Government releases 800m Extra Funding to MOD

Westminster News:

Government releases £800m extra funding to MOD

The MOD will receive a budget increase of £800 million in the next financial year, the Government confirmed on 29 March. This includes a withdrawal of £600 million from the £10Bn Dreadnought contingency fund, announced in 2015, and will ensure that the UK’s next generation of ballistic nuclear submarines can be delivered in accordance with the 2015 Strategic Defence and Security Review (SDSR). A further £200 million will be added to the budget in the next year through the ‘Supplementary Estimates’ released by the Treasury in February. While this was assigned to the current financial year, MOD said it had brought forward payments, thereby releasing extra cash for the 2018-19 budget.

The increase is independent of the Modernising Defence Programme (MDP), which is reviewing the force structure and capabilities of UK armed forces in light of a significant budget shortfall to cover the delivery of that promised by the 2015 SDSR. The MDP is expected to report in the summer. Stephen Lovegrove, the MOD permanent secretary, and General Gordon Messenger, vice chief of the Defence Staff, laid out their views on this during an interview with Defense News, stating that defence is ‘an expensive thing to deliver if you’re in the premier league…and we’re determined to remain in the premier league.’ Nevertheless, General Messenger acknowledged that MOD must make ‘sensible decisions within the budgetary envelope that we are afforded by our government.’

Meanwhile, on 23 March, the Joint Parliamentary Committee on National Security Strategy published their report into the requirement for the MDP, expressing concern that it would be no more than a ‘short-term political fix’. Suggesting the defence budget was under ‘extreme strain’, the report cited the flawed 2015 SDSR as perpetuating a ‘long-standing failure to match ambition with capabilities and funding, relying instead on unrealistic promises of efficiencies and reduced contingency funding.’ Having been forced to spin off the defence element of the cost-neutral National Security Capability Review (NSCR) into the separate MDP, in order to avoid major cuts to the Armed Forces, the result is an ‘uncomfortable halfway house between a quick refresh and a full review.’

UK re-joins Boxer programme

It was announced on 31 March that the Army is to re-join the Boxer wheeled armoured vehicle programme, having originally left the programme 14 years' ago. The widely speculated move has been taken as the MOD moves closer to selecting the troop carrier to meet the Army’s Mechanised Infantry Vehicle requirement. Alongside Germany, MOD was heavily engaged in the original design, development and testing of the vehicle. However, in 2003 the UK withdrew from the programme, citing vehicle weight growth and a changing requirement. Since then Boxer has entered service with the armed forces of Germany, the Netherlands and Lithuania, who together have ordered a total of almost 700 vehicles. Last month Australia selected the Boxer to meet its own Land 400 programme, with Slovenia expected to place an order in the coming months.

The MOD is now taking forward negotiations with the Organisation for Joint Armament Cooperation (OCCAR) and Artec, the joint venture between German firms Krauss-Maffei Wegmann and Rheinmetall, who build Boxer. Any deal will be subject to commercial negotiation and assessment in 2019, with the aim of having the first vehicles in service by 2023. The announcement is a rejection of MOD’s stated policy of competition-based procurement to ‘ensure best value for money’ and has proven controversial as a result. Potential rival bidders, including General Dynamics and Nexter are understood to have pushed MOD to follow their own stated policy. In an attempt to rebut this, MOD claim to have conducted a comprehensive market analysis of Mechanised Infantry Vehicles in-service, entering service and in development. The exercise showed that Boxer delivered on the Army’s requirements for protected mobility, capacity, flexibility, utility and agility.

The Government’s prosperity agenda has also become a key battleground, with MOD keen to demonstrate how Boxer will support the UK supply chain. The press release announcing the move stated that, in the event that Boxer is selected, the UK will reassume the rights it had as a project partner, which will allow the option for the vehicle to be built and exported from the UK. Anticipating the move, Artec announced in February that it intends to assemble the UK’s Boxer fleet at Pearson Engineering in Newcastle. BAE Systems and Thales UK would also form part of a British supply chain that Artec estimate would secure or create at least 1,000 jobs - 60% of Boxer’s value creation and 100% of final assembly would be in the UK. British companies are also expected to compete for the manufacture and supply of many of the vehicle sub-systems.

General Sir Nick Carter appointed Chief of the Defence Staff

On 28 March it was announced that General Sir Nick Carter will succeed Air Chief Marshal Sir Stuart Peach as the next Chief of the Defence Staff (CDS) from June 2018. The CDS is the professional head of the armed forces and principal military adviser to the Prime Minister and the Government. General Carter has served as Chief of the General Staff, the professional head of the Army, since September 2014. Commissioned into the Royal Green Jackets in 1978, General Carter commanded 20th Armoured Brigade in Iraq in 2004 and 6th Division in Afghanistan in 2009/10. He then served as Director General Land Warfare before becoming the Army 2020 Team Leader. He returned to Afghanistan to serve as Deputy Commander ISAF from October 2012 to August 2013, and was appointed Commander Land Forces in November 2013. On his departure from MOD, ACM Peach will take up an appointment as chair of NATO’s Military Committee.

