21
Examination of witnesses
Lord Robertson of Port Ellen and General (Ret'd) Sir Richard Barrons.
Q62 The Chair: Good morning, and welcome to this session of the Industry and Regulators Committee. As you probably know, we are inquiring into the particular relationship between the Government and the defence industry. The meeting is being broadcast on parliamentlive.tv. There will be a transcript taken and you will have a chance to check that in case we have misinterpreted any of the words that you have used.
I formally start by welcoming both Lord Robertson of this parish, if I can say that, and General Sir Richard Barrons, who, together with Fiona Hill, produced the Strategic Defence Review (SDR), which, with what you have both been doing since, started the national dialogue that I think you wanted to take place. Maybe you could both introduce yourselves and then we will start with questions. I am Dianne Hayter, and I will introduce my colleagues as they put questions to you.
Lord Robertson of Port Ellen: Thank you, Madam Chair. I am Lord Robertson of Port Ellen. Once upon a time, I was Secretary of State for Defence; then I was Secretary-General of NATO. I was asked by the then incoming Prime Minister, now outgoing Prime Minister, to be the lead reviewer of the three people who would do the external review of UK defence.
We produced our report on 2 June last year. We were told at that point that our job was over. I think it is worth emphasising that point: at that stage, we were told we were done, finished and had no further role to play inside the Ministry of Defence. Therefore, there is a certain limitation to what we can tell you. Since then, we have had one major session at the Ministry of Defence with the officials in charge of implementing the defence review. We went over the 62 recommendations we made in some detail, all of which were accepted by the Government at that time, but that was the only point at which we received any feedback on what we said.
Subsequent to that, however, another committee of this House, the International Relations and Defence Committee, which I chair, had heard from the Chief of the Defence Staff in order to ascertain from him his view about the implementation of the recommendations. We also had the National Armaments Director, Rupert Pearce, along with his senior staff, to give us a full briefing about how they see the implementation of the recommendations we made. It may be that your committee will want to see the transcript of that particular interrogation. I think it will help you with the work you are doing on the implementation of the supply chain aspects of the review itself.
The Chair: You should know that our team has already supplied us with exactly that transcript; they are ahead of you on that, but thank you. Sir Richard, would you like to introduce yourself?
General (Ret'd) Sir Richard Barrons: I am General Sir Richard Barrons. I am an artillery officer. I joined the Army in 1977 and concluded my time in uniform as commander of Joint Forces Command, one of the six chiefs, in 2016, so I have been in the afterlife now for 10 years. I work in defence and security, run Universal Defence & Security Solutions, and I am co‑chair of TheCityUK Defence and Resilience Group. Of the three of us who led the review, I was the military voice.
Q63 The Chair: Thank you for that. As you know, we have really taken up one part of your defence review which called for the creation of a new partnership between the Government and the defence industry. A lot has happened since you recommended that, not least the change of Secretary of State and the publication of the Defence Investment Plan (DIP). Today, we are not looking at the quantum of funding but very much the relationship that you recommended. We heard from some trade bodies that there has been progress in building that new relationship, but, given that you both know the MoD and the industry very well, we are interested in hearing from you about the extent to which you think that relationship has already begun to develop, and what further steps you think the Government could take to fulfil the recommendation you made.
Lord Robertson of Port Ellen: It is an important dimension of what we recommended. I should say that the process that led to the SDR as a whole involved various propositions being put out at the beginning of the process to the wider defence and external community, with a series of questions that, in many ways like you, ask for evidence. We got some 9,000 submissions. We had to use artificial intelligence to sift them, otherwise we would still be reading them today. We used that and then set up a series of panels. We had a committee of experts underneath us: a NATO expert; an industry expert; a tech expert, Grace Cassy, who appeared before this committee; and Sir Jeremy Quin, who was one of the previous Government’s defence procurement Ministers. We had a senior Treasury official as well as part of that group.
We then sent out to various experts each of the propositions. The acquisition side of this was hugely important. We were determined to get the right answer to the way in which procurement had been done previously where there was a six-year period between an idea and the contract being placed. We had to address that. We also had to address the perennial view of the Treasury, which is that defence is a waste of money, it just goes into a black hole, is eaten up and wasted. We had to tackle all of that. We had each of these groups looking at all the information we had received to get a draft and produce the recommendations from the report.
We considered the procurement side. The innovation and industry chapter, which was 4.2 of the Strategic Defence Review, is hugely important in getting the right equipment at the right time and at the right price in order that the fielded forces would have it on time. We believed we had produced a series of recommendations which, if they were carried out in full, would lead to a wholesale reorganisation of the procurement process and eliminate a lot of the waste that had characterised it in the past. Richard may want to give more detail.
General (Ret'd) Sir Richard Barrons: To pick it up at that point, at the heart of the review is an extraordinary pivot away from the way things worked in the post-Cold War era to get the Armed Forces fit for war in the 21st century and the digital age. This is the biggest transformation of how you build and operate Armed Forces for 150 years. It will work only if there is the same step change in acquisition. At the heart of this partnership is the idea that the Armed Forces must constantly evolve, so never really finish, at the speed of innovation, most of which will come from the private sector. An acquisition organisation—I use this metaphorically—used to buy a battleship every 30 years in a very steady cycle. Someone would spend years, even decades, writing a specification that industry would read, argue about, compete against and eventually come to a decision on. There would be a contract and they would make it; then they would find it did not work and then make it again. That really does not work.
As to the review, the way the services responded in articulating that demand signal for that transformation is impressive, so where defence needs to go is pretty clear. The question now is: how do you get there? An element of that is: is there enough money to do it quickly enough? We are not talking about that this morning. Now we are talking about the new industrial partnership. What that requires, first, is a new organisation to draw on private sector innovation. The MoD is creating UK Defence Innovation. It still has not appointed the director-general. It is sitting on a budget of about £400 million which it can use. That is going into the right place, but it has not got there yet and a year has passed.
