We have no declarations of interest from Members. Before we go into the main session, I will ask Mr Nick Smith MP to ask a couple of questions about how the military is supporting the current situation around the country, with the strikes that are going on. 

Q2

Nick Smith: Good morning, everybody. Mr Williams, could you help us? I want to talk about the issue of military staff covering for striking workers in the weeks ahead. There has been some media coverage that up to 1,000 military personnel have been asked to support staffing in the national health service, the Home Office and Border Force. That does not include the fire service, where there may also be difficulties. Could you confirm how many military staff have been deployed and are ready to help out in those services, please? 

David Williams: Certainly. Through our MACA arrangements—that is military assistance to the civil authority—we are providing support to help maintain essential services in three areas. For Border Force, we have identified and trained around 600 armed forces personnel. My expectation is that they will be operating in support of passport control activity at major points of entry. 

Q3

Nick Smith: Have they already been trained? 

David Williams: They are already trained and ready to deploy. We have identified a similar number of armed forces personnel to support the NHS, specifically through ambulance driving, and that training is under way in support of five ambulance trusts in England this week. 

Q4

Nick Smith: Have those 600 been trained up already? 

Q5

Nick Smith: Thanks. So quickly totting that up, that is approximately 1,400 personnel. 

David Williams: That sort of order, yes. 

Q6

Nick Smith: Do you think you need any more to be deployed? 

David Williams: At this stage, those are the live conversations we are having with other Government Departments. It is possible that there may be some requests for assistance from the devolved Administrations. We have notionally earmarked up to around 2,500 troops, should they be needed. 

Q7

Nick Smith: Okay, so it is not in hand for Scotland and Wales, but you expect it to be. 

David Williams: It depends on the requests that they make and whether those are requests that we are able to help out with. 

Q8

Nick Smith: So you think overall it could be up to 2,500 personnel. 

David Williams: It could be. At the moment, I am not expecting it to get that high, but we have made plans on a contingency basis in case. 

Q9

Nick Smith: Given that many of these military staff are already in training for all this activity, I understand that the costs are now borne by the Department of Health and the Home Office. What, would you estimate, has it cost so far? 

David Williams: In terms of the principles that I mailed to Mr Pate on the detail, we run an arrangement whereby we charge out to other 

Government Departments the full cost of military assistance, and then it is for them to accommodate within their budgets. That is the arrangement that we will use for this phase of industrial action. To date, the numbers will be pretty low because we will charge in arrears, but I do not know whether there is a number that you have in mind.   

Charlie Pate: It depends on the exact scale and duration, but we are looking at several million a month for the type of level that Mr Williams has described. And all of that will be charged to the relevant Department. 

Q10

Nick Smith: I understand it is about—let me know if this is right—£4,000 per week per military personnel. Is that right? 

Charlie Pate: It would be of that order of magnitude, yes.  

Q11

Nick Smith: So we are looking at an approximate cost of up to 2,500 personnel at about £4,000 per week for however long this difficult time takes.  

Charlie Pate: Those are the kinds of sums we are looking at, yes. 

Q12

Sir Geoffrey Clifton-Brown: Good morning. Mr Williams, why is there full cost recovery from the Departments? Surely you have the overhead of those military personnel, anyway. You are paying them and housing them, so why is it full cost recovery? 

With the integrated review refresh in the spring, we are now thinking about how we may need to adjust the equipment plan beyond what we have already done in support of Ukraine and in our own replenishment. We can go into that in detail if you wish. That will become clearer in the next couple of months, based on the lessons we have learned from Ukraine. 

Q14

Nick Smith: Give us your very quick, back-of-the-envelope response: what do we need to think about straightaway to get up to snuff?  

General Magowan: If I were allowed to say one thing in an elevator, I would say that hard-edged, conventional war fighting deterrence is very much back. That translates into certain capabilities that we are now going to put more focus and more resource into through the process of the integrated review refresh. 

Q15

Nick Smith: I will come back to you with one single question: will we need more soldiers to work alongside that extra capability going forward? 

Q17

Mr Francois: There was a RUSI paper that came out just over a week ago that talked about initial lessons learnt from the Ukrainian invasion, one of which is that the Russians fired off in two days the equivalent of our entire war reserve of artillery, and you are still telling us that the plan has not been overtaken by events. 

General Magowan: I am not saying that it has not been overtaken. What I am saying is— 

Mr Francois: You just said that it had not. 

Chair: Let the General finish. 

General Magowan: We have a baseline plan that is based on war fighting, but you are absolutely right, Mr Francois, that we have identified quickly and are addressing the fact that we do not have the resilience and the redundancy in our supply chains for munition stockpiles—both basic stockpiles and complex weapons. That is why I am working closely with Mr Start to ensure that we are delivering that resilience into our sovereign primes to get after it. The point you are making about munition rate in war fighting that we are seeing in Ukraine would be one of my key lessons from Ukraine, and that is why we are taking the action. That will see an adaptation of the equipment plan, but it does not mean that the equipment plan is completely unfit for purpose. 

David Williams: I think that the point of the debate is around the phrase “largely overtaken”. There are definitely changes that we all want to make. The core of the plan seems to hold good but, in terms of assumptions around the duration and intensity of the land battle, there are clearly lessons to learn from what is happening. 

Mr Francois: We are going to come back in a few minutes to the land environment specifically. General, I think you yourself would volunteer that that is a particular area where we may have to enhance what we are doing— if that is fair. To save time, we are going to come back and look at land very specifically, so perhaps we will just leave it there. 

Chair: Thank you, Mr Francois. Jonathan Djanogly. 

Q18

Mr Djanogly: I was just listening to Mr Smith and Mr Francois. There seems to be a growing consensus coming out of Ukraine that, despite the wonderful efforts that we are giving to the Ukrainian people, the UK itself is underequipped—albeit with quality equipment—to fight a major war on the European continent. Is that correct? 

David Williams: If we think back to the integrated review, in that context it is important to emphasise the centrality of our membership of NATO to UK defence. In a world where you are thinking about a land war in Europe with Russia, that would be a NATO endeavour, not a UK-only one. We need to look at resilience—assumptions around stockpiles and capability— in the NATO context in the first instance. Later in the hearing Mr Start, who is our national armaments director and a rep to NATO in that space, may have some points to add. 

