Sunday, 16 June 2013

To spend, to save, to cut, to deploy - the fiscal challenges facing Defence.

 
 
Humphrey has recently returned home following an extended period of travel. In his absence it is clear that a great deal is going on in the world of Defence judging by the plethora of articles in the media about the MOD. Most contentious of all has been the current spending round, and it is clear that there is one going on for the media is full of the usual round of stories about how cutting X from the budget will lead to various apocalyptic circumstances. A cursory glance on ARRSE or elsewhere shows that the debate is clearly in full flow, although no decisions have yet been taken.
 
 Humphrey has a very strong rule that it is utterly pointless to write about scenarios or views expressed in the media during the run up to spending rounds. The public and media are bystanders and unwilling participants in a vicious war conducted internally by spreadsheet, emails and whispered briefings. The fact is that every government department at present seems to have leaked some form of doomsday scenario out there, ahead of settling for a different deal. One must remember that each media intervention, each email seen by a journalist or each ‘friends of the Minister / Official / Officer’ briefing are deliberately designed to further an agenda.
 
Often this whispering campaign is designed to support arguments held which people are not privy too – to try and manipulate opinion (not necessarily of those who believe that they are the intended target audience) and to try to shape ones own short and long term future for both their department and future career path.
 
There is remarkably little point on commenting on a work in progress when all that the public is seeing is material leaked to further a specific goal. This sort of debate will go on often right to the wire, and involve a great deal of negotiation, debate and work. Writing a long article about how the UK ability to deploy underwater knife wielding ninjas is threatened due to budget cuts is right now pointless as no one outside of a tiny group knows what the likely budget will be. The only time it is worth writing on the budget is when it is publicly known and the parameter of the debate is better understood. In the meantime the author will read with wry amusement the stories in the press which claim that X or Y will be threatened – it is very hard to make such judgements until you know the size of the budget.
 
Once the budget is settled, then the next phase of the traditional planning round antics begins – having tried to bat off generic calls to reduce the budget, a new battle of leaks will begin with the services leaking their own agendas to try and jockey for position as new planning rounds begin to bite. Again, the papers will be full of stories talking about how the MOD may have to disband the Red Arrows, scrap HMS VICTORY or replace Household Division horses with Shetland Ponies. This usually signifies that the planning round is in full swing, although again, there is little point in taking any speculation seriously until an announcement is made. What will make this next phase most interesting is that it will be done against the backdrop of a Strategic Defence Review in around late 2015. This is where the real interest should be – not in arguments over whether the UK can still afford to do X or build Y, but the fact that for the first time in a long while an SDR is going to be put together after the spending plans have been formulated.
 
This is significant as much of the preparatory work for the next review will be beginning soon, and it can be done knowing the financial baseline. It’s much easier to consider the outputs of Defence when you know how much you have to spend. What is also very interesting is that several statements have been made recently which appear to be setting the parameters of this debate – firstly, there seems to be a clear view that the equipment budget will continue to rise in spending terms to cover the planned acquisitions. As Humphrey has noted elsewhere (HERE) there is relatively little room for cost growth in the current budget, and inflation will quickly wipe out the limited headroom which does exist. At the same time there was media coverage this week suggesting that the Prime Minister has publicly ruled out further manpower cuts to the armed forces as a result of the current spending round. Now while this statement could be open to a lot more debate (does this mean that the spending round will not cause cuts, but the SDSR may open door to manpower reductions as a result of changes to defence planning assumptions?), it also further reduces the ability to manoeuvre for achieving spending cuts.

Finally, this week the Prime Minister gave a speech which seemingly got little coverage, but which was designed to set out his vision of where the UK sits in the world, particularly with reference to economic growth (https://www.gov.uk/government/speeches/plan-for-britains-success-speech-by-the-prime-minister) Without in any way expressing a view on the political context of the speech, there were some interesting lines about how he saw the continued role of the UK diplomatic and military presence across the world. These included:
 
 Where once our diplomatic network was shrinking, we are now on the march; in a couple of years, we’ll have opened 20 new diplomatic posts around the world, from Liberia to Laos. We’re the only nation in Europe to be expanding our diplomacy in this way; indeed, we’re now only one of three European countries represented in every single country in ASEAN, and we have the largest diplomatic network in India of any nation on the planet… (We have) reinvigorated relations with our old partners in the Gulf, where we’re active commercially, diplomatically, and with renewed military co‑operation to the east of Suez”
 
This perhaps sets the scene for a view where the UK continues to be seen as playing a much wider diplomatic and military role in the global environment. Most interestingly of all to this author is the use by the Prime Minister of the phrase ‘East of Suez’. The concept of a British Prime Minister in the 21st Century talking of an East of Suez military commitment would have been unthinkable just a few years ago, so this is perhaps quite an important line.