Secondly, it needs a different and tiered approach to acquisitions. This is in the review. The National Armaments Director absolutely gets it, but because it has taken a year to get the Defence Investment Plan out, almost none of those changes has yet been enacted. So we are not yet in a place where the National Armaments Director has had the scope, the programme, in order to refashion the acquisition organisation to attach to innovation at the speed it is coming.
There is a third and often forgotten dimension to this, which is that in the world we live in this will work only if acquisition is attached to private capital. There are some allergies to this in the body politic. There is no shortage of money, but as for the conversation between the MoD and the Treasury—and the City—about how private capital does those things that private capital will do well, it is hard to call it even embryonic, but it is coming. In sum, it has to be completely different or it will fail. The thinking is quite good; the action so far is pretty poor.
The Chair: We will come back to the question of private capital perhaps a bit later.
Q64 Lord Best: You explained that the nature of warfare has changed dramatically, and the dependence now is on new technologies and requirements such as drones and anti-drone capabilities. Tell us a bit more about the changes to procurement processes and contracts that will deliver in this new world where speed is everything and the 30-year battleship is no longer the issue. What are those changes to procurement processes and contracts that will make a real difference?
General (Ret'd) Sir Richard Barrons: Let me start by being a bit Clausewitzian. I am going to argue that the nature of war as a human phenomenon has not changed at all. We are still dealing with this brutal and feral thing. What we are talking about is the character of it. How it is fought is changing so dramatically. You described the drone enthusiasm. It has become clear that at the heart of that change are three core ideas. First, you build the Armed Forces around what some will call a digital killweb architecture. In the review, it is called a digital targeting web, but essentially it networks every form of sensor, satellite, aircraft, ships, submarine, tank and aircraft, mobile phone and database. Everything that lets you understand the world is networked into a database which will be in secure cloud, and the volume and speed of that data is such that it has to be managed by AI. The output of that data activity is to identify what needs to be done, or could be done, and to specifically allocate targets ranked in priority to every form of weapon that you have, kinetic or not, so it goes bang or it is cyber. You are watching that network today playing out over Iran. It allowed the US to hit Iran a thousand times a day.
All the technology that makes that work—the sensors, the secure cloud and the AI—are developed in the private sector. The weapons systems are a bit “nichey”, but the network is from the private sector. This thing evolves every single day. In order to build that architecture, you need a relationship where you have the operators—the people doing the fighting or thinking about it—sitting alongside the technical experts. They are co-developing this, and the reach back into industry in some cases, as you see in Ukraine, is measured in hours, sometimes days and occasionally weeks. That partnership which needs to be established—there are plenty of examples both in the UK and Ukraine of how that works—makes some people uncomfortable, because how do you inject competition into that? How do you constantly refresh that arrangement so that you know you are getting the best?
There is another layer down there. Those sensors and effectors, which in an analogue way used to be the ships, tanks and aircraft with people on them that we remember, are evolving rapidly into still some of those. It is really clear that there is no such thing as a silver bullet. The drone is a word that has become synonymous with autonomous and uncrewed capability, but it works as part of a wrap with other things. We are talking about evolution, not a complete change, but that crewed, uncrewed and increasingly autonomous mix relies on artificial intelligence, autonomy and robotics, all of which come from the private sector. The Google driverless car—there are other available technologies—is the same technology that will allow ships, things that float, go under the water, fly, or drive, to collaborate and move autonomously. It all comes from the private sector.
The third element is that you have some high-end stuff—cruise and ballistic missiles, which are autonomous weapons. They are very specialist, really expensive and take ages to make. They partner with a very large element of low-end weapons, which is what most people think a drone is. A long-range drone with a range of 2,000 kilometres and last-mile artificial intelligence so it finds the target is still quite sophisticated, but it is much cheaper and you can mass produce them. We are talking about a partnership that allows you constantly to evolve the digital killweb architecture and this crewed and uncrewed autonomous mix in high-low variety at the speed of innovation. You could not write that down today and specify it; you have to sit with the industry and co-develop it, remembering that this is a global arms race so you are going to develop it at the speed of benchmarks set by other powers. That will cause you to go faster than you are comfortable with.
Lord Robertson of Port Ellen: I have heard all this before from Richard and it is very impressive, but inside the Ministry of Defence there is a section devoted to helping Ukraine. It can move very quickly. It has to move very quickly because the Ukrainian demands are very quick indeed, so it can make mistakes; it can buy off the shelf; it can move very quickly indeed. In a war, you have urgent operational requirements, UORs. Again, things have to be done. What you have to do in normal circumstances is build in the whole question of competition that is involved in that. Somehow, you have to get between the old system and the new system, which demands speed and effectiveness.
Lord Best: It is not easy.
Q65 Baroness Valentine: I am diving even further into real-time innovation. To ask you about some specific examples, what steps could the MoD take to spread the good practice we have heard about, such as in Commercial X and Taskforce Kindred, across the whole range of its procurement activity? To what extent do the Government need to accept greater levels of risk and uncertainty in their procurement of new capabilities? I know you already touched on some of this, but perhaps you can take some specifics from that. Is there anything you would like to say on that question?
I have a supplementary for General Barrons. You mentioned TheCityUK. That looks both to investors and the rest of the country. I do not think we have a question about how supportive the regions, the new combined authorities and nations are to investment in defence. I would be interested in a response to that as well.
General (Ret'd) Sir Richard Barrons: Taskforce Kindred is a body established by the Ministry of Defence to take what is currently about £3.5 billion a year of support that the UK gives to Ukraine for its fighting and turn it into usable capability. At the heart of it is a process, which I am sure the MoD would explain better than I can, by which it has a pile of money and it has the Ukrainians with a problem. It defines that problem to industry, industry then comes up with solutions as quickly as possible, and the best ones are bought and delivered really quickly. This means that the acquisition of, say, a shell or cheap drone happens at the speed of what is on the market, or what can be made really quickly. This is not a new idea. The Army has something called Task Force RAPSTONE which seeks to do the same. The Royal Air Force has a Rapid Capabilities Office and the Navy has an equivalent. Everybody is absolutely clear that there are some things, generally medium to low-end capability, where it is not complicated, so do not make it complicated. If you have money, go and buy it, and do not expect everything to last for ever, so cycle it through.