General Magowan: It might be worth adding against your question specifically that Ukrainian bravery, courage and esprit de corps, with considerable support from international allies, has held the Russian armed forces in check. Within a NATO context, if we were embarking on what you have just described, I would not back the Russian armed forces. 

Q19

Mr Djanogly: That is a fair point. In the context of the readjustment of your spending, plus what you have just been describing in terms of having to reassess things again from Ukraine—I think you said looking more at the traditional, conventional-type forces—can we cope with all that within 2% of GDP? What gives way? 

General Magowan: If we are going to meet the threats that we are now seeing playing out in front of our eyes, either it is going to involve significant reprioritisation in certain areas of the equipment plan—not overhauling it, but some reprioritisation, although that will invoke risk across our capability—or we will need more resource to prevent us from having to make those choices. 

Q20

Sir Geoffrey Clifton-Brown: Good morning, everybody. I will start with Andy Start, please. The second world war taught us that every sort of engineering factory was immediately put into action to produce arms. Since then, we have largely run down that capability, so you can have all the money you want and learn all the lessons you want, but if you do not have the manufacturing capability to make all these replacement missiles and everything else, you cannot do it. That takes a lot of time, so what is actually happening about increasing our manufacturing capability? Is this being done on a UK basis? Is it being done on a NATO basis with our NATO partners, particularly the Americans? 

Andy Start: You are absolutely right that we address this with our allies. On a NATO basis, we get together among all the armaments directors in what is known as the Conference of National Armaments Directors. Within that forum—I have already been out in Brussels twice since I have been in the job—we talk through that dynamic of how we stimulate that industrial supply chain to be able to meet our long-term needs. 

production—warm production lines, if you will—that can then be ramped up at a time of war. We are starting to shift those conversations; that is happening on a NATO basis. Together among our colleagues, we are combining the long-term requirement and articulating that back to all our industry to allow it to invest in those long-term strategic capabilities. Then, in the UK, we are proactively working with our key suppliers—which is BAE Systems, MBDA and Thales—to make sure those production lines are ramping up, and we have obviously placed letters of requirement into the United States. 

Q21

Q22

Sir Geoffrey Clifton-Brown: It is not just a question of replacing what we have used, is it? Given Mr Francois’ figure about the Russians using the entire amount of UK missiles in the first 48 hours, you have to make a judgment now about not only the replacement amount you will need, but how much extra you will need because of the changed method of warfare. 

General Magowan: Absolutely, and that is what we are doing right now. We are replenishing the stocks that Mr Start has just talked about. We also have lists of munitions and broader capability that we want to invest in now through the process Mr Start has just outlined, particularly through our sovereign primes, to ensure they have the resilience to respond. Whatever happens through the integrated review refresh, we will address this munitions shortfall and increase it. 

Charlie Pate: On the financial aspects of that, not least given the previous question, there are two elements. We have agreed funding from the Treasury from the reserve for the replenishment of stock that we have gifted to Ukraine. 

Sir Geoffrey Clifton-Brown: Whatever it is? However much it is? 

Charlie Pate: Well, we are doing that on a case-by-case basis. If we are replacing like for like, that is reasonably straightforward. In some instances, what we have gifted is no longer in production, or our requirement is slightly different, so we work through that and agree with the Treasury what they will reasonably replenish. Secondly, the Chancellor provided £560 million for the Ministry of Defence, over and above the budget set out in the equipment plan for the next two years, to go to exactly Mr Start’s description of restarting those production lines with the UK companies.  

Andy Start: To give you some level of confidence, there are stocks that we have already acquired. We have already acquired replacements for NLAW, for high velocity missile and for other air defence capabilities. We have already bought what was available from stock and we are working with each of our suppliers to make sure they have longer-term requirements to stimulate the long-term demand. 

Q23

Mr Francois: Are you saying that we have now replaced in our war stocks all the NLAWs that we have given to Ukraine?  

Andy Start: Thank you for the question, Mr Francois. We have already bought that which was available, because it was in existing stocks, and we have placed an additional contract for long-term production with the NLAW manufacturers, which is Saab and Thales in Belfast. That contract was placed last week.  

Q24

Chair: When will that be delivered? 

Andy Start: Progressively from ’23 onwards. It is not an instant replacement— 

Q25

Q26

Mr Francois: How long will it take us under the contract you have just signed to replace all the ones we have given to Ukraine?  

Andy Start: I don’t know. I would have to come back to you on the detailed timing. It is a phased delivery programme between now and— 

Mr Francois: It is several years, isn’t it?  

Andy Start: It is at least two years, for all of them. It is a progressive rampup.  

Mr Francois: Thank you. I don’t think that is quite the impression you were conveying to begin with. Shall we get on to land?  

Chair: We have got it clear now. I am just going to go back to Sir Geoffrey, and I will come back to you in a moment, Mr Francois.  

Q27

Q28

Sir Geoffrey Clifton-Brown: Given that you can’t just bounce this on to the Treasury and expect them to give you the money next day, are you anticipating in your minds that this will be complete by, say, the end of February? I am trying to tie you down a bit more.  

David Williams: We are engaging with the Treasury routinely as we go.  The precise timetable for the endgame is not yet agreed.  

Sir Geoffrey Clifton-Brown: Okay. Back to Mr Francois’s point, this is going to be a game changer—not just Ukraine; there are a whole load of other factors that we will come to in a minute that will change your budget perceptibly. I know it is planning for all the equipment you have contracted for and it has an aspiration for a whole lot more equipment, but isn’t this particular defence plan likely to be superseded by something that looks very different? When we have this hearing next year, we will be looking at a very different defence plan, won’t we?  

David Williams: I think it will be adjusted and updated. As I said to Mr Francois, it is the balance. I think the core of the plan will hold good, but I expect that you will certainly see the impact of decisions to adjust our capability plans, both in the light of lessons from Ukraine, and to reflect some of the direction of travel on our recent announcements of a partnership with Japan and Italy on combat air. 

We are expecting a leaders’ decision on the AUKUS partnership with America and Australia in the first part of next year. There are a range of decisions in the nuclear enterprise, particularly around our new programme to replace the warhead, that we will want to reflect in next year’s planning round or possibly the one after. 

