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Liam Fox: Radical reform needed at the MoD

I would like to thank Jane's and the other sponsors of the UK Defence Conference 2009 for asking me to give the opening keynote address today.

It has been a common feature of recent British defence reviews that they have been predicated on the belief that the world is becoming a less dangerous place.

Unfortunately, I believe that events over the past year suggest the opposite to be true and that we are living in a deteriorating global security environment.

In Afghanistan, the Chairman of the Joint Chiefs of Staff, Admiral Michael Mullen has described the situation as being serious and deteriorating, a view echoed in General McChrystal's strategic assessment recently submitted to President Obama and Secretary General Rasmussen.

In next door Pakistan, the Taliban reached an operational distance of within 60 miles of Islamabad and Pakistani security forces are currently heavily engaged in offensive operations across the North West Frontier and the FATA. The political and military stability of nuclear-armed Pakistan are by no means guaranteed.

In Putin's Russia an ever more assertive state is rearming, is still occupying Abkhazia and South Ossetia and has threatened to militarise the Arctic region, to the great concern of our close allies in NATO, especially Norway and Canada.

Piracy is running rife not only off the Horn of Africa but also in other less frequently mentioned places like the Gulf of Guinea and the Strait of Malacca.

Iran, in an unprecedented move, deployed six warships in the Gulf of Aden earlier this summer, is on the verge of acquiring a nuclear weapon, continues with its missile tests and continues to export terrorism. Its bloody oppression of the internal political dissent generated by the disputed election shows an ever more dangerous regime guilty of some of the most barbaric and depraved human rights abuses anywhere in the world.

North Korea has tested a second nuclear bomb, has conducted a series of provocative missile tests and has torn up the armistice that brought to an end the 1950-53 Korean War.

In all parts of the globe new threats are emerging which require a response from the international community.

The British Armed Forces are currently participating in 15 NATO, EU, UN and OSCE operations around the globe and have a military presence in the form of 41,000 troops in 32 countries and overseas territories.

It is against this backdrop that we meet here in London from across the world to share ideas, debate current events and to exhibit leading military hardware, but most importantly, to learn from one another. I cannot think of a better forum to discuss how we organise our national security and defence structures to best manage, counter, deter, and when required defeat the threats we face today.

Given the degree and velocity of global change, defining our strategic interests and determining how to protect them is one of the biggest challenges facing any government. Yet the government in office after the election, due in the next nine months, will find itself with a military that is overstretched, undermanned and in possession of worn out equipment, and the worst peacetime public finances in our history. The unfunded liability associated with this decade of neglect is likely to run to billions of pounds. Yet there is no more money.

According to reports of the Gray Review, the much awaited but heavily suppressed and damning report on the MoD's procurement programme, the current defence equipment programme is underfunded to the tune of £35 billion and is running an average five years behind schedule.

In fact, expected cost overruns in the next 10 years alone amount to £16bn. This equates to unfunded liability of £4.4 million per day.

With headline equipment programmes utterly unmatched by funding, future defence procurement becomes little more than a child's wish list to Santa Claus.

The defence and security of the United Kingdom is increasingly being run on a wing and a prayer and, as the money has failed to materialise for the unfunded projects, so they are delayed and delayed with the taxpayer left to foot the bill and the military left to ponder their absent capabilities.

Unfortunately, if half of what was reported in the Gray Review is true, the next government will not only the task of balancing defence priorities between the conflict we face today and wars of tomorrow but will also have the challenge of putting back on track a decade of mismanagement and neglect of the MoD's finances.

In a final piece of spin of his premiership Tony Blair said that defence spending has remained broadly stable at 2.5% of GDP - if you take into account Iraq and Afghanistan. In other words, much of the burden of Iraq and Afghanistan was being carried by the core defence budget. On top of serial incompetence in procurement we will also have to live with the legacy of the toxic personal and political relationship between Gordon Brown and Tony Blair.

Gordon Brown never had much sympathy for the military and was never keen to fund Tony Blair's wars.

Tony Blair was either unwilling- or too weak- to force him or he didn't bother about the details of whether we were actually funding his interventionist foreign policy. The net effect is chronic overstretch which will take years to rebalance. Putting Humpty together again will be no easy task.

Think it can't get any worse? Then think again.

New Labour's deluded belief that we could all live beyond our means indefinitely has produced an economic train crash whose effects will be felt for a generation.

The enduring legacy of New Labour's brand of socialism has been to saddle us with cradle to the grave debt.

They will leave office not only having failed in their duty to properly support our Armed Forces in conflict but the economic calamity they leave in their wake will make the task of rebuilding our security in a dangerous world all the more difficult.

It is a world that is also becoming more complex. Globalisation means that Britain's economic and security interests are increasingly interlinked to others with an unavoidable shared set of interests and the unavoidable importation of strategic risk.

