential opponents: cyber-attacks and information warfare are all potential threats.
The hon. Gentleman rightly identifies the potential difficulties on the north European plain. Should not the Ministry of Defence therefore reconsider its decision to withdraw from north Germany and reinstate our capability there?
Yes, I certainly think it should reconsider it. All the old, conventional threats are still very real and require conventional responses. We have to maintain our original capabilities while also expanding and improving them.
On the range of capabilities, last year Hurricane Irma wreaked devastation in the Caribbean, and HMS Ocean was a key element in our response to that tragedy. Now, apparently we have sold HMS Ocean to the Brazilians, but we have a proud humanitarian tradition on these islands and it is our duty to maintain it. This is not just about responding to threats; it is also about our humanitarian duty. We have direct responsibility for our overseas territories and bonds of close friendship with other members of the Commonwealth.
Ministers have so far refused to commit to keeping HMS Albion and HMS Bulwark, which give our armed forces an amphibious landing capability, as the hon. Member for Torfaen (Nick Thomas-Symonds) said in an earlier intervention. The hon. Member for Barnsley Central (Dan Jarvis) pointed out last month that
“40% of the world’s population live within 100 km of the coast”.—[Official Report, 11 January 2018; Vol. 634, c. 516.]
I voted against the Iraq war, but the fact remains that we made a very effective contribution with our amphibious invasion of the al-Faw peninsula in 2003. I may not always be in favour of using military options, but I want, and the British people demand, that we have as many options on the table as we can and that we maintain our capabilities.
Meanwhile, there are proposals to cut the Royal Marines, some of our most useful, well-trained, high-quality and greatly effective troops. The variety of roles they can undertake underpins the ability of Great Britain to project our military power. As I will mention in a moment, this has led to low morale and a culture of fear for the future in one of the most important and valuable parts of our military.
Then there is the Navy. I received an email—one of many that have been sent to many Members from all sorts of sources—from a former Army major, writing to me through “gritted teeth”, that
“the area of defence that has been shockingly neglected is the Royal Navy. Put Trident to one side and disregard the vanity project that is HMS Queen Elizabeth and you have virtually no ships. The Royal Navy has to be the most important service for an outwardly facing island nation.”
I agree with that. In December 2017, all six of our Type 45 destroyers were laid up in Portsmouth, whether for repairs, equipment failures, routine maintenance or manpower shortages. The possibility of a significant crisis requiring a naval deployment catching us not ready is strong—too strong.
I am grateful to the hon. Gentleman for giving way again. He is absolutely right. In December 2017, not only were none of our destroyers out, but, as revealed by an answer to my parliamentary question, for the first time in history not a single Royal Navy frigate or destroyer was deployed overseas. That demonstrates powerfully the scale of the pressure on our Royal Navy and its lack of capability.
That is a very good point and that was a worrying incident.
On recruitment and numbers, the Public Accounts Committee “Army 2020” report notes that
“the Army’s recruiting partner, Capita, missed its regular soldier recruitment target by 30% in 2013-14 and it recruited only around 2,000 reserves against a target of 6,000. A huge step-up in performance is required if the Army is to hit its ambitious target of recruiting 9,270 new reserves in 2016-17. The size of the regular Army is reducing faster than originally planned but the size of the trained Army reserve has not increased in the last two years because more people have left the reserve than joined.”
We have shifted from an emphasis on the regular Army to one that includes a very strong Army reserve. All the same, we still need a regular Army, but we are not meeting targets for that either. Our force strength numbers are not up to scratch. In April 2016, we were short by 5,750 personnel. A year later, that had increased to over 6,000. By August 2017, it was over 7,000 and the latest statistics available show our armed forces are short of their full strength by 8,160 men. The problem is getting worse.
My hon. Friend highlights a very important point. What I cannot understand is why it takes the best part of a year for someone to be able to join the armed forces. Surely that should be addressed as a matter of urgency.
There is clearly a problem, one I hope the Minister will deal with later. Why does it take so long to recruit? Are we putting off potential recruits with our very slow processes?
Just before my hon. Friend moves on from the issue of recruitment, does he agree that the performance of the Capita recruit partnering project contract has been distinctly sub-optimal, and that if this continues for very much longer the Ministry of Defence would be wise to seek an alternative?
My right hon. Friend is of course a former Minister for the armed forces and really does know what he is talking about. The Government should listen to him.
There is a problem with morale. Those who perceive service morale as low increased by 12% on the previous year in the Army and 15% in the Royal Marines in 2017. The overwhelming majority, 74%, feel proud to serve—we are proud of them for feeling proud to serve—but only a third feel valued by their service. What is the point of training men and women if we fail to keep them?
On retention, the hon. Gentleman referred to the reservists and the recruitment challenges that they face. My infantry battalion—a reserve battalion—has seen a significant influx of former regular soldiers echeloning through from the Regular Army as it has been severely downsized, including by, in effect, the disbanding of an entire battalion of the Royal Regiment of Scotland. The concern is how long these former regular soldiers will remain reservists before they move out altogether, because they have benefited from a transition payment. Could that financial incentive just be temporary, and will we see a further pressure on reserve recruitment in the longer term?
That is a fair point. Pressures build on pressures.
In conclusion, the problems are many, but they must be tackled head on. Speaking personally, my record on spending and saving is clear: I think that the state should spend as little as possible. However, we also have responsibilities of absolute necessity, such as the defence of the realm. It is not pompous to say that—it is an absolute fact. That is the first responsibility of what we do in this House and we are falling short. The Government simply have to commit to spending more if we are going to have the armed forces that this country requires. In order to maintain our independence—not just of sovereignty, but our freedom of action and ability to make our own decisions rather than be dictated to by circumstances—we need highly trained, fully manned, well equipped armed forces. For a trading island nation on the cusp of Brexit and turning her face to the world, Great Britain must turn the tide of decline in defence.
I hope that this debate will prove a turning point, but that is up to the Government to decide. One thing is sure: further stagnation and cutting capabilities will set us back further. Once again, I am reminded of the wise words of Admiral Andrew Cunningham during the battle of Crete. Exposed to German air assault, his ships were taking heavy losses as they helped to evacuate the Army from Crete to Egypt. Some suggested that he should suspend the Navy’s part in the evacuation, saving his ships but ending the tradition of solidarity under fire among the armed forces. Cunningham knew that the Navy must not let the Army down and he refused. He said these words:
“It takes three years to build a ship, but it takes three centuries to build a tradition. The evacuation will continue.”
Our traditions of a great nation and great armed forces must continue. That is why this important debate must continue, too.
It is a great pleasure to follow the fantastic overview that the hon. Member for Gainsborough (Sir Edward Leigh) set out of the defence estimates. For Members who do not find themselves—as many of us do—becoming defence-obsessed, due to our concerns at the lack of funding being sent into the defence of this wonderful realm, it was a fantastic primer on the concerns that we must face as a country.
I want to look at the reserve forces, an area that the hon. Gentleman also raised. I declare a sort of interest as the chair of the all-party group on reserves and cadets. I recently met an academic from the University of Bath, Dr Patrick Bury, who has been looking at the progress of the Future Reserves 2020 plan, the main purpose of which was to provide direct support to a reduced Army and to increase the reserves to 35,000. Following the meeting, I rather upset a Minister in the Ministry of Defence, who received more than 100 parliamentary questions in the lead-up to Christmas. He took me aside to remonstrate with me for giving him so much work. I pointed out that if he had answered some of the questions the first time around, there might have been 50% less questions, but that is the way of asking and pursuing parliamentary questions.
The information I will speak to in today’s debate is all provided—sometimes reluctantly, but it was provided eventually—by the Ministry of Defence through parliamentary questions. I am deeply concerned that the expenses involved in Future Reserves 2020 not only show a programme that is struggling to achieve its goals, but are such that we need either to redefine or to look at whether the money we are spending, given the outcomes we are achieving, would be better spent elsewhere. We all know that the Ministry of Defence cannot afford to waste that expense. Every penny counts in the Ministry of Defence.
To provide context and make the costs clear, what is the current reserve structure? The reserve model means that Army reservists sign a contract in which they commit to achieving a certain amount of training time, and to achieving training targets over a financial year. That involves 27 days’ training, including a two-week continuous period away, which is known as annual camp. If the reservists achieve that commitment, they are considered to be fully trained and up to date, and ready to fulfil their role in supporting the Regular Army—in other words, they are deployable—and are rewarded with a tax-free bounty cash payment.
It goes without saying that, for a reservist to achieve a high level of practice and well-honed skills, they would need to achieve that minimum level of training. It is only 27 days. Many members of the armed forces parliamentary scheme spend more than 27 days in the armed forces and do not qualify to be reservists. They nevertheless give that commitment. Unlike those in the armed forces parliamentary scheme, the reservist is not compelled to complete their commitment to get their pass-out certificate. They have only to complete a minimum of 27 days. The only compelling desire is achieving the tax-free bounty.
We can therefore use that tax-free bounty as a useful way of assessing how many people in the reserves are deployable. It is possible to be an Army reservist without achieving any training targets in a financial year, so if we want to know about the Army reserves, we need to look at how many achieve their bounties. Let us look at the cost of the programme. The easiest way to calculate the cost is to look at the bounty payments combined with the number of reservist service days claimed over the past few years. I am making a general assumption. A basic private’s pay in April 2017 was £46.42 a day—some will earn more, and therefore my numbers might be lower, but I am giving the benefit of the doubt and working on the assumption that everybody gets the minimum payment.
In 2016-17, 1,008,290 reserve days were claimed, and 14,930 reservists qualified for their bounty. That resulted in a spend of £68 million—it was nearly £69 million. In the year 2015-16, 957,390 reserve service days were claimed, and 14,990 reservists qualified for their bounty. In 2014-15, 884,050 reserve service days were claimed, and 14,270 reservists qualified for their bounty. Therefore, despite the rising costs, and despite continual recruitment, the true number of qualified reservists has remained stable, at just less than 15,000. It is not just that we are failing to meet targets year on year, as pointed out by the hon. Member for Gainsborough, but we are not increasing our numbers of deployable reservists.
The wages and the bonuses are low.
What my hon. Friend is describing is fascinating. Does she agree that Army 2020 was really designed to give the Government political cover in the light of the reduction of the regular Army to 82,000? It is not just a question of the retraining days; it is a question of whether the 15,000 reservists to whom she referred can actually be deployed alongside regular troops. I am told that in some cases there is no joint training at all.
My hon. Friend is absolutely right. What we have here is a consistent pattern of only about 15,000 deployable reservists. Despite the money that has been poured into the reserve forces, we have not increased their number, but we have massively decreased the number of regulars. Our Army capability is therefore shrinking. That is something that we must be very worried about, but what worries me even more is the fact that we are spending huge amounts of money while receiving little or no return.
My hon. Friend has referred to the significant reductions in the regular forces. As was mentioned earlier, a large number of former regular service personnel have moved into the reserves, but they may be doing so on a temporary basis. That may explain why so few people—in real terms—are achieving their bounty qualifications each year.
I intend to talk about the reserve bonus scheme in the next part of my speech. I am sure my hon. Friend will welcome that.
Part of the problem is that, despite the theory that employers would be willing, and even encouraged, to allow people to take their time to go to, for instance, the annual camp, it is not happening. As people are under pressure to remain in work and to retain their jobs, they are not willing to give those 27 days. They are not able to make that commitment.
Further inefficient costs to the Army reserve can be seen when we look at the “regular to reserve” bonus scheme and its failure to retain personnel. The scheme was introduced in 2013 as a way of enticing former regular soldiers to join the reserves in order to keep their expertise within the military and pass it on to the new reserves who were being recruited. We were retaining capability, and also using the former regulars to train the reserves. The incentive for ex-regulars to join the scheme is, again, financial: a £10,000 bonus is paid in four instalments, provided that they meet the requirements of training and attendance at each stage.
As of October 2017, 4,350 ex-regular soldiers have joined the reserves under the scheme. At first that looks like a good number, but the question is, how many have been retained? In 2017, only 480 of those soldiers achieved all four instalments, which indicates a dropout rate of 89%. I accept that that figure does not take into account the fact that entry into the scheme may be staggered over the preceding four years, but it none the less demonstrates that retention of ex-regular soldiers in the Army reserve is a problem.
I can give an example. An ex-regular soldier who turned up at my house to do a piece of work had signed up for the reserve bonus scheme, and had found that once he had left the military and started work, the pressures of civilian life—being back with his family and getting into the new job—meant that he could not retain the commitment that he had thought he would want to ease his transition out of the military and into the civilian world. These are men and women with vital knowledge and expertise who are used to military life. Their retention is vital, but even with that offer of £10,000, there is not enough to keep them and for them to commit to what is being asked. This further suggests that the current model of the Army reserve just is not working.
The situation looks bad on its own, but if the cost of the scheme is taken into account, it looks a lot worse. Breaking down the entrants to the scheme into their respective ranks and assuming this distribution follows through the key milestone payments, and using these elements and combining wages and bonuses, the scheme so far has cost just over £29 million, with only 480 soldiers reaching all four payments. I am sorry to bat on about this, and I know the figures are boring, but I am deeply concerned. We have a reducing capability in our Army. We have been sold a pup, with a promise that the reserves would fill a gap in the regular forces, but that is not happening.
Defence is an expensive business—there is no getting around that—but it is also a business in which we cannot afford to lose highly skilled and highly able individuals willing to give the time and effort to get through their training so that they are deployable. I know that many Members of this House, including the Minister, are eager to fulfil our commitment to them so that they retain their membership of the reserves and their employability. I honour, and express my gratitude for, the service of all those reservists, but are we getting value for money in a way that allows us as a country to have the forces that we need? It is my concern that we do not, and the MOD’s own figures suggest that the reserves model as it stands cannot provide us with the numbers we need.
The challenges and menaces we face are very real. Many of our platforms are not fit for purpose and the readiness of our forces is just not in place, and we have heard about the disastrous Capita contract. I appreciate that the Minister has apparently suggested that he will resign if the military is cut further, and I hope he does not have to resign, because he is a good Minister, whom we trust, rely on and respect, but we also need the Minister to hear the concerns that we are expressing.
None of us want our Army to be damaged. All of us know that our personnel can, when fully trained and fully committed, be some of the best in the world; that knowledge is shared across our NATO alliance. But we are getting weaker, and that is unacceptable. I call on the Minister to look at how we are spending in terms of the reserve forces.
My hon. Friend is making an important point about the numbers, but does she share my concern that a huge amount of experience is being lost from our military? There are people performing roles with a few years’ experience who would have taken 10 or 15 years to reach that position in the past, and the experience of many of them—excellent soldiers and sailors though they are—might come under pressure in the fiercest of circumstances.
My hon. Friend is right, and this is also making them so much easier to be bought off by companies who seek the expertise and qualifications they achieve in the military. They feel dissatisfaction when they see the forces they joined—particularly the Army—being hollowed out. That is leading many more to consider leaving.
I shall make one final comment. I have spoken to a young man who was working as a full-time reservist when I first met him. He has told me that a lot of his time as a full-time reservist was spent going out and trying to recruit. He said that one of the most frightening things was that so many of the youngsters he spoke to about joining the armed forces had no understanding of military life. They had no idea of what NATO stood for, for example. This is a wider problem that we as a country need to tackle. We need to get the message out about how invaluable our armed forces are and how critical it is that our young people should seek the life, the experience, the skills, the challenge and the satisfaction of a military career, whether as a reservist or full time.
Does my hon. Friend agree that we still need to do a lot more for people leaving the service? There are still too many ex-military personnel finding civilian life very difficult. Does she agree that we need to support them as they adapt?
I agree with my hon. Friend; it is difficult for people who have been in an all-encompassing environment to transition. I know many ex-MPs who have found it very difficult to transition out of this place, because it is not just a job; it is our whole life and requires great commitment. That is what the military is like as well, and that transition is grave.