However, there are two challenges to the supposition that everything should be bought that way. If you are in the business of buying the new nuclear deterrent, the Dreadnought boats, that will not work that way. This is a multiyear, almost generational programme, where you will have an industrial partner. It is pretty niche and, frankly, you will make it in the way it is made now. I am trying not to say “cost-plus contract”, but it will feel like that. You have to manage the risk and efficiency in a different way.
The second one, which is often forgotten, is that the war in Ukraine is a big war at scale and it consumes a lot of stuff. Taskforce Kindred can go to industry, buy thousands of drones or shells, send them to Ukraine and they will be consumed. NATO is about deterrence. What NATO will never do is fill warehouses with lots and lots of stuff that goes out of date the moment you shut the door behind it. In a deterrence model, you need to work up prototypes for things like drones, so you know you are on the front edge of technology, and then know how, apart from your front-line stocks, you can get it made quickly in a crisis, which is the merit of a thing like a drone or shell. You cannot do that with nuclear submarines. The thinking does not directly move across.
When we started the review, we found that, for any MoD project valued at more than £20 million, the time between having an idea and wanting this thing and a contract being signed was six and a half years. That reflects a world that has passed. The challenge for the National Armaments Director is to decide where the things are that you can work with industry and can be done quickly, such as buying a commodity, and how to manage really high-end things that take years; submarines, ships and the Global Combat Air Programme would be in that bracket. Then, in the middle, there are helicopters, armoured vehicles and that sort of thing, which need to be built sensibly but not in a 30-year cycle. He has that segmentation. He just needs to take the book of rules fashioned over decades, throw it away and produce the rules for war in the 21st century. He absolutely knows how to do that; he just now needs to do it.
On your “money” point, TheCityUK, the City trade association, listened to what was in the Strategic Defence Review and realised two important things. One is that it is now on the pitch. With war as a whole-of-society endeavour and a battle of wills, the City is not a bystander; it is a target and an enabler. It thinks it has two parts to play here. One is in resetting its own resilience, since that is its job, in its businesses, investments and supply chains. It takes that really seriously, because the Government will not do that for them. Secondly, it has been the case for 2,000 years that the Government here eventually, when they want a war paid for, go to the City for the money. We have interfered with that in recent decades by just using the taxpayer.
Now the City is back on the pitch and it understands two things. One is that there is a lot of money that wants to do this, and it likes the things that are common: logistics, infrastructure and digital architecture. It will get into innovation, but there is a different risk profile there. More than that, it understands prosperity. One of the core ideas in the review is that, if the UK seizes on how to do war in the 21st century well with this transformation, it has all the intellectual capital and engineering brilliance to make things that it needs, but they are so good our allies will buy them. Therefore, there is a direct link in principle between this transformation and export-led prosperity. The City understands that.
There are also the regions. We had really interesting conversations with regional representatives such as Durham University, and in Scotland and the West Country. They understand that they have a role to play in fuelling up defence in their own interests, but also in their commercial interests. The challenge is that, in the absence of the Defence Investment Plan, there was no demand signal you could get behind. We are still waiting for the articulation of that relationship between acquisition and private sector capital and industry. The National Armaments Director has it in his head; he just needs to deliver it now.
In addition, in wider government, how do we bring private capital to fuel up defence—I must make clear that there are two bits of defence we are talking about here—in ways that reflect a commercial interest, taxpayers’ interests and efficient delivery? The most annoying thing here is that people are stuck on things like the Annington Homes challenge, when the City is offering new commercial vehicles. They will take all the delivery risks because they are confident they can do it better and it can be done off balance sheet, but this is just a new way of doing business. To get that conversation going seems to be really hard.
We talk about the Defence Investment Plan. That was the stuff that made the cut. An awful lot of defence-related requirements were just not even remotely affordable when we did the review. To take the £60 billion to £80 billion hole in infrastructure, if you want an integrated missile defence of the UK, an iron dome, that money is absolutely outwith the Defence Investment Plan’s ambition. I would say the same for things like digital architecture. The City can not only resolve the little gap in the DIP; properly enabled, it can tackle the other half of the iceberg that the DIP does not even get close to. When it does that, it will fuel prosperity. If that is the opportunity, my view is that the Government should now seize it having exhausted all other options.
Baroness Valentine: I apologise. I think we have wandered into Baroness Drake’s subject. Do you have any insight into whether the combined authorities or nations are supportive of this?
General (Ret'd) Sir Richard Barrons: Anecdotally, on the grounds of the small things, yes, absolutely. Everyone sees that the revitalisation and transformation of UK defence is important to them because they are citizens and they are on the pitch, too, but it is a major growth opportunity.
Baroness Valentine: Is there anything more on Commercial X and how the broader MoD can learn from what is going on there? Lord Robertson, I do not know whether that is relevant.
Lord Robertson of Port Ellen: I think it is. As Richard clearly said, there is an appetite in the commercial sector to link up both on the innovative side and the normal procurement side, as well as on those elements that have not been covered by either the strategic defence review or the defence investment plan—the big issues which, if backed by government as collateral, can attract a lot of private business.
It should be said that the concept of risk is an interesting one. Risk is used a lot in the Ministry of Defence. If you walk into the street and cross the road, you are risking your life at that point. That is a common view about risk. Risk in Ministry of Defence terms is basically stuff that is unfunded. You take a chance on it. It goes into the programme and there is a risk involved in that, but the reason why the system has become so bureaucratic over the years is that layers and layers of assurance have been built in. Every time something goes wrong and the National Audit Office writes a report, another level of assurance goes into the process. That is why you have this incredible six-year gap taking place in procurement. We need to be much more agile and change the culture of risk aversion and bureaucracy which has bedevilled the whole of procurement for so long.
