Ministry of Defence Ministry of Defence Annual Report and Accounts 2017-18 Annual Report 2017-18 Annual Accounts and HC 1272 Ministry of Defence Annual Report and Accounts 2017-18 For the year ended 31 March 2018 Accounts presented to the House of Commons pursuant to section 6(4) of the Government Resources and Accounts Act 2000 Annual Report and Accounts presented to the House of Commons by Command of Her Majesty Ordered by the House of Commons to be printed 19 July 2018 HC 1272 © Crown copyright 2018 This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned. This publication is available at www.gov.uk/government/publications Any enquiries regarding this publication should be sent to us at: [email protected] ISBN 978-1-5286-0237-2 CCS0318104056 07/18 Printed on paper containing 75% recycled fibre content minimum Printed in the UK by the APS Group on behalf of the Controller of Her Majesty’s Stationery Office Contents Section Page Performance Report Overview Foreword by Secretary of State for Defence 8 Introduction from the Permanent Secretary and the Chief of Defence Staff 9 Our Vision 10 Strategic Objectives – Notable Achievements 11 Departmental Structure 12 Defence Operating Model 14 DG Finance: Financial Performance Summary 15 Performance Analysis Protect Our People: National Strategic Objective 1 23 Project Our Global Influence: National Strategic Objective 2 40 Promote Our Prosperity: National Strategic Objective 3 56 Manage the Department of State and the Defence Enterprise: Strategic Objective 4 66 Accountability Report Corporate Governance Report 91 Remuneration and Staff Report 110 Parliamentary Accountability and Audit Report 133 Annual Accounts Financial Statements 156 Notes to the Accounts 161 Annexes Statement of Approved Maximum Armed Forces Numbers 210 Sponsorship Agreements 213 Core Tables 215 Performance Report 6 Annual Report and Accounts 2017–18 Overview Foreword by Secretary of State for Defence The first duty of Government is to defend our country and to keep our people safe. The Ministry of Defence plays a pivotal role in providing defence and security for our people across the globe, and in doing so we drive a more prosperous economy and allow our nation to thrive. The 2015 Strategic Defence and Security Review described how the world is changing; but since its publication, threats have continued to intensify and evolve and we are facing a range of complex challenges both at home and abroad. In 2017, the National Security Council commissioned a focused National Security Capability Review (NSCR) to identify how we could develop, deliver and deploy our considerable national security capabilities to maximum collective effect. The NSCR reported in March 2018 and concluded that the fundamentals of our defence strategy within SDSR 2015 remain sound; however, to secure our competitive advantage over potential adversaries, we must be able to move quickly to strengthen further priority capabilities and ensure a proper balance of our investment. In January 2018, I agreed with the Prime Minister and Chancellor that the MOD should lead a Modernising Defence Programme (MDP) to identify how we can deliver better military capability and value for money to make a full and enduring sustainable contribution to national security and prosperity. The programme builds on the firm foundations of SDSR 2015 and the NSCR and aims to strengthen key capability areas more quickly to meet the threats that we now face, and to put UK Defence on an enduringly affordable footing, so that our contribution to national security and prosperity is sustainable over the long term. Whilst these reviews have been in progress, our people have continued to be involved in a wide range of activities. Operationally, we have continued the fight against Daesh, provided support to the police following terrorist incidents in the UK, supported progress in Afghanistan, deployed troops for vital NATO missions and provided aid in support of hurricane relief efforts. Our work to promote prosperity grows apace. As published in the Dunne Review report, the UK defence industrial sector has an annual turnover of £22Bn and supports 260,000 jobs. The UK also secured export orders worth £5.9Bn in 2016. We are providing additional support to smaller and non-traditional suppliers and millions of pounds are being spent to promote innovation. We have deployed HMS SUTHERLAND and HMS ALBION to the Asia Pacific region to take part in exercises to demonstrate our capabilities and to support defence industries. We launched the Veterans Gateway in June 2017 which provides a single point of contact for those who need help and support. In February 2018, we also commissioned a new 24-hour mental health helpline, provided by Combat Stress, aimed at serving personnel and their families who need to seek advice. We have created a Ministerial-led Covenant and Veterans Board to provide strategic oversight of the Covenant. And I announced the commissioning of a new Veterans Strategy and the creation of a Veterans Unit to champion the changing needs of Veterans and ensure action is taken to meet those needs. Given such a high level of activity I would like to thank all those in Defence for their dedication and commitment to keeping our nation and our people safe. Once the MDP is complete, I believe they will be better able to do this work in future and we will be able to create a modernised force fit for the future. 