I shall take no more interventions, but before I finally sit down, I want to make the point that life in the military does not mean that someone will get post-traumatic stress disorder. It worries me that that possibility seems to have got into the public consciousness. Life in the military will offer someone a chance to grow, to mature and to become an asset to their country, and I just wish that more people understood that, rather than thinking about the downsides of joining our military.
It is a pleasure to follow the hon. Member for Bridgend (Mrs Moon). As a former Defence Minister, I too can attest to being on the receiving end of a rolling barrage of parliamentary questions. This points to her great assiduity when it comes to defence matters, which she has demonstrated again in her speech this afternoon. I am glad to have been called to speak on the Defence estimates, which, for reasons I will explain, include an important change in the Government’s defence policy. I therefore believe that the estimates need to be increased. In giving important evidence to the Defence Committee last week, the new Secretary of State for Defence argued that “state on state” threats were now the primary threat to the security of the United Kingdom. This is an important shift in the Government’s position, and it has the logical knock-on effect that defence expenditure should now be increased to meet these new circumstances and the far more serious challenge that they represent.
It is important to put this change into historical context. I shall begin by going back to the 1980s, when the Berlin wall was still standing and the cold war was at its height. Britain, then as now, was a key member of NATO, and we spent about 5% of our GDP on defence, principally to deter the Soviet Union and the other Warsaw pact countries. As the Chairman of the Defence Committee, my right hon. Friend the Member for New Forest East (Dr Lewis), has pointed out in the House before, in the 1990s after the wall had come down, we, like other countries, took a peace dividend. This reduced our defence spending to between 3% and 3.5% of our GDP.
As we entered the new millennium, the horrific events of 9/11 led to massive shifts in strategy. The United Kingdom became involved in expeditionary conflicts in Iraq and Afghanistan, where our forces became increasingly optimised to fight wars with a counter-insurgency element, at reach, against technologically inferior but nevertheless very determined enemies. As a result, and with the MOD already under considerable financial pressure, we optimised our force mix accordingly while deprioritising areas such as anti-submarine warfare and air defence to the point where, today, we have only 19 frigates and destroyers and have seen a major reduction in fast jet squadrons. As the process continued, by the time of the 2010 strategic defence and security review and the accompanying national security strategy, it became the Government’s policy that there was no existential threat to the security of the United Kingdom. With echoes of the 10-year rule of the 1930s, state-based threats to our security were effectively seen as no longer relevant. However, the events of the past few years have shown those assumptions to be highly erroneous.
The activities of a resurgent Russia in annexing Crimea and effectively invading parts of Ukraine have shown a Russian willingness to use military force on the European landmass in order to achieve its political objectives. We have also seen heavy Russian involvement in Syria, which the House was discussing a little over two hours ago, and massively increased Russian submarine activity in the North sea, the north Atlantic and the GIUK gap. Russia has also exerted pressure on the Baltic states, which are now members of NATO and covered by the article 5 guarantee. All of that is occurring at a time when we have reduced our defence expenditure further to where it sits today: barely 2% of our GDP.
I wonder whether the right hon. Gentleman is going to address our undersea cables and the risks posed by Russian submarines in particular. I was recently at a meeting at which Defence Ministers from several states expressed grave concerns about the number of Russian submarines that they were seeing off their coasts and alarm at those submarines seeking the undersea cables that come ashore in their countries. Is the right hon. Gentleman aware of that issue?
I am sure that the Minister may want to say something about that when he replies, but he will be constrained, because it is difficult to discuss the exact details of such matters in an open forum. However, when I served in the Ministry, I was certainly aware of a potential threat to those undersea cables, and everything that I have understood since then leads me to believe that that threat has increased, not decreased, so the hon. Lady makes an important point. The Chief of the General Staff, General Sir Nick Carter, sounded a timely warning in his recent very good speech to the Royal United Services Institute about growing Russian military capability and areas where we need to bolster our own Army in response.
In the United States, the recently published defence strategy, authored by Secretary Mattis, has declared that state-on-state competition, particularly with Russia and China, is now viewed as the primary threat to the security of the United States and its allies. That important change in policy was then echoed to some degree by our Secretary of State for Defence in his evidence to the Defence Committee only last Wednesday, and it is really important that the House appreciates what he said. During the sitting, he explained that the threat to the United Kingdom from other states, such as Russia and North Korea, is now greater than the threated posed by terrorism, telling the Committee:
“We would highlight state-based threats… as the top priority”.
He went on to say that state-based threats have
“grown immeasurably over the past few years.”
When I put it to the Secretary of State at that hearing that what he was announcing—the primacy of state-based threats to our security—was a massive change in focus and that it would have a knock-on effect on how Britain’s military was structured and its readiness for war, he replied unequivocally, “Yes it does.”
That means that the defence review that is currently under way—the modernising defence programme—is now taking place against a significantly revised strategic background, in which deterring military threats from other states such as Russia, North Korea and, to a lesser extent, China is now to become the primary focus of this country’s defence policy. This new context brings with it certain important implications.
First, we absolutely must retain our independent strategic nuclear deterrent as the ultimate guarantee of our national security. All three states I just mentioned are nuclear armed, and it is important that we retain our deterrent to deter any nuclear threat against us.
Secondly, if we are to deter state-on-state threats, clearly we must bolster our conventional defences. Joseph Stalin is reputed to have said, “Quantity has a quality all of its own.” We can no longer rely on advances in technological capability always to give us the edge in any future war. We also need to make sure we have sufficient mass—the number of platforms—to deter our potential enemies. That means, for instance, rebuilding our air defences and bolstering our anti-submarine warfare capabilities to help protect the sea lines of communication across the Atlantic, which will be vital in any conflagration on the European mainland.
My right hon. Friend is making a powerful speech, and I am interested in his comments on rebuilding our air defences. Is he as encouraged as I am by the announcement last week of the combat air strategy? Does he also agree that, given the enormous cost of modern aviation programmes, we will have to look at doing one of two things? We will either have to take a very serious strategic look at what kind of aviation military capacity we want and then to plan accordingly or, if we want full-spectrum military capability, it will ultimately mean more money.
I agree with my hon. Friend. He is right that the Secretary of State for Defence announced the new combat air strategy at the Committee, but what he announced on state-on-state threats was even more important. If we now have to deter Russian aviation capability as a state-on-state threat, it will be extremely expensive but, as my hon. Friend the Member for Gainsborough (Sir Edward Leigh) wisely reminded the House in his excellent introduction to this debate, the first duty of Government, above all others, is the defence of the realm. Our whole history as a nation reminds us that we forget that at our peril.
Thirdly, we must seriously consider how we could reconstitute forces in a national emergency. We must accumulate war reserves in order to show that we have the ability to sustain a fight if we were ever to get into one. As just one example, the Committee took evidence from BAE Systems executives a few months ago. When we asked how long it would take to build a Typhoon from scratch, we were told it would take four years or, if they attempted to accelerate the process, perhaps three years at best.
Those long lead times for manufacturing sophisticated modern military equipment mean that, in reality, we would likely have to fight a so-called “come as you are” war, which involves using equipment that is either immediately available or that can be reintroduced into service at short notice. It follows from this that we should now adopt a practice of mothballing highly expensive and complex equipment when it goes out of service—rather than disposing of it all, often for a pittance—so we have the ability to reconstitute at least some mass, should that be required if the skies were ever to darken again.
Fourthly, in light of the new strategic situation of state-on-state threats, spending 2% of our GDP on defence is simply not sufficient. We helped to deter Russia during the cold war by spending 5% of GDP on defence. If we now have to deter Russia again, we will simply not be able to do so by spending only 2% of GDP on defence —our allies also need to make a greater contribution. If we are to maintain an independent nuclear deterrent, bolster our conventional forces and build up our war reserves, we obviously need to spend something much nearer to 3% than 2% on defence. If we will the ends, we must also will the means.
Finally, I went to the cinema recently to watch Gary Oldman’s wonderful portrayal of Winston Churchill in “Darkest Hour”—he got the BAFTA and I very much hope he gets the Oscar, too. That film brought home graphically what happened to our nation after the policy of appeasement in the 1930s and our having run down our armed forces to the point where they were unable to deter war. I humbly suggest that my friends the “pinstripe warriors” of the Treasury, as I call them, should be taken en masse to watch that film as part of their continued professional development, in the hope that that might yet bolster our overall determination as a nation to defend ourselves.
I am going to make a relatively brief contribution to this debate. I wish to make one simple point, which I shall base on something I have mentioned before in this Chamber. First, for the record, I probably ought to draw the House’s attention to the fact that I have a family member serving in the armed forces.
What we should do first is bank the good news, which, as we all know, is that the armed forces enjoy popular support the length and breadth of this country. I have made mention before of the Territorials and cadets in my constituency, all of whom are greatly supported by the local communities. It gladdens everyone’s heart to see the cadets parade on Remembrance Sunday. Even better is when, as happens now and again, the 4th Battalion the Royal Regiment of Scotland—the Seaforth, Gordons and Camerons—come to exercise their right to parade through my home town of Tain with bayonets fixed and colours flying. I assure Members that people from my home town and round about turn out in great numbers to see this. Equally, when HMS Sutherland pays her occasional visit to the county of Sutherland, at Invergordon in Easter Ross or indeed off the north coast, people are very pleased to see that warship.
I wish to take the opportunity to give my personal thanks to the Under-Secretary of State for Defence, the right hon. Member for Bournemouth East (Mr Ellwood). He may not know about this, but a Royal Navy warship—a small one, I suspect—is going to visit Wick on 6 April. That is hot news in the royal borough of Wick and I assure him that the ship will be very well received. As a humorous aside, I might add that my own way of saying thank you to the 4th Battalion the Royal Regiment of Scotland when it came to parade was to give the sergeants’ mess a bottle of very good whisky made in my home town which goes by the name of Glenmorangie. The commanding officer was not at all pleased with me for having done that, but I shall spare hon. Members the details.
So I have set out the basic premise on which I base my argument, which is that we have the foundation of good will, and the point I wish to make today is simply that we should build on it. In the past, small local projects could be undertaken by the armed forces for the good of the community. In the past, the Royal Engineers could come out to build a small bridge, repair a footpath and so on. One might say that that was not a wise expenditure of armed forces money, but they do have to train. We should try to get back to that kind of involvement of the armed forces in the community. I am not talking about doing this in a social work way; it should be a genuine involvement.
Mention has been made of how so many people are unaware of what the armed forces do and even of what NATO stands for. One way of reversing that decline is to get the people in Wick to come on board this warship on 6 April—they will learn something—and to come to see the 4th Battalion the Royal Regiment of Scotland parading. That will build up knowledge, and will build up even further the confidence and enthusiastic support for our armed forces.
The hon. Gentleman is making a good series of points about the outreach of the armed forces and their visibility. Ought we not to encourage the more widespread wearing of uniform by service personnel when they are going about their business in our communities? The standard practice is for them to wear civilian clothing, but wearing the uniform, as the American services do, would also raise the profile and recognition of our armed forces.
That point is extremely well made. I might say, for the amusement of the House, that when I was a lowly private in the 2nd Battalion the 51st Highland Volunteers I used to find that one of the best ways to get home after a long camp far away in a remote part of the highlands was to wear my uniform and hitchhike—invariably, one got a lift pretty fast.
Do you still use it?
Unfortunately, that uniform has shrunk over time.
We have heard so many times in this Chamber about the difficulty our armed forces have recruiting. If we build up the good will and the knowledge of what the armed forces do and stand for, as the hon. Member for Gainsborough (Sir Edward Leigh) said, that will surely improve recruitment. That is the prize because, at the end of the day, the defence of the realm, with the enthusiastic support of the people, is paramount.
I might be a touch over-optimistic, but I get the impression that a sea change is going on, at least in this Chamber. It was only in 2016 that we first started to debate whether 2% of gross domestic product was a sufficient investment for this country to make in defence in peacetime. At that time, it seemed fairly outlandish to suggest that we ought to be talking about 3% of GDP or even more. It is not outlandish to suggest that now. Of course, that is partly because of the shift in the strategic situation, which my right hon. Friend the Member for Rayleigh and Wickford (Mr Francois) outlined so comprehensively a few moments ago, but it is also partly because of the efforts of colleagues on the Government and Opposition Benches—I pay tribute to my old friend, my hon. Friend the Member for Gainsborough (Sir Edward Leigh), for doing this today—to bring this subject forward time and again to impress on the House and the country that we are simply not investing enough in defence.
My right hon. Friend the Member for Rayleigh and Wickford referred to pinstriped warriors in the civil service. I do not wish to point any fingers in any particular directions, but when the National Security Adviser appeared before the Joint Committee on the National Security Strategy on 18 December and was asked whether it would be possible for him to recommend that the defence budget ought to be increased, given the fact that the security capability review that he had been conducting was supposed to be fiscally neutral, it worried me that he responded:
“When I said that the 2015 review was fiscally neutral, it was fiscally neutral within a growing envelope.”
In other words, he meant that there were certain absolute increases in the sums being spent. At a later stage, having tried to lump together the defence budget with all other moneys spent on security of one form or another to give a global figure of £56 billion, he went on to say:
“If we concluded that the total set of capabilities, optimised across that £56 billion, was insufficient to meet the threats, of course we would say that to Ministers. That is not a conclusion I expect to reach, but of course I always have the freedom to give Ministers candid advice.”
I am rather worried if our top security professionals do not feel even a twinge of doubt about the level of priority that we are giving to defence. When sometimes people stress the point, which is not without merit, that when we talk about spending 2% or 3% of GDP we are talking about inputs, not outputs in terms of capability, I say to them that of course it is true that we could spend a huge amount of money on defence, but if we spent it on all the wrong things, it would not do us a lot of good. Conversely, though, if we are simply not spending enough on defence, nothing that we can do will give us the outputs we need.
I hear what the right hon. Gentleman says about civil servants, but the decision to cut the defence budget by 16% between 2010 and 2015 was not a civil servant’s invention. It was the political decision of the Chancellor of the Exchequer and the Government at the time.
Yes, and I will come to the issue of how we can use the percentage of GDP to track what has been happening to defence in a moment. I hope that the hon. Gentleman—a former Defence Minister in the Labour Government, of course, and a very good one—will try to be non-partisan about this for the simple reason that successive Governments are responsible for what has happened.
What actually took place was, as has already been hinted at, something that has been going on over a very long period. Colleagues on both sides of the House have heard me recite this so often that I am afraid they might do that terrible thing and join in, singing the song with me. But I will just run through it again. In 1963, the falling graph of defence expenditure as a proportion of GDP crossed over with the rising graph of expenditure on welfare at 6%. So we were spending the same on welfare and defence—6%—in 1963. In the mid-1980s, as we have heard, we regularly spent between 4.5% and 5% of GDP on defence, and that was the period when we last had an assertive Russia combined with a major terrorist threat—the threat in Northern Ireland. We were spending at that time roughly the same amount on education and health. Nowadays we spend six times on welfare what we spend on defence, we spend four times on health what we spend on defence, and we spend two and a half times on education what we spend on defence.
We have to ask what we mean when we say that defence is the first duty of Government. If it is the first duty of Government, it is a duty that is more important than any other duty, because if we fail to discharge it everything else is put in jeopardy.
I partly take the right hon. Gentleman’s point, if he is looking back to 1963 and the role of successive Governments from then to now. But it is also true that there was a substantial cut in defence spending in 2010-11, which bears no relationship to what happened in the previous 13 years. If defence spending had carried on increasing in real terms from 2009-10 to the present, £10 billion more would be being spent on defence than is spent under this Government. That is a substantial change from this Government to the previous one.
