(DIP0005) Written evidence submitted by DefenceSynergia A National Defence & Strategy Research Group Exposing the incoherence and Weakness in the United Kingdom’s Defence and Security Strategies Who are we? DS was formed ahead of the 2010 SDSR. We established our group to achieve one goal: to research and challenge weaknesses in UK’s strategy and defence policy and then seek to influence better outcomes by constructive engagement with mainstream political players. All DS members are self-funding, many have served in the Armed Forces, and none is beholden to any public or commercial organisation or special interest group. The Defence Committee has announced the relaunch of its Defence Industrial Policy: Procurement and Prosperity Inquiry. This DS input for the Defence Committee inquiry is made in the shadow of the current Covid-19 crisis which has altered all previous fiscal/economic forecasts to such an extent that UK Defence Industrial Policy may well be impacted in ways not foreseen even a month ago. The input uses the 10 questions posed in the Terms of Reference below but has been made without speculating as to what the financial climate may look like over the next few years. The terms of reference for the Inquiry are in (bold) and the DS response is below: 1. Is the current Defence Industrial Policy effective? Is a new Defence Industrial Strategy required? DS wonders what Defence Industrial Policy the HCDC is referring to? Sir Peter Parker was tasked with providing a National Ship Building Strategy which has been implemented 'more in the breach than the observance'. The Ministry of Defence (MoD) still seem to hold to the view that complex warships must be built in the United Kingdom (UK) and Trade Unions, understandably, argue about what constitutes a complex warship – Royal Fleet Auxiliary (RFA) support ships for example. However, in this maritime area there is more heat than light. When the focus of MoD is shifted to aircraft it seems that “buy US” or collaborate is the only strategy being exercised. [F35B Lightening II, E-3D AWACS, P7 Wedgetail, P8 Poseidon, C130J Hercules, C17 Globemaster III, Apache and Chinook are all US manufactured - Sentinel (ASTOR) is a US/Canadian collaboration - whilst Typhoon FGR4, A400M Atlas, A330-200 Voyager, Lynx/Wildcat, Puma and Merlin helicopters are all UK/European collaborative projects.] With the exception of the Royal Navy, where QEC Carriers, Type 45 Destroyers, Type 23 Frigates (T26/T31e to follow) MCMV and nuclear powered submarines (SSN/SSBN) are all UK sourced and built it can be argued that the UK has no definable Defence Industrial Strategy to speak of. There is a similar approach when it comes to land equipment with Boxer, (German), AJAX (US and Spanish) and the future communications system MORPHEUS (US, but produced in the UK) Operational effectiveness should be the primary criterion within a “Security and Defence Industrial Strategy”. Industry has become so internationally interdependent that, to achieve best value for the intended task, a strategy that procures from almost any source (threats must be considered most carefully e.g. Huawei) should/must be considered. There will be exceptions to this where the UK holds a significant technological advantage that secures best protection. However security of the supply (DIP0005) chain is a critical consideration to protect the UK’s defence forces. For clarity both the Defence Industrial Strategy & Defence Industrial Policy should be publicly available documents. 2. What are the national skills and competencies needed for a successful UK defence industrial sector? How can the UK ensure, and assure, that these are maintained in the right place at the right time for the right cost? DS contends that, given the right investment, the UK has, potentially, amongst the very best skills and competencies. It would be crass to believe that, at least since the 1998 Security and Defence Review, anything like the correct level of investment, interest even, has been accorded to this by the UK government. This will not just be a matter of money, although vital, but a full range of incentives will be required for our most talented and successful research and manufacturing enterprises who currently do not have close enough professional & personal contact due to the procurement structures and processes. 3. Does the market for Defence systems, products and services have any specific characteristics, which differentiates it from other markets? Does international collaboration limit the potential for defence exports? DS believes that, in the interests of Security and Defence where classified aspects are essential, the Defence Systems market is unique. A more general point is that most procurement is with a single national customer who is sometimes not ‘an intelligent customer’ through inability to hire best talent! In terms of international collaboration one might think that having collaborated, the UK would then be in a stronger position to benefit from improved exports but, investment in all forms would be the only way to ensure this - being untrammelled by such things as European Union strictures can be seen as advantageous. 