Why Now Is Not The Time For A Defence Budget Increase...

 

The Chancellor Rishi Sunak has announced his financial update to Parliament, providing an assessment of British Government financial spending plans. Despite significant speculation ahead of time that there would be a boost in defence spending, the announcement provides no additional funding, and reconfirms the uplift from the last Comprehensive Spending Review.

There is already disappointment building on some channels that the MOD isn’t getting more money in response to the Ukraine crisis, in sharp relief to other NATO nations, but the question is perhaps, does the MOD really need more money right now? The answer is, controversially, perhaps not.

This may sound an incredible view to take, but there is a strong logic behind which makes compelling sense. Having reflected on the decision not to provide additional funding right now, Humphrey is of the opinion that, in the short term, this is potentially the right move.

Image by Ministry of Defence; © Crown copyright

When the Integrated Review concluded last year the MOD agreed to a very generous financial settlement for the next five years. This meant that the Department could focus on delivering transformation of its services to face the next generation of threats, while operating with relative financial security.

Clear plans were made that enabled real terms growth of the budget to maintain the NATO spending commitments of 2% of GDP on Defence, and which provided a clear financial plan to work to. Simply put, the MOD knew what it wanted to deliver, it worked out how it was going to fund this over several years and the plans are in place to do this.

This work is predicated on delivering the force structures and outputs in the Integrated Review, which will see the MOD change significantly as it brings new equipment into service at the same time as retiring older capabilities that, at the time, it deemed less relevant to future operations.

Put together, the plans made sense and ensured that the MOD was on a relatively even keel (standfast the eternally difficult woes of the procurement system).

Fast forward to February 2022 and the Russian invasion of Ukraine and suddenly every country in NATO seemed to be expanding its defence spending – most notably Germany adding an extra €100bn to its planned budgets over the next few years. There was speculation at the time that the UK would follow suit and up its defence spending significantly too.

This of course has not yet happened, and there are good reasons for this to be the case. The first is that the MOD budget has already grown in the last year to enable additional funding – most other countries have not done the same, so for them this is about playing catch up.

Secondly, the UK already funds at 2% of GDP on defence, and again other NATO member states were not spending to this level. Their announcements, proportionately will now bring them closer to matching the UK level of defence spending.

The big challenge is that the war is barely 4 weeks old and it remains far from clear what the outcome will be. Although initial indications and open source media trawls indicate that the Russian performance is nowhere near as credible as expected, and Ukraine is holding out and indeed going on the offensive, it is early days. There is a long way to go before we are at the stage where this is likely to be resolved.

After the war is over there will need to be an enormous ‘lessons identified’ review for all NATO militaries on how their understanding of the war changes the assumptions and plans for NATO operations. Much is being learned and gleaned that needs to studied, considered and analysed to decide how it will impact on NATO defence.

In the UK it is far too soon to know what needs to be done differently as a result of this conflict. Does more money need to be spent on anti-tank missiles, should Challenger 3 be scrapped as being poor value for money, is more investment needed in strategic airlift and drones, or should additional funds be found for cyber and long range cruise missiles? All of these are just some very initial thoughts on what may need to be looked at in the MOD shopping list.

Image by Ministry of Defence; © Crown copyright

This analysis takes time to do properly, and to work out not only what the priority is, but also what the answer is to address it. In turn this requires work to define the requirement and how much it will cost – this is not something that can easily be done in a couple of weeks, particularly when looking at major strategic decisions that may shape the next 10 or 20 years of British defence policy planning.

The first thing that is needed is time – time to do the proper work to identify what requirements have emerged, what have changed and what may no longer be required. When you’ve done this, you are in a much better position to understand what you actually need to procure, versus using the MOD version of the Silvermans catalogue going “I’ll have 10 of everything please”.

Time is also important because it helps planners work out how to spend the money in a way that ensures projects are delivered in an affordable way that allows the right infrastructure, people, logistical and training support to be in place to bring the equipment into service and then support it in the medium term.

Saying “lets immediately double the purchase of Type 31 frigates” as some have suggested sounds great – it expands the size of the Royal Navy, puts more grey hulls in the water and makes the RN look even more awesome than usual – right? Well actually possibly not.

Doubling the T31 buy means shoehorning 5 extra frigate builds into a fairly taut shipbuilding programme that has finite capacity – both physically and with people. The supply chain is also fairly taut too, with all the subcomponent manufacturers having finite capacity to build equipment, and an order book that is rapidly filling up.

The RN meanwhile is working on crew assumptions that will see people arriving on these ships in the next few years and coming from elsewhere to do this. Adding 5 extra ships in now completely blows the crew planning assumptions out the water and will lead to a personnel crisis in the RN as it tries to find five ships company worth of crew that it wasn’t expecting to need.

Even if you commit to growing the Royal Navy today, in 5-7 years’ time, you will not have a large number of spare Chief Petty Officers hanging around – the recruits an expansion gains will not hit this point for 15-20 years realistically.

