U.K. Launches Defense Review Effort
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By Douglas Barrie
Fears of procurement near-paralysis may be premature, but U.K. government reassurances of “business as usual” are unlikely to dispel industry worries over the impact of the defense review process.
A full-blown Strategic Defense Review (SDR) was finally set in motion last week; however, it will not actually occur until the next Parliament, post-general election, in 2010. Bob Ainsworth, the secretary of state for defense, announced the initiative on July 7, although the groundwork was undertaken by his predecessor, John Hutton, who resigned on June 5.
The first stage of the planned SDR is a consultative Green Paper, which will seek broad opinion regarding the U.K.’s military needs. At the heart of the debate is the thorny issue of how much funding any British government will be willing and able to allocate to the defense coffers in the coming years.
Industry and academia fear the amount will not be nearly enough.
One inevitable side effect of the review process—given past experience—is, at best, a slowdown in procurement decision-making, say defense ministry sources and industry executives.
However, the ministry maintains that, irrespective of the initial review work being undertaken, normal activity will continue.
“Planning Round 09 is concluded, and PR10 has begun. The Strategic Defense Review is a separate entity to the PR10 work. Defense business does not stop just because we are starting the process for an SDR; this includes initial gate and main gate decisions” in the procurement process, says a Defense Ministry official.
The Green Paper, says Ainsworth, “will involve a detailed examination of a range of issues, including the lessons we have learned from our recent operations, the changing character of conflict, [and] the requirements on and aspirations of our armed forces.” The paper is expected to be finished by early 2010.
The U.K.’s military capacity, medium-term equipment aspirations, and the adequacy of funding are all being thrown into sharp relief by British involvement in the war in Afghanistan. London has more than 9,000 personnel, the majority from the army, committed to the conflict.
The full extent of the government’s financial problems may only become clear following the general election, providing the funding backdrop against which the strategic review will be carried out.
Think tanks and academic institutions are cautioning that the outlook is difficult. The U.K.’s Royal United Services Institute is warning the Defense Ministry that it faces dire spending cuts. RUSI says “the best estimate” is that the ministry will have to reduce its budget 10-15% during 2010-16, a minimum of $5 billion a year.
The claim is made in the first of the RUSI’s Future Defense Review working papers. In the immediate aftermath of the next election, most analysts expect there to be a new, comprehensive spending review leading to a prolonged period of public austerity, including in defense. In addition, RUSI says if the “government is to provide a modest level of real-terms growth to health and education, or if the economy fails to recover its previous trend rate by 2010, tax increases may not be able to prevent deeper defense reductions.”
The report’s author, Malcolm Chalmers, a former special adviser to the Labor government, cautions that “not all existing capabilities and legitimate aspirations for new capabilities can be afforded, given the extent of savings likely to be required.”
The Society of British Aerospace Companies, an industry lobby group, is already concerned that the premise of the forthcoming SDR is based on the need for spending cuts, rather than adequately funding defense.
SBAC Chief Executive Ian Godden says, “The debate about big projects versus better conditions for troops or more boots on the ground, and between one service or another, is a false one or at best highly risky. The real issue is the fact that as a nation we no longer adequately fund our own defense. Threats to our security do not go away simply because we are in a recession.”
Godden warns there is “the danger . . . that the review will instead be Treasury-driven, becoming a budget-reduction exercise, downplaying the threats facing the U.K for the sake of budgets.”
Industry analysts are already highlighting various big-ticket procurement programs as possible candidates for cuts. These include the Royal Navy’s two aircraft carriers to replace the smaller Invincible-class ships. Work began last week on the first of the new carriers, the HMS Queen Elizabeth.
One option mooted by some defense executives is the possibility that the U.K. continue with the first carrier, but defer the second’s build program.
Godden also previously flagged budget cuts to military research and development as unwelcome—a 7% drop in 2009. At least some government officials recognize the importance of trying to ensure that no further R&D cuts are implemented. Paul Drayson, who holds posts within the Defense Ministry and the Business, Innovation and Skills Dept., does not want to see more cuts and hopes to reverse the trend.
Meanwhile, the Conservative Party says it will implement a strategic review if elected. Liam Fox, the shadow defense secretary, says that while the review is “long overdue,” it is welcome “as long as the work will serve to inform the full Strategic Defense Review, which a Conservative government is committed to undertaking.”
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