What it does demonstrate though is that the spending review and the SDSR will seem to work on several key assumptions – limited equipment budget growth, no headcount reduction to the armed forces as a result of spending cuts and a continued global military presence, including deployments East of Suez. The challenge is how to take these general views and merge them into a spending package which is credible – while headcount reductions are politically difficult they do save a lot of money – the personnel component is the most expensive part of the budget, and cutting a few thousand troops will save hundreds of millions over 10 years in both real terms of reduced salaries, but also fewer equipment buys, fewer barracks and so on. If you wish to maintain the equipment budget, and also troop levels, then something else has to give – R&D, estates, allowances, civil service numbers etc. The question is firstly is there enough scope in Defence to provide this level of spending cuts without impacting on the front lines (one only has to look at the 1994 Front Line First review to realise that protecting the front line at the expense of the rear echelons can be immensely difficult), while at the same time what happens if the required savings targets cannot be met through this alone?
 
Already there is huge debate in the media claiming where cuts can be made (the classic example of the £1000 MOD chairs which didn’t actually cost anywhere near that much was in the Times), while the Telegraph has an article claiming that the ‘lavish perks’ can be cut (HERE) although in reality the perks are far fewer than people think (and are in fact not really perks, but essential components of defence diplomacy and the ability to do their job). This debate will doubtless continue for some time yet with all the tired old clich├ęs dug out in support of the arguments.
 
So, the real challenge is not perhaps the spending review, but the process of merging the spending review outcomes with the political wishes of what not to cut or do and delivering a future force capable of meeting these outputs. There is no right answer to this debate, and it will doubtless occupy a lot of peoples time over the next two years, but it will be a fascinating period. Combining the natural desire to see the UK retain a global ‘presence’ (power being not necessarily the right phrase), with smaller levels of funding and a population which is reportedly tiring of overseas sustained entanglements, and a global situation which looks increasingly volatile. Given that the SDSR of 2015 will set the direction of travel for defence out to the late 2020s, it has the potential to be a most interesting period indeed. At this point Humphrey would flag up that the excellent website Think Defence is running a new series on discussing the construct of the next SDSR, where there is likely to be vibrant debate on what the next review may have to consider and conclude (HERE)
 
Therefore, for this author at least, there is no need to worry about newspaper headlines proclaiming the end of the world for defence – this is a natural cycle and one that has always occurred this way. It is far better to stand back, avoid speculation and instead wait to see what emerges. If a week is a long time in politics, then nearly two years to wait for an SDSR can be a lifetime for Defence…

5 comments:

  1. here here Sir H.

    Last paragraph sums it up rather nicely.

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  2. "This perhaps sets the scene for a view where the UK continues to be seen as playing a much wider diplomatic and military role in the global environment." - How can we do this militarily ?
    Our ability to project our strength on a substantial scale and for any length of time is only possible when backed up by American logistical might.
    We can keep a small force in the field for a short time, in such places as Sierra Leone.
    Anything else needs the support of Uncle Sam.

    I do wish that our politicians and civil servants would be realistic as I think members of the public are.

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    1. Ianeon - while I enormously value and appreciate you taking the time to comment, I do sometimes read your posts with the image of Eeyore sitting behind a PC :-)

      Your comments about requiring US assistance are utterly false. The UK is not remotely reliant on the US for logistic support in HERRICK or TELIC, and has kept 10,000 troops deployed for many years without it.
      I presume that as its only 10,000 troops many thousands of miles from home, we are somehow a failed state still?

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    2. I think the answer is somewhere in between. Yes, the UK can conduct significant military operations far away from home for an extended period of time. But don't act like the UK has not gotten valuable assistance from their cousins across the pond.

      I know for a fact that there has been alot of logistical assistance provided by the U.S. to the UK. Not to mention the air support, intelligence, and myriad other tasks that the U.S. has helped the UK with in Iraq and Afghanistan. And do we really need to get into how the U.S. bailed out the UK (and the Iraqi government) in Basra in 2008?

      So while the UK can conduct independent ops, TELIC and HERRICK would have been alot more costly (both in blood and treasure) if it were not for the U.S.

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