As recent events have shown with the economic crisis, instability in one corner of the globe can quickly affect everyone.

This interdependence must have major implications on how we organise our national (and international) security structures and identify our threats. It goes without saying that the challenges this presents to our Armed Forces are numerous and complex.

The 21st Century strategic environment demands that Western militaries are able to simultaneously conduct war fighting, peacekeeping and humanitarian operations. Furthermore, it requires Western Governments to supplement these military operations through an array of soft power tools, such as international aid, diplomacy, and the spread of information and ideas.

We can see this challenge clearly in Afghanistan. Failure in Afghanistan would have profound geopolitical implications. The damage to the cohesion, confidence and credibility of NATO would be immense and it would provide a shot in the arm for jihadists worldwide. Afghanistan must be, and will be, our military's main effort under a future Conservative Government though we will need clearer, more practical aims and a clearer strategy for achieving them.

But organising our Armed Forces to combat the current insurgency in Afghanistan, coupled with a defence budget with a black hole of £35bn, offers a temptation to lose sight of future conflicts for the sake of the ones we are fighting today. This has led many to believe that we have to choose between fighting the war or a war-but this is a false dichotomy.

Insurgencies are not a new phenomenon. The counterinsurgency operations currently being conducted in Afghanistan are not a guarantee of what warfare will look like in the future-but a continuation of past trends. It is impossible to predict the exact shape and nature of the threats we will face but we can make some educated guesses.

Although state-on-state warfare is still a possibility, it is unlikely to take the same linear, symmetric, and conventional form as state-on-state warfare did in the 20th century. Rather, it is likely that many of our potential adversaries, knowing that they cannot match our technology, resources or conventional firepower, will resort to strategic and tactical asymmetric measures in an attempt to defeat us. Attempts to disrupt our social and economic well being through international terrorism, cyber attack or threats to our energy security can be anticipated.

The changing scope and nature of these threats has implications for our procurement plans. We need to focus more on capability and less on specific equipment. Some programmes we already have will contribute to the flexibility we will need in a range of challenges.

For example, would a Mastiff armoured vehicle become useless in a state-on- state conflict? Would rotary wing airlift, ISTAR capability, and an interagency, joint and combined military approach which have defined the current asymmetric fight in Afghanistan become irrelevant in future state-on-state conflicts? I don't think so!

As General Sir David Richards, the new Chief of the General Staff, said at a recent RUSI conference: Whether one is fighting non-state actors in Afghanistan or proxies sponsored by a disgruntled major power there or somewhere else, the skill sets and weapon systems required will look usefully similar: a virtuous congruence, if you like, between non-state and inter-state war.

But the equipment programme is only one piece of the puzzle. All three services need to be asking if they have the correct up-to-date doctrine to meet and defeat the challenges they may face now and in the future. Do they have the institutional framework in place to ensure that our military leaders can grow, learn and adapt when required? Here, it is the Government's role to ensure that our military has the tools and resources needed to make this possible.

Saying that we can only focus on the war at the expense of a war is not good enough for the British people and would be an easy way out for any government whose first and foremost responsibility is the defence of the realm.

How do we balance competing defence priorities? How do we ensure that current commitments are properly resourced without neglecting future strategic challenges?

In order to make sense of this a future Conservative Government will immediately do three things:

First, launch a wide ranging and detailed strategic defence review;

Second, conduct an in-depth capability review;

And third, a radical root and branch reform of the procurement process.

First, the Strategic Defence and Security Review. I welcome the Government's belated announcement in July that they will finally start the process for a Defence Green Paper which will eventually be part of an SDR after the next general election. It should begin immediately.

The Conservative Party, the defence industry, and the Armed Forces have been calling for such a review for more than two years. Regardless of where the current Government is in its review process one of the first acts of a future Conservative Government, were it to be elected, would be to conduct a wide ranging and deep SDR.

The purpose of the SDR will be to define what Britain's strategic interests are and where they exist at home and abroad. Unless you have clear foreign policy objectives you cannot have a proper defence strategy.

This will allow them to then assess the strategic environment and the threats posed to our interests within reasonably predictable limits.

It will then determine the capabilities we need to protect those interests.

Only then will we be able to look at specific programmes and the shape of our Armed Forces to see if they can deliver the capabilities we need. Of course, the main challenge here is between equipping our forces to succeed in our current conflicts and preparing for any future contingencies as I have discussed.

Finally we will have to determine the affordability of the designated equipment programmes and whether they offer value for money. And believe me, in the new age of austerity all defence programmes will need to demonstrate their value for money before we start spending taxpayer's money.

In sum, an SDR will serve as the primary means for the Ministry of Defence, and other government departments, to assess the global and strategic threats to the United Kingdom and how our response to these threats will be translated into potential new policies, capabilities and force structure.

