These Are Your Options Minister...

Twitter followers will be aware that Humphrey is on holiday at the moment, hence the reduced postings, but one story is running that is absolutely worthy of breaking radio silence to comment on. This is the news that the RN may lose both of its LPDs (ALBION and BULWARK) as savings measures under the latest miniature defence review being conducted in the Cabinet Office.

Humphrey has absolutely no idea what is, or is not, being discussed as part of this review, but given the furore on Twitter, it seems timely to try to set out what is actually going on.

Image by Ministry of Defence; © Crown copyright

What Is An Option?
To begin with, lets define what an ‘option ‘actually is, to help set the context as to why these reports have circulated. When the MOD conducts reviews, be it short term planning rounds or larger defence reviews, it is assigned a top level budget target that it has to meet for spending.

This figure is broken up among the different front line commands, with the Centre (e.g. Head Office) directing the percentage cuts that need to be made to each budget, in order that when combined together the new lower figure is reached.

This can be done both for ‘in year’ spending (e.g. spend less money from your current budget due to overspends elsewhere, or changes) or for multiyear spending (which looks out at the planned expenditure over the next 5-10 years.

Each Service or Command (such as JFC) will begin a process of pulling together a series of options that look at what needs to be spent and how things could be done differently (the so-called ‘defer, descope or delay). This can include spending less money early and delaying a programme. Or it could mean reducing the aspiration to do as much with the project, maybe buying less or putting less capability on it (so-called ‘descoping’), or sometimes money can slip to another financial year – for instance if the financial planners spot a bottleneck where multiple programmes all need money in Yr3 (of the 10 year look forward), they may seek to get some programmes to reduce spend, or delay them to solve a wider problem.

This delay is often taken knowing it will cause bigger problems downstream (the delay to the CVF is a classic example of this), but also in the knowledge that you face a choice of deferring and spending more, or not deferring and cancelling multiple projects to fix the funding gap.

Similar options will be put together for ships or units training and activities, or for operations. This may include ideas like scrapping a ship, or delaying and cancelling training. This is done to show the potential savings that could be accrued from not doing something, or doing it differently.

This work is brought together at varying levels of each Service, where the options are woven together to build a series of packages of measures. Some of these will be decided locally, but the money saved banked, others will be politically contentious and decided by Ministers.

The overall aim of the exercise is to produce a series of packages that can go to Ministers that set out how the money can be saved, different ways in which it can be done, and the overall impact to defence outputs if that measure is taken. If it all works, then Ministers (and sometimes the Prime Minister) approve the measures, and direction is issued to deliver as required (e.g. pay off ships, scrap aircraft etc.).


The LPD Leak
The issue with the leak of the ‘delete LPD’ option is that outside of those building the packages, the public do not know the context in which it is being considered. What this means is, what else is being looked at, and what are the circumstances in which it could be taken?

A lot of the work during reviews and planning rounds is built on scenarios, so gaming out what happens if you took all the money out of one budget (e.g. make all the savings from the RN), or what happens if you increased a single service target savings, in order to make headroom elsewhere for other spending (or enhancements).  Its often the case that people wish to understand the implications of what happens if you delete a capability wholesale – how much will it save across a range of areas, and what impact will it have?

For instance, in the case of the LPD option, it could be that planners want to understand how if the RN had to meet all the savings, or a bigger chunk of them, it would meet the goal and at what pain level. Similarly it could be that they want to understand how, if the UK deleted its amphib capability wider savings could be made. If you paid off the LPDs and got out of major amphibious operations, then you free up manpower, resources, you could scrap associated units allowing big savings of land release (which meets wider government policy goals) and so on. It allows you to look at the 2nd and 3rd order effects too – so if you reduce the Amphibious force, can you reduce the number of RFA tankers and stores ships if you need less fuel and supplies? How do you save in reduced long term refit and supply costs, or could you save in the long term equipment plan costings too by deleting a future LPD programme?

A single decision of this magnitude can have major repercussions throughout the RN and Defence – it would, from a financial planning perspective offer significant savings at a time when it is clear the budget is under enormous pressure. Therefore it is absolutely right and proper that planners consider every option and course of action to consider what its impact would be.

The public does not know the wider state of the debate, and it doesn’t know what other options are being tabled. Given what we’ve seen in the press so far Humphrey would make an educated guess that to meet the savings figures required, the Services are having to look at a ‘delete entire Fleet / Capability’ range of options such as ‘delete Typhoon Tranche 1’ or ‘delete Puma’ or ‘delete Challenger 2’ etc. Not because they will be taken, but because it is only by looking at this level of cuts that you realise big savings.

How Bad Is It?
We are past the era of salami slicing – shutting a squadron of aircraft early will realise a small amount of savings in manpower and airframe use. But it won’t significantly impact on the fixed overheads like training, maintenance and support – all of which are needed if you operate 1,10 or 100 of an airframe. Only by deleting the airframe do you save big money (hence the reason to delete Harrier in 2010).

The real question is how bad are things if the RN is being forced to run options that offer up the crown jewels of the fleet? To delete the amphibious capability represents a massive and damaging cut to UK capability, and would be running contrary to the National Security Strategy and UK policy goals.

To even consider getting out of the power projection game in this way indicates that things look very challenging right now. That this is being run as a potential option, even if only purely hypothetically, indicates the scale of the financial challenge facing the MOD.


Why Leak It?
There seem to be three reasons why options leak historically. Firstly,  those done by people who are concerned that an option will do lasting damage and who seek to influence public opinion to prevent it being taken (the so-called ‘noble leaker’).

There are those who leak a politically unacceptable option so that it can then later on not be taken, leading to widespread relief, and preventing deeper questioning of just how much had to be saved elsewhere to keep the capability in service (the so-called ‘cynical leaker’).

Finally there are those outside the Services or Civil Service who leak for reasons linked to politics. A gentle push here, a prod there, and a reminder that more money is needed elsewhere. It never hurts to curry favour with those from whom you ascended, in case you need their support in future... (the so-called ‘expedient leaker’).

A good way to determine where the leaks have come from will be the level of witch-hunt that follows the news. Previous leaks over the years have seen responses ranging from stern letters warning of dire repercussions for the leaker when caught, through to no action whatsoever. Some leakers are perhaps more equal than others...

What Happens Next?
It is inevitable that further such leaks will follow – both the RAF and Army will be keen to try and shape their own narratives over the next few weeks, highlighting where cuts may fall on their own services. But, what is key to remember is that these are options, nothing more.

It is not until the final packages are assembled, setting out what the future force structure looks like (e.g. the so-called ‘readjustments) that we will see inspired briefing and more coherent information emerge. Anything can change right up until the last minute though, so expect multiple changes, briefs and counter briefs as the Services vie for support.

There seem to be two likely outcomes to this situation though. The first is that in the New Year major force changes, significant capability deletion and potentially manpower reductions will be announced that will do deep, long term and serious damage to the UK as a global power. They will be spun as ‘enhancements and adjustments’ (so potentially some good news like keeping OPVs on) to hide the likely extensive range of very damaging cuts.

Alternatively, there could be some kind of crisis funding deal agreed as part of the budget process, whereby further funding is provided and the worst of the cuts are ameliorated. Either way, it seems exceptionally unlikely that the MOD will escape significant pain over the next 6 months.

The Defence Budget may well be growing and the UK may show how more money is being spent on defence by stretching the phrase ‘2% of GDP’ to the absolute limits of credibility. But what is also clear is that there is a significant hole at the heart of defence funding, that baring a major long term injection of cash, will require very tough choices to be made. Never has the phrase ‘a growing defence budget’ sounded more hollow.