Add to this the wider challenges of finding training space for all these people, ensuring that there is sufficient capacity to train them in the ships and produce five new frigates worth of people able to fight the ship, and suddenly its clear that ‘doubling the Type 31 buy’ as a short-term political commitment is actually really bad news for the Royal Navy. This is even before thinking about what such a move would have on wider plans to deliver Type 26, Type 32, MRSS, FSS and so on into service – it is a very finely balanced plot to deliver.

The RN is looking to grow and expand the escort force, but this is a 10-15 year project to do right because it needs careful management to ensure the right ships, people and equipment are ready in the right timeframe to be valuable and deployable, not just tied up alongside for want of sailors or spare parts.

The same logic is true of both the RAF and the Army – any change to add new equipment now and to spend on the shopping list means actually causing a headache that could cause major disruption and make the military less effective as a result.

Image by Ministry of Defence; © Crown copyright

It is understandable that people want to see the armed forces grow and get more money – but this needs to be done in a sensible way. The answer is not to take the findings of the Integrated Review and throw them out within a year, and instead throw vast sums of public money to buy ‘stuff’ without having a clear idea of why it is needed, how it will be used and how it can be best delivered in a way that doesn’t disrupt the armed forces current plans.

There is absolutely no doubt that lots of lessons will be identified that throw up new requirements that did not previously exist, or will change the funding priorities around. This will in turn call for Defence to undertake tough analysis on what to prioritise, what to stop doing and what to do differently in order to meet this changed set of requirements.

The challenge though is doing this in a policy compliant way – right now the clear direction that HM Government has given the MOD to deliver is set out in the National Security Strategy and Integrated Review – this is the clear and unambiguous statement of planning intent of how the UK will do national security policy and delivery, and is agreed by Cabinet.

It is not possible for the MOD to unilaterally abandon the findings of the strategy, or change the outcome of the Review – that is a wider cross Whitehall piece of work. There will doubtless come a time when Whitehall agreement is found on what new priorities and security policy looks like, and this will in turn change what the MOD plans to buy and operate – but it cannot, and is not, done in isolation.  (There is an excellent article on Wavell Room which looks in far more detail at the IR and how it could be relooked at and why it is still relevant)

What is likely to happen is that over the near future Whitehall departments will assess what needs to change in terms of national security policy and outputs. This could take the form of a ‘new chapter’, much as the 9/11 attacks created the ‘SDR New Chapter’, or it could be an internal assessment. But it is highly unlikely that any significant changes will happen to Defence spending until this analysis has been completed.

What this means is that in the short term we are unlikely to see any changes to the Defence budget for the simple reason that the MOD doesn’t yet know what it needs to spend the money on, because it doesn’t yet know whether British Government policy will change.

It also doesn’t yet know whether it needs money to spend on genuinely new equipment, or whether to reprioritise funds onto existing equipment that hasn’t been prioritised as much recently, or if it needs funds for investment in additional resilience (e.g. estate improvements and munition stockpiles).

The MOD needs time and direction to work out what it wants to do, how much it needs to do this, and to enter negotiations with the Treasury for a properly laid out funding bid and not just provide demands for a blank cheque for ‘war stuff’.

Image by Ministry of Defence; © Crown copyright

Making expansive funding announcements about defence spending is always easy and popular, but finding ways to spend the money sensibly is much harder. The challenge for MOD here is not the lack of a short term uplift, but to ensure that it can make the compelling case for more funds for uplifts that are credible both in the short, medium and long term.

If, for the sake of argument an extra £10bn was injected into the Defence budget tomorrow, as a one time uplift to buy new kit (which is very roughly how much was given in UORs for HERRICK over a 10 year period), then the MOD would have a real problem on its hands.

Finding a way to spend that money immediately, with companies who had the capacity to do what they wanted (and who had the ability to deliver the capability required on time) is surprisingly difficult. The defence industry doesn’t sit about with spare people and capacity on a ‘just in case’ basis.

Even if it could spend the money in a hurry, this is a one off capital injection, which would leave MOD rushing to work out how to support it in the medium term. A key reason why many UORs left service was the lack of funding for them after HERRICK when other better capabilities that were more widely employable already existed.

The same would be true here – adding short term money boosts doesn’t make the underlying problems go away, it merely defers them for a while. Far better to wait, do the work properly and get a multi-year funding deal agreed that ensures there is a budget for people, equipment and support for years to come, not just a quick splurge of cash to deliver an in year solution that isn’t funded or supported for the long term.

This view may not be popular with those who think that the MOD should get more money now, and that something needs to be done. But ultimately this is public money, derived from the taxpayer, and it must be spent properly and in an accountable way. Having a sensible credible plan on what you really need is much more important than an ostentatious display of ‘in year’ cash.

Now is not the right time for a defence budget increase. There is without doubt a serious and compelling argument to be made for additional money for the MOD. It will almost certainly need extra funding to handle the challenges ahead, but it needs to understand properly what those challenges are, and how it will address them before it starts spending. This is a message that may not land well, but is an important one to hear and understand.