The SDSR
2015 is under a new review, and there is no denying that it all depends on
money, and specifically on shortages of it, rather than on government taking
actual notice of the “changed security environment”. We should all be aware of
this: money is tight. The savings that were integral part of the financial plan
are very hard to make. The amount that is supposed to come from “efficiencies”
is enormous, and government has kicked out this review of the review primarily
because it is becoming undeniable that generating that much money is just not
feasible.
Efficiency targets
The 2010 SDSR ordered the MOD to
find, in the following ten years, efficiencies for 7.1 billion pounds.
The 2015 SDSR ordered the MOD to
find a further 7.3 billion of money to re-allocate elsewhere within the defence
budget. 5.8 of these are expected to come from within the Equipment Plan, and
1.5 from the wider budget.
The Better Defence Estate strategy
is estimated to require 4 billion of expenditure on infrastructure over ten
years. One billion is firmly allocated, one billion is expected to emerge from
budgeting measures already ongoing and 2 billions have yet to be found.
These efficiency targets add up to
16.4 (or 17.4, depending on how much you believe to the vague lines about the
second billion of infrastructure budget) billions to be found from within the
defence budget, to be reinvested to deliver the aims of the SDSR 2015.
Lately, press sources but even the
MOD itself, in the person of Stephen Lovegrove, the MoD’s permanent secretary,
consistently talk of a target of 20 billions in “efficiencies”. There is no immediate explanation for the
missing 3 – 4 billion from the targets announced previously, although the MOD
claims that the “20 billions” are not a new request and were in the plan all
along.
In any case, it is a lot of money.
The last time the NAO reported about it, the MOD had identified 4.6 of the 7.1
billion efficiencies mandated by the SDSR 2010. That was months ago, yet the
talk still is of 20 billions, like nothing had been achieved at all.
In short: the details are, as
always, not provided. The gap could be as “little” as 11,7 billion or as large
as 24.6, depending on how you add the numbers that get thrown around.
It is a big hole that needs filling,
but the feeling is that there is still a lot of confusion.
Currency exchange rates
Many like to put a lot of focus on
the drop in the value of the sterling and identify it as a major factor. It
certainly doesn’t help, but is probably not quite the elephant that some would
have us believe. At least, not yet.
I will not venture into trying to
guess how much coverage the MOD has though currency edging and forward buying
as it is not my sector and there are not enough published information about it,
but I will put some focus on one factor that regularly gets overlooked when the
currency exchange rate gets mentioned: the MOD did not and does not plan its
budget according to the day’s exchange rate. While it is true that work on the
SDSR 2015 was carried out when the pound traded well over 1.40 or even 1.50
dollar, the SDSR was not built on the assumption that such a rate would hold.
The department writes out its plans
on the basis of a central, more prudential assumption about what a longer term
exchange rate might be like. As far as I know, the assumed pound to dollar rate
that underpinned the SDSR 2015 estimates has not been revealed. A document
suggests that, regarding the pound to Euro rate, the central assumption was
that a pound would buy 1.20 euro. This means that the actual drop compared to
the planning baseline was smaller than if you just looked at the daily
fluctuations.
Of course, while 2015 saw the
pricetag of several programmes descend in-year due to a strong pound, the
situation today still is clearly inverted and this does add pressure.
The absolute vagueness of the 10 year plan
Another factor to keep in mind is
the extremely murky nature of the 10 Year Equipment Budget. The document is
published yearly, but it is extremely vague. It contains little to no
indication of the number of programmes included in any macro area (“ships”, or
“land”) and tells nothing about when they start, when they end, and what they
procure (number of vehicles, for example).
A little more information comes from
the MOD’s Major Project Report sheet, again published once a year and which
paints the picture of the status of the main ongoing programmes in the previous
financial year.
The NAO used to publish its own
review of the MOD’s Major Projects, and that document was particularly
interesting because it offered some more detail (dates, numbers) and context
for in-year and historical variations. Unfortunately, the NAO no longer
produces said report.