4. Is tension between competition and strategic choice inevitable? DS believes this to be a naive question since tensions will almost always exist, not only within terms of competition and strategic choice but also between them. The trick is applying the right group of minds to alleviate the tensions created. 5. Should the UK adopt a formal Offset/Made in the UK policy? What impact would this have on the national and international defence markets? Yes. DS argues that a reasonable and proportionate offset/made in the UK policy would be wise and sensible, particularly in the light of our response to Question 3 above and through having exited from the European Union. 6. What is considered in assessments of “prosperity” and “value for money” in defence procurement? What consideration is given to the local economy, skills retention and balancing the positive financial impact across the regions and nations of the UK? DS has been watching the UK defence market place for over a decade and it is clear that agencies such as the trade association ADS Group (ADS) and Oxford Economics (OE) have produced reams of statistical evidence to show that the UK defence industrial base is a National economic multiplier where for each £ spent by Her Majesty's Government (HMG) a higher percentage dividend accrues to the economy as a whole through indirect and direct employment, spending and taxation. The problem is that the Treasury seems wedded to the notion that cost not operational value to the (DIP0005) Nation is all that counts. DS has argued time and again that buying abroad must be a Defence imperative not a mere factor of cost. The economic multipliers of doing so accrue abroad – not in the UK thereby, potentially, altering what appears on the surface a cost advantage into a cost drain when the domestic costs of unemployment and lost economic multipliers are factored in. 7. What progress has been made in implementing the recommendations from Philip Dunne’s report? DS respectfully suggests that Mr Dunne be asked this question since there does not seem that much progress has been made; unfortunately, the MOD has, in general, remained silent when questioned on progress. The Committee might also ask what became of the 2015 CIVITAS report edited and co-authored by Sir Bernard Jenkin and others 'Defence Acquisition for the 21st Century1 and what will become of the recent paper by Trevor Taylor and John Louth for the RUSI entitled 'The Challenge of Change Acquiring Technologies for Defence in UK'? 2 8. Does the MoD understand the risks and opportunities in the Defence supply chain, and the procurement strategies of other buyers in the market? DS considers this question to be very specifically addressed to the MoD but, there is little evidence to indicate that the MoD is alert to and nimble in their exploitation. Procurement timescales frequently make it impossible for SMEs to participate as they cannot survive within the time scales without revenue. During operations in Iraq and Afghanistan it was frequently SMEs who responded to urgent operational requirements with novel solutions and in turn received revenue quickly enabling them to survive. 9. What has been the impact of reforms to defence procurement and acquisition? How should Head Office and DE&S acquisition reform be aligned to defence industrial policy and strategy? DS is astounded at the naivety of the second part of this question since it is axiomatic that any reforms (what are they?) should be intrinsically aligned to Defence Policy and Strategy. In respect of the former part of the question if there has been meaningful reform of defence procurement then the impact has been negligible in so far as defence price/cost inflation is concerned. Despite the Parker warship building strategy mentioned in paragraph 1 ships are being delivered that should not have been accepted until faults had been rectified – EG T45 and OPV – albeit DS welcomes the news that HMS Richmond is being used to test new and future systems.3 10. Given that major capability acquisition programmes are international by design—the Combat Air Strategy and Type 26 frigate for example—how does a modern national defence research and industrial policy successfully manage cross-border long term partnerships and align with the industrial approach of allies and partners? What lessons can be learnt from other defence exporting countries? DS considers this to be a complex managerial technique since allies and partners differ from one another in this respect. Perhaps, one might begin by attempting to align, as far as is possible, the operational requirements of the various parties; there will then be a debate over the budgetary aspirations, the Lowest Common Multiples in 1 http://www.civitas.org.uk/pdf/DefenceAcquisition 2 https://rusi.org/event/rusi-paper-launch-challenge-change-acquiring-technologies-defence-uk 3 https://ukdefencejournal.org.uk/frigate-hms-richmond-trials-new-engines/ (DIP0005) terms of design and agreement on the best acquisition arrangements.