National Security Capability Review published

On 28 March, the Government published its National Security Capability Review (NSCR). Initiated in July last year, it was commissioned to reassess the implementation of the National Security Strategy and the SDSR, both published in November 2015. This was deemed necessary in a world where the threat level has intensified. Though defence spending came under most initial scrutiny, the MOD budget was divorced from the review in January and is now subject to an independent review, the MDP, expected to report in the summer. As a result, the focus of the final report is on how the UK should resource and deploy the range of capabilities that exist to support national security outputs. Given the increasingly complex and intertwined nature of the security threat, the review sets out a number of measures designed to ensure the UK is best equipped to address these. These include a new national security doctrine, the Fusion Doctrine, a new counterterrorism strategy, a National Economic Crime Centre, growth in the National Security Communications Team and the expansion and deepening of the UK’s diplomatic network.

Melrose succeed in GKN takeover

On 29 March, The board of GKN  lost its battle to prevent takeover by US investment firm Melrose Industries, who specialise in turning round troubled manufacturing businesses and selling them on. The fraught hostile takeover  won the backing of 52% of GKN shareholders. Admitting defeat, GKN's management said it would now work with Melrose to ensure the success of the new company. GKN, which employs 58,000 staff worldwide, 6,000 of them in the UK, drew protests from government, unions and GKN customers. Having previously suggested that the Government could intervene if the takeover proved to be against the UK’s security interests, Business Secretary, Greg Clark MP said that Melrose must now to honour its commitments to stay UK-based. The Financial Times provided a comprehensive post mortem on the winners and losers in the deal.

Parliamentary Questions:

• Modernising Defence Programme : Asked what the timetable is for the publication of the MDP, the Secretary of State for Defence, Gavin Williamson MP, replied that MOD ‘intends to be in a position to share headline conclusions … in time for the NATO Summit in July [2018].’

• Modernising Defence Programme : Asked whether MOD plans for the MDP to consider defence diversification and its relevance for the UK defence industry, Mr Williamson confirmed that the work ‘includes a workstream to modernise the MOD’s relationship with industry by improving on commercial capability and strategic supplier management.’

• Modernising Defence Programme : Asked whether the MDP will specify how the Dreadnought Programme is to be funded, whether it will assess the safety, affordability and strategic relevance of the Trident nuclear weapons system, and if it will consider the global threat of nuclear proliferation and its effect on UK security, Mr Williamson replied that:

‘On 18 July 2016, Parliament decisively supported our commitment to maintain the UK's independent nuclear deterrent. That decision has been taken and that commitment is not under consideration as part of the Modernising Defence Programme. The aim [of the review] is to deliver better military capability and value for money, so that Defence is configured to address the more complex threats we face as well as achieve enduring affordability. The ultimate defensive and protective capability, our nuclear capabilities, including Dreadnought programme continue to be funded from the Defence budget.’[The review]…will be informed by the current global security situation and will take into account a comprehensive range of threats, building on the National Security Risk Assessment 2015 and the work conducted across Government for the National Security Capability Review.’

• DE&S Funding: Asked what funding MOD allocated to the eight main Defence Equipment and Support Operating Centres in 2016-17, the Defence Procurement Minister, Guto Bebb MP provided the following breakdown:

• Satellite Navigation: Asked what recent discussions the Government has had with EU counterparts on the UK's future relationship with the Galileo satellite project, Mr Bebb replied that:

On 24 January 2018 the UK Permanent Representative to the EU, Sir Tim Barrow, received notice that the UK would no longer be allowed access to information about the future design of the Galileo satellite navigation programme because this could compromise the integrity of the system following the withdrawal of the UK from the EU.

Since receiving this letter, the Secretary of State for Defence has raised the issue with his EU counterparts on several occasions, including at February's meeting of NATO Defence Ministers, and in subsequent bilateral contacts. He emphasised that we have a world-leading space sector that has contributed a significant amount of specialist expertise, time and money to the Galileo programme, and that we have a shared interest in continuing a close partnership on Galileo. He made clear that the UK would seek to overturn this decision and expressed his belief that the UK's exclusion would not be in the interests of the Galileo programme or our EU partners. We are unambiguously committed to European security and we hope that an ambitious partnership on security matters will be a core component of our future relationship with the European Union.

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