So yes, I think you will see change, and it will be noticeable change, but it is not starting from a blank sheet of paper. This is a balanced plan that delivers well against the objectives of the 2021 integrated review. It is affordable within the financial assumptions that we had at the time. I expect the refresh to be that—a refresh of the integrated review, not back to square one. It is about the degree of commonality versus the degree of change.  

Q29

Sir Geoffrey Clifton-Brown: My last question is for Mr Pate. I know that

That actually then links to the £4.5 billion figure, which is the DNO’s view of risks that it has not included in the budget—we call that “risk outside costing”. Part of CAAS’s work is to look at those risks and say, “Actually, some of those are more likely to materialise than the project team thought,” so there is an increase in the DNO’s view of risk outside costing of about £4.5 billion. That is on top of existing risk. But at this stage, we do not think that those risks need to come into the programme. That is the ongoing debate that we have every year. You asked about the £10 billion. I do not have the exact figure, but it is around a fifth to a quarter of that.  

Q30

Sir Geoffrey Clifton-Brown: Is that £10 billion fixed for the first 10 years, or does it apply to the whole project? 

Charlie Pate: It applies to the whole project. We agreed indicative profiles with the Treasury in spending review 20, and we have drawn down the first two years of those. Indeed, as part of the autumn statement, the Chancellor agreed to the number that we had settled on in SR24 next year, so we already have certainty that that number is available to us should we require it, which I suspect we will. 

Q31

Mr Francois: General, the RUSI report that I referred to earlier said that NATO, including the UK, does not have the ability to fight a sustained war with Russia because, essentially, we run out of ammunition and kit too quickly. You have intimated that, when we get the review, which will lead to a revised and updated equipment plan, the land element may be an area of greatest change, so let’s focus on land briefly. We have not bought a new armoured fighting vehicle, other than Terrier and some engineering stuff, into service for over 20 years. Most of our armoured fighting vehicles are either obsolescent or obsolete. The Warrior CSP was cancelled, so we will lose our armoured infantry capability entirely. The Boxer IOC has slipped to 2025, Challenger 3 to ’27 and Mobile Fires to ’29. How on earth are we going to update the British Army so it could deter the Russians when all these programmes are so late and/or over budget? I haven’t even mentioned Ajax yet. 

Chair: We will save Ajax—we’ll save the best until last.  

element of Russian land forces at bay, and actually pushing them back in Ukraine, with support from a range of partners. That shows that when we are at war, the ability to understand the environment and to adapt quickly gives one the upper hand in the battle space.  

Q32

Mr Francois: To save time, we understand that. We have nothing but admiration for the Ukrainians. We have lent them kit, and now they are teaching us tactics. But let’s talk about the British Army. If we crashed the 3rd (UK) Division out of barracks at 5 am tomorrow—I am not saying anything that the Russians don’t know—we would be lucky if half of it even got out of the tank park, because the vehicles are so old and so prone to problems; then it would take us 60 days to get to Estonia. How can we deter Russian aggression with a British Army whose armoured fighting vehicles are clapped out?  

General Magowan: That is precisely why we have invested so much into modernising the Army to deliver future soldier through those programmes.  

Q33

Q34

Mr Francois: You said that, but it is going to take years for any of those new programmes to come in and there is a war going on now. What are you doing to speed it all up? 

General Magowan: That is what we are learning from Ukraine. We are not fast enough and not flexible enough in our approach. We are learning those lessons and putting them into the equipment programme delivery now. I am not suggesting that delivering the totality of the equipment programme for the Army would see us at green with regard to divisional level war fighting. A range of risks remain untreated, particularly what we call joint enablers—for example, medical and integrated air missile defence. I won’t give you the long list; we can do that in a private hearing—no problem. There is more that we need to do. One of the key lessons from Ukraine is that we must be faster in our procurement to enable us to do what you have just said, which is deter the Russians.  

Andy Start: What he was particularly complimentary about was the way we had been able to give them modern equipment to augment their legacy equipment to deliver a better outcome. What does that mean for us in terms of the UK? First, we are pressing on with trying to drive forward the modernisation programme we have. We will have our first vehicles for Boxer delivered in ’23, and they will roll out through ’25 onwards. Having ridden in that vehicle, it is a game-changer in terms of the capability that it delivers.  

Q35

Mr Francois: Sorry, but you people always elide delivery and initial operating capability. It does not go into service until 2025, does it? 

Chair: Yes, can you be clear on that? It would be helpful.  

Andy Start: The first vehicles will be delivered to the Army in ’23. The IOC is in 2025—you are absolutely correct. If we were in a time of war, would we accelerate that and take more risk? Of course we would. There is an acceptance programme for all these pieces of equipment that is very careful and very scrupulous, but if we were actually in a conflict, we would take more risk. One of the reasons we have been able to go so quickly to support the Ukrainians is that the Ukrainians are prepared to take risk in terms of rolling out new equipment. That is why we have been able to use our future capabilities group to roll out things such as UAVs at an incredible rate to support them—because they are prepared to take risks.    

Q36

Mr Francois: But the IOC is for a mechanised infantry company, and that is three years away.  

Andy Start: As I said, we are pressing on with the programmes at the greatest speed we can. If we needed to and we were in conflict, we would take greater risk and go faster.  

Q37

Mr Francois: How much faster? 

Andy Start: You’d have to look on a programme-by-programme basis. 

Q38

Mr Francois: But General, if the job of armed forces is to deter war, wouldn’t we be more likely to deter war in the first place if we were evidently readier to fight? Shouldn’t we speed up now to show that we are ready to fight, to make it less likely that we will have to?   

Andy Start: Mr Francois, if I may— 

Mr Francois: Your implication was that if there is a war, we will speed everything up, but by then, on one level, it is too late, isn’t it? The deterrence has failed.   

General Magowan: But that implies that we are not doing everything we can to be as fast as we can within the parameters we have.  

Mr Francois: Self-evidently we’re not.   

General Magowan: Well, we are. We are doing— 

Mr Francois: No; if it takes another three years to bring a mechanised infantry company’s worth of Boxers into service, with respect, General, we are clearly not.    

Q39

Chair: As you raised the point, Mr Francois, can I just be clear? Is there a way you could speed it up? Mr Start hinted that you can take more risks. General Magowan, what would that look like for the British armed forces if you had to do it faster, and how fast could you go? 