The end result is that it is
extremely difficult to track MOD plans and detect changes or predict what is
going to happen, especially outside of the main projects.
Some points that need to be made:
the plan covers a period of 10 years and rolls forwards with each year that
passes. The last issue to be published covered expenditure plans between 2016
and 2026. Several programmes, including some of the biggest ones, actually
stretch far beyond 2026, so that only a part of their value is included in the
current plan.
When the press reports say that the
10 year plan is in trouble because of the “31 billion for the new Dreadnough
class of SSBNs”, for example, keep in mind that those 31 billion are mostly
outside of the current horizon. In 2026, the first submarine in the class will
still be in the shed and most of the programme will still lay into the future.
Similarly, the latest report
(finally!) gives us a realistic indication of when the MOD expects the
procurement of 138 F-35s to be completed, and that is 31/03/2035, which means
that almost a decade of expenditure is outside of the current equipment plan horizon.
Same goes for Type 26, with only 3
ships at most entirely covered within the period (possibly, even they extend outside of the current horizon, depending by how much delivery dates have shifted. The MOD is no longer offering precise dates, only talking about "around the middle of the 2020s").
Obviously, this does not mean
that these problems aren’t “taking away a lot of space” within the budget, but
we ought to be careful with the figures and with the blame-laying.
It is worth noticing that the
imprecision in collocating projects and expenditure in the correct timeframes
completely skewers perception of who gets more money: there is a common
perception that the Navy is getting the vast majority of the equipment money
while the army gets “nothing”, but the truth is somewhat different. The Navy
“proper” had a share of 30,695 billion in the pre-SDSR 2015 plan, which became
31,983 with SDSR-induced changes. A 4% growth coming from the bringing forwards
of some elements to earlier years.
The Army went from 23,387 billion to
28,368, a 21% expansion that makes it a winner in the SDSR, although the
enduring confusion in its plans would never make you think that.
The RAF went up 11% from 29,613 to
32,837. Joint Forces Command grew by 35%, in large part due to the fact that it
is the budget holder for the P-8 Poseidon as well as the Future Beyond Line of
Sight programme for the replacement of the current SKYNET communications
satellite capability.
With 49 billion, Strategic
Programmes is the largest budget, driven by the Nuclear element, from reactor
cores to AWE infrastructure to the (very expensive) maintenance and
life-extension of the stockpile of nuclear warheads, with their refurbishment
into MK4A standard.
When you count the nuclear deterrent
separately (it is not directly controlled by the Navy), Navy Command isn’t
quite as rich as people think. And the army is not at all as
poor as it claims to be. It is my opinion, already detailed more than once,
that the Army is, more than poor, dramatically confused about what it wants to
be and do. Some will not agree, but that is the feeling I get from the current
situation. There are many, many programmes the Army is grappling with. Many requirements requiring attention. Many of these programmes have been in the limbo of "concept" and "assessment" phases for many years. They swallow money constantly, and never deliver anything.
And more requirements open up in the early 2020s when the Heavy Equipment Transport truck fleet contract expires, when the C Fleet PFI expires, and the tanker fleet reaches its OSD point. Replacement for DROPS and Light Equipment Transporters have been on the "to do" list for years, as well, and progress is virtually non existent.
It is extremely difficult to say
which programme is most at risk and most in trouble, simply because we actually
are given no information about the vast majority of ongoing and planned
efforts. This also means that a lot of things (and a lot of money) will shift
around in the incoming review with us, on the outside of the MOD, getting
little to no clarity about it.
One example of just how hard it is
to keep track of things will help you realize the extent of the problem: in
2014 the Army had a massive overarching programme known as “Mounted Close
Combat” which covered everything from Challenger 2 to Warrior and from Ajax to
Mechanized Infantry Vehicle. That monster programme had a budget of 17.251
billion, spread out to the project end date of 31/12/2033.
Obviously, as a single programme its
scope was way too great and so it was split into four separate components going
into 2015.
