DefenseNews, By Andrew Chuter, June 9, 2017
LONDON -The Conservative government’s general election effort June 8 may have ended in failure. But for the immediate future, the Ministry of Defence will continue to be pinched.
There, officials continue to focus on trying to bring the budget under control irrespective of the wider political situation, say analysts and others.
The current defense program is unaffordable and the MoD can’t expect to be a priority for more spending if the minority government led by the Tories loosens the purse strings on its austerity plan, said Sir Peter Luff, the former Tory defense procurement minister. He pointed to health and social welfare as among the sectors getting a lot of focus.
Luff, and others, said the MoD will likely run a quick mini-review of defense and security strategy ahead of making some hard decisions on issues like future equipment programs.
Industry executives are already reporting delays and programs cuts as the MoD seeks to bridge the gap between funding and requirements.
Despite the spending squeeze, it’s possible there could be a number of contract announcements between next week and the start of Parliament’s summer recess in mid-July. That could include a long awaited MoD deal with BAE to build the first three of eight planned Type 26 frigates at its yards in Glasgow, Scotland.
The MoD has not formally acknowledged they have a budget problem, but it has been reported in the U.K. that spending commitments could be running at between £10 billion and £20 billion, or as much as U.S. $25.42 billion more than budgeted over the life of the 10 year, £178 billion (U.S. $162.7 billion) equipment program.
“My guess is a review will happen quite quickly as the defense program is unaffordable at present,” said Luff, who served as defense procurement minister from 2010 to 2012. “I don’t see them getting any more cash than they have been promised to solve their problems so there will be tough choices to be made, irrespective of whether there is a minority government or not. The priority is to get the budget back in balance again.
The British defense sector is in bad shape and it could get worse, said Howard Wheeldon of Wheeldon Strategic.
“Further defense per se will be lower priority than policing and security,” he said. “There will in my view be no additional cash made available for procurement, personnel or the defense [sector] as a whole. U.K. defense looks to me to be in a bad place. Will it get worse? The answer I fear is yes.”
“Defense will have to fight hard for what it needs. [Prime Minister Theresa] May is intuitive in respect of security requirements, but I fear she does not get defense,” Wheeldon added.
In their manifesto the Tories pledged to increase defense spending by £500 million (U.S. $635.35 million) a year above inflation up until 2022, taking the budget from £35.1 billion in 2015–16 to £39.7 billion in 2020–21.
The Tories had pledged the extra £500 million a year for five years when they won the election in 2015 and May has effectively extended that spending hike by a further two years, if, as seems unlikely, the minority government survives that long.
Luff said he would be surprised if the MoD published the long-awaited defense industrial strategy review and associated national shipbuilding strategy before completion of the wider defense review.
ADS, the defense and aerospace lobby group, said it hoped to engage with the Government in the coming weeks over the industry strategy reviews.
An ADS spokesman declined to discuss when the trade association would like to see the reviews published but said, “It is more important than ever that industrial strategy gives business the long-term certainty it needs to invest.”
Luff said the MoD couldn’t afford to shelve the industrial reviews but he did think they would have to wait their turn after the defense and security review had been published.
Michael Clarke, the former director general of the Royal United Services Institute think tank in London, said in a briefing paper ahead of the election, that the strategic defense and security review conducted in 2015 was already drifting off course.
“It has become axiomatic that the new government will have to conduct a quiet review very quickly as defense increasingly falls back into all the old habits of drift and evasion that leave the armed forces much hollower than they appear,” he said.
Defense planners will have to look again at the requirements, commitments and costs to make the promises of the 2015 review stick, said Clarke.
The review of 2015 was strategically coherent but the Tories failed to fund adequately the large amount of new equipment, like the Boeing Poseidon P-8 maritime patrol aircraft program and the British Army Mechanised Infantry Vehicle requirement, aimed at reshaping capabilities by 2025.
Alex Ashbourne-Walmsley, a director at Ashbourne Strategic Consulting, said the MoD shouldn’t expect any new money from government to fix the problems caused, in part, by the failure to fund additional equipment of the Strategic Defence and Security Review.
“I don’t think there will be much new money for defense in any Tory policy changes that address public pressure for less austerity and more public spending. There may be more money for counter- terrorism and policing, but defense will be a low priority,” she said.
“I think you will likely have to wait a couple of weeks until the Queen’s Speech for a better idea on the direction of travel of the new government,” she said. The Queen’s Speech is when the list of legislation the government hopes to get approved by Parliament over the next year is published.
One election silver lining for the Tories in defense, said Luff, was the rolling back of the vote of the Scottish National Party.
SNP policy is to close the Royal Navy nuclear submarine base on the Clyde, home to British Trident armed nuclear submarines, as well as a fleet of hunter-killer nuclear submarines.
With the likelihood of the SNP pushing through its efforts to hold a second independence referendum receding as its support in Scotland crumbled June 8, “question marks over the deterrent have gone away,” said Luff.
Britain has recently started building the first of four Dreadnought-class ballistic missile submarines in a £32 billion (U.S. $40.69 billion) program scheduled to see first of the boats enter service in the early 2030s.
Prime Minister Theresa May called a snap election for June 8 hoping to improve her slim majority in Parliament ahead of Brexit negotiations, due to start next week with the European Union over the terms of leaving the organization.
The Tories remained the largest party in Parliament, but lost their majority with the far-left Labour opposition polling much better than expected. They are now forming a government backed by a small number of Democratic Unionists from Northern Ireland.