General Magowan: Mr Start and I are always having conversations about how much risk we are prepared to take in terms of procurement, and whether we want to take financial risk, technical risk or integration risk. There are a number of examples, particularly in the electronic warfare space, where we have taken considerable technical and interoperability risk to deliver capability into the hands of the Ukrainian war fighter, which we probably need to do within our own system to deliver the speed that you’re talking about. But it is much easier to do that when you are facing an adversary, as the Ukrainians are, than in the context we are in today. That does not mean we are not trying to learn those lessons in our own procurement system today.  

Q40

Mr Francois: Let me follow up directly. Part of the concept of the integrated review is that, while we might have a smaller Army, it would communicate with all elements and everything would be much more joined up and therefore far more effective. The brain to do that is called Morpheus, because by 2026, Bowman may have to come out because the crypto won’t be up to scratch. How are we doing on Morpheus? In answer to a WPQ on the 13th, it was said that progress on the Morpheus Evolve to Open assessment phase has “fallen considerably short of what was anticipated,” and that the Department is “reviewing next steps on how best to achieve our objectives on Morpheus.”  

Morpheus is a basket case. We have spent £1.5 billion of taxpayers’

David Williams: Shall I come to that one? As you know, Mr Francois, Morpheus is part of the overall land environment tactical comms programme. The majority of that programme is progressing well, including upgrades to the Bowman radio system, the wide-area network and how we enhance situational awareness for troops who are dismounted. The point of the Morpheus Evolve to Open programme is to allow us in future, through the life of the platforms rather than on day one, to exploit thirdparty upgrades— 

Q41

Mr Francois: Mr Williams, to save time, we know what Morpheus is meant to do; the question is, why is it not doing it? Why is it so late? 

David Williams: We have successfully now got through the design for the Evolve to Open programme. We are not confident that the current arrangements will allow us to deliver. We are holding GD, General Dynamics Mission Systems, to delivery against the original contract— 

Mr Francois: GD is the Ajax contractor as well— 

David Williams: Well, General Dynamics is the parent company. This is a different division, but yes. 

Without prejudice to that contract, we are thinking through other options for delivery, so that we can get this open architecture in place. Otherwise, with a proprietary system like Bowman provided to us by General Dynamics, updates need to run through that company. In a way this is consistent with an approach to IT systems more generally; it is about freeing us from the original manufacturer to allow us to exploit a range of capabilities. It is not day one, black or white, either it is there or, if not, the capability fails; it is about being able to exploit these platforms with the communication systems, with their sensors, through life. 

We will get there. It is late. It was due by the end of 2021—I think that was the contractual date—so it is a year late, and it will clearly take a bit longer to get in place. We are on it, and it is a priority. This element of the programme has not gone well— 

Q42

Mr Francois: Mr Williams, a translation into English: GD has us over a barrel. 

General, last one: you say that you want to speed everything. Our soldiers are arguably the best trained in the world—although the Ukrainians have been incredibly brave and impressive—but our soldiers cannot fight with kit that is obsolescent and does not work. Can you reassure the Committee that, buried somewhere in the depths of the Ministry of Defence, you have a plan materially to speed all these programmes up so that if we were to go to war 3 Div would have a fighting chance? Can you assure us that something along those lines already exists? 

General Magowan: Absolutely. If we had to fight tonight with that division to deter and defeat an adversary in Europe, we would absolutely be ready. 

Q43

Mr Francois: Right. Can you then assure us that you are doing everything you can to speed up these programmes to give us a better chance of winning? 

General Magowan: Absolutely. 

Q44

Chair: Mr Start, you can assure us that as well? 

Andy Start: Yes. 

Mr Francois: Thank you. 

Q45

Nick Smith: General, you have talked about this very altered security situation. You have talked about your agility and working in collaboration with Mr Start. The phases you have used as a group about the equipment plan in the recent minutes have been about it being refreshed, adjusted, updated and adapted. It’s too damn general! We need you to be much more specific. General, what changes do you expect to be made to next year’s equipment plan so that the Army is fit for purpose? 

General Magowan: Clearly, I can give a very full answer to that question, but you have to bear with me in this environment, please, because by answering it in a very full way, I am exposing operational risk. I have been very clear that there is operational risk in the plan— 

Nick Smith: We don’t want you to do that. We are on your side. But give us that very sharp response to show us that you mean business. 

General Magowan: In general terms, in the land environment, we need to improve our ability for a division to work as an integrated whole, so there is a range of joint enablers, as we call them—I will not list them all here—in which we have lacked investment over the years. There is no doubt about that. We are holding operational risk against that. They are the sorts of things that we would have to adapt very quickly if we were fighting that division tonight. 

Q46

Nick Smith: So in terms of changes to the equipment plan to meet the objective you just talked about, what would you do? 

General Magowan: Either changes to the equipment plan to ensure that we are baking in more hard-edged deterrents or enhancements to the equipment plan if we were provided more resource.  

Q47

Nick Smith: What and how? 

Chair: What would be your wish list? I think that is what Mr Smith is asking. What is your Christmas list?  

Mr Francois: Yes, we do.  

Q48

Chair: Do you have anything that you can reveal and can say in the room?

General Magowan: Okay. I think we have been quite clear that—again, learning the lessons of Ukraine—our ability to strike with precision at depth needs to increase. Our ability to defend ourselves from the sky through what we call integrated air missile defence needs to thicken up; we have some capability, but not enough. Again, that is a lesson from Ukraine. We are also learning another lesson from Ukraine. In the wars we have all fought in Iraq and Afghanistan, from an allied side—certainly not from the local side—we have been dealing with one, two, three or four casualties. We are now in the business of being prepared to deal with many more casualties than that. Our medical supply chains and our medical response plans do not necessarily match that. Would you like me to go on? That is in the land environment. In the maritime environment, we need to increase our lethality. 

Q49

Nick Smith: What does that mean for the equipment plan in the next few months, to get it up to speed?  

General Magowan: The things I have just articulated to you are the things we are going to argue for through the integrated review refresh. If we receive more resource—we will see—then we will add those to the equipment plan. If we do not receive more resource—we will understand why—then we will have to prioritise accordingly through what we call a balance of investment. I have just dealt with the land environment, because that has been our focus in this conversation, but I could talk about the maritime and air domains as well, within this hard-edged, warfighting environment if you would like me to.  