The Chair: We might come back to pursue that in a moment.
Q66 Baroness Drake: My questions are on investment in the defence sector. Sir Richard, you anticipated some of my questions in previous answers. I will be a little more specific. Listening to the evidence we have received, there is a debate about the availability of capital—you talked about the stasis, still, of the embryonic discussions between the Treasury and the City—and the visibility of opportunities and the shortage of confidence to invest in the market itself in the UK. You are quoted as saying that the Defence Investment Plan has decent transformative elements but it is not going to crack the issue. If we could stay with that point, where and how does the defence investment plan fail to provide sufficient demand signals to give investors that confidence? What is needed in that defence plan to deliver that confidence and get investment flowing? In particular, could you pick up the point about SMEs? The evidence we received is that they are a critical part of the supply chain. In the scale-up period we use their innovative potential. Could you pick up that in your comments?
General (Ret’d) Sir Richard Barrons: Let me start with the Defence Investment Plan. The reason it is going to fail is not because it does not articulate the right path forward. It does. It captures the review very well, and there are some early wins in there. The Defence Investment Plan will not work because it will take more than 10 years to get the Armed Forces to a minimum state of readiness, when our own Prime Minister has said Russia may attack NATO five years before that. The strategic flaw that we are all having to manage is that our analysis of the military risk the country faces suggests that defence needs to be sufficiently restored and transformed to play its part in NATO-wide deterrence against Russia by no later than 2030. The current funding plan, which essentially means defence goes backwards for two years—there is no new money—then proceeds really slowly in this Parliament; and then there is an as yet insufficiently quantified promise of more money in the next Parliament that gets defence ready for the fight five years after it is likely to have started. That strikes me as a questionable strategy.
Lord Robertson of Port Ellen: To put it mildly.
General (Ret'd) Sir Richard Barrons: The second reason, if we focus more on the demand signal, is that, now we have a Defence Investment Plan, the MoD has broadly set out the things it is going to buy over time with some money attached against it. What it has yet to do is tell industry and the City which bits of that it wants to put to private investment. My read of this, since I have a foot in both camps, is that the MoD has identified some things that it is thinking about putting out to private capital, but in the opinion of the outside world it is too small, it is taking too long to get there, and it just does not reflect the ambition of the peril that we face. Let us say the DIP gap over the first four years—and we are just talking about the DIP at this point—is still £15 billion. As far as the City is concerned, if you wanted £50 billion over four years, of course that can be found. The question is: what is it for, and on what terms?
The next step is for the MoD—and this is very firmly in the National Armaments Director’s mind, as I understand it—to go to the City and say, “These are the things we might start with, but what else could you do?” In things like major infrastructure refurbishment, the City has more money and much greater expertise in putting that right than the MoD is capable of mustering, for all sorts of good reasons. Until that demand signal is set out and there is a deal on what it is, the City does not know where it is welcome. It wants a conversation with the MoD and the Treasury about how it can be far more welcome than it currently anticipates.
For many SMEs, last year was a disaster because we did not have a National Armaments Director and the DIP was not out. They saw the promise of the SDR, and they knew the thing they were trying to make, whether it was software or hardware, was SDR compliant because they read the document, but they could not get a contract and they could not see their way to a contract. Then in many cases they were told it might be four years away. Any small business, as you understand really well, cannot sit not making any money for four years. Some—I thought this was a tragedy—such as Reaction Engines, which was a hypersonic venture, went out of business. Others could not get money out of the MoD, so they got money out of America. In the case of many businesses, they saw where the big spend is, which is in Germany and Poland, and they have gone there. That depleted our defence industrial base, and it means that when we want those things in four years’ time—I think that is still too late—we will have to import them. I thought that was deeply regrettable.
Most of the core innovation in the things that we talked about, such as artificial intelligence and how you make a drone that swarms and becomes autonomous, is sitting in small companies. They need to be attached to public and private money in a way that allows them to partner with the MoD and with the primes, which will remain really important players here, otherwise we will pass on the innovation that, frankly, you only get with a hungry SME. Everyone understands that, but the machinery to make it happen is currently insufficiently funded and the money seems to be too far away. Of course, businesses will go where the money is.
Baroness Drake: Would you say, therefore, that another consequence of that is that the opportunity to build more of the supply chain in the UK, particularly the innovative part of the supply chain, is being lost?
General (Ret'd) Sir Richard Barrons: The requirement to have some parts of a sovereign supply chain is a mixed record. The MoD has issued to a number of companies studies on the munitions factories that it wants. It wants to build six of them. This is really good, because you need energetics, drones and shells that you can make and be sure that you can use and get hold of when you need them in a crisis. The problem is that if you are going to build a munitions factory you need to know that somebody will buy the stuff, and the first challenge is getting the MoD to commit to an offtake from a new munitions factory. Secondly, that offtake, since it is this deterrence model that we talked about, is unlikely to satisfy the costs of the investment in building the factory. The thing that has to happen is for the UK, with its allies, to agree how a number of countries will commit to an offtake from a factory based in the UK, and there will be trade-offs in this. If the MoD does that and produces, say, 15 nations that all want the same thing and the factory is built in the UK, industry and the City will see a return. Until we join that up, working out where you might want a munitions factory and what it might do is academic unless there is a business case attached to it, and we are not there yet.
Q67 Lord Camoys: Given that I am new to this committee and was not here at the start of the inquiry, I declare in relation to the inquiry that I worked for the Foreign, Commonwealth and Development Office from 2002 to 2009. I also have shareholdings in Rolls-Royce plc, Rheinmetall AG and Palantir, all of which have business activities in the defence sector. Thank you very much for giving evidence today.