“Armoured Cavalry 2025” chiefly
covers the acquisition and entry into service of the Ajax family of vehicles,
to culminate by 30/04/2025 in a completely renewed Armoured Cavalry capability.
“Armoured Infantry 2026” includes
chiefly the Warrior CSP, but not only that. There is the enduring problem of
replacing FV432 as well, with a notional OSD of 2026.
“Armour MBT 2025” covers the
delivery of life-extended MBT capability to be fully operational by 2025.
“Mechanized Infantry 2029” covers
the renewal of this other area, with FOC in 2029 and with the main focus being
MIV.
In 2015 the MOD included only
Armoured Cavalry and Armoured Infantry in the list of the major active
programmes, so no detail at all was available about the other components. The
Cavalry component had a budget of 6831,53 million; the armoured infantry a
budget of 2176,45 million. Thanks to the NAO’s own report, the last one of its
kind, unfortunately, we learn that Warrior CSP aims for 445 vehicles in total,
including 65 “Armoured Battlegroup Support Vehicles”, aka converted,
turret-less hulls to replace FV432 with. The report, however, notes that the
ABSV requirement is larger than 65 vehicles and the army envisages a greater
procurement effort, including more variants. A delay of two years to the ABSV
element is anticipated, and once implemented it is decided that ABSV will be
its own Category A (aka, worth over 400 million) project, separated from WCSP
proper.
The report published this year, and
which actually details the year 2016, has the Armoured Cavalry pricetag reduced
to 6248 million thanks to vaguely described “cost saving measures” including an
extended Initial In-Service Support Contract for Ajax. Good news, in theory. In
practice, we don’t know what elements of capability were traded out to make it
happen.
Armoured Infantry also drops, all
the way down to 1612,72 million, to be expended out to 31/12/2026. In this
case, the budget has shrunk because ABSV was “removed as a direct cost-saving
measure in the Annual Budget Cycle (ABC) 2016”. There is no way to tell whether
the removal is permanent or not, and if, when and how we can expect ABSV to
reappear. Is the 2015 plan of making it its own programme later on still on the
cards? The FV432 still definitely needs replacement. But we are given no clue
of what’s happening.
Together, these two changes amount
to almost 1150 million which have shifted around / vanished. With no fanfare,
no real way to assess how bad the damage is.
Armour MBT 2025 gets finally
reported, with a budget line of 744,79 million to be expended between
04/12/2014, start date, and 01/06/2026, current end date.
Mechanized Infantry 2029 remains
unreported as it is still in very early stages, with little to no money
allocated to it yet. There is still a lot of money left to get to the over 17
billion originally attached to the MCC, but tracking all movements is difficult
if not impossible.
It gets worse when considering the
Multi Role Vehicle Protected, which made the news recently when the US approved
the UK request for purchasing up to 2747 Joint Light Tactical Vehicles from
Oshkosh. The number surprised a lot of people because the Army had earlier been
reasoning in terms of far smaller purchases, of a few hundred vehicles at most,
while saying that the rest of the requirement was still being defined.
Details about MRVP are
extraordinarily scarce, despite the Army having talked repeatedly in public
about this programme. To this day, the exact requirement remains non
formulated. MRVP includes three “Groups” or “Packages”. Group one is for a
general purpose 4x4 platform, and is the one to be fulfilled via JLTV (if the go
ahead will be given early next year, when Main Gate is planned).
Group 2 calls for a larger vehicle,
probably a 6x6, that must deliver a Troop Carrying Variant with a capacity of
2+6, probably in various sub-variants; plus the Future Protected Battlefield
Ambulance variant.
Group 3 should deliver a lightweight
(air portable) recovery vehicle for support to the other two groups and the
other platforms within the Protected Mobility Vehicle portfolio (the likes of
Foxhound, Jackal, Husky, RWMIK+).
The Army hasn’t yet been able to
decide exactly what replaces what, and when. Group 1 will replace a number of
unprotected Land Rover and Pinzgauers in various positions across land
formations, but is also “candidate” replacement for everything from Panther to Foxhound.