I will not defend what happened in 2010. I was a shadow Defence Minister for slightly longer than the duration of the second world war in the years up to 2010, and I was told retrospectively that the reason I never became a real Defence Minister was that it was known that I would not go along with what they were planning to do. So I am not inclined to lay down my life for the Cameron-Lib Dem coalition of those years. I did not do it then, and I will not do it now.
Having said that, it is all part of a bigger trend, and I come back to my projection of the situation. At the end of the cold war, as we have heard, we took the peace dividend. We had the reductions, which were reasonable under the circumstances. But in 1995-96—the middle of the 1990s and several years after we had taken the peace dividend reductions—we were not spending barely 2% of GDP on defence as we do now, but we were spending fully 3% of GDP on defence. From then on it was downhill all the way—
Will the right hon. Gentleman give way?
I will give way to my good friend the deputy Chairman of the Committee in a moment.
I can remember Tony Blair on HMS Albion in 2007, looking back on his 10 years as Prime Minister and saying, “Well, I think we can say that we have kept defence spending roughly constant at 2.5% of GDP if the cost of operations in Afghanistan and Iraq are included.” But in fact the cost of operations should not have been included, because they are meant to be met from the Treasury reserve. The real figure over the Blair decade came down to 2.1% or 2.2% of GDP.
It is clear from the figures provided by the Library that while in most years there was an actual increase in defence expenditure during the years of that Labour Government, since 2010 it has been -1.4%, -1.4%, -4%, -3.3%, -2.4% and -2.9%, and in 2016-17 it did actually go into the positive, +1.4%. My friend should be clear that there was a step-change when the Cameron Government came in that led to year-on-year cuts, and our armed forces are feeling the effect of that.
What I am looking for today is agreement across the House that we recognise that we should not be having almost theological debates about whether we are just above or just below the 2% minimum guideline that NATO prescribes to its member states for defence expenditure, but that we have to get back to the level—at the very least—of what we considered appropriate for so long, right up until the mid-1990s, when the Labour Government came in, which was 3% of GDP.
Will the right hon. Gentleman give way?
I will give way one more time, but I want to concentrate on the bigger picture, because frankly neither of the parties has much to be proud about on defence expenditure since the mid-1990s.
The facts do not bear out what the right hon. Gentleman is saying. According to the Library, the last time defence expenditure was 3% was 1993-94. After that, there was a 7% decrease in 1995, a 1% decrease in 1996 and a 5.7% increase the following year. The Labour Government came in, following the Treasury rules laid down by the previous Government, and in 1998 increased defence spending by 5.8%. The idea that the last Labour Government were following a trend that had been set is just not the case.
It depends whether the hon. Gentleman is talking about absolute figures or percentages of GDP spent on defence. In 2016, the Defence Committee produced a unanimous report called “Shifting the Goalposts? Defence expenditure and the 2% pledge”. We had the Committee staff use all available sourcing to draw up a definitive table of what had been spent on defence by Britain as a proportion of GDP over the past 50 years. The figures for the period we are talking about are: 1990-91, 3.8%; 1991-92, 3.8%; 1992-1993, 3.7%; 1993-94, 3.5%; 1994-95, 3.3%; and 1995-96, 3%. It then dips below 3% in 1996-97 to 2.7%, and thereafter it is down and down, with little blips here and there, until it is hovering around 2.5% because the cost of operations were included.
The point about all this is that we should not be arguing about who did the most damage. We should be agreeing about what we need in the future. If we are hearing a chorus of voices from the Labour Benches—it is music to my ears—saying that we have not been spending enough on defence and we need to be spending more, that is what we should be saying loud and clear to those people who seem to be perfectly content to spend the existing inadequate sums.
I do not wish to prolong my contribution, but I do wish to speak briefly about the equipment plan that was alluded to in some detail by my hon. Friend the Member for Gainsborough. The equipment plan of 2016 is for £178 billion over 10 years. That includes a small number—nine, which some would say was too small a number—of new P-8A maritime patrol aircraft, replacing a capability that was quite wrongly dispensed with after 2010. We are also supposed to be replacing 13 Type 23 frigates and supplying mechanised infantry vehicles out of this budget, and we are of course engaged in resurrecting carrier strike capability—another capacity that was temporarily lost after 2010.
The first report of the Defence Committee in the new Parliament was entitled, “Gambling on ‘Efficiency’: Defence Acquisition and Procurement”. The word “efficiency” was in inverted commas because we believe that the affordability of the scheme is predicated on an estimate of £7.3 billion of theoretical efficiency savings that are to be made in addition to some £7.1 billion that was previously announced. As we have heard, the National Audit Office thinks that the equipment programme is at greater risk than at any time since reporting was introduced in 2012. The truth of the matter is that we encounter black holes everywhere we look in defence. This brings me to my concluding point.
I am grateful to the Chair of the Select Committee for the points he is making. We can starkly illustrate this issue. Training operations that had been committed for next year have been delayed, and we now hear that there are more. We also heard, very openly and honestly, at the Defence Committee last week not only that we going to have to cut mobile phone contracts and car hire contracts, but that—thinking about next year’s budget—£300 million has already been flexed into this year’s budget for a black hole in the Dreadnought class.
The hon. Gentleman is a stalwart of the Committee. I hope that he will develop that important point if he catches your eye presently, Mr Deputy Speaker. Obviously there has to be flexibility and a means of making adjustments when adjustments have to be made to very large sums during the course of an annual budget cycle. But we are talking about an overall shortfall that is so great that we are not going to get anywhere unless we recognise reality and accept that defence should not be so far down the national scale of priorities that it has far left behind those areas of high Government expenditure with which it used to bear straight comparison.
I mentioned previously the National Security Adviser and his security and capability review. The House will know something of the difficulties that the Defence Committee has had in getting the National Security Adviser to appear before it on the grounds—he says—that defence was only one out of 12 strands in that review. The new Secretary of State for Defence has now had some success in regaining control of that one strand for the MOD. Nevertheless, there is something to be said for a very in-depth interrogation of the people who are currently charged with the overall design of our defence and security policy.
At the present time, there is a degree of complacency by people who work in these Ministries. Then, as if by magic, the scales drop from their eyes the moment that they leave. Dare I say this in relation to our most recent former Secretary of State for Defence? Throughout his tenure he played a very straight bat, constantly talking up how much more money was being spent on defence. But within a very short time of leaving his position he made an excellent speech—I believe it was on 22 January this year—in which he said not only that he feels that we need to spend more on defence, but that we ought to be spending 2.5% of GDP on defence by the end of this Parliament.
In the further contributions to this debate, I look to some magic formula that will take hold of our Defence Ministers, civil servants, National Security Adviser and all the rest who seem to think that all is well with the world when, confronted with threats such as we face today, we are spending a fraction of what we used to spend in percentage terms of GDP, and who are saying, “Everything is fine and we are on course.” We are not on course. We need to change course, and the direction in which we have to go is towards a significant uplift to 3% of GDP to be spent on the defence of the United Kingdom.
I want, first, to say something about spending and then to say a bit more about some of the points that can be made from the actual estimates. I think that that would help the defence debate. I will refer to historical defence spending but, whatever the rights and wrongs of that argument, let me say this: there is no disguising the fact that this country is not spending enough on the defence and security of the realm. I have said that before and I will say it again. That is the frank reality. That is the truth. That point has been heard—loud and clear.
My advice to the Minister is that he and the Defence Secretary use the power of this Parliament’s voice to go to the Prime Minister and tell her that we, the elected representatives, by and large do not think that we are spending enough on the defence and security of the country. As the Chair of the Defence Committee said, it is no good generals, admirals, national security people or whoever is responsible telling secret meetings that there is a real problem, and then, in three weeks’ or three months’ time, trying to tell the British public that £x million or £x billion more is needed and expecting them just to click their fingers on the basis of, “If you only knew what we knew.” It is not good enough and it is not satisfactory.
I have said at many meetings that the whole of Government need to shift their attitude and be clear what we are talking about. My hon. Friend the Member for North Durham (Mr Jones) will make this point in a different way. The tables are available from the House of Commons Library. Hon. Members can go back to when they want. One paper goes back to 1956, showing the percentage of GDP spent on defence at 6%. It is now at 2%. We can see the ups and downs within that time but, as my hon. Friend pointed out, the table is clear.
Let me give Members one stark reality. The out-turn figure for the defence budget in 2009-10 was £45 billion at 2016-17 prices. These are not my figures; they are the Library’s. If the Government think that they are wrong, they should tell the Library. The 2016-17 out-turn figures, at 2016-17 prices, were just over £35 billion. There are some notes at the bottom which, quite frankly, I do not properly understand: they talk about changes in accounting practices, and counting this or counting that. However, there can be no doubt that it is a huge reduction. I totally agree with the Chair of the Defence Committee that we are now in a position where we all need to say that more should be spent and more has to be spent. The drop in the figures in that table is frankly astonishing.
Let me ask a couple of questions of the Minister that I really want answered. One of the big things that came out of the defence debate that we had a few weeks ago was that the national security adviser said that anything he found—it did not matter what it was—had to be fiscally neutral. The Chair of the Defence Committee said, and I agree, that the state-on-state threats are much greater and more intensified than they were. But apparently that does not matter: it has to be fiscally neutral. Can I ask the Minister a direct question? If the modernising defence programme says that the Government should be spending billions of pounds more to secure the defence of this country, is that whole programme predicated on a fiscally neutral position, or is it predicated on the Government funding what their modernising defence programme tells them?
As the Chair of the Defence Committee said, the defence threats are not reducing but intensifying. It is not acceptable to me, or, I believe, to this House, to say that as we are now facing a greater state-on-state threat because the terrorist threat is apparently not quite as big as it was, we will take some money from this budget and move it to that budget. That is not good enough, because we do not know what will happen in three, four, five or six years’ time. We cannot take money from a capability that is not necessarily needed quite as much at this time in order to pay for something else. It is the methodology of madness.
The hon. Gentleman will perhaps be surprised by how much I will say in my speech that—I hope—he agrees with, as I agree with him. The capability review was fiscally neutral, and we found that unacceptable. That was the first thing that the Secretary of State dealt with, perhaps breaking the trend that my right hon. Friend the Chair of the Defence Committee suggested was the case. Let me make it very clear that the study that we are doing now is not fiscally neutral, but we do have to decide what our defence posture is and how much it will cost.
There we go—that is the power of Parliament. That is the point I am making. We had the debate before and this was fiscally neutral. The original review—the national security and defence capability review, or whatever it was—was not set up by accident; the Government set it up, and defence was included in it. Parliament said that that was not acceptable, and the Government responded and took it out. We then said that it was not acceptable for that review to be fiscally neutral, and now the Government are saying that it will not be. Of course no one is saying that we should buy chariots or whatever—what we have has to be relevant to the needs that we face. Before, it was budget-driven: it was a case of having whatever it needed to be in order to meet the budget requirement.
It is going to be difficult for the Government to do this when, for example, we are told today that, even in their response to the Select Committee’s report on the F-35 programme, they will not put a figure on what one F-35 is going to cost. Then the Government say, “We’re buying 138 F-35s—that is the current plan—and 48 will be F-35Bs, but we’re not sure what variant the other 90 are going to be.” How can the Government talk about being fiscally neutral in their plans when they could not say to the Defence Committee a couple of months ago what the cost of the F-35 is and they cannot tell us in their response published today either?
It is not just the F-35. Much has been said in the past few weeks about the procurement of the new Type 31e frigate. There is no budget line in the defence budget for that. Likewise, the P-8, which is being trumpeted as a vital need for our maritime patrol aircraft—I agree—is not capable of delivering the sonar buoys or torpedoes that are currently being used, so there is added cost there.
I completely agree with my hon. Friend. That is the point of the debate on estimates days. For the Minister to be able to say that we will have the capabilities that we need to meet the threats that we will face, we need to be able to say how much those capabilities are going to cost. My hon. Friend raised the issue of frigates; I am using the example of the F-35s. Cannot the Minister go back to the people who plan this and say, “We need some detail on these costs. Otherwise, how can we project forward what the equipment plan or any other plan is going to cost us?”
The hon. Gentleman answers his own question in a way. He asked for, and supports, a fiscally open defence modernisation programme. That will pose the question as to whether we want A variants or B variants of the F-35s. The study needs to be done. On the individual cost, he knows from his own experience that it will vary, as the cost of prototypes does. There was not a unit cost for the F-16 because it was a prototype. It is very difficult to pinpoint the exact cost because the life cycles, the upgrades and the weapons systems that would be put on board vary. That is why we cannot provide the exact figure that he is seeking.
I will leave it there, but the Government need to have a better idea, and make it public to the Select Committee and Parliament, of the individual costs. I say gently to the Minister that, otherwise, in a year’s time or two years’ time, he will find himself in exactly the same place that the Government find themselves now, where the National Audit Office is pointing to various gaps in the affordability of the equipment programme.
Let me give another example of where the Government need to be clearer with regard to their estimates. I again say this as something that the Minister and the Government should be saying to the Treasury and to the Prime Minister. The hon. Member for Belfast East (Gavin Robinson) mentioned this point. As the Minister knows, the Government have had to bring forward £300 million to pay for some more upfront costs with regard to the deterrent programme. When they were asked where that money has been taken from, there was a very vague answer, to put it mildly. In essence, therefore, it is an IOU for future programmes. I think that between 2006 and 2007—certainly in the last few years of the Labour Government—where there was an upfront cost that perhaps needed to be taken from future programmes, the Treasury came forward with an uplift to the defence budget to pay for it. That then gave some certainty to future programmes.
Because the Treasury has not uplifted the Ministry of Defence figure by that £300 million, there is already a potential £300 million gap in the future—next year or the year after. I say this to the Government, again trying to be helpful: the Ministry of Defence should go to No. 10 and say, “We believe that where there are additional costs with regard to our deterrent programme that were unforeseen, or there was a growth in those costs, the Treasury should fund that uplift in costs, as was previous practice”—for example, the £300 million. I use that as just one example.
My hon. Friend has given two excellent examples. There are plans for a super-garrison at Catterick. I understand that service accommodation was meant to be completed by 2020 but is now estimated at 2023, which will clearly create cost overruns. Around the CarillionAmey contract, again, we are seeing a lack of maintenance on that, which will end up costing us more. We are seeing cost overruns in not just equipment but a whole range of areas, including accommodation.
My hon. Friend gives another good example.
I have given the Minister a couple of examples, notwithstanding all the questions. I make a plea again to him and to the Government: when we know that the Government are considering their options on amphibious ships, please do not say to Parliament that these are things they cannot talk about and that the Government do not comment on leaks. That does not help us. It does not help this Parliament in trying to support Ministers to ensure they have the resources to defend the country. We then have a situation where, three months or two years down the line, those capabilities are scrapped, and we are all left thinking, “If only we’d known a bit more.”
Let me also mention something positive that the Government should do. We should help to explain this to the British public. Tucked away in annex A of the estimates, under the “Memorandum for the Ministry of Defence Supplementary Estimates 2017-18”, the Government list the additional estimates that they have had to ask the Treasury for for operations. I do not believe the British public would know how many operations our armed forces are rightly involved with.
If we want to build support for our armed forces, we should be telling the public that there is £1 billion for operations, peacekeeping and the MOD’s share of the conflict, stability and security fund, and that there is a further allocation of £84 million for the UK’s contribution to Afghanistan, as well as allocations for the wider Gulf, counter-Daesh activity, the EU mission to counter migrant smugglers in the Mediterranean, NATO enhanced forward presence in Estonia and Poland, enhanced intelligence and surveillance and support to UN peacekeeping operations in Somalia and South Sudan. Those are just some examples, and the Treasury is giving money to the MOD to support all those different things.