My question is about changing the culture at the Ministry of Defence, in particular in relation to the country’s needs to deliver at pace. I am interested in two things. Sir Richard, do you think a cultural shift is happening at the MoD to enable this? Conversely, has there been any pushback at the MoD to the need for change in mindset? I am conscious you have not been in uniform for 10 years, but I am very interested in what you in particular see on this. Secondly, Lord Robertson, what role can and should our incoming new Prime Minister play to enable this cultural shift as well as the centre of government around him?
General (Ret'd) Sir Richard Barrons: I do not work in the MoD. Lord Robertson and I were taken prisoner by it for about nine months and very much enjoyed the experience, and then we were essentially shown the door—mission accomplished. We are both on the Embankment, shouting at this building now, “Where is our review?” What I see—and I maintain close contacts with people who work in the MoD, with the industry that supports it and many people who observe it—is a massive struggle to make that culture change happen. First, it requires the senior leaders—and they absolutely understand this—to insist that these changes are made, and that starts at the level of politics, because the senior official and military leadership of the MoD are essentially going to have to smash apart ways of working that have been developed over decades and install new ones. That will make a number of people very uncomfortable and some of them very significantly unemployed because they will need fewer people. This is before you introduce the essential role that AI will play in restructuring much of our public service.
The frustration is that, first, within the MoD a culture is entrenched that produces ever more polished admirations of a problem without coming to grips with the solutions. Those solutions do not appear because either there is not any money or they require really difficult change; you are going to smash organisations apart. In the DIP, there is some money. With private capital, there would be more money, so we can resolve that, but the issue is the smashing apart of the organisation.
One achievement of the review that we were particularly proud of and fits with defence reform was the creation of the integrated force. It had taken since 1959 to get to the point where the Chief of the Defence Staff was the commanding officer, essentially, of the Armed Forces and where the service chiefs report to him. In the new Military Strategic Headquarters set-up, you now have a machine by design for top-down decisions on balanced investment and what is going to happen. It is still building that machine. The point of that machine is that it removes the sense that everybody in the MoD above the rank of lance corporal and equivalent has a veto on any decision on anything. In other words, “This is to be done. Do it”, in a wartime way. It knows it has to do that. Without the DIP, it did not really have the focus for it. It has a DIP. It is not a brilliant answer, but it is an answer. Now it needs to get on with the organisational change, and that will be in the way the MoD works, and in the way specific things like the acquisition organisation Defence Equipment & Support works. In my view—this will be shared by many people who do not work in the MoD—if they have not done that within a year, if they have not shown visible signs of this reorganisation, we have got the senior leadership wrong.
Lord Camoys: That is very sobering indeed.
Lord Robertson of Port Ellen: It is sobering. In the short term, given the nature of the threat, inevitably people will have to buy off the shelf and buy what is available rather than promoting the local industry and the SMEs, which eventually will be crucially important for the supply chain. That is why they have already had to take decisions about buying missiles; they need them urgently and they cannot be produced very quickly. You asked about the position of the Government. The Government are about to change. It looks as if we will have a new Prime Minister on Monday, barring something dramatic happening. The putative Prime Minister, Andy Burnham, wrote an article in the Times last week in which he said, “It is right that we rebuild our hard power for a new era that is very different to the one in which much of our current military equipment was first designed”. That is an interesting view. He also went on to say, “I want to be more open about how and where defence spending is spent. Our increased investment must be combined with an increase in scrutiny”. That is an early stage in his political development, and it is encouraging if that is going to be the way in which he will treat the whole question about defence procurement.
The Chair: Thank you very much. I do not know if any of you has seen “Dear England”. Gareth Southgate brought in a woman, as it happened, who was an industrial psychologist. I am not sure whether the MoD is doing the same, but it might be a useful injection.
Q68 Lord Fuller: I prepared a question about “always on” capacity and sustainability. I think you answered it with offtake, finance and platforms, so I will take a different tack. Sir Richard, you spoke very cogently about the tension not just between the matériel but the software, the interoperability and all that sort of digital infrastructure. I do not think we have heard evidence thus far about how we are going to ensure we have sovereign capacity and capability in this targeting so that we have our own arms around the way in which we use the sensors and task weapons. How are we going to make sure that the UK maintains its place at the table and we do not just outsource it to the big seven tech firms in other jurisdictions that may be less reliable?
General (Ret'd) Sir Richard Barrons: That degree of sovereign control is essential, but it needs to discriminate. There is quite a lot in that digital killweb that I described of sensors communicating with each other where in effect they are doing the same thing. It is going to be a standard form of networked AI-based capability. There is going to be a level of common technology, and you need it to be interoperable with your allies. We should not worry about everything.
However, there are some things that we should really worry about. The first is that in the operation of a digital targeting web you need the space to consider and take sovereign decisions privately. There will be some areas that are not shared with allies and that should be inaccessible to them. That is not actually anything new. What we are talking about is how you do that in the AI era. Some of that can be accomplished by having common AI tools that operate behind a firewall, so they are isolated essentially, or possibly AI tools that have been developed nationally. They may therefore be less good, but they might be good enough. But we must be absolutely certain that it is possible to control your military operations in ways that neither your enemies nor necessarily your allies are privy to until you are ready to tell them what you are doing or what you have done.
Another dimension to this gets less traction. When we think about AI—and a lot of this is about artificial intelligence—and we understand the potential evolution of AI, it is best compared to the evolution of the aircraft. If you go back to the First World War and you had canvas and string aeroplanes wheezing around over the battlefield, that is pretty much where AI is now. You might conceive it as an app that is going to get ever better. In 1914, no one ever foresaw the F35 and where you would be 80 to 100 years later. In thinking about AI, we have to assume that, quite quickly, it will absolutely outgrow the capability of the human to keep up with it, understand it and possibly control it. That is why a lot of people who make AI are profoundly disturbed that they are making a thing that could get beyond us and do harm in all sorts of unanticipated ways.