Chair: We will leave that there for now because we need to comment on the numbers on the equipment plan and we could end up discussing an entire battle plan for any scenario. But I think the point is being made both ways and I thank you for that. It is always the challenge, isn’t it? We all want more capability, but it does not usually mean that things drop off the edge, so that is something we will be keeping an eye on as the integrated review goes through. We will have just one last point on this and then Sir Geoffrey is going to move on to the money.  

Q50

Sir Geoffrey Clifton-Brown: Mr Williams, I saw Mr Francois’s scepticism about almost all the witnesses’ responses on Morpheus. We cannot go into aspects of Morpheus, but it is the step-changer. In the last hearing we had on the digital, I think it was Mr Pate who actually admitted to me that Morpheus’s digital capability will be the limiting factor of how Ajax can operate. We are going to get into Ajax later, but I think perhaps you might want to reflect on the answer about how quickly this integrated warfare, from an Army perspective, could be brought into operation and perhaps just think about that and give us a note on what you can reveal please. 

Q55

Sir Geoffrey Clifton-Brown: How will you make the £1.4 billion cost reductions required over the next three years, particularly given that the new efficiencies you have got to find have not been identified yet?  

Charlie Pate: On efficiencies, this might sound paradoxical, but I take confidence that our lower-confidence numbers are increasing. We are reflecting that we have more ideas of efficiencies across the organisation. Indeed, Mr Start and the DE&S have done a tremendous job delivering about £9 billion since 2016.  

I could reel off specific efficiencies that we have delivered this year. We have taken a prudent view on that pipeline of new ideas that we have and have taken into the plan the £3.4 billion of lower-confidence efficiencies. There is a bigger pipeline beyond that, which gives me the confidence that we can deliver the £3.4 billion. We just have not finally agreed which programmes to pursue at this stage.  

Sir Geoffrey Clifton-Brown: I have set you up nicely for Mr Francois to come in.  

Chair: I think Mr Grant wanted to come in briefly.  

Q56

Peter Grant: Mr Pate, in the NAO Report, paragraph 7 refers to the £2.6 billion deficit in the first seven years and says that, “The Department believes that this level of overprogramming across the first seven years is a manageable approach because it expects that some projects will be delivered more slowly than planned.” How is that different from the £13.2 billion management adjustment for realism that is already built into the plan?  

Charlie Pate: They are similar areas. The £13.2 billion is what we accept in our specific programme costings, given historical performance and our view of the deliverability of the portfolio, when you take it as a whole. Individual project teams are costing individual projects on the basis of what they think should be delivered. We then take an overarching view, including discussing with DE&S and the other delivery organisations what they actually think we can get through the delivery chains.  

Chair: I think we’ve got that point. This Committee has some sympathy with that point of view, but there are obviously accounting issues that come into it. 

Q58

Peter Grant: If all the frustrating delays suddenly fell out of the system, everybody started operating at full efficiency and none of this slippage happened, what would you do? Would you go over the budget for the year, or would you tell somebody somewhere to artificially stop the projects until the new financial year? 

David Williams: Well— 

Chair: Mr Williams is thinking about nirvana. 

David Williams: The options in those cases are either that we choose to allocate more money to the equipment programme, either by reprioritisation within defence budget or by a discussion with the Treasury, or we would need to deliberately slow down progress to deliver within our budget, but, as Mr Pate says, that is not our experience now.  

Alternatively, the Comptroller and Auditor General will qualify my accounts and I will have an unpleasant hearing in front of the Public Accounts Committee explaining why I haven’t lived within the budget that Parliament has voted, but that is not really an option available to me as accounting officer. 

Charlie Pate: Mr Grant, without being unduly pessimistic, I am afraid that I don’t think we would get to that stage. We have a plan with projects at very different stages of their life cycle. That uncertainty of planning, particularly as we are considering a project—before it enters contract, at which point the figures show we have much greater certainty of delivery, both to time and cost—is what is reflected in the discussion we have just had. 

Q59

Mr Francois: We are going to come on to efficiency savings, Mr Pate, but within the context of the overall plan. Last year, when we discussed the increase in the size of the plan, we pointed out that the MoD had basically 

got a very good settlement of an extra £4 billion over four years, in simple terms. What you had done was to basically extrapolate that to the end of the plan, and that is why the plan went up quite a lot, and that is why you were then able to say that it was in balance. Is that a fair summary? 

Q60

Mr Francois: Okay, but we now have inflation of 10%. We will come back to that in a minute. The problem is that that profile would have fitted a defence budget of about 3% of GDP by the end of the plan. We are now talking about 2% of GDP, subject to the integrated review, so you do not really have that money anymore. It is all up in the air.  

The problem is, bluntly, that from about year 3 to year 10 that is all now funny money, because if the integrated review does not go the way that you want, and the Budget in the spring does not go the way that you want, suddenly all that extra money disappears and the whole plan becomes completely unaffordable, doesn’t it? 

Charlie Pate: I’m afraid I am not sure on the calculations there. The £242 billion budget—an over £500 billion budget in total for the Department is implied by that—is actually a prudent calculation. We are at 2.3% of GDP currently for the whole NATO-qualified spending. That includes the Ukraine £2.3 billion. That profile actually begins to fall over the decade. 

Q61

Mr Francois: Are you saying that if in the spring the MoD was told, “We’re going to spend 2% of GDP on defence,” you would still have an equipment plan of £242 billion? I am not sure that that adds up. 

David Williams: If the Government chose to hold only at 2% of GDP over this period, in the second half of the decade the defence budget would increase. 

Q62

Mr Francois: Yes, it would increase, but it would not be able to cover the £242 billion over 10 years, would it? That is my point. 

Charlie Pate: On the current trajectory, with this plan and the broader departmental budget, we fall below 2% later in this decade. This is a prudent plan. Three per cent. would be tens of billions more by the end of the decade. 

Q63

Mr Francois: So you are saying, just to be clear, that that £242 billion is affordable at 2%. 

Charlie Pate: If we dropped to 2% very immediately there would be shortterm reductions, but later in the decade, yes. 