Our country is proud of that work. Our country is proud that our armed forces are involved in defending human rights, defending democracy and doing what they can to ensure that stability exists and conflict is prevented. The Government should be shouting much more loudly about that. It should not be tucked away in an annex; it should be one of the forefront siren calls that the Minister makes in these estimates debates.
I finish with this, and it goes back to where I started. We are not spending enough money on the defence and security of the realm and the role that this country plays in promoting democracy and defending human rights across the world with our allies. All power to the MOD’s elbow when it goes to the Treasury and the Prime Minister to demand more money, but let that be done through the voice of this Parliament, where the majority of Members believe we should be spending more money and will support the Minister in trying to achieve that.
Angus is proud of its long-standing ties to the armed forces, and it is vital for both the country’s defences and the Angus economy that the armed forces are properly funded. While I am pleased that this Government are committed to meeting the NATO target of spending 2% of GDP on defence and that the UK has been one of only three NATO members to consistently meet that target since 2010, we should be careful not to rest on our laurels. I completely agree that we should look at 2% as an absolute minimum on which we should build. It is a start, not an end point.
The world is constantly changing, both politically and technologically. It is crucial that our military capabilities are funded sufficiently, to ensure that they can keep up with those changes and secure our country in any and all circumstances. At the same time, funding alone is not enough. We must ensure that the money the Ministry of Defence does receive is spent as wisely as possible, and this Government have worked hard to make defence spending more efficient. The Government took the right decision to conduct a new defence review this year, and I look forward to its completion. I hope it will lay the groundwork for a well funded, well equipped military that is fit for the challenges the future may hold.
I firmly believe that the RM Condor base in Angus must be part of that future. RM Condor and the Royal Marines of 45 Commando who serve there are a valued part of Angus’s community and economy. Moreover, through their skills and professionalism, they help to keep this entire country safe. I am glad therefore to have been assured on many occasions that RM Condor will remain an integral part of our defence capability.
RM Condor quite simply is good value for money, and I am pleased that this Government recognise that. Cynical scaremongering about the future of the base by some in the Scottish National party does nobody any good and serves only to cause unnecessary anxiety for service personnel and their families. It is important that 45 Commando continues to have the necessary facilities at RM Condor, and while there are ongoing discussions about the future of the base’s airfield, the review must be conducted in such a way that it does not detrimentally affect work at RM Condor. Currently the airfield offers training facilities for the in-house rifle range and an incredibly impressive indoor facility for urban combat drills that they built themselves inside one of the old aircraft carrier hangars on the airfield. It would be foolish to divest so much of the airfield that 45 Commando was unable to utilise those resources and had to travel to alternative ranges for training.
This question can and must be resolved in a way that works for RM Condor and Angus as a whole. I look forward to these upcoming developments in defence spending. I hope and expect that they will deliver for Angus and the United Kingdom as a whole and demonstrate that we can trust only a Conservative Government with the armed forces.
The scale of the cuts we have experienced in defence are genuinely endangering our ability and the Government’s ability to protect our nation.
I maintain the point that I made earlier. It is tremendously disappointing that the Secretary of State is not here to respond to the debate. I take the Minister’s point about the fact that the Secretary of State is meeting the Prime Minister. I am sure she is a busy woman and he is a busy man, but, given how much we read about how extensively the Secretary of State is supposed to be lobbying for defence spending, it would have been good if he had been here.
I have been in the position of being on the Front Bench and having people complain about the fact that I am the one responding. It is meant as no insult to the Minister. In my opinion, he might make a better Secretary of State than the one we have at the moment, but I do not mean to undermine his career by saying so. I would prefer it even more if my hon. Friend the Member for Llanelli (Nia Griffith) was the Secretary of State. I say again, it would have been good if the Secretary of State had been here.
I repeat the point made by my hon. Friend the Member for Bridgend (Mrs Moon): it would be a tremendous shame if the Minister was forced into a position where he felt he had to resign because of the level of cuts to the Ministry of Defence. He would be a loss to the Government. I know how seriously he takes his position and what an agony it would be for him if he had to do so, so I hope he is not placed in that position.
The truth is that this Government have presided over a scale of cuts and over the failure of armed forces recruitment that we have seen. The Government have presided over huge cuts—[Interruption.] The Secretary of State’s arrival shows the power of my speeches. Not only have the Government broken their 2015 manifesto pledge to retain a standing Army of 82,000, but we continue to see more people leaving the Army than joining it, and under this Government military housing is in a disgraceful state.
The Government have announced numerous unfunded spending commitments, which are estimated by the National Audit Office to have left a £21 billion black hole, and they have achieved their commitment to continue spending 2% of GDP on defence by including things that would never previously have been included. I have to say—I am sure my hon. Friend the Member for North Durham (Mr Jones), who was previously on the Front Bench, would repeat this with feeling—that if any Labour Secretary of State for Defence had presided over such a record, the right-wing press would be demanding their head on a platter in a way that defied anything previously seen in the press.
The moment is arriving when the Government must decide what their story is. We are hearing that the country faces very significant new threats. The scale of the threat from Russia has grown to its greatest extent at any time since the cold war. Brexit means that a not insignificant element of our key partners’ defence response will take place through an institution that we are no longer a part of. There is an urgent need to scale up our cyber and hybrid warfare capabilities. We have observed the extent of Russia’s upscaling of its capabilities, and we need to take action to ensure that we are responding. We are also seeing regular incursions by Russian aircraft and submarines into UK space, and an increasingly aggressive posture by Russia and Putin. If all those things are true—I believe they are, and we have heard from credible sources that they are—it is unconscionable for defence spending to have such a low priority in the apparent strategic approach of the wider Government.
As my hon. Friend has said, the roots of the current defence spending crisis lie in the disastrous 2010 SDSR, and the Government must be held to account for their performance. The real-terms funding cut in the departmental expenditure limit since 2010 is almost £10 billion. As my colleagues have said, this is an extraordinary amount out of a budget that was about £40 billion back in 2010, and this at a time when inflation in defence equipment and skill shortages has grown substantially. It is therefore impossible to take seriously the suggestion that the Prime Minister is presiding over a Government who have our nation’s future safe in their hands.
I have long feared that the announcements made in the 2015 SDSR on future defence procurement bore no relation to the budgets set for it. I thought that the 2015 SDSR was a considerable improvement on what had gone before—that may be setting a low bar, but it was an improvement—and it is important to recognise that. However, if the budgets from the Treasury for the Ministry of Defence do not bear any relationship to what is promised, it is incumbent on all of us to highlight that. The NAO figures showing a £21 billion black hole demonstrate that I was right to be suspicious.
The Government should come clean. I am absolutely calling on the Government to bring forward more money, but if they are not going to do that—if the Treasury is not willing to come up with the amount of money required to fill the black hole—the Government must be candid with Parliament and with the people about which of the spending commitments made in the SDSR are not going to happen.
The Government will get so far in bridging the gap by putting off decisions and allowing timescales to slide, such as with the commitment on the Type 26s. There is now a commitment—or a theoretical commitment—on Type 31s, but I suspect the actual development of the frigate will continue to be pushed into the long grass. Each of these delays both undermines the ability of our armed forces to respond and increases the demand on the servicemen and women on the existing platforms.
I am immensely proud of the UK’s commitment to the aircraft carriers. They are a piece of collateral that the whole nation should take pride in. It was a really important announcement—initially by the previous Labour Government and subsequently by the coalition Government —to commission and then to build them. However, the scale of the current cuts calls into question the amount of resources required by the aircraft carriers. In 2009-10, when the idea was initially put in place to go forward with the aircraft carriers, the Government were spending, in today’s terms, about £45 billion a year on the armed forces. With a Government who are now spending £35 billion, it is a different decision, and it has to be placed in the context of the scale of subsequent Government spending cuts to the MOD.
The Government appear to have a strategy of not going forward with more Type 26 frigates, but of having a greater number of Type 31s instead. That means we will have less capable ships, but they can be in more different places at the same time. As I have said, this calls into question the amount of resources—both financial resources and personnel—that the aircraft carriers will be consuming. Whether the Government would have commissioned two aircraft carriers if the scale of the subsequent cuts had been known about at the time is an important question.
I asked the Minister for the Armed Forces a parliamentary question about the scale of current recruitment and retention performance, and almost all the major arms of the Army lost more people last year than they recruited. The Royal Regiment of Artillery lost 170 more people than it recruited; the Royal Engineers, 130; the Royal Corps of Signals, 270; the infantry, 750; and the Royal Electrical and Mechanical Engineers, 100. There was a similar picture for the reserves, which we were told would make up some of the deficit. In the Army future reserves, the Royal Engineers lost 50 more people than it recruited; the Royal Corps of Signals, 20; the Royal Logistic Corps, 200; and REME, 160. Right across the Army, more people have left the service than have been recruited.
This reduction is to an Army that is already significantly under the numbers promised in the Conservative party manifesto of 2015. I believe I am right in saying that a standing Army of 82,000 is no longer the policy of the Government, although they have never officially come out and said that. It is very clear that a significant commitment was made in the 2015 general election—it was a very popular commitment—and they should be held to account for delivering on it.
Soldier numbers in our Army, which were stable throughout the previous Labour Government—they actually went up during the last five years of the Labour Government—have fallen from 98,340 in 2010 to 73,870 now. It is interesting that while there has been a fall of 25% in the number of soldiers, there has been a fall of only 15% in the number of officers. It is an interesting development for a Government who pride themselves—or claim to pride themselves—on defending the frontline that we have seen a bigger decrease in the ranks than in the officer numbers, and that is significant.
There is clearly a significant funding element to the fall in Army numbers, but there are also a number of other reasons why they are in such a distressing state. Morale among members of our armed forces continues to be challenged both by the demands placed on them and by issues such as pay and pensions, the quality of housing and the number of times that they have to go repeatedly on different kinds of deployments because of the shortage in numbers.
There is also real fear among our armed forces regarding this place’s commitment to actually using the Army. Our 2013 debate about airstrikes in Syria, which was referred to a great deal in the response to the urgent question immediately before this debate, called into question this place’s commitment to keeping an Army and being willing to use it. I get a strong sense from my responsibilities on the armed forces parliamentary scheme that there are people in our Army who think it is legitimate to question what we in this place actually see as their role and our willingness to deploy them.
The right hon. Member for Rayleigh and Wickford (Mr Francois) made a strong point about the outsourcing partner’s performance on recruitment and demanded that it step up or ship out. He did not quite put it like that—I am paraphrasing—but he was absolutely right. As I have said in previous debates—I do not apologise for saying so again—it would be beneficial if the Government published the number of people in each constituency who are recruited to the armed forces, so that we can take pride in our constituents. That would also enable us to hold to account the outsourcing company for its performance with regard not only to the overall numbers that it recruits, but to where it is recruiting them from and the extent to which it is achieving its aims.
I thank the hon. Member for Gainsborough (Sir Edward Leigh) for introducing the debate. I say to the Minister and to the Secretary of State, who popped in but has popped out again—[Interruption.] I apologise: I expected him to be on the Front Bench. He has popped back, not popped out. I say to him that he can be absolutely certain that there is a real commitment among Members to strengthen his arm in his negotiations with the Treasury. We wish him every success and he can be absolutely certain that he will have our support if he is able to get from future spending reviews the resources that our armed forces need and deserve.
Let us have the hon. and gallant Member for Aldershot (Leo Docherty).
Thank you for calling me to speak, Mr Deputy Speaker. We are considering the way in which the Ministry of Defence spends its money, and I want to draw attention to an instance of the MOD spending money in a very unwise way. It is my belief that its funding of the Iraq Fatality Investigations unit is a misuse of MOD money—taxpayers’ money—that allows the unit to pursue soldiers and veterans in a vexatious and spurious manner, and is having a highly detrimental effect on the bond of trust that underpins the relationship between the Government and their soldiers. I call on the MOD to bring to an end its funding of the IFI unit.
I draw attention to the experience of a serving soldier and Iraq veteran, Major Robert Campbell, a decorated and injured soldier who has faced seven separate inquiries of one form or another into an historical incident involving the unfortunate death of an Iraqi teenager some 15 years ago. Major Campbell has been cleared and exonerated by all seven inquiries, the most recent of which concluded in December 2017. The service prosecuting authority decided that no charges should be brought. Some of the inquiries he had to endure also involved the now defunct and utterly diminished Iraq Historic Allegations Team, which brought about a series of inquiries driven by the discredited lawyer, Phil Shiner, who has now quite rightly been struck off.
Given the fact that the Government rightly acted to close IHAT, it is unfortunate that it seems to have been born again in the form of the Iraq Fatality Investigations unit. Such vexatious and spurious hounding of veterans and soldiers, with the use of taxpayers’ money, is entirely unacceptable and represents a betrayal of their commitment to their country.
I thank my hon. and gallant Friend for giving way; he is making a powerful speech. What effect does the persecution of those who have served our country in conflict have on the morale of our armed forces?
My hon. Friend asks a pertinent question. It utterly diminishes the faith that our servicemen and women have in the Government’s commitment to minding soldiers’ backs. Soldiers deploy with the good faith that, no matter what, as long as they act honourably, the Government will back them up. Of course, soldiers expect to be held to the highest standard with regard to the law. That is the case with Major Robert Campbell and others. He has endured an inquiry into this historical allegation seven times over, and each time he has been exonerated. By great coincidence, just a few weeks ago he was awarded the Long Service and Good Conduct medal, and then he got a call to say—can you believe it?—that an eighth inquiry was under way. This situation must end.
I call on the Minister to tell the House in his concluding remarks how much the MOD spends on the Iraq Fatality Investigations unit; how many servicemen and women are undergoing investigation at this time; how many have been previously cleared of allegations against them; and what immediate steps the Department will take to bring about the end of the use of MOD money to pursue soldiers and veterans in this way.
The military thrives because there is an absolute bond of trust between those who serve and those who govern. If that is in any way undermined, it would be a huge dereliction of the Government’s duty to maintain that essential bond. I hope that the Government will act decisively, in the best interests of our soldiers, veterans, military community and our country as a whole.
I congratulate the hon. Member for Gainsborough (Sir Edward Leigh) on his introduction to the debate. I agree with him that it is important to secure more such opportunities to discuss defence and how it is financed.
I do not think that anyone who follows the defence world and the way that the MOD has conducted itself over the past few years would conclude that the situation is anything other than dire. It is fair to say that the new Secretary of State realises that as well. There is also, however, a collective sense of acute amnesia, certainly among those who were Government Members in 2010, about how we arrived at this position. It is clear that the mess that the defence budget is in today is a direct result of policies taken by the coalition Government and the present Conservative Government. Seven years of ill-thought-through, rushed cuts and, on occasion, very bad decisions are now coming home to roost. The new Defence Secretary has the unfortunate task of sorting it out—a task that I do not envy him, to say the least. It is therefore worth recapping how we have arrived at this position.
The Chair of the Defence Committee, the right hon. Member for New Forest East (Dr Lewis), said that these were not political decisions. They were political decisions that led directly to the mess we have today. To ignore that is to avoid the evidence and means that we will not learn the lessons for the future for how we manage our nation’s defence. In 2010, the new Conservative-led coalition implemented a number of deep cuts to the armed forces. The right hon. Member for North Somerset (Dr Fox), the then Defence Secretary, justified them by claiming that the defence budget had a £38 billion black hole, which somehow meant that rash and direct action would have to be taken straightaway. No one knows how he arrived at £38 billion. I have asked Ministers in this House to explain it on numerous occasions. The NAO and the Defence Committee could not arrive at a £38 billion black hole either, but it was used in every debate as the reason why cuts to our defence budget had to be made.
The Government stopped using the figure after a while, when they realised they could not justify it. I think it came about from a clear misinterpretation of the 2009 NAO report on major projects started under the previous Labour Government. The report was a snapshot of cost increases in 2009 and related primarily to the Queen Elizabeth class aircraft carriers, the A400M transport aircraft and the Astute submarine programme.