Another reason for maintaining sovereign control is: are you sufficiently in control to stop the AI outgrowing your human controls on it? There is an element of this that is: as long as we subscribe to things like the laws of armed conflict—and we do—and international law, if you are going to have increasingly an AI-enabled system, which is the only way you will be effective on the battlefield, how do you know that that is compliant with your values? One role for AI is going to be—and some of these programmes are in development now—where an AI sits on the AI, essentially auditing it as it goes for compliance with our laws and values, producing an audit trail. We are going to use AI to police AI. This does get really quite complicated.
Lord Fuller: Lord Robertson, as someone who has been accountable for defence in the UK and in NATO, does this give you the collywobbles? How do you get into the OODA (Observe, Orient, Decide, Act) loop there?
Lord Robertson of Port Ellen: It certainly worries me as a human being, as an individual, that we might be stretching ourselves into territory that we have no real control over, but at least we are warned about it. We are aware of the risks, problems and dangers. Therefore, surely we are capable. We have the skills and the technical knowledge to be able somehow to predict where it is going and how to control it. If it gets out of control, I would be seriously worried for my grandchildren, certainly.
Lord Fuller: You anticipate there might be political guard-rails: “Thus far and no further”. I cannot think of the mechanics of how we might draw back from the cliff edge if AI gets carried away.
Lord Robertson of Port Ellen: That is into the arena of speculation. I do not know. We are capable as a human society of being able to recognise what the dangers are and producing the guard-rails that might help us in future. If we do not, the future is particularly difficult to see.
The Chair: Thank you. We will have to come back to that legal question. We have had some interesting submissions about how much international law affects uncrewed weapons.
Q69 Baroness Carberry of Muswell Hill: My question is about the supply chain, industrial capacity and sovereign capability. Both of you have gone some way to answering this question, but I want to press a bit further. How can the UK go about deciding, on the one hand, where focus needs to be on building sovereign capability, about which we have heard a lot in recent weeks, and, on the other hand, where we realistically are going to still need to look to allies and partners in other countries? What is the process for identifying where our focus now needs to be and where do you think we should end up?
Lord Robertson of Port Ellen: It is a question of political judgment about how much sovereign capability you have and how much you are going to share. The strategic defence review was based, as we were told, on NATO first, and therefore the basis of our national security is common security. Therefore, the nature of NATO is the interoperability of the forces. That is what gives it enormous strength and resilience against any potential enemy. A balance has to be struck between what are sovereign capabilities, because there are domestic industries involved, and the shared capabilities that we can have.
Our experience of multinational capability building has not been a good one. When I became Defence Secretary in 1997, my deputy was Lord Gilbert. He had been the deputy to Fred Mulley 18 years before, when Labour was last in power, and there were two projects on his desk 18 years before still on his desk in 1997: the Eurofighter Typhoon and the Merlin helicopter. We dealt with them and we got them to deal with that. The experience of multinational operations is not a great one. Maybe we have to become more sophisticated in the future. GCAP, a joint programme for the sixth-generation fighter jet that might be crewed or uncrewed in the future, is based in Italy, Japan and the United Kingdom. Other countries are desperate to join that programme, and it has to be a balance as to how much you can afford to share it to make sure that at the end of the day you get the product on time and on budget.
General (Ret'd) Sir Richard Barrons: It is a really complicated question, and there are no cheap answers, which is why many people shy away from trying to answer it. The first part, when we talk about sovereign capability, is that we have to revisit the resilience of the UK under NATO Article 3 and its other obligations. If the country, running on the fumes of just-in-time and globalisation from the post-Cold War era, cannot take a modest blow—and that includes not just the physical preparations of the population but the cognitive preparation of the population for a day without water, power or telecoms—everything you might do in the military is for naught because you have given up on day one. We called for a whole-of-society discussion on resilience, and it is embryonic—that is a generous term.
Secondly, we made some commitments in the SDR to NATO based on what NATO asked the UK to do. They are: for the Navy, the Atlantic Bastion; for the Army, the strategic reserve corps, the thing that NATO keeps saying it wants more than anything else and the thing that is pretty much at the back of the queue; and an Air Force that makes, frankly, the most impressive European contribution to the NATO air and space component in Europe.
We know what we have committed to doing, and the requirement now is to deliver those three capabilities at the level not just where they can fight tonight and tomorrow but where they can endure. Some of that is about investing in stocks. During the post-Cold War, most nations held about three months’ worth of ammunition at wartime rates, because they knew they could consume that ammunition and then industry will kick in. In the intervening 35 years, that entire system collapsed. The stock levels were run down. They were expensive. It was days and maybe a week in some cases, hours in one or two other cases. Industry, in the absence of orders, is not there any more. We have to rebuild our stock levels and then understand the manufacturing capacity to keep up, which is why we come back to munitions factories. I would think that the amount of money that is currently allocated to that problem in the defence budget is about a quarter of the true cost of doing that. We are going to have to get there with help.
Once we fulfil our commitments, then, as Lord Robertson said, it is a question of edge. Right now, we are very focused on the Russian problem as part of a NATO-wide issue. The clock is owned by Russia, and we have talked about 2030. The review is really clear that the medium-term tech challenge was set by China. It is not so much what China intends to do or does; it is the proliferation of Chinese technology, particularly AI and missile technology, that will flood other parts of the world because it will be good and cheap. The investment case in the Global Combat Air Programme, for example, means that we can be sure that we, with our extremely good aerospace defence industry, are investing in a technological edge that will deter into the 2030s, 2040s and 2050s. and that is an important sovereign act. It means that we are not reliant on anybody else. Other allies, like the US, do not really share this technology so much.
The final aspect—and we have talked about it—is that in all circumstances the country must be able to exercise command and control of its country and its Armed Forces, and that is about resilient data architecture. How many data centres in this country on MoD land are underground? Of the 64 data centres, none. You watched Iran hit Amazon Web Services in the UAE. There are some very basic things to be done so that you can maintain command and control, operate your digital targeting web, communicate with your population, and know that that does not require the co-operation of any ally and will withstand the interference of your opponents. These are thoughts no one has had for 30 years, and a relatively small part of it is for the Ministry of Defence. An awful lot of it is a whole-of-government and whole-of-society thing. I do not see much of that.