The graphic offered by the Army, however, offers a variety of OSDs (some of
which ridiculously absurd, such as Foxhound leaving service in 2024!) while not
formulating a concrete plan for replacing those fleets.
 |
| The Army itself, as early as last year, seemed utterly confused about the where, how and when of the Multi Role Vehicle Protected. Confusion appears to rule supreme in many areas. |
The most amazing thing is that we don’t
even know where the MRVP belongs. In a presentation given by the army at DVD
2016, the MRVP is the future solution to the Light Protected Mobility
Requirement, and sits under Protected Mobility Vehicle Programme, itself just
one of three areas of the Operational Support Programmes, with the others being
Operational Support Vehicles Programme (including the MAV SV fleet, Heavy
Equipment Transporters, tankers, C fleet, B fleet, Phoenix service for the
provision of civilian vehicles etcetera); Operational Infrastructure Programme
(including tents, shelters, deployable workshops and bridging equipment).
From
the presentation it seems that even MIV sits in this area, but we would expect
it to be under Mechanized Infantry 2029. Where does it actually sit? Is MRVP part
of Mechanized Infantry 2029 too? Impossible to say. Is Group 2 progressing? How
many vehicles will, in the end, be pursued? Over how many years? Few know it, and
those few are all somewhere within the MOD or Land HQ in Andover. Nobody seems to have a complete picture of what is going on.
What next?
There is a lot of uncertainty ahead.
It is very hard to tell in which exact direction things will tilt. I do not
think the government wants to be seen walking back on major SDSR commitments
after banging the drum about them so much. The review is not MOD-limited, and
this might actually be somewhat encouraging as it signals that the pain will be
shared, and that some more money might be shifted towards defence to plug the
worst holes. There will be pain, but wherever possible it will be kept well
hidden in the vast dark zones of the equipment plan, the voids in which entire
programmes float, out of sight.
Among the big ticket items, MIV is,
I think undeniably, the most vulnerable one. Main Gate for the MIV is only
expected in 2019, and until then there is little to no money solidly committed
to contracts relating to it. It is also a relatively unglamorous programme,
which is far less recognizable in the public eye that the MPA, or the carriers,
or even Warrior and Challenger 2 themselves.
Rumors have started to circulate
about the putting on hold of the “Strike” experimentation, and if there is any
truth to them the army must be thinking about what it can (and what it should)
salvage.
I’ve already argued at length about
the reasons why I consider Army 2020 in its current form is a suicidal move, so
I won’t repeat it now. I will only say that if the review puts a stop to this
half-formed Strike madness and forces a more realistic look into the army’s
force structure and goals, then some good can still come out of it.
Other commitments that already look
vulnerable or dead include expanding the Shadow R1 fleet. So few know about it
in the general public that it is easy to imagine the expansion being quietly
abandoned. Especially as the RAF takes over command of the Army’s few fixed
wing Islanders and Defenders in the new year. Who wants to bet that the
additional Shadows never come; or if they do they come at the expense of the
Islanders?
Another vague SDSR commitment that
looks essentially dead is the “longer range helicopters” for the Special
Forces. MV-22 Osprey was greatly desired, but is not going to happen. Chinook
air refueling probes and a couple of tanker kits for C-130J were the second
option, but even that seems dead, especially with the wing box replacement
programme on the Hercules being targeted only at the long fuselage variant,
while the tanker kit is associated to the short fuselage.
657 AAC, which flies for the Special
Forces, is flying on borrowed time. Latest information released show that only
8 Lynx AH9A remain in use, and nothing can be seen moving in terms of procuring
a dedicate replacement. Director Special Forces might end up having to regret
turning down the 8 “Light Assault Helicopter” configured Wildcats that were put
forward in 2011.
Sentry updates are up for scrutiny as well, although the RUSI proposal of dropping the update in favor of a new fleet purchase might not be realistic. While the update is expected to cost a lot of money, i'm not sure there is a cheaper new-buy alternative out there.