I just wish to correct a mistake by my hon. Friend: he missed out the word “deliberate” before “misinterpretation”. I am sure he did not mean to, but it was a deliberate misinterpretation.
It was a deliberate strategy, in the Cameron-Osborne Conservative party, to ignore the facts and spin—“If we keep saying it long enough, people will believe it.”
The 2009 NAO report said that if the equipment budget was not increased at all over 10 years, it might be possible to arrive at a figure of £36 billion. How did they then get an extra £2 billion? I think the then Defence Secretary just added some personnel revenue costs to get to the £38 billion figure. What the report actually said, however—this point was completely ignored—was that the scenario it envisaged, of the budget remaining constant in real terms over the 10-year period, would lead to a £6 billion funding gap, which could have been managed over that 10-year period.
My hon. Friend the Member for Bridgend (Mrs Moon) is right. The impression was given to the public, and to everyone else who wanted to hear this spin, that the £38 billion had to be found in-year straightaway. That was a clear fabrication. We know that, because when the current Chancellor became Defence Secretary, following the resignation of the right hon. Member for North Somerset after two years, he suddenly announced that the black hole had disappeared. I do not know whether he was auditioning for his current job as Chancellor, but the idea that it is possible to get rid of a £38 billion in-year black hole in the defence budget in just two years is complete nonsense.
The Conservative Government used that as a smokescreen to allow them to cut the defence budget, as part of the Chancellor’s austerity drive, by 16%. The effect of that has been some of the decisions referred to earlier on, including the scrapping of capability such as Nimrod. Making people compulsorily redundant in our armed forces was completely inexcusable. Certainly, if the Government I was a member of had done that when I was a Defence Minister, we would have been rightly decried by the people who are always arguing for defence. Those decisions have had an impact on what is happening today. My hon. Friend the Member for Gedling (Vernon Coaker) referred to the increased expenditure on the Trident programme. The £1.2 billion to £1.4 billion in additional costs happened because that decision was delayed. The deal done by the then Prime Minister David Cameron to get the Liberal Democrats on board in coalition delayed the programme, which built in costs.
The right hon. Gentleman is nodding. He and I kept raising that and asking why that decision had not been made. The costs arriving now are because of the decisions taken by the coalition Government. I accept all that has been said about increased defence expenditure, but we cannot get away from the core decisions that have led to the problems we have today.
The 2015 pre-Brexit strategic defence and security review announced an additional £24.4 billion spending on new equipment. Some of that, for example on the P-8, was to fill the gap the Government created in 2010 by a hasty decision to scrap the Nimrod. Reference was made earlier to the civil service making decisions. I am sorry, but it was not civil servants or generals making those decisions; it was Ministers making these decisions, including the right hon. Member for North Somerset and the current Chancellor, when he was Defence Secretary. They decided to reduce the size of the Army to 82,000. I asked a retired senior general, “Who came up with the figure of 82,000 for our armed forces?” He scratched his head and said, “We were just told that that was what the figure was going to be to fit the cash envelope.” We then had the construct of Army 2020, which is a complete political cover, to try to give the impression that we are going to keep the Army at nearly 100,000. As my hon. Friend the Member for Bridgend very eloquently outlined in her contribution to the debate, that is not only not producing the additional personnel required, it is actually costing more than if we had not done that in the first place.
Another point about the 2015 review is that, again, hasty decisions were taken in ordering the P-8. There is a gap, created by this Government, in maritime patrol aircraft. The P-8 was to be bought off the shelf—the Apache contract was announced at the same time—from the United States. That was pre-Brexit. The added costs in foreign currency exchange are now creating pressures on the defence budget, and that is before we look at the effect on the economic and industrial base of our country. It may seem an easy option to buy off the shelf from the United States, but that lets our own industrial base decline, and that is what is happening. I have not yet seen any meaningful commitment by the contractors, Boeing, to create real jobs in the UK. What angers me is that if it was the other way around and we were selling equipment to the United States, we would be unable to do so without a clear commitment to jobs and investment in United States industry. That is where the MOD woefully and shamefully let down the British economy.
My hon. Friend will not be surprised to hear that during a visit to the Boeing factory in Charleston three weeks ago, I asked Boeing whether it regretted taking action against Bombardier and almost damaging and destroying the economy of Northern Ireland. Its response was, “We’re American, it’s what we do. It’s America first, second and third.” That is the sort of company that we were putting our trust in.
It is. As an example, we have to look only at the sale of Airbus in the United States market. As part of that deal, it had to build a plant in Alabama, I think. We have the mindset in this country that somehow the ticket price looks cheap, but we are not thinking about the loss in tax revenue going back to the Exchequer and the fact that the defence industrial base is suffering.
Some decisions in 2015 were very strange. The Navy has been mentioned, and I accept that naval platforms are far more capable than they were 10 or 20—and certainly 50—years ago, but people are fixated on the number of hulls. The Government came up with the novel idea of having a cheap alternative through the Type 31e. This was literally just to deal with the idea that we have a certain number of hulls. I asked what the Type 31e is capable of doing. It cannot do NATO tasks and it is not clear what weaponry will go on it. Lo and behold, when I looked at the Ministry of Defence budget, I saw that there was no budget line for it at all—it has a £1.3 billion price tag on it—so again, how will it be paid for?
The Secretary of State needs to look not just at asking for more money, which the budget clearly needs, but at some of the ill-thought-out decisions. Take the P-8, for example. Buying off the shelf from the United States might look like a simple solution, but as I understand it, the sonar buoys and missiles cannot be fired from the P-8 as it is configured, so we will have to redevelop the programme, adding more costs in. This is about looking at whether we have to revisit some decisions and take things out of the budget. I think that will be the case if we are to fit the budgets,
The issue of numbers is always contentious. When we were in government, I remember the hue and cry from the Conservative Front Bench—the right hon. Member for New Forest East was part of it—when we froze training days for the Territorial Army. The cost was £20 million. From looking at the headlines and at the way some Conservative politicians were going on, one would have thought that the world had stopped. If a Labour Government had slashed the defence budget by 16% and sacked and made people redundant, as this Government have, they clearly would have been condemned.
It is the same old story. I understand the point that the right hon. Member for New Forest East made about arguing for defence—I have argued consistently for it in this House—but these are political decisions. When I was in the Ministry of Defence in 2010, I did not hear Conservative politicians stand up and say, “No, we do not need extra expenditure.” We were being condemned because we were not spending enough. In 2010, I did not see a single poster or anything in the Conservative manifesto saying, “We are going to slash the defence budget by 16%,” but these are the real facts and we cannot ignore them.
Let me turn to recruitment, which my hon. Friend the Member for Bridgend touched upon. I do not like to say, “I told you so,” but the decision on the Capita contract for recruitment was criticised at the time. My hon. Friend the Member for Gedling raised complaints, asking why armed forces personnel were being taken out of recruitment centres and why such centres were being closed in some areas. The position we find ourselves in now was bound to happen. We have heard some of the stories. The recruitment process is not only taking a year, but given the rate at which people are being failed, it is no wonder the Government are not meeting the targets. It is now time to revisit the contract and put uniformed personnel back into recruitment centres. The Capita contract should be scrapped, because it is completely failing to deliver what was outlined.
My hon. Friend the Member for Bridgend talked eloquently about reservists. It is time to rethink “Army 2020”. It was never going to work. It was political cover so that when the Government were cutting the Army to 82,000, they could still give the impression that they had an Army of more than 100,000. The issues my hon. Friend raised are not the only concern. I have never had an answer to the question about how we get formed units. How do we get training whereby regulars and reserves can train side by side to go on operations? I have not seen any evidence that that is happening in practice. If, in addition, it is costing what my hon. Friend says it is, it might be time to revisit it and see whether those resources can be put elsewhere. Let us come back to the suggestion that Ministers were asking advice from the Army about this. They were not; it was a political decision imposed on the Army.
Before the hon. Gentleman moves on from recruitment, may I ask whether he accepts that the other main problem with Army recruitment is the very large number of people who are being failed on medical grounds, often for very minor medical ailments that date back to their childhood? For instance, in the year to February 2017, some 10,600 people—both regular and reserves—who wanted to join the Army were told, “No, you cannot join on medical grounds.” At the same time, the regular Army was 3,000 recruits short. Does he believe that the MOD should look at that area again?
That situation was predictable when the system was set up. What is worse, I have heard stories about young people who have nearly got to the end of the selection process but do not get called back in, but who then get a telephone call from some Capita call centre saying, “I’m sorry, you’ve failed. That is it.” I am sorry, but that is not the way to treat people who have tried to join the armed forces.
The right hon. Member for Rayleigh and Wickford (Mr Francois) makes a good point. When we had senior non-commissioned officers stationed in recruitment offices, they could work out how to handle the recruits and use their breadth of experience to explain what life in the armed forces is like. This situation could have been avoided. Unless something has changed radically in the last few years with injuries, I agree with the right hon. Gentleman. I had case in which someone had a childhood knee injury. That person had to wait six months for a decision and then the knee injury was flagged up as the reason why he could not join the armed forces. That cannot be acceptable.
To give a personal example, I joined the Territorial Army with a good friend back in 2006, who went on to serve in Afghanistan. He left the reserves and when he sought to rejoin, he was disqualified on medical grounds. That is someone who had actually served in Afghanistan and who did not have any obvious injuries.
My hon. Friend raises a very good case from personal experience. This needs to be looked at. I would scrap the contract and take it back in-house. The old system perhaps needed tweaking, but it was delivering.
I am sorry to hammer the nail, but this is very important, and we have the Secretary of State on the Front Bench at the moment to hear this. Is the hon. Gentleman aware that in some cases, people have been failed and prevented from joining the Army for relatively minor issues, such as asthma? Paula Radcliffe and Sir Chris Hoy would have failed on the same grounds.
That prompts the question, “How are the tests being done, what criteria is being used and how are they being interpreted?” The problem is partly that if we have a civilianised and, as it has been described to me, bureaucratic, tick-box process, common sense does not kick in, and perhaps common sense is what we need as well.
The problem is that we need to look at the size of our armed forces from a strategic point of view. What do we actually need? A decision was taken suddenly that the answer was 82,000—the Army was told that that is what it would get because the budget required it—but we need to look at the strategic needs of our armed forces. Members of the Royal Navy are under severe pressure in terms of deployment. With smaller numbers, there is a bigger turnover of individuals. In addition, people are doing constant back-to-back tours, which is not good for morale or family life. If that is happening, the chances of people staying in long-term will clearly be affected.
We need to look at our Navy. The idea that we have a Navy that cannot deploy and that we have ships that are laid up—my hon. Friend the Member for Gedling said that we are not deploying ships—is a damning indictment. The sight this week of HMS Mersey, an offshore patrol vessel, escorting three Russian vessels through the English channel summed it up in one. We need to think seriously about what we need. The hon. Member for Gainsborough said that we are a maritime nation, and that it is about not just kit, but people.
My hon. Friend makes a good point. If we do exactly what he says, we will be in a ludicrous position. We will be saying, “To facilitate scrapping Albion and Bulwark, we will modify our aircraft carriers,” which takes us into the realms of never-never land. What does that mean? We are not going to do a beach landing from an aircraft carrier. We might have a few more helicopters or a dry dock facility, but the idea of carrying out an amphibious landing from an aircraft carrier belies the point of having amphibious craft, which is to land on beaches and lay marines off on them.
I do not disagree with my hon. Friend, but that goes to the point—this was the problem back in 2010—of the Treasury being let in the door of the MOD, and being in control and in the driving seat. When I was a Minister, I chaired the finance group in the MOD when we were looking for savings and dealing with the Treasury. I know exactly what Ministers are dealing with. The Treasury does not understand the value of our armed forces and how they operate. I am glad that the Secretary of State seems to have wrestled control of that element back. If our defence policy is determined by Treasury figures, we will have very strange decisions that will not match strategic needs.
We keep hearing from the Government that they are meeting the NATO 2%. As someone who is committed to NATO and who supports it—I am a member of the NATO Parliamentary Assembly—I can say that that is an academic argument. It is important in that we are trying to get people to spend a minimum of 2%, but it is also important to look at what our NATO partners spend that 2% on. It is clear that the Government have rejigged the figures. I am not saying that they have done anything illegal or anything like that, but in 2015, they changed how defence spending was calculated. War pensions of £820 million were included; assessments of contributions to UN peacekeeping of £400 million were included; and the pensions of retired military personnel, which was another £200 million, were included. The thick end of £1 billion of that 2% is made up of things that the hardiest defender of Government policy would not think were frontline defence commitments.
It is about being realistic. It would be fine if we were spending only 1.8% on defence but spending it on the right things. There is a case for increasing the defence budget—that argument was made by the right hon. Member for New Forest East and by my hon. Friend the Member for Gedling—but we need to do it by setting strategic objectives that show why we need more than we are spending. There is also an onus on the MOD to ensure that what it is spending is not only efficient, but provides value for money for the taxpayer.
All hon. Members who have contributed to this debate have said that our armed forces are universally and rightly held in the highest regard. I agree. But, it is not just national sentiment; it is because they are vital for our nation’s security and because they define our place in the world. I do not think for one minute that the new Secretary of State or his ministerial team lack commitment to the armed forces—they are all committed to defence and want to do the best for our armed forces, so I wish them well in the battle they will have with the Treasury—but without new money or a radical rethink about the commitments we ask our armed forces to fulfil, I fear for their future, and more importantly for Britain’s place in the world.
It is a pleasure to speak in the debate. I congratulate my hon. Friend the Member for Gainsborough (Sir Edward Leigh) and my right hon. Friend the Member for New Forest East (Dr Lewis) on securing it in this year’s series of debates on estimates. They have long been strong champions of our armed forces and are rightly proud of Britain’s history of defence.
That pride is not misplaced. This country has the fifth-largest defence budget in the world. I have the honour of representing two military bases in my constituency —Kinloss barracks and RAF Lossiemouth. Moray has a long history of service, and the armed forces are intertwined in our local communities. In the last year alone, servicemen and women from the two bases in Moray have served in South Sudan, the Falkland Islands and Romania, and in Cyprus as part of the international efforts against Daesh in Iraq and Syria. Scotland and indeed Moray have long benefited from the UK’s defence budget, and the defence industry is one of Scotland’s great success stories.
I am delighted that, in the numbers we are discussing, we can see that the investment will continue to increase. Defence spending is due to rise by 3% in real terms over the next year, which is an increase of more than £1 billion. We will feel that investment directly in Moray. The arrival of nine P8 Poseidon aircraft at Lossiemouth will mean 400 extra jobs and investment of £400 million. There can be no doubt that the Government remain strong on their commitment to the defence of our country. I look forward to seeing the positive impact that that new capability will bring to Moray.
On Thursday, I look forward to welcoming the Secretary of State for Defence to the official turf-cutting ceremony for the new Poseidon strategic facility at RAF Lossiemouth. I also commend the work he has embarked on since taking up his position. His recently announced defence modernisation programme provides the perfect opportunity to assess our spending. I know that he will not shy away from the difficult decisions that need to be taken to safeguard the future of our world-class armed forces.
You’ve got the job.
If there is a job going, I will take it.
I should like to touch briefly on an extremely pertinent issue currently affecting MOD personnel—serving and civilian—based in Scotland. The budget confirmed by the SNP Government last week raises taxes for anyone earning more than £33,000 in Scotland. It will also mean that someone serving in Scotland at the same rank and doing the same job as someone in England will pay more tax if they earn more than just £26,000. That is simply unfair and unacceptable. To put that in perspective, everyone above the rank of lance corporal will pay more in Scotland, as will every single Royal Navy officer. That is an attack on our hard-working service personnel and a kick in the teeth for all those who have chosen to serve our country. I thank the Minister and the Secretary of State for their communications—they met my hon. Friend the Member for Angus (Kirstene Hair) and I to discuss the issue. I make another plea on behalf of MOD personnel in Scotland. The “Nat tax” is unfair and cannot be allowed to stand, and I call on the UK Government to use the powers available to them to mitigate the worst effects of that ill-thought-through tax rise.