8 Annual Report and Accounts 2017–18 Introduction from the Permanent Secretary and the Chief of the Defence Staff Defence has a lot to be proud of in 2018, we have continued to provide enduring support to the defence of the realm but we have also reacted quickly to new threats and challenges. The tempo and scale of operational commitment remains significant. The campaign against Daesh continues: we are disrupting their activities and they have now lost control of much of the territory they once held. We are approaching the 50th unbroken year of Continuous at Sea Deterrence and the Submarine Delivery Agency went live in April, to strengthen support to our nuclear submarines and deliver the new Dreadnought class submarines for the future. We are also celebrating 100 years of the Royal Air Force, an achievement we are all proud of. We continue to contribute to a number of NATO activities, including the Enhanced Forward Presence in the Baltic States and Poland and we provided over 2,000 troops to assist with the provision of hurricane relief in the Caribbean. Troops were deployed on the streets following terrorist incidents in the UK and we supported the investigation into the incident at Salisbury. We continue to develop our capabilities in other areas, launching both the Defence Cyber School in March 2018 and the Defence Space Strategy in May 2018. As we prepare to leave the EU, we have been working hard to strengthen relationships with European Allies. We have signed the Comprehensive Memorandum of Understanding with the Joint Expeditionary Force nations; Defence collaboration agreements with Croatia and the Netherlands; the Northern Group continues to develop as a forum for collaboration; and we continue to contribute to EU operations and missions. The US remains our pre-eminent partner and over the last year we have signed a number of military sales agreements with them and continue to strengthen our cooperation and interoperability across all Services. The UK-France Sandhurst Summit in January was a particular success, with several important agreements reached. Our efforts to support prosperity continue: we have introduced measures to help bring small and medium enterprises into the supply chain; and we are on-track to meet our targets on cadets and apprentices. We have reached important milestones relating to delivering the Strategic Defence and Security Review: HMS Queen Elizabeth was commissioned into service, the Dreadnought submarine programme commenced Delivery Phase 2 and we have increased the number of F35 aircraft to 15. We continue to invest in and support our people. In addition to the work on the Covenant, a Veterans Gateway has been launched to provide a single point of contact for those veterans wanting help. In July 2017, we launched the Defence People Mental Health and Wellbeing strategy, which provides a new operating model to help tackle this serious issue. We also accepted the Duke of Westminster’s generous gift of Stanford Hall as The Defence and National Rehabilitation Centre. The Royal Assent gained for the Armed Forces (Flexible Working) Act is an important step towards allowing Service Personnel to work more flexibly, reducing disruption to their family life at key times and improving retention. The Future Accommodation Model and Enterprise Approach are also making good progress in improving the offer for Service Personnel. As we look forward to next year,the strategic context remains dynamic and complex and we will need to be adaptable and agile to match the inevitable challenges that 2019 will bring. Annual Report and Accounts 2017–18 9 Our Vision • The first duty of Government is to defend our country and to keep our people safe. • Our national security and our economic security go hand-in-hand. Our strong economy provides the foundation to invest in our security and global influence, which provides more opportunities at home and overseas to increase our prosperity. • In a more dangerous world, we have chosen to use our hard earned economic strength to support our Armed Forces and give them what they need to help keep Britain safe.