MARS Solid Support Ship is also at
risk, as it is a rather expensive programme (i think the ballpark for the 3 vessel was in the region of 1 billion), with no contracts yet signed. It
is unfortunately pretty easy to imagine it shoved into the future once more.
Type 31E herself is still essentially a question mark. There is no indication
of when the actual programme might actually begin, and it comes as no surprise that the Shipbuilding Strategy is taking ages to come out. Even though i fully expect it to leave more questions than answers, even when it'll come out.
Warrior CSP manufacture and entry in
service is delayed by an expected 12 months due to the reported difficulties
with integrating the new turret and negotiating new terms for the final
contract, so that is yet more pressure that gets pushed to the right.
MRVP is penciled for Main Gate early
next year, but will it actually begin? And with what numbers, and over how many
years?
Apparently, the Army is trying to see if something can be done to cut down the “regiment mafia” and streamline the string of RHQs and Infantry Divisions commands. This is extremely controversial and already has caused an explosion of leaks and comments by illustrious ex-high officers, but it is highly desirable to press on with a reform in this area and, indeed, with a realistic reassessment of the Army’s structure and the balance of infantry to supports.
If the MOD wants to carry out a serious rethink, they do have plenty of areas to touch.
The amphibious force is unfortunately badly exposed. The loss of a Bay, the incoming loss of HMS Ocean, the mothballing of one LPD and the delay to a vague future of every single major programme the Marines tried to get funded (BV206 replacement, lost in the wilds; Desert Hawk III replacement, not funded; Fast Landing Craft and Force Protection Craft, out in the cold...) are signals of how weak their position is.
It would be a tipical MOD cock-up, to close the carrier gap but kill off amphibious capability while at the same time saying that it is key and that the future of war is dictated by geo-demographic considerations, with more and more people living close to the world's shores.
I'm particularly worried about the future of the amphibious capability. It is badly exposed and i don't know if the Navy is in any condition to be an ally and a defender, considering the difficulties elsewhere in its own budget and manpower.
We’ll be subjected to increasingly
catastrophic news report in the coming period, as always at times of budget
reviews. MOD insiders will make sure to drop soundbites to the press about some
of the most unpalatable options in an attempt to rule them out by public
outcry. We’ve seen it all happen in the past.
As of today, I don’t think anyone can
claim to know the ins and outs of the budget situation, and even less can guess
what exactly will happen next.
Regardless of what happens, everyone
who cares about the armed forces should renew the call to the Defence Committee
to push in Parliament for a substantial change in how the long term equipment
plan is shaped up, formulated and reported. The current 10 Year Budget Plan is
absolutely unaccountable and basically doesn’t commit government to any measurable target. And the feeling is that, even within the MOD itself, this convoluted
and deliberately vague method of planning is preventing joined up thinking,
generating capability holes where a programme doesn’t properly talk to another
and in general promoting a “decide only at the last second, and only for the
short term” culture which ensures the math of the budget will never work out. Type
31E risks to be too disconnected from the future programme for replacement of
MCM and Survey vessels. There risks to be an overlap between the two ships,
which will drag the Royal Navy’s capabilities towards the bottom. The Navy
risks to go from having no “second tier” flotilla to having 3 classes of
low-capability ships for use on constabulary tasks (Type 31, River Batch 2 and
the future MHC). In the Army, the disconnect has reached levels of ridiculous
that are simply hurtful: Ajax being out of place and awkwardly trying to
reposition before its production even starts is just the most glaring example,
but the ABSV saga adds to the pain. In general, the Army seems to have little
clue about how to make sure that WCSP, Ajax, ABSV (?), MIV (?) and MRVP
together cover the requirements.
Budget cuts happen everywhere, and
in most of Europe the budgets are much smaller than the one the MOD gets to
play with. It is high time to ask why only the MOD cuts generate such
nightmares and the brutal cancellation of entire capabilities. No, the fault
doesn’t sit only on the shoulders of politicians.