Q64

Mr Francois: All right. I am not quite sure that I agree with you, but fair

efficiency challenge this year, which is roughly equivalent to 5%, as per most Whitehall Departments. Last year we did, and that contributed to us landing exactly on our budgets, both the resource and capital. 

Q65

Mr Francois: But Mr Pate, to save time can you just give us some actual examples of how you are going to save that £3.4 billion? 

Charlie Pate: Yes. We are working through a lot of our support contracts. Mr Start has saved £229 million on Hawk support through partnering with industry and other nations. At the other end of the scale, we have saved £28 million on Merlin operational data recovery through using a different way to meet the regulatory standards, using technology. 

Mr Francois: Did you say Hawk?  

Charlie Pate: I am saying Hawk. 

Mr Francois: Don’t get us going on MFTS. Okay, go on—keep going. 

Charlie Pate: Those are genuine savings against the baseline that was in the equipment plan. Going further, we are working together to introduce category management across the Department. That is something that industry has been doing for decades, but actually is a really important part of our industrial strategy—giving a pipeline to industry of what our contracts are looking like. For example, with gas turbines having a category across air and maritime, we are expecting savings of £148 million from that category. These are approaches, and I can give you many more specifics. 

Mr Francois: No, you’ve given us a few. 

Charlie Pate: We have 100 categories that we are developing that will drive that. 

Q66

Mr Francois: Quickly to Mr Start then, you are now the head of DE&S. How many people do you employ? 

Andy Start: About 12,000.  

Q67

Mr Francois: I know you are not responsible for it, but what about for the Submarine Delivery Agency? 

Andy Start: About another 2,000, is it?  

Q68

Mr Francois: To ask a question on efficiency, the Israelis, who have many similarities to us, run a procurement organisation with about 2,500 people. Why are they able to do that with 2,500 people yet you need 12,000? 

Andy Start: We have got a massive difference in scope of what everybody does. If you break that 12,000 down, about half are in operational delivery, so that is the logistics, support and delivery of all the kit, running the client and defence support centre and actually doing a lot of the frontline work on munitions. Half are actually in frontline execution roles.  

The other half, about 6,000, run the acquisition and development programmes. Of those, about two thirds are monitoring and maintaining the large scale of contracts we run, and the balance are doing the new concepts and evaluations. When you start to look into the detail of what they do, it is a significant team, but they are doing a huge amount of work. If you look at the spectrum of capability that we run in the UK and compare that to Israel, it is quite different.  

Q69

Mr Francois: I am not sure I agree. I still think it is 12,000, and I do not accept your point that half of them are in operational roles so that all counts. Even if we take the 6,000 figure, you still need twice as many people to do what the Israelis appear to do far more efficiently. The Submarine Delivery Agency has 2,000 people, and we deliver less than one submarine a year. Surely we could find some efficiencies at DE&S, couldn’t we?  

Andy Start: Mr Francois, I absolutely believe that there are opportunities to things faster, better, leaner and more agilely, and I am committed to doing that. It is also worth noting that the range and complexity of what we do is huge. We have 1,750-odd programmes and 500-odd projects. The vast majority of those contracts are ahead of budget, and the majority are ahead of time. It is a huge complexity that we are managing. We can definitely do better, and I am committed to doing so.  

Q70

Mr Francois: I am so sorry, but on a point of fact, of the 1,800, some are ahead of time, but overwhelmingly they are the smaller programmes. Among the larger programmes, there is a massive amount of delay. Of the 52 that the Infrastructure and Projects Authority audited, nine are red, only three are green and the rest are amber. That is not exactly a worldbeating record, is it? 

Andy Start: I am glad you raised that, because it gives me an opportunity to explain the dynamics that are in play there. Those ratings are joint ratings that we do—our SROs do—and are then audited by the IPA. We take the IPA input. To run through the three categories, the green are the most straightforward programmes, obviously. The amber programmes are the ones that are expected to deliver on time and on budget but have risks that we need to manage. Then there is a small balance, and it is a relatively small balance in the context of the overall programme performance, that are late and problematic and unlikely to deliver on time or on budget or both. The red programmes are where we really have to put some energy,

and I intend to do so. I have a long track record of fixing red programmes, so I am committed to doing so.  

Q71

Mr Francois: Forgive me, but to save time, we have had debates about colours and categories in the past. There used to be five. They got rid of amber-green and red-amber. There were a lot that were red-amber, so there are a lot that are hiding in amber in that sense. Even of the ones that are amber, many are late and/or over budget. It is not true to say that only the red ones are in trouble. Many of the amber ones are in trouble as well, aren’t they? Be honest.  

Chair: What percentage of the amber ones are you worried about them tipping into red? 

Andy Start: I worry about all programmes tipping into red. Some reds we do recover. You will notice that in the IPA report there is a very good descriptor about how by working with the IPA and taking their recommendations we are moving some back, but it is a small proportion that will tip into red. As I said, red does not mean that we will not deliver. We will deliver, but we will just deliver potentially late or over budget.  

To reiterate, we have 500-odd projects and programmes, and a very small proportion of those are red. Statistically, the majority of programmes are delivered either on time or early and the majority of programmes are delivered on budget or ahead of budget. That is one of the things that really surprised me, coming into the role. I was not expecting that, because that is not the public narrative. 

Q72

Mr Francois: I will ask one last question on this and then hand back. This Committee concluded last year that the UK’s defence procurement system is “broken”. That is what we, as an all-party Committee, concluded. You have inherited what we believe is a broken system. Can you guarantee to the Committee that when we get the IPA annual report next year— probably in July—there will be a much smaller proportion of red programmes than there is now? 

Andy Start: First, I do not recognise the characterisation. It may be your opinion, but it’s not what I have seen, having had the privilege to actually see inside the wire and look at the real data across the full range of 1,750 contracts and 500 programmes. The vast majority are in pretty good shape. I think we have to be pretty proud of what some very hard-working colleagues do to deliver for this nation. They are really committed to doing so, both in industry and in the DE&S. I firmly do not recognise the characterisation. You are entitled to your assessment, but my assessment is not that it is broken—on the contrary. 

Q73

Mr Francois: But in fairness, you have been doing the job a few months; this Committee has been monitoring procurement for years, and that is why we got to that conclusion. It does not relate just to your last few months in office, to be absolutely clear. 