Lord Robertson of Port Ellen: Richard mentioned NATO Article 3. Article 5 is that an attack on one country is to be seen as an attack on all. Article 4 is we think we might be attacked and therefore we are calling on allies to help. Article 3 says all countries must look at their own national defence as part of collective defence. We never had to bother with that before. We are an island nation and surrounded by water. That protection has now gone. Undersea cables, undersea pipelines and long-range missiles mean that we are as much a target as anybody else. Therefore, Article 3 comes into play for the United Kingdom in a way that it did not before.
Baroness Carberry of Muswell Hill: Thank you both for helping us understand the complexity that lies behind all these decisions. I will ask a simple question, bearing in mind what you said about how this is not straightforward. I do not want to appear naive. We touched earlier on SMEs. When decisions are being made about targeting procurement, in the hierarchy of imperatives where do UK-based SMEs that are suppliers in the defence industry sit? What weight is given to the need to nurture those companies and the jobs and skills that they provide into the economy?
Lord Robertson of Port Ellen: They should be very high up in the agenda. We see that the supply chain is crucially important. Therefore, encouraging it was one of the priorities in the defence review. That is why we proposed the creation of the two new organisations, the Defence Innovation centre and the rest of it. It is very much part of what we need to do to make sure that we are properly defended.
General (Ret'd) Sir Richard Barrons: UK Defence Innovation with a budget of £400 million apparently is the core magnet for SME innovation. It just needs a director-general and to get going. That is a win. Organisations like Kindred, which we talked about, and RAPSTONE provide a framework where the services can connect to industry for things that are available now. In order for that to work, the major thing that needs to change is they need some money. They have exhausted industry’s capacity and enthusiasm for contributing to experimentation at the exclusive expense of industry, at the end of which there is no sale or there is a competition, or there is a prospect of a sale in four years.
In fuelling up these task forces and frameworks with money, it is an example from abroad, but Helsing, which is a now multi-billion euro company, was fuelled up by €200 million from the German Government. That is the sort of seeding that takes a brilliant start-up and gives it the muscle to become a big company. We have not been able to afford to do that. Then there is bureaucracy. No SME can manage the current MoD’s expectations on the billion forms you have to fill in to compete in a way that BAE Systems does an extremely expert job in. One part of acquisition reform is to attach money to programmes and less bureaucracy, and then we are away. In the absence of that, they will go abroad.
The Chair: My goodness. We heard of a 6,000-page application form, which seemed a little OTT.
Q70 Baroness Harding of Winscombe: We heard from other witnesses that the MoD’s risk appetite needs to change. We specifically heard that it needs to move from risk avoidance to risk mitigation. Appreciating that you are on the Embankment observing this, I would be very interested in your view on whether the MoD is changing its risk appetite and what the barriers are to accelerating that change.
General (Ret'd) Sir Richard Barrons: When we say the MoD, this is a good moment to be a little less homogeneous. From the perspective of the service chiefs, as I know them and the way that they operate, they know they are in this world and that they have to have money, which allows them to experiment in the knowledge that not everything will work and some things will only work for a short period. The Army’s 20-40-40 evolution—20% crewed systems, 40% attritable, 40% consumable—is an extraordinarily capable exposition of how a land force fights in the 21st century, but it needs to experiment and it needs money to experiment, and not all of it will work.
The problem, setting aside that it does not have the money, is that it will be spending public sector money and there is an entire bureaucracy that wants to know what every penny was spent on in advance, in triplicate, and if it does not work who is to blame. The answer is always somebody else, it seems. This risk aversion has been about trying to cap waste. In this cultural change, failure cannot be seen as waste in every case. Where there is a failure because of incompetence, that is clearly different, but let us discriminate between those two things. There is a legacy here of proven poor performance in some big acquisition programmes, Ajax being the most recent case. If you examine what happened with Ajax, there were a lot of reasons for saying that programme was going to fail. There were 1,000 specification changes to an original vehicle, which went from one version to six vehicles and from 20 tonnes to 40 tonnes, and that is just the start of the problem. Some of this, as we talked about, is for the National Armaments Director to fix. A lot of it is about giving the services the money and the freedom to experiment and accept waste, and do that in partnership with the private sector, which understands this perfectly well.
Baroness Harding of Winscombe: Lord Robertson, how much is it the politicians’ job to set the risk appetite? How do we shift the dial?
Lord Robertson of Port Ellen: It is the job of the politicians. It is easy to say the Treasury or the MoD, but, actually, it is the politicians who are in charge, and they can drive the system. I try not to constantly criticise the Treasury or even the MoD when it is in fact the politicians who are in charge and who are able and capable of driving that change. There is an obsession with the likes of Ajax and some of the other projects that have got out of control. If you look at the Lower Thames Crossing or HS2, that sort of risk aversion is not confined to defence procurement as a whole. If you are going to get risk mitigation, it has to come culturally from the very top. I believe John Healey was doing that, and I have no doubt that Dan Jarvis is in the process of driving that as well.
I remember Colin Powell, in between the times when he was Chairman of the Joint Chiefs of Staff and the Secretary of State in America, coming to lecture at the Ministry of Defence about racialism in the Armed Forces. He said that day, “How do you stamp out racialism in the Armed Forces? Well, I ask you the question: how do you change the direction of a column of ants? The answer is step on the first 10”. When he was American Secretary of State, I constantly kept quoting that to him as well. There is a lesson there as well. Sometimes you have to be pretty brutal in order to get that change in culture and the risk-averseness that seems to affect so many as well.
By the way, I should have said at the beginning that I am a senior counsellor with the Cohen Group in Washington, just to declare a momentary interest here.