The fact that the last SDR was in 1998 is completely unacceptable. The world has changed. In the words of the Gray Review: In corporate life, no enterprise would persist with a 12-year-old strategy without at least re-evaluating it fully on a regular basis. Few who would expect to prosper would even try to do so.

This is why, on top of immediately conducting an SDR, the Conservative Party has pledged to hold regular defence reviews every 4-5 years. If necessary we will put this requirement into legislation. This will allow our Armed Forces to respond to new threats as they emerge and will also give the defence industry the predictability they require. The longer you wait between defence reviews the more instability you can expect.

Secondly, we will simultaneously conduct a capabilities review. This review will be used to get the structure of the Armed Forces and civilian component inside the MoD correct to ensure that we, as a department, are best configured for the tasks we have to accomplish.

It is time for the MOD to get its house in order. There are questions for all three services as to whether they have an over abundance of senior posts. How do we reward merit and excellence and end the absurdity of the Buggins' turn culture- and how do we stop the trend where the military seems consistently to shrink while the civil service keeps growing?

Currently, there is one civilian for every two armed forces personnel in the Ministry of Defence. In other words the total of civilians in the MoD is larger than the Royal Navy and the RAF combined -16% of the civil service is in the Ministry of Defence.

We need to do a proper capability review which looks at all aspects of manning and force structure to ensure that we have the right balance of personnel-both in and out of uniform.

And finally, we will perform a root and branch reform of the procurement process. Under a Conservative government the procurement process will be the servant, not the master, of the SDR and capability review. How can it be that while we have a navy of only 34,000 we have almost 24,000 people working in procurement alone?

As the Gray Review has illustrated, the current procurement process is broken. There is currently a lack of programme management, commercial and financial skills inside the procurement process.

Military personnel are routinely placed in roles inside the procurement process for which they do not have the required skills or experience. We wouldn't ask a gynaecologist to perform neurosurgery so why would we ask an infantry colonel to lead and manage a particular equipment programme worth hundreds of millions of pounds?

We have to get this process back on track. Defence procurement under a Conservative Government will have four main objectives.

  1. To provide the best possible equipment to our Armed Forces when they need it, where they need it and at a reasonable cost to the taxpayer.
  2. To use defence procurement to underpin Britain's strategic relationships. I would like to see closer procurement with cooperation with the United States-our key global ally, and , under certain conditions, France-our key European ally.
  3. To provide better stability to the Armed Forces and better predictability to the defence industry-regular SDRs will play an important role in realising this objective.
  4. To preserve UK defence jobs by maximising exports. The Conservative Party will use defence exports as a foreign policy tool and we will seek to increase Britain's share of the world defence market. We will return DESO to the MoD.

To meet these objectives we will test any future equipment programme against five criteria:

  1. Capability: We have a bad habit of talking about equipment programmes as if they exist in the abstract when we should be talking about capability: does this piece of equipment enable our Armed Forces to fight effectively and win on the modern day battlefield?
  2. Affordability: Can we afford not only the initial procurement costs but also the through life costs?
  3. Adaptability: How can we get the greatest flexibility in the equipment we buy while ensuring that as many potential roles as possible are fulfilled?
  4. Interoperability: will this piece of equipment allow the British Armed Forces to take part in Combined and Joint military operations with our allies, specifically in NATO?
  5. Exportability: is this piece of equipment one that will have a high export demand which, may in the long term, create jobs at home and positively affect the British economy?

Reforming the procurement process will be no easy task. In fact, it will probably prove to be our greatest challenge in terms increasing the efficiency of the MoD.

The thousands of hardworking civil servants and military personnel working in procurement have been let down by a failed system. All options for reform, no matter how radical, are on the table.

With a £35bn unfunded black hole in equipment programme, at a time when we are asking our Armed Forces to do more and more, this Government has brought us to the brink of a defence crisis of unprecedented scale in modern history. The dreadful state of the national finances means that we must focus hard on analysing our strategic interests.

'Thinkers' may be currently unfashionable at the MoD but they are an unavoidable part of competent Government. Right now the MoD needs a new vision, fresh thinking, and new leadership that only a new Government has the energy and confidence to provide.

You can delegate authority, but not responsibility. Labour Ministers are to blame for the failings at the Ministry of Defence - not the Civil Service or the Armed forces.

For too long defence has been at the bottom of this Government's priorities. We have had four defence secretaries in four years, one of whom was part-time. We now have a defence secretary ranked 21 out of 23 in the cabinet and a part-time procurement minister.

Increasingly the public are wakening up to the sorry state of defence under Labour. It is likely to be an election issue for the first time since the end of the Cold War.

Global change is occurring at a rapid rate. Change is being forced upon us. In the sphere of security we need to stay ahead of the curve-changing if we wish to stay ahead of the threats. We need to adapt if we want to keep safe and time is not on our side.

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