Andy Start: No, and to be fair, I am not looking at my performance; I am looking at the incoming data. So I do not recognise the characterisation. What I am committed to doing is to driving forward integration, agility and

pace within my department, and I am hoping you will see the effects of that over the coming years. 

Q74

Mr Francois: There will be a far smaller proportion of reds next summer, right? 

General Magowan: Yes. I can prove that now. 

Chair: The man in uniform rides to the rescue! 

General Magowan: To back up what Mr Start has just said, Mr Francois, five of the reds are going to amber. That has not been disclosed yet, but that is what is going to happen. And—I will be honest with you—two of the ambers have gone to red. I make that plus three, so at least it is moving in the right direction. 

Q75

Mr Francois: Okay, so by next year—well, in July, General, maybe we’ll have you back and see how you got on. 

General Magowan: That is a September snapshot. 

Charlie Pate: They are quarterly snapshots.

Mr Francois: All right, we will see. Thank you very much. 

Q76

Chair: And we would expect, in a programme as complex as this, that there would be a risk of red at any rate, but the question is how you manage it— or manage those ambers. 

Andy Start: These are our SRO ratings. I do not want to discourage the SROs from being open, honest and transparent. 

Q77

Mr Francois: Sorry, but this is really important. If those are your ratings, you use different ratings from the IPA— 

Chair: No, they are agreed with the IPA, just to be clear. 

Andy Start: If I can help clarify that— 

Q78

Chair: This is absolutely clear. They are agreed between the IPA and your SROs, so neither side can just—you cannot game it is what you are saying. What you are saying, Mr Start, is that you want that culture of honesty so that people are not afraid to say, “There’s a big problem here.” 

Chair: Absolutely, and we are very well apprised of that fact, but thank you for that. 

Q79

Nick Smith: I have a quick question for Mr Williams about project management and costs. What evidence is there that you have a realistic understanding of project costs, given that your independent cost assurance team estimates that project costs could be between £5.2 billion and £14 billion higher? 

David Williams: First, although they operate independently, it is a team working within the Ministry of Defence. It is effectively a judgment about risk—how likely risks are to materialise. As the NAO Report, and indeed our publication, set out, the position of a surplus over the 10 years of around £2.6 billion is our central estimate. We ourselves think the left and right of arc is plus or minus £7 billion, so if everything came good, we would have a larger surplus, but in a reasonable worst-case scenario, where the risks materialise, there would be a deficit. This is not a precise science. It is about the application of judgment and how we layer up risk provision within project costs, and about the contingency that we hold within the equipment plan and at departmental level. Those project costs are informed by the work that CAAS does. 

As part of our improvement work, alongside Mr Start’s initial findings on arrival in DE&S, and partly in response to the Committee’s findings last year, we are running a series of externally led studies and work strands, one of which is about how we improve cost forecasting and cost control. I absolutely accept that there is scope to improve, but I just wanted to give you a sense that these are a complex set of judgments and where in that risk profile you choose to put your central estimate is, in the end, a matter of judgment. 

Q80

Nick Smith: We accept that and we understand the point you make about it being about judgments, but the question is about what evidence you have got. Can you evidence your judgment to back up your point? 

David Williams: Mr Pate, do you want to come in on the detailed evidence? 

comparators available, and it challenges the project teams on their evidence for those risk judgments. That internal tension is incredibly helpful to us in understanding what we need to align for. 

Q81

Nick Smith: I think you said that you have overall contingencies of £3 billion for the Department, but CAAS talks about the estimates being higher, between £5.2 billion and £14 billion. 

Charlie Pate: The £14 billion is its very worst case, and even it says that is unlikely to occur. Again, I come back to what I was saying earlier, if we were to carve out that as a risk that we expect to materialise, we would be taking cuts to the equipment plan, so we are trying to balance here. On the relevant contingency number, that CAAS £5.2 billion is split between the £1.6 billion on the Dreadnought, for which we have the £10 billion contingency agreement with Treasury, and £3.6 billion for the rest of the conventional plan. That is against our £4.3 billion equipment plan contingency. I am sorry—that was lots of numbers. 

The £3.6 billion helps guide us as to what we need to set aside for the equipment plan contingency, so we do not do an absolute like for like, but in the final setting that we take to the Defence Board, we have the CAAS view and we say, “Well look, it is saying £3.6 billion of potential risk. We have over £4 billion of contingency. That seems about right as a judgment.”

Q82

Sir Geoffrey Clifton-Brown: I want to take you back, Mr Pate, to the figures you gave the Committee about the rate of increase to the defence budget. The £2.3 billion figure that you came up with just now, which was the first time I have heard anybody come up with that figure, presumably includes the £14.1 billion extra that you were given in the 2021 financial round for four years. 

Charlie Pate: I think the £2.3 billion I added is for the military support to Ukraine that was announced. 

Q83

Q84

Sir Geoffrey Clifton-Brown: You said 2.3%. 

Charlie Pate: That is part of the 2.3% of GDP that the former Prime Minister talked about in the summer. 

Sir Geoffrey Clifton-Brown: So without that it is back at the original 2%.

Charlie Pate: It is more like 2.1% 

Q85

Sir Geoffrey Clifton-Brown: If you do not get a settlement of more than 2%, you said that you will be in deficit in the first few years. Can you quantify what that means? If you are in deficit in the first few years, how are you going make that surplus up in the last few years? 

Charlie Pate: To be fair, we were talking through a hypothetical scenario where the Government were to say, “The 2% is a ceiling.” Actually, what they have said is that it is a floor. All I was trying to describe is that, given that we are above 2% now, if the Government said it was at 2%—as Mr Francois was suggesting—that would be a budget cut. 

Chair: So we await the statement in the spring. 

Q86

Sir Geoffrey Clifton-Brown: One further point from me. The Report identifies a possible £25 billion in extra costs for CAAS. 

Charlie Pate: That is our risk outside costing. 

Sir Geoffrey Clifton-Brown: Yes, risk outside costs not identified in this plan. How likely is that to occur? If any of that occurs, that starts to throw the whole plan out. 