Baroness Harding of Winscombe: How do you think Parliament should assist in that shift to risk mitigation? I am very mindful that, in national wartime, the nation’s risk profile changes. We are not in that world except for the poor citizens in Ukraine. It does not surprise me that regarding Ukraine we have been able to shift the way we behave. How do we make that shift to risk mitigation in a world somewhere between peace and war?
Lord Robertson of Port Ellen: We have had a declaration of war against us. General Gerasimov in Russia and others have made it clear that they are at war with the West in general and maybe the United Kingdom in particular. As I am going to say in a Lord Speaker’s Lecture tomorrow night, we have been singled out by many opinion-makers in Russia as well. We need that national conversation that was promised in the defence review and promised in the national security strategy, and it needs to start to make sure that people realise what the threat is and how vulnerable we actually are. It is at that point that we will get, first, the trade-offs in terms of national expenditure and therefore presumably a better investment in the insurance policy that is defence, and, secondly, a change in the culture that will allow things to be done on a quicker basis. If you have a department inside the Ministry of Defence at the moment that is charged with looking after Ukraine and can move at the speed of light, there is no reason it cannot be done in other areas, too.
Q71 Lord Teverson: One of the areas for a successful UK defence industry is being able to export. I was pleased to see in the SDR that you mention exports quite regularly. Some of the evidence that we have had particularly from the SME sector is that it finds it very difficult to export or to enter other national markets, even in Europe. I see from the report that our exports in 2023 were £15 billion, which is pretty good, it seems to me, but I suspect most of that is through the primes. You say that if we fight together we should build together, and there are particular opportunities for dual-use companies as well. The ministerial introduction says, “We will create a new Defence Exports Office in the Ministry of Defence”. Transferring it from Business to the Ministry of Defence was one of your recommendations. Do you think that is sufficient? Will that work? Particularly in the SME sector, what do we need to do to help those exports?
Lord Robertson of Port Ellen: Simply moving the bureaucracy from one department to another will not work on its own, that is for sure. It makes a lot more sense than it did in previous times, when Gordon Brown moved it to the Department for Business. There is a synergy involved with the way in which the system is done. Sometimes it is an obsession with sovereign and exotic equipment that leads to the fact that you cannot export what you produce—I have seen that in the past—but there has been a change in direction. The Type 26 frigates that are being made in Glasgow at present are designed specifically to be simpler than before and exportable as well. In fact, there is now a huge contract with Norway, and Babcock at Rosyth is in the process of bidding for a Danish order as well. We are now getting back to the way in which we produce things that are relatively simple and have an export market.
General (Ret'd) Sir Richard Barrons: I absolutely agree. Moving some furniture is not the total answer to this. Giving the MoD responsibility for exports directly is really important. The defence investment plan lays out some things that the services are going to do that are transformative: the hybrid Navy; for the Army, the autonomous collaborative platforms to fly with the attack helicopter; and the same for the Air Force. For me, the solution is to make exportability key to the requirement at which they are now beginning to write. It is the intention that these bits of kit, by design and requirement, will be exportable from the get-go, and that therefore requires a conversation with allies. It requires the Government to get behind industry in the way that they attach to international customers. They need to pick their targets carefully. Some countries like Germany seem to be quite self-contained and doing really well, although they are building a lot of the wrong stuff. Other countries, if they see the UK kitemark on something, are really interested in it. Make it part of the requirement and allow the MoD to campaign in partnership with industry abroad.
Finally, the MoD has some frameworks. It has bilateral treaties. It has the framework role in the Joint Expeditionary Force. It just does not really use those, and certainly not in the Joint Expeditionary Force sense, as a vehicle for gathering like-minded allies to say, “Look, we are going to make this thing. Don’t you think we should all have it?” It relates to the munitions conversation that we had.
Coming back to the point that we discussed earlier, in the review the idea is that more money goes into defence, it is spent on globally pace-setting transformation, and in doing that it fuels export-led growth. What we are talking about here is the export-led growth, so let us make it happen.
Lord Teverson: We have the situation where the European Union has been completely unreasonable in terms of its membership fee for SAFE[1], even though Canada managed to join it. Would that help exports, or is that programme largely irrelevant in terms of defence procurement and Europe?
Lord Robertson of Port Ellen: It would certainly help if we were part and parcel of the European Union initiatives. It is interesting that the European Union has gone through this transition. In my time in NATO, it had nothing to do with defence other than creating wiring diagrams that were not really connected to any specific capabilities. Now, in view of the urgency of the situation in Ukraine, it has developed a whole series of initiatives as well as a commissioner devoted to defence as a whole. The more we can be connected to it, the better it would be.
Q72 The Chair: I realise we have taken you out of time, but I would like to leave one question with you. Sir Richard mentioned earlier the issue of competition. The more you have very close iterative development, one has to think of the competition. There is also from outside the potential for misuse of public funds. We had one piece of evidence that suggests that because of this—they are not arguing against the way we are moving—it needs stronger democratic oversight, ethical governance, transparent procurement and meaningful public engagement. I guess it is a political issue, but how do we make sure that with this much closer relationship we do not fall into any of the potential difficulties that come with it?
Lord Robertson of Port Ellen: We have the National Audit Office, which has become much sharper in its role in how it looks at public procurement as a whole. You have the Defence Committee in the House of Commons and the IRDC in the House of Lords. The Government are now proposing to establish another committee responsible to the Prime Minister to overlook the Defence Nuclear Enterprise programme as well, which takes up 25% of the Ministry of Defence budget, and that is underestimated by a lot of people in this country and in NATO as a whole. There is a genuine level of scrutiny. Part of the problem is that maybe there is overscrutiny, because at times that leads to the overinsurance that is built into the system, but it should work well at the present moment.
The Chair: I thank you both. Lord Robertson has already given us a warm-up for his speech tomorrow that some of us will hear. Sir Richard, we are very grateful that you particularly came along. It was not too far for Lord Robertson to be able to come here, but we appreciate it enormously. We probably will join you on the Embankment continuing to ask questions of the MoD. That now finishes the public session today. Thank you both.