We are a military nation, and Scotland is proud to play its part in that. Moray is a fantastic example of what Government investment in defence looks like, and we will continue to play our part in the defence of our nation and our interests around the world. Under this Government, and with a rising defence budget next year, I have no doubt that Lossiemouth, Kinloss, and our capabilities around the globe will continue to go from strength to strength.
Thank you for giving me the opportunity to contribute to the debate, Mr Speaker. Let me also pay tribute to the hon. Member for Gainsborough (Sir Edward Leigh) and the right hon. Member for New Forest East (Dr Lewis) for their efforts in securing the debate, and for their persistent scrutiny of the Government on defence matters, which has been of long-standing note in the House.
It is interesting to follow the hon. Member for Moray (Douglas Ross), whose constituency is the home of the Royal Air Force in Scotland—although, sadly, it has been much diminished since only a few years ago, when Kinloss was home to the RAF’s fleet of marine patrol aircraft. That yawning capability gap is just one of the many litanies of defence cuts that we have seen in the past few years, so I do not entirely agree with the hon. Gentleman’s glowing review of the trajectory of British defence capability in recent years. That speech aside, however, I have been struck by the consistent level of shock and dismay expressed about the extent of the reduction in Britain’s defence capabilities.
It is an established fact that there has been a steady decline in defence spending as a percentage of GDP. It has fallen from 2.4% in 2011 to 1.9% in 2016. Not only has it declined every year under the present Government, but it is lower than it was in any year under the last Labour Government, which rather puts paid to the mythology about Labour’s defence record. Those figures, however—damning as they are of the Government’s real commitment—belie the true criticality of the situation. A recently published letter from former defence chiefs described the 2% target as “an accounting deception”, and added:
“Most analysts…agree core defence expenditure for hard military power is well below 2%.”
As has already been pointed out today, the inclusion of pension liabilities and other elements that were previously excluded from core defence spending suggests that what we are truly spending is much less than 2%. I welcome the commitment by the Secretary of State to making the 2% a floor rather than a target, and I hope that we can reboot our spending to increase the percentage substantially in the longer term.
I intend to stick to some essential points to which I hope the Minister will respond. Not only is defence spending well below the 2% minimum target, but its effective purchasing power is being eroded year on year. The defence inflation rate is running well above the national rate. In 2015-16 the defence inflation rate was 3.9%, the highest rate since 2010, while the national GDP deflator was just 0.8%. We only know that because the Ministry of Defence calculates the figures in conjunction with the Treasury, but, as the defence analyst Francis Tusa recently noted, the MOD and the Treasury stopped calculating them last year, so the visibility of the real purchasing power of defence has now been lost. We must recover that visibility as a matter of urgency, because it is the only way in which we can really scrutinise the trajectory of defence purchasing power. I hope that the Secretary of State will commit himself to discussions with the Treasury about the reinstatement of the calculation, because it is vital for us to have the information in order to plan ahead.
In recent months the Army has been cut by a fifth, wages have been frozen for a sustained period, and—as we heard from the hon. Member for Gainsborough—no Royal Navy ships were on patrol in international waters over Christmas, which is shocking and unheard of in recent history. All that can be attributed to the funding gap of £21 billion in the equipment programme, which shows how underfunded that programme is, and reveals the gap in defence spending overall.
I referred earlier to the relentless decline in defence spending in recent years. It peaked at £45 billion in real terms in 2009-10, the last year of the Labour Government. Although it has been suggested today that there is currently a £10 billion gap, I calculate that if the trajectory of an average of, say, 1.7% had been maintained rather than cut, we would have seen real-terms spending of £53 billion by 2020 rather than the £37 billion that has been projected. According to my calculation, the real funding gap is £16 billion rather than £10 billion. Members may feel free to correct me, but I believe that if we extrapolate the trend of defence spending before the cuts started in 2010, we see substantially more defence spending. Perhaps that shows just how critical the situation is, and demonstrates the reality of the root cause of the cuts.
The present position is both absurd and depressing. We know what the solutions are, and addressing them is a matter of political will. The key themes of the debate have concerned the chronic underfunding of defence, and the failure to recognise the uniqueness of defence industrial capability and understand how we can get the most out of it. The hon. Member for Gainsborough asked whether we were getting the bang for our buck that we ought to be getting, and what capability we received per pound in comparison with our peer countries around the world. That is a critical question, and I think that we, as a country, should investigate it. How can we secure maximum capability? I suggest that we can largely blame the way in which defence is financed.
When I was in the shipbuilding industry, we designed and built complex warships such as Type 26 frigates. We were massively constrained by the arbitrary limits placed on capital expenditure. Like many other Members, I take issue with that. When a programme of that kind is being commissioned—possibly the most complex and the largest-scale defence equipment programme, indeed the largest-scale engineering programme, undertaken anywhere in the world—the imposing of arbitrary annual limits on spending is ridiculous. We ought to finance such programmes in the same way as we finance other critical national infrastructure programmes, such as HS2, Crossrail and the Olympic games.
Does my hon. Friend agree that when equipment such as ships is being ordered, the payback to the Exchequer in tax should be taken into account and the jobs should not be exported?
Absolutely. My hon. Friend has made an excellent and salient point. He and I are both members of the all-party parliamentary group on shipbuilding and ship repair, which is currently undertaking a study of that issue. According to another study, conducted by the Fraser of Allander Institute at the university of Strathclyde, the overall benefit to the UK economy per annum from the shipbuilding industry on the Clyde alone is £366 million a year, in purely multiplier effects. As for the idea that we can competitively tender programmes overseas, we are losing the opportunity of industrial benefit as well. We are not just talking about the loss of core capabilities; we are talking about the loss of revenue and economic potential for our country.
I know that the hon. Gentleman has no intention of being churlish or unhelpful. He will, I am sure, acknowledge that having a shipbuilding strategy, together with a maritime growth strategy, is a particular feature of this Government, which marks them out from their predecessors of all political persuasions.
I do not accept that point. It was a Labour Government who, in 2005, introduced the first defence industrial strategy, which defined a far more robust way of delivering shipbuilding capability in the UK. It defined key industrial capabilities, and that is sorely lacking from the Government’s current shipbuilding strategy. I hope that there will be some improvement as a result of the ongoing discussions on the matter.
I cannot believe that the hon. Gentleman has misunderstood me. Perhaps I did not explain myself carefully enough. I commissioned the maritime growth study, and it was the first for donkeys’ years, so I am not quite sure what the hon. Gentleman means.
That may have been a discrete maritime growth strategy, but the overall defence industrial strategy encompassed maritime aspects. However, I welcome the right hon. Gentleman’s efforts in that regard, and I hope that we can work constructively to improve the strategy in the manner that I suggested.
The funding of large-scale equipment programmes must be revisited as a matter of urgency, because it is not sustainable. The annual limits on key programmes that are multi-generational cannot be allowed to continue. When we were looking at the programme for the construction of the Type 26, we wanted to invest potentially half a billion pounds in reinvigorating the infrastructure that would support it, but because of the arbitrary in-year spending profile we could not invest in the infrastructure and facilities that would have benefited the programme throughout its life cycle, and we therefore lost that long-term benefit. For the sake of short-term savings, we are losing long-term efficiency in the generation of defence capability. That may be an answer to the question from the hon. Member for Gainsborough about whether we were receiving the maximum benefit. Perhaps if we sow the seeds of the maximum capability at the start of programmes, we will reap the benefits of efficiencies through the manufactures that result from those highly complex programmes.
Defence inflation and the need to pump-prime programmes at the start to ensure that they meet world-class standards are just a couple of the issues that we need to challenge if we are to get the most out of our industrial capability. I hope that the Secretary of State will take those comments on board.
During this debate, the subject of how much we should spend on defence and what we should be spending on has taken up a lot of the time, as is only right in an estimates day debate. I want to take this opportunity to put on record my agreement with the sentiments expressed by, among others, my hon. Friend the Member for Gainsborough (Sir Edward Leigh), the hon. Member for Bridgend (Mrs Moon), my right hon. Friends the Members for Rayleigh and Wickford (Mr Francois) and for New Forest East (Dr Lewis), the hon. Member for Gedling (Vernon Coaker), my hon. Friend the Member for Angus (Kirstene Hair), and the hon. Members for Chesterfield (Toby Perkins), for North Durham (Mr Jones) and for Glasgow North East (Mr Sweeney). Simply put, I agree that more needs to be spent on the defence of our nation, and that the continued speculation about cuts to capability and manpower not only weakens us in the eyes of our allies, but does untold grievous damage to the morale of our men and women serving today. I also want to mention something that has not been touched on this afternoon. I pay tribute to my hon. Friend the Member for Plymouth, Moor View (Johnny Mercer) and others for their tireless campaign to get more help and investment into mental health support for serving personnel, and to the MOD for the announcement this weekend of the creation of the new helpline operated by Combat Stress.
Today, however, I want to raise something different, which I estimate would cost the UK Government very little money at all. All Members are aware of the current problems in recruitment to the armed forces. I know that a great deal of time and effort is going into revamping and modernising the recruitment process and the new recruitment campaign. However, there is one group of people that, apart from in the rarest of circumstances, is very unlikely to be found in the ranks of the Army, the Navy or the Air Force: subjects from the British overseas territories. These territories are British by choice and their residents are British subjects. However, despite being loyal citizens and holders of a British passport, and being fit and able and willing, individuals are still ineligible to serve in the armed forces of this country unless they have resided on the British mainland for five whole years.
Let us put that into perspective. That means that an 18-year-old Falklander or Gibraltarian who wanted, like his compatriots on these islands, to have a rewarding career in the armed forces would be forced to move to the UK mainland and live, and presumably work, here until the age of 23 before being eligible to join up. Some might argue that, for example, the Royal Gibraltar Regiment and the Falklands Island Defence Force give the chance for rewarding careers in the armed forces for citizens of overseas territories, but if they wanted to join the Royal Navy, the Royal Marines, the Air Force or any regiment in the regular British Army they would be prevented from doing so for five whole years simply by virtue of not residing in these islands long enough. I put it to the House that that is not only daft, but is borderline discriminatory, and it is doing our loyal subjects in our overseas territories a huge disservice, and denying our armed forces willing volunteers at a time when we are struggling to fill the books.
I am listening carefully to what the hon. Gentleman is saying, and I have no problem with it, but it was his own Government when they came into office in 2010 who turned off the pipeline of recruits from the Commonwealth. If he wants to increase the numbers and “fill the books”, as he said, there is an easy option in terms of Commonwealth recruits.
I agree. That was a decision of my party and the previous coalition Government, and I am taking action on it with the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard); he asked me to join him in attempting to change the situation, and I was only too keen to assist.
This is simply an unfair situation, so in late November the hon. Gentleman and I wrote to the Home Secretary expressing our hope that something might be done to arrest this wrong. We received a reply from the MOD, which was welcome of course, saying it could not do anything as this was a Home Office policy. We knew that, which is why we sent the letter to the Home Office. It obviously feels it has enough on its plate to be dealing with just now, which is understandable, but the fact is that this is not a tricky issue to solve; it requires a minor tweak, and it has precedent. Until 2006, citizens of British overseas territories had to pay “overseas” fees at British universities. In 2007, however, due to the fact that overseas territories do not have their own higher education institutions, the Government brought in legislation equalising the levels of tuition fees, so that now at British higher education institutions a student from Stanley will pay no more than a student from Southampton.
Surely it is possible to do something similar for those young people who want to serve their country in the finest armed forces in the world. In this 100th anniversary of the end of the first world war, a conflict that saw thousands of young men from across the then empire volunteer to fight for this country—76 from the Falkland Islands alone—we should do honour to those who fought under our flag by righting this wrong.
We have heard many times this year that Britain is charting a new course in the world, re-establishing relations with allies old and friends new. What better signal to send to the outside world that this truly is a “global Britain” than granting citizens of our overseas territories the same rights as citizens living on these islands? What better way of honouring the commitment to this country of citizens of our overseas territories throughout the years than by removing this residency requirement and allowing British subjects, wherever in our global family they reside, to serve without restriction in the armed forces of this country?
It is a pleasure to follow my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) and to congratulate the Members who have brought this debate forward. I find myself in the happy position of agreeing with much of what I have heard.
The armed forces of our country have been engaged in continuous operations for the last couple of decades, yet at the same time—particularly in the last seven to eight years—we have been dealing with a sustained programme of deficit reduction. That has not been mentioned in this debate in connection with the financing of our armed forces. The stress and strain that this has placed on our military is manifest as we ask them not only to do more in the world, but to do a more varied set of tasks while managing with fewer resources. This asks a lot of the men and women who wear the Queen’s uniform, but they wear it with commitment and pride, which is worthy of our respect. They put themselves on a path of service that puts them in harm’s way—sometimes in deadly harm’s way—on our behalf, and we should not forget that.
However, we should have gratitude not only to the men and women of our armed forces, but to those who support them in the supply chain. I am proud to have visited, and spent time with, the men and women who work at the Babcock military vehicle and armament repair facility at Forthside in Stirling. They told me their stories of deployment alongside our troops in Afghanistan and Iraq. They are, in their way, as heroic and dedicated to the cause of defending our United Kingdom as the enlisted men and women, and their sacrifice and work is worthy of our celebration. These contractors and suppliers who support our military in theatre are a vital cog in the machine of our defences. It is one of our jobs in this Parliament to ensure that our military is well served by these contractors. The MOD would do well to remember its role as the customer and better leverage its authority as a customer with these contractors. I believe that there is room for improvement in that area in terms of value of money.
At present, there is a threat hanging over the future of vehicle and armament repairs in Scotland. I hope that Ministers will take the opportunity provided by this debate to confirm that the MOD expects such repairs to be carried out in Scotland in future. I very much regret that as things stand I appear to have failed to convince the MOD to exercise its voice of customer with Babcock and to site the mobile defence support group unit for Scotland in my constituency. That is a wrong decision, especially given the calibre of the highly skilled and extremely loyal workforce, whose support of our armed forces included, as I have said, regular and repeated tours of duty in war zones such as Afghanistan and Iraq. These workers are my constituents and I believe they deserve better from the MOD.
We cannot go on asking our armed forces to have the level and reach of the operational commitments we lay on them and expect of them while continuing to cut back on the resources available to them. It is a simple but effective slogan to summarise my position and that of a great many other Members across the House by saying this: no more cuts.
I turn to other matters. We should be very wary of Russia. I have a strong feeling for Russia, as you might know, Mr Deputy Speaker, because my son Luke, who is a constituent of yours, served two years in Novosibirsk in Siberia as a voluntary representative of our Church. Over the two years he was there, he became very fluent in Russian and became a great lover of all things Russian, in particular the people of Russia. He has shared his enthusiasm for Russia with all his family, including me, and I have had the opportunity to experience the warmth and hospitality of the Russian people myself. However, the issue of Russian nationalism is a different story, as it is with the nationalism that has emerged all around the world. Nationalism is a destructive force that divides people and pits ethnicities and national identities against one another. Fundamentally, it is a poisonous ideology wherever it is found, and although it is often disguised in modern times, it is still a threat to our way of life and to the security and peace of the world. We must be ready to meet nationalism head on, to challenge it and to defend its victims.
Given what the hon. Gentleman has just said, does he support ending the Olympics, which are a competition between nations? There is a bit of nationalism there. End the Olympics!