Charlie Pate: It would. This is project risk management, though, so each project team takes an assessment: as good practice, they set out all the possible risks, and then judge likelihood and impact. That £25 billion is judged less likely to occur, as opposed to the £13 billion that we have provided for as risk inside costing, which is judged more likely to occur. There is potential for those to occur, but equally there is potential for the risks inside costing not to occur, so it does come back to project management and judgment of those risks. 

Q87

Sir Geoffrey Clifton-Brown: Given the very small contingency that you hold, £4.5 billion, if even a small proportion of that £25 billion starts to enter into the plan—you do not think it will, but if it did—that starts to throw the whole costing of the plan out, doesn’t it? 

Charlie Pate: Yes, I accept that, and we would have to look at what is within the plan or return to the Treasury for further funding. But the judgment at this stage—and it is judgment in managing the plan—is not to fund those risks, because to do so, we judge that we would over-fund the plan, and then we would return to the situation that we were in in the early 2010s of habitually underspending as a Department by more than £1 billion a year. We have not done that for the last few years. 

Sir Geoffrey Clifton-Brown: Others will start to unpick inflation, exchange rates and so on—other risks. 

Q88

Mr Francois: Let us look at some external pressures on the budget. We now have inflation at 10.7% this month, I think, and historically, inflation in the defence industry tends to be higher than in the economy generally. How are you going to keep to this plan, given that at the moment, at least, we have inflation at nearly 11%? 

Charlie Pate: There are two sides to the question, if I may. The first is how we calculate, and it is not a simple calculation: it is certainly not as simple as just putting a number into an Excel spreadsheet. We look at a range of different indices—16 or 17, I think, at latest count—that align with our types of expenditure: infrastructure, plant and equipment, clothing, transport. Those all have different UK industry indices, so we plug those in, and different contracts use different rates as well. Using those, we can take a view on what is most likely. 

Charlie Pate: About a third of our foreign exchange expenditure is in euros. You can tell me what the current rate is, but yesterday it was about €1.16, which is significantly above our medium rate that we set. There is some balance there at the moment. At the end of the day, we forward purchase— as I have described before—over three years, but that forward purchase is now becoming more expensive. We would have to go into the equipment plan without further money. For inflation and foreign exchange—which is an element of that inflationary pressure—without additional funding, as General Magowan said earlier, we would have to go into the plan and take reductions. 

Q90

Mr Francois: And take something out. Okay, that is a very clear answer. Let me give you one very quick example: the E-7 Wedgetail. It costs £2.1 billion for five aircraft, renegotiated now to £1.9 billion for three. How on earth is that an efficient decision that contributes to the defence of the UK, given that we have taken the AWACS, which used to do the job, out of service? We have no current capability at all. 

General Magowan: On the capability side, the E-7 is a significant step change from the E-3 capability; we would be really keen to talk to you about its capability in a private session. It is absolutely critical to the spiral development of the F-35 and also FCAS. As you say, we have a capability gap at the moment, but NATO does not. As part of the coalition, we rely on NATO to ensure that that AWACS capability is there. We have got military capability coverage, but we must commit to the E-7; otherwise, we will not be able to integrate the battle space in the way that we need to for the future. 

Q91

Mr Francois: Very quickly, we know that the Russians have used cruise missiles very liberally. If Jens Stoltenberg was right and we went to war, we would lose all our fixed radar stations on the east coast in 24 hours. We have not got an airborne early warning aircraft at the moment; you cannot use Crowsnest, because that is one of your red basket cases, so we need the E-7. We will not even say, now, when the IOC for E-7 is; you are only saying that you will complete the full business case with Boeing by next summer. Why on earth did we take the E-3 out of service before the replacement was available? If we went to war and lost all of those eastcoast radar stations, we would be blind, wouldn’t we?  

General Magowan: No, Mr Francois, because, first, that was a balanced

Chair: Please be quick on it. The danger with this is that it is like a box of Quality Street—there is something for everybody—and I am trying to rein in the Committee’s enthusiasms because we need to keep up with our numbers. 

Q95

Nick Smith: Mr Pate, you talked about your 18 baskets, around inflation, and that was interesting, although I understand that, at the time you made the judgment of what the likely inflation rate would be, the OBR told you that you should consider a rate of 8.7%. Why did you ignore that OBR guidance judgment?  

Charlie Pate: We have not ignored its judgment at all. It provided an assessment, I think in July, from its fiscal sustainability report. Obviously, this report is from March—it closed in March. It is fair to say that the inflationary outlook was very uncertain this time last year, and that is what we were working towards. We did not want to take precipitous decisions on the equipment plan, because that would have meant taking capabilities out. We agreed, internally, that we would continue as we were, noting in the equipment plan—we have noted it very clearly; we haven’t hidden this— that that was, well, not a risk but an issue, as I have described.  

Nick Smith: I was going to make a complimentary comment, Mr Pate, but I will move back to Ajax.  

Mr Francois: Sorry Charlie, there is always next year.  

Charlie Pate: Compliments are acceptable. 

Q96

Nick Smith: Mr Williams, Ajax is really important to our country’s security and to jobs in south Wales. Do you agree with General Dynamics that there is strong progress on Ajax and that the extensive trials are demonstrating the full capability? 

Q98

Nick Smith: Mr Williams, you talked about the 18-month trial that is still in hand and the most recent scrub. Thanks for that. Is the project still deliverable within the terms of the original contract? 

David Williams: Our intention is that it will be deliverable within the firm price that we set for the contract, and we want to hold to the original contract as closely and strongly as we can, but for example the contract requires General Dynamics to integrate the Combat Mk II headset and we do not want it to do that anymore, in part to address the noise issues. I think we need to look at the bare minimum changes to the contract to reflect how the programme needs to move forward. We are engaging in a conversation about what the future milestones will be that allow us to unlock payment to the company. As you know, we have made no payments for around two years on this project thus far. 

Q99

Nick Smith: Thanks for that. It is good that you have a firm price, although I expect that GD will be interested in getting its money as soon as possible. It is probably in all our interests that an accommodation be reached between the Department and the company. Have you got a new operating capability date for Ajax that you can share with us, please? 

David Williams: Not that I can share with you today. That is the date that is being worked through in this process. It will go to Ministers for their agreement, and Ministers will announce it once agreed. I expect that will be very early in the new year.