There is a great difference between nationalism and patriotism, which is far more wholesome. It is no mistake that the leader of the Scottish National party herself has said that she very much regrets the fact that the word “national” is to be found in the SNP’s party name. But I am not here to talk about the SNP, disappointed though its Members will be to hear that. I urge Ministers across Government to take seriously the direct warning by General Sir Nick Carter that Russia poses a major threat that the UK would struggle to confront without an increase in defence spending.
I also want to mention recruitment. I believe that subcontracting recruitment to a civilian business was not a good decision. Such recruitment cannot be determined by someone working with a spreadsheet, and I seriously doubt that any private company has what it takes to function as an adequate recruitment agent for the British armed forces.
Housing for our armed forces is also an issue. Some of the anecdotal stories shared with me about living conditions for service families are, quite frankly, nothing less than shameful. However, that is too broad an issue to be covered in the time available tonight.
We also need to be sure that our troops have the right equipment at the right time. There is a black hole in the budget, as has been admitted. We have laid orders for equipment that we do not have the money to pay for. If we are not careful—I say this as a member of the Select Committee investigating Carillion—we will find ourselves in a situation of robbing Peter to pay Paul that will become a vicious circle, and we all know where that will lead to.
The hon. Gentleman is right to point out the difficulties that we can get into when we rob Peter to pay Paul. The Defence Secretary recently told the Defence Committee, in discussing the £300 million needed to support the development of the at-sea nuclear deterrent and the critically important Dreadnought programme:
“We have had to make sacrifices elsewhere in order to ensure that the programme keeps going”.
That is what this debate has been all about, and the hon. Gentleman is right to make that point.
I am grateful to the hon. Gentleman, my colleague on the Business, Energy and Industrial Strategy Committee, for making that point.
In regard to capabilities, I very much regret the fact that the Royal Navy does not have the number of surface vessels that it requires to send both our aircraft carriers to sea at the same time with the prerequisite level of air and submarine protection. I lay that before the House as an example of the capability issues that we face. We further need to be sure that we are meeting the needs of modern warfare, as has been mentioned several times. The UK is vulnerable to cyber-attack, which presents a clear and present danger in terms of the peer-to-peer threat that we are living under.
Addressing these issues will require resources and a new range of skills for defence and for counter- attack. That is why I welcome the Secretary of State’s announcement a few weeks ago of the defence modernisation programme review. It seems to me that this review came about because he was faced with a choice between one set of unpalatable cuts and another set of unpalatable cuts. Our armed forces are not only an emblem of our national pride that symbolises our national values; they are also a vital tool to project British values across the world. I believe, as a Conservative Member of Parliament, that no Conservative Secretary of State for Defence should contemplate undermining our defences further with more cuts. We must give our armed forces the reassurance and the resources that they need to do the job, and an increase in the defence budget should be forthcoming.
It normally falls to the Scottish National party to break the consensual mood of these debates, but I fear that the hon. Member for Stirling (Stephen Kerr) has somewhat jumped our gun in that respect. Some of what he had to say was useful, but I will take no lectures on patriotism from a party that is presiding over the housing crisis that he describes, the recruitment crisis that he describes, or indeed the morale crisis that has been adumbrated by so many Members tonight. It takes a bit more than jumping on a tank with a Union Jack to be taken seriously on these issues.
Returning to the consensual points, however, I would like to thank the hon. Member for Gainsborough (Sir Edward Leigh) and congratulate him on bringing forward this estimates debate. He eloquently highlighted the miasma of despair that hangs over the finances in the Ministry of Defence, just as we have done fairly frequently in this Chamber and in Westminster Hall. I half-joked with the Government Whip earlier that the speech I am about to make was the same one I have been making for the past five months—[Interruption.] I have no intention of sitting down! I mean no disrespect to the colleagues who also take part in these debates, but much of what has been said this afternoon and this evening has been said before. And no doubt the response will be the same. We will be told that we have to wait for the review of the new defence modernisation programme, and that is something that we look forward to engaging in.
In one of my sadder moments, one night when I was suffering from insomnia, I was looking for something to listen to on Radio 4 when I came across a programme from 2011 featuring an interview with the right hon. Member for Barking (Dame Margaret Hodge), who was the Chair of the Public Accounts Committee at the time. It was a programme on defence procurement. Anyone listening to that programme tonight—I am sure that many Members will want to go and do just that when they leave the Chamber—would be forgiven for thinking that that interview was conducted last week. So dreadful is the state and condition of defence financing that we are repeating the same problems over and over again. I genuinely want to make a contribution that offers an alternative to the way in which the financing is done, so that we can avoid the shambles that the National Audit Office pointed out only a couple of weeks ago. I will return to that in a moment.
My hon. Friend makes a good point. Other hon. Members have raised the point—I think it is worth repeating, and I know that Ministers will hear it with some sympathy—that when it comes to defence spending, the housing that is provided for service personnel and particularly for their families is of critical importance. A number of my constituents have approached me about the housing conditions in Leuchars, and I hope that my hon. Friend will urge the Minister to look into this to ensure that military bases are as family-friendly as possible.
I am quite confident that the Minister has heard my hon. Friend’s point, and that he will do just that. I shall go on to talk about the equipment plan report, but I think another National Audit Office report came out the day before that one, which covered the Annington deal on military housing. Admittedly, that does not affect Scotland, but the report states that if that deal had not been signed by the Conservative Government in, I think, 1996, the taxpayer could have saved some £4 billion. We could undoubtedly have had better military housing as a result.
I want to offer an alternative to the financing model, to which I have alluded in the past. The model that is used in Sweden and Denmark involves longer projections for funding and reaching defence agreements that last more than just 12 months. The Danish model, which admittedly is imperfect, has a defence agreement that involves all the political parties. The heat of the politics is taken out of the agreement, allowing the Government to sign up to a funding model lasting somewhere between five and six years, so that even when there is a change of Government, the model can still be adhered to. Obviously, there are caveats, such as that if the Parliament chooses to diverge from the plan, it ultimately has the power to do so, but it means that the Government are not constantly chasing their tail. I would encourage hon. Members who regularly attend these debates to consider that model, which we are certainly keen to see the Government explore.
My hon. Friend makes a prescient point. At the Joint Committee on the National Security Strategy today, the experts were recommending the Danish model as something that the UK should follow, and I am sure that the Ministers are listening to that point.
I am grateful to my hon. Friend. I would hope that such a model could avoid some of the incredibly alarming passages in the NAO report, which have been highlighted by many right hon. and hon. Members. There is a funding hole in the equipment plan of up to £20 billion. To make that clear, that means that we cannot afford to buy the equipment we say we need in order to keep us safe.
I give all the weight I can to the Ministry of Defence in trying to get it the money that it needs—if not just to stand still, then certainly to move forward—but I do have some criticisms of how the Department has managed to get into this position. Why were the exchange rate projections so badly out—by up to a quarter in some cases?
I understand that that is what caused it, but how did the MOD manage to get the calculations so badly wrong? When there is a funding hole of £20 billion just in the MOD’s equipment spending—before we get to estates, personnel and all the rest of it—why is no one being hauled over the coals? I cannot think of another Minister or Department that would be allowed to get away with that, but it is due to a fundamental problem in how this Government, this Parliament and Governments over many years have decided to fund defence. It needs radical change. Even if the solution that we think might be helpful is not the perfect solution, something has to give, because the situation is unsustainable. The NAO is clear that the result is that projects must be cancelled, delayed or scaled back. I therefore ask the Minister to make it clear to the House which projects are to be cancelled, delayed or scaled back. Can we have a guarantee that not a single project in Scotland will be cancelled, delayed or scaled back, because that is the road that the NAO says the UK Government is heading down?
The situation adumbrates the need for a new SDSR—one that takes account of the change in currency fluctuations and of the fact that Britain will no longer be in the European Union. Our current security policy is based on our being members of the EU, so we need a new one that takes account of the fact that we are coming out, because that undermines operational capability.
The hon. Gentleman makes a point about the impact on real defence spending of things such as currency fluctuations. We are talking about the need for stability in the defence budget and for it to be fiscally neutral, which I think was the term used by the Secretary of State, so should the Treasury not give special dispensation to the MOD so that it is pegged to a certain real level of spending, which would be an automatic stabiliser that rises and falls automatically with changing valuations or with defence inflation rates?
There is nothing that I could add to make that point any better. The hon. Gentleman is absolutely right.
The hon. Gentleman poses an interesting question. There was an SDSR in 2015, and the modernising defence programme, which will presumably have consequences, is going to be announced in the next few months. Just to be clear about what he is saying, is his argument that there should be another SDSR at the end of the five-year period in 2020 or before that?
I rather suspect that I cannot get the Government not to go ahead with its modernising defence programme. My preference would be for a proper SDSR, rather than this mini review, but we are where we are. Despite the supposed lifting of the fiscally neutral element, I fear that we are heading in the same direction. The hon. Gentleman will remember the statement: three of the four announcements were cuts. Let us not dress that up in any other language; they were cuts. I fully expect that to happen again when the announcement comes later in the year.
Setting aside our views on whether we should have the nuclear deterrent, the other alarming aspect of the NAO report is its rising cost. All of a sudden, it has gone up by £1 billion—overnight, it seems. It has gone up by so much that the MOD’s director general nuclear is having to review the costings, so I would welcome some information on when that review will happen, when an announcement will be made and when Parliament can expect to get the information.
I want to end on a note of consensus, so my final point is that the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) made the very good point, with which I can find no reason to disagree, about making it easier for people from the British overseas territories to join up, instead of making them wait five years, which would be eminently sensible given the existing recruitment problems. Those problems have been well documented in the House, not least by the right hon. Member for Rayleigh and Wickford (Mr Francois) —I have just learned that I have been mispronouncing his constituency the entire time, but he is such a gent that he has not even told me.
This has been an important and informed debate, as it always is, and the House is better informed as a result. We look forward to the results of the mini defence review and to engaging with it. As the Secretary of State knows, the Scottish National party hopes that there will be a particular focus on the activity, or lack of it, in the high north. I look forward to hearing what the Minister has to say in his winding-up speech.
I welcome this opportunity to debate the MOD budget, and I thank the hon. Member for Gainsborough (Sir Edward Leigh) for his part in securing it and for his excellent opening speech. We have heard a number of thoughtful contributions this afternoon, and I hope that Members will forgive me if I do not mention them all individually owing to the lack of time.
It is clear that there is deep dissatisfaction at the state of the defence budget on both sides of the House and a real desire for proper investment in our armed forces and our nation’s defences. We are all used to hearing from Ministers that the defence budget is growing, and I am sure that there will be more of that this evening, but the truth is that years of deep cuts by the coalition and Conservative Governments mean that the defence budget is now worth far less than it was when Labour left office.
Defence spending has been cut by nearly £10 billion in real terms between 2010 and 2017, and the defence budget will fall in real terms next year according to the Government’s own figures. Our purchasing power has been cut dramatically due to the sharp fall in the value of the pound, and then there is the gaping hole in the Department's defence equipment plan. It was truly shocking to read the National Audit Office’s recent report which concluded that the plan is simply not affordable and that the funding gap may be as large as £20.8 billion. That conclusion was not particularly surprising since the affordability of the plan has been in doubt for some time, but that should not detract from the seriousness of the situation. The plan represents the £180 billion of equipment and associated costs that are required by our armed forces over the next 10 years in order to keep this country safe, and yet it is clear that the MOD does not know how on earth it is going to pay for it.
That is the disastrous legacy of the decision to make deep cuts to the defence budget in the 2010 SDSR, and the belated attempt to row back five years later without having the necessary funding in place. It also serves as a warning about how difficult and costly it is to replace a capability once it has been cut, as we are now seeing with the maritime patrol aircraft. The result is a plan that, in the words of the NAO,
“does not provide a realistic forecast of the costs the Department will have to meet over the next 10 years”.
That would be unacceptable for any Government programme on such a scale, but it is deeply worrying in the context of the many pressures already facing the defence budget. Notably, the plan does not even include the cost of the Type 31e frigates, nor does it address concerns about the cost and affordability of the F-35 programme—concerns that have grown as Ministers have repeatedly been unable to supply adequate cost estimates for the F-35s, something which the Defence Committee described as “wholly unsatisfactory”. I would be grateful if the Minister set out the Department’s response to the NAO’s conclusions and outlined what urgent steps will be taken to address the issue of affordability at the earliest opportunity.
The equipment plan is also heavily reliant on billions of pounds of efficiency savings. We all want value for money for the taxpayer, but Ministers have been keen to make assumptions about savings without sufficient evidence that those savings are achievable. The Select Committee concluded in respect of last year’s plan that
“it is extremely doubtful that the MoD can generate efficiencies on the scale required…or detail how it would proceed to do so”.
Sadly we seem to have exactly the same issues with this year’s plan, because the NAO again finds
“a lack of transparency on the full amount of savings included in the Plan and the Department does not have evidence to support all the savings it has claimed to date.”
We all agree that every effort should be made to maximise efficiency savings, but the Government’s consistent over-reliance on projected savings to fund key programmes—savings that they are patently failing to achieve—suggests either a shocking naivety or a poor attempt to disguise yet more cuts.
That is also one of the biggest risks facing the modernising defence programme, as three of the four work strands focus so clearly on generating efficiencies through reforming the management of the MOD. As I have said previously, the Minister and his colleagues will have support from both sides of the House if the review results in proper investment for our defences and our armed forces, but there will be deep disquiet if it merely results in yet more cuts of the kind that have been widely briefed in the press in recent months.
That brings me to the potential cuts to our amphibious capabilities. I was in Plymouth with my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) on Saturday, and there is real concern in that city about the fate of HMS Albion and HMS Bulwark. Ministers, including the Defence Secretary just last week, have repeatedly failed to address speculation that those ships will be taken out of service earlier than planned as a way of generating short-sighted savings.
Although I appreciate that the defence review is ongoing and will not report until the summer, the Minister is not precluded from stating categorically that the review will not result in cuts to our amphibious capabilities—cuts that will leave us with significant gaps—and I sincerely urge him to say something this evening.
I thank my hon. Friend for visiting Plymouth at the weekend. Does she agree that we not only need to provide certainty for the crews of HMS Albion and HMS Bulwark, and for the Royal Marines, but we also need to recognise that the sale of HMS Ocean to Brazil has hit morale in the city and is damaging retention in our armed forces?
My hon. Friend makes a valid point.
It is clear that the work strands of the review will look in detail at the way that industry does business with the MOD, which is an area where progress can and should be made. It is apparent from responses to the consultation on the defence industrial policy refresh that there is a desire for the MOD to be more flexible and collaborative in setting requirements, as well as in engaging with industry at an earlier stage in the procurement process.
Opposition Members would also like the definition of “good value” to be expanded to include wider employment, industrial or economic factors when making procurement decisions and awarding contracts. There have been a few nods in that direction from Ministers, and we welcome the reference to it in the national shipbuilding strategy, but the defence industrial policy refresh is extremely disappointing, in that it fails to make any such changes.
The Select Committee also called for a broader definition of “value for money”. This call has received the support of the trade body ADS, as well as defence trade unions such as Unite and Prospect, so I would be grateful if the Minister could explain why the MOD has decided not to pursue such changes.
There is also strong support within industry for fair and open competition, wherever possible, when making procurement decisions. The Secretary of State reflected that in general terms before the Select Committee recently, but there has been no firm commitment that the contract for the new mechanised infantry vehicles will be subject to open competition. I would be grateful if the Minister could confirm this evening that this really will be the case.
The MOD budget has also taken a substantial hit due to the sharp fall in the value of sterling following the EU referendum. The Department faces a real challenge given that so much of the equipment plan is denominated in foreign currencies. That is made worse by the fact that the MOD has, for some reason, used exchange rates that do not reflect current market rates—something that the NAO identifies as a risk to the plan.
Of course, one reason for the collapse in the value of the pound is a clear lack of investor confidence because of the way that this Government are handling the Brexit negotiations. The Opposition firmly believe that a clear commitment to negotiating a customs union with the European Union would provide the certainty that industry and investors need that they will not be hit by burdensome and unnecessary tariff barriers when Britain leaves the EU.
That is particularly important for defence companies, which depend on pan-European supply chains and simply cannot afford to see barriers to trade imposed between Britain and our European partners. But the Government have recklessly decided, point blank, to rule out a customs union, in a move that seems clearly designed to appease the hard right of the Conservative party rather than reflect the interests of our economy and workers in the defence industry.
Finally, as well as the severe challenges to the MOD budget in the here and now, there is also the spectre of massive potential costs coming down the line for forces accommodation. As the NAO’s recent report highlights, the Conservatives’ decision to privatise the housing of service personnel and their families in 1996 has been a disaster from start to finish.
The Conservatives ignored repeated warnings at the time, including from my right hon. Friend the Member for Warley (John Spellar), that this sell-off of public assets would not deliver value for money, and now we learn that the deal may have cost the taxpayer up to £4.2 billion. That has left us in a ridiculous position whereby the Government now rent back the same accommodation at increased cost. The MOD will be held over a barrel if the company demands costly rent rises when the lease is up for renewal in 2021. I would be grateful if the Minister could set out exactly how the Government plan to manage the lease renewal process in a way that does not simply result in further unnecessary costs to the taxpayer.
There is support on both sides of the House for real investment in our national security and for an end to the short-sighted and painful cuts that have marred the last seven years. We cannot do security on the cheap. It is time for this Government to deliver the proper investment in defence that the British public expect.
It is a pleasure to respond to this debate. As others have done, I thank my hon. Friend the Member for Gainsborough (Sir Edward Leigh) and my right hon. Friend the Member for New Forest East (Dr Lewis) for securing this debate. I believe the Procedure Committee and the Liaison Committee were both involved in setting this new precedent for discussing estimates.
It is interesting that this debate was preceded by an urgent question on the situation in Syria. A number of options, ideas and proposals were put forward by Members on both sides of the House, and we should remind ourselves that we are able to make such proposals only because we have the hard power that allows us to stand up in this world. There is a question as to whether we use that hard power, but it does allow us to affect the world around us as a force for good.
In praising our armed forces, it is important that we pay tribute not only to those in uniform but to those who support them: the wives, the partners, the husbands, the children and the entire armed forces community. We, Parliament and the nation, pride ourselves on their incredible professionalism and sense of duty. They are among the best in the world—disciplined, reliable, committed, brave and very well equipped and trained—and we thank them for their incredible service.
The majority of people come out of the armed forces better for it, and our nation is certainly better for their service and for what they do in civilian life once their work is complete. It has been mentioned that we perhaps do not pay tribute to or acknowledge the work that is done across the world. Operations are taking place not just in the obvious—Iraq and Syria—but in Afghanistan and Africa. We are helping to stabilise nations, and we are helping those nations to become strong so that they can make a mark on their own future.
As we have heard today, the MOD budget sits at about £36 billion this year, and it will increase by 0.5% above inflation each year. We have the largest defence budget in Europe and the second largest in NATO, and we should remind ourselves that not all NATO countries are meeting the target. Fifteen out of 29 NATO members spend only 1.5% of their GDP on defence.
The Minister is right in what he says, so what pressure is the UK putting on those other NATO nations, both diplomatically and publicly, to get them up to the 2%? I would like to see a lot more done, when the Prime Minister is stood with other leaders, to put pressure on them to achieve that.
I am pleased the Defence Secretary is in his place, because this is very much of concern to him, as it is to all of us in the House, and it gets raised regularly. The last time he was in Brussels he raised it, and our allies in the United States are concerned about it too. The hon. Gentleman raises a very important point. Let us be honest: we know that, for varying reasons, the financial year has been tough. We are grateful to the Treasury for recognising the fiscal pressures the MOD is under and providing an extra £200 million window to allow us to close the books on the financial year 2017-18. I make it clear that this is new money; it is different from the £300 million that has been brought forward to assist with the continuous at-sea deterrence programme.
Looking ahead, there continues to be a lot of debate, as has been expressed today, about the pressures on and size of the armed forces, their annual budget and the 10-year spending plan. I thought it would be helpful to place things into context following the defence and security capability review and the defence modernisation programme, and to flag up some realities that are not for this budget, but which are coming around the corner. The Defence Secretary has spoken of the need to look at outputs, rather than inputs. We must not just set out the number of tanks, ships or personnel that we need; we must first ask ourselves what we actually want to achieve. That leads us to determine the size of our armed forces and the defence posture we wish to show. This should reflect our duties, both domestic and overseas; our ambitions as a force for good; and our international responsibilities as a permanent member of the UN Security Council and lead member of NATO.
We also need to adapt to the changing circumstances, as the threats we face become complex and intertwined. We must recognise that the world has become more dangerous since the publication of the 2015 SDSR. The risks and threats we face are intensifying and diversifying faster than expected, hence the purpose of the defence modernisation programme. It will allow more time to carefully consider how defence works, as well as what defence needs; it will aim to improve how defence operates; and it will focus on achievable efficiency and create different arrangements with suppliers. This modernisation will allow us to take the necessary long-term decisions about our military capability.
For clarity, let me say that the defence modernisation programme consists of four workstreams: the delivery of a robust MOD operating model, creating a leaner and more efficient MOD; a clear plan for efficiencies and business modernisation; a study of how we improve our commercial and industrial strategy, building on, for example, the shipbuilding strategy and the recently announced combat air strategy; and a focus on our defence policy outputs and our military capability—arguably the most important of the four.
That is all well and good, and all long term. Given that, why are the Government not sorting out the Capita contract on recruitment, which is clearly, visibly, obviously and lamentably failing the country, our armed forces and the recruits?
The right hon. Gentleman touches on something that I am not going to disagree with, but it is pertinent to and included in the workstreams I have just mentioned; we will be seeking more efficiencies and business modernisation. That means looking at our relationship with the contractors we work with, in order to improve the service we need to provide for our service personnel.
The work I have described will be led by the MOD, working closely with the National Security Secretariat and the Treasury, and engaging widely with Parliament, think tanks, academics, defence experts, international allies, the media, devolved Administrations, the defence industry and, of course, the public.
Having all of those other worthy people involved does not get to grips with the problem of the here and now; it is pushing everything off to the right and over the horizon—again. Why will the Department not get a grip of just this programme and sort it out, because it is crippling to our armed forces?
We have a programme—it is not fiscally neutral, as the last study was. This will allow us to make the changes and the recommendations that we need to take forward. I hope that the right hon. Gentleman will be able to get behind that, in order to make sure we can provide the service and the changes that we need to make, and which our armed forces deserve.
What the Minister has just said is very important. Will he confirm what he just said: that this modernisation of defence programme is not fiscally neutral?
I can say it again and I think I am going to say it a bit later, because it is in my speech: I am happy to confirm that it is not fiscally neutral. That is exactly why we are doing this. I am not saying this just because the Defence Secretary is in his place, but the first thing he recognised was the fact that the capability review was fiscally neutral and it was prohibiting us. We saw a lot of the stuff that came out in the media and so forth. The challenges that that would have imposed on our armed forces were exactly why there was a requirement to look in more detail at what our armed forces are doing. We now have that opportunity and we have to make the case as to what changes we need, what our defence posture is and how we move forward—
I am not going to give way again. If I may, I will make some progress.
Let me make it clear that this approach will allow us to deliver a better understanding of the implications of the new threats. It will confirm what conventional capability is critical and it will place the MOD on a more sustainable, affordable long-term footing, optimising our relationships with the private sector.
I am not giving way at the moment. As I have said, as has the Defence Secretary, the programme is not fiscally neutral. It allows us to expand and propose changes. It will assess the capabilities and the force structure we need to deal with the threats the UK faces. We will then consider the implications for funding.
When the Prime Minister, the Chancellor and the Defence Secretary met in December to confirm a way forward on the national security capability review and the defence modernisation programme, it was agreed that no changes would be made to our capability until the modernising defence programme was complete. With one eye on next year’s 2018-19 budget, I very much hope that that is still the case. The requirement for the defence modernisation programme is making sure that we understand the financial pressures affecting defence and looking into the future. If it is not the case, there would be no requirement for a defence modernisation programme. As the Deputy Chief of the Defence Staff for Military Capability told the Defence Committee last week, we are, unfortunately, seeing cuts to training exercises and
“a general suppression of some force generation across…frontline commands”
I stress that this is being managed without affecting prioritised units which are heading on operations, but if units are not training, it builds up a backlog of diminished capability.
Another issue raised in the Defence Committee last week related to the National Audit Office report on equipment, which cited a £20 billion deficit over the next 10 years. I make it clear that that makes some significant assumptions of risk, many of which will not be realised, and does not factor in the efficiency recommendations that the defence modernisation programme might make. Nevertheless—
I am sorry that the hon. Gentleman does not listen to what I am saying, because it is important and pertinent. Perhaps he can hold on to his seat for a second and allow me to finish this important point about the NAO report. Is that okay with him?
The NAO report does not factor in the efficiency recommendations, but nevertheless we must acknowledge the financial pressure on our equipment programme. As has been mentioned, there are also new and emerging factors, such as cyber, space and complex weapons upgrades. We must respond to them all, which of course adds to the bill.
I will give way to the hon. Gentleman for the last time.
I am grateful to the Minister for giving way. He says that this is fiscally neutral. He knows what the problem is now—[Interruption.] What was agreed in 2015 was fiscally neutral. It was unachievable because the efficiencies were unachievable and the land sales were unachievable. That is not my opinion; that is what the former Secretary of State, the right hon. Member for Sevenoaks (Sir Michael Fallon), said. If we know that, we know that in reality the only way that we can fix this is with more cash.
The hon. Gentleman should refer back to Hansard to understand what I have actually said. I shall make some progress.
Will the Minister give way?
Let me finish this part of my speech, then I shall come back to the hon. Gentleman. I am surprised by the way interventions are being made, because I am going through a series of acknowledgements of where things have gone wrong, another example of which is the challenge of flexing—the spending of future defence budgets today—which should be the exception, not the norm. CASD is a £31 billion programme and it has been necessary to bring forward some of that spending, which is why the budget has been increased by £300 million this year.
On the equipment plan, the Minister is right to say that the £20 billion black hole is the upper end of the estimate. He talked about taking that seriously, so what will it be this time next year?
We have only just completed the budget for 2017-18, and I should be clear that we have yet to embark on the annual spending round for next year. Perhaps this differs from other Departments because we have an opportunity to make a case for additional spending. We have the opportunity to make the case for a defence posture and to say what is appropriate for Britain. I cannot answer the hon. Gentleman’s point at the moment, but the purpose of this entire process is for us, hopefully with the House’s support, to make the case to the Treasury and to the Prime Minister. That is what the modernisation programme is all about.
I fully understand the direction of my right hon. Friend’s argument and I realise that it has been a great success for him and the new Secretary of State to regain control of the process for the MOD. If, as a result of the MOD’s examinations, the minimum recommendations on what the country needs to be able to deter threats and defend itself successfully require a significant increase in the defence budget—frankly, that is the assumption that has underlain many of today’s speeches—can we rely on the whole ministerial team to stand together as one and say to the Prime Minister, “We simply must spend more on defence”? That is what is required.
My right hon. Friend hypothesises, but it is absolutely the case that we stand together to put forward a programme that will allow the defence posture that we believe the country absolutely deserves. It is not just about asking for more money, which is obviously simple to do, and we will be lining up with other Departments doing exactly the same thing; we should also recognise that there are efficiencies to be found in the MOD itself. Indeed, as outlined in the 2015 SDSR, we are realising £7 billion of efficiency savings and moving to a more commercial footing, seeking to sell more of our world-class military equipment.
The most important reason for doing this now rather than waiting for the next SDSR in 2020 is that the world around us is changing fast. That raises important questions —arguably more so for Britain than for other countries—about exactly what role we aspire to play as a nation. The outcomes and recommendations of the defence modernisation programme will provide the evidence for how to answer the big questions. We are experiencing a chapter in which the conduct of war is changing at a furious pace. As the world gets more complex and unpredictable, ever fewer countries have the means, aspiration and, indeed, authority to help to shape it for the better.
As the Prime Minister said in her Mansion House speech last year, we are seeing resurgent nations ripping up the international rules-based order. Left unchecked, the growing threats could damage the free markets and open economies that have fuelled global growth for a generation, at the very time, post-Brexit, when we are seeking new trade deals around the globe. The task of a global Britain is clear: to defend that rules-based international order against irresponsible states; to support our partners in unstable regions by repelling the threats that they face; and to back visions for societies and economies that will prosper and help the world.
My concern, which I think is shared in all parts of the House, is that there is a tragic collective naivety about the durability of the relative peace that we enjoy today. That point has been repeated again and again in the debate. Our country, economy and values are vulnerable to a range of growing dangers, both state and non-state, that have no respect for our borders, including the rise of so-called sharp power—the deceptive use of information for hostile purposes and the manipulation of ideas, political perceptions and electoral processes. It is a model that is not new, but because of the speed and the low cost, which come thanks to the internet and so forth, it is far easier to procure.
My belief, which I hope is echoed around the Chamber, is that it has always been in our nation’s DNA to step forward when other nations might hesitate and to help to shape the world around us. However, to continue to do so will require investment, so I end by repeating my thanks to the Treasury for its support. It has to endure all Departments seeking to increase their budgets. We often say that it is only with a strong economy that we can consider any increase in any budget, but I politely add that without a strong defence, a strong economy cannot be guaranteed.
Last week, the Secretary of State spoke of 2% of GDP being spent on defence as a floor, not a ceiling. The message has to be clear: if we want to continue to play an influential role on the international stage, with full-spectrum capability; if we want to provide the critical security that post-Brexit trade deals will demand; and if we want to remain a leading contributor in the fight against extremism in the middle east and elsewhere, we cannot continue to do all that on a defence budget of just 2% of GDP. Two per cent. is just not enough. This is a question not just for the Government and parliamentarians, but for Britain: what status, role and responsibility do we aspire to have as we seek to trade more widely in a world that is becoming more dangerous?
This has been an historic debate. For the first time in nearly 60 years, the House of Commons has discussed estimates on estimates day. I have been campaigning for this for 10 years, and the quality of this debate has vindicated the decision to discuss money on estimates day. I am so pleased that I persuaded my right hon. Friend the Chair of the Defence Committee to make the Ministry of Defence the subject of this first estimates day debate on money.
Everybody has spoken with one voice. This has not been a party-political debate in that sense. Whether from New Forest East, Gedling, Moray, Aberdeenshire, Glasgow, Aldershot or Rayleigh, everyone has made the point—and the Minister has just echoed it, one of the first times that I have heard it from the Front Bench—that spending 2% on defence is simply not enough.
In the spirit of consensus, I echo what the Opposition spokesman said—that we cannot get security on the cheap. I also echo what the hon. Member for Gedling (Vernon Coaker) said, and I tell the Secretary of State to go back to the Treasury and No. 10 Downing Street and say that every single Member, from the SNP, the Conservatives and Labour has made this point—[Interruption.] And the Liberal Democrats. How could I forget the great speech about the contribution of the local regiments in Caithness? Members spoke with one voice. The Secretary of State can go back and say, “This is not like the 1930s. This is not like the Fulham by-election when we were worried about public opinion on disarmament. We have the support of the whole House.” He should go back, get the money and make sure that we defend our country.
Question deferred (Standing Order No. 54).