I call to order today’s Defence Committee evidence session. I am very grateful to our four esteemed guests. Welcome back to David Williams, the Permanent Secretary at the Ministry of Defence. We also welcome back Lieutenant General Sir Robert Magowan, who is the deputy chief of the defence staff for military capability. Welcome also to Aneen Blackmore, the director general finance at the Ministry of Defence, and also a warm welcome to Andy Start, the chief executive of Defence Equipment and Support and also the national armaments director. Before I delve further, I would also like to put on record, Mr Start, our gratitude and thanks to your good selves. The Defence Committee last week had the pleasure of visiting DE&S Abbey Wood in Bristol and we found that a very thought-provoking and informative visit. Once again, thank you to all of your staff there, to everybody involved, for all of the hard work that they do. As Defence Committee members, it is our job to ask difficult questions, but please do not let that take away from our gratitude for their hard work to keep us secure in the UK, as well as abroad, and their monumental efforts recently to mobilise to support our allies in Ukraine. Speaking of questions, Permanent Secretary, at our last evidence session where you accompanied the Secretary of State you told us that you expected to reduce the civilian staff by around 10%. That, understandably, caused considerable consternation among staff. Just to clarify, will this involve redundancies and/or a recruitment freeze?

Let me clarify my remarks at the last hearing. I was looking to give the Committee a sense, from a personal perspective, of the likely trajectory of civil service headcount within the Department but, just to be clear, no formal targets have been agreed within the Department. We will work through a series of work strands, in common with other Government Departments, as part of the second phase of the spending review, looking at productivity and at efficiency. We will do that work on a whole-force basis, looking at the right balance between colleagues in uniform, reserves, permanent civil servants and contractor support. The primary control, I suspect, will end up being a workforce budget, rather than a specific headcount. There is still quite a lot of work to do. We will need to engage staff and trade unions in that work as it develops over the coming months. As I said to the Committee last time around, there will be areas of the civil service workforce where actually we will want to see numbers go up. Digital is an example of that, partly because of the priority we are placing in that area, but it also gives us an opportunity to convert some of our current external assistance or temporary staff into permanent civil servants. My personal sense is that we have probably peaked in terms of civil service numbers and I would expect them to come down over this Parliament, but no formal targets have been agreed and there is quite a lot of work still to be done.

The Defence Committee members and I have met with union officials as well. They were unaware of anything. Nothing has been agreed upon; nothing has been consulted upon. Also, I wanted to inquire about how you will avoid losing skills in a way that further increases temporary staffing and consultancy spending. How will you avoid doing that?

To your first point there, picking up on a specific question from your opening remarks, it was not intended on my part to be an announcement of a new programme to reduce civil service headcount. We have been having discussions over pretty much my entire time as Permanent Secretary about the right level of staffing, with 2019 levels being a broad indication of where we might end up. We currently have no plans, to your earlier point, for any redundancy schemes. As to how we ensure that we do not lose skills that we need, for me that goes to the civil service offer overall. That is partly about pay. I was pleased that we were able to implement a decent pay rise for civil servants in the Department last year, though it will not surprise the Committee that satisfaction with pay from our annual people survey is low. It is also about the nature of the job, the support that staff get and the learning and development opportunities. We are fortunate in defence to have a civil service workforce in a variety of roles, from direct support to the frontline through to the back office, who definitely get the mission in terms of the contribution they make to the country, to the Department and in their support to the armed forces.

You rightly noted this, and we are all aware in the wider defence community of the crisis within recruitment and retention. Some stats have recently been published regarding Capita and its performance. Once again, it has substantially missed recruitment targets. In terms of regular soldiers, it is the worst performance in five years. It has met only 63%, so less than two-thirds, of its targets. What would you say about that and how can this be rectified?

The Capita contract relates to Army recruitment. We are currently well advanced in the replacement project for that contract, the armed forces recruitment project, which will operate on a tri-service basis. We are running through the final stages of commercial engagement and expect to be in a position to place a contract by the spring of next year. Learning some of the lessons from the introduction of the original Capita recruitment contract, that new programme will have quite a phased introduction of service, giving our new supplier, whoever that might be at the end of our competitive process, two years before the recruitment requirements fully step up. We have learned a number of lessons from our experience of working with Capita on recruitment, including the importance of contact with personnel in uniform at the right point in the process. This Government have also set out a number of measures, including reviews of medical standards, which will help to reduce the number of rejections from applicants, and have set out an ambition to substantially shorten the period from application to offer to entry into training. It is a broader programme than simply a replacement for the Capita contract.

General, as the deputy chief of defence staff for military capability, given Capita’s dire performance as laid out in the stats, are you concerned about the state of the Army and about recruitment? What are your views on this?

Yes, I am concerned. As we all know, a critical part of military capability is our people, both civil service and military, and the fact is that the Army has not been able to meet its targets. We hold it to account every quarter through the investment approvals committee for the very reasons that you are articulating, Chair, because we are concerned about it. As the Permanent Secretary has articulated, we have a way through here, through a broader recruitment programme and the measures that the Permanent Secretary has just outlined. In direct answer to your question, from a military capability perspective, yes, we need to recruit more across all three services and we need to retain more as well. I fully admit that.

Can I just get the sequencing clear? You described that you were into the tendering process for the replacement of Capita across all three services and the Government have subsequently announced these, as some would say, eye-watering new targets in terms of the number of days before you get a place in training. Are you having to review the tender process in order to plumb in these new targets or is it sufficiently flexible that you can apply those targets retrospectively?

No, we do not need to go around the commercial arrangements again. For example, one of the big factors in shortening that timeline from interest to offer to starting training is getting electronic sharing of patient records with a candidate’s GP, rather than writing to the GP and waiting for a response back. You might imagine, in a priority list for a GP, where writing a letter to us about somebody who is essentially healthy sits, as opposed to the patients they are seeing on a daily basis. That is one of the factors behind the time it currently takes, and we have made good progress with the Department of Health on getting electronic patient sharing. Some of the measures that we have to speed up that pipeline are independent of where we end up with the contract, but incentives for performance then will be tied to those new timelines.

It is just a quick one. What will the target be for recruitment under the new system in terms of weeks?

That was set out in the Secretary of State’s speech to the party conference.

Just remind the Committee of that.

I can send you the dates.

You do not know what the—

I do not want to give you the wrong dates. I do not have the precise ones in my mind.

Of the improvements that you outlined a few minutes ago, what is it that Capita is not doing now that will change when the new contract comes in? What is the difference? What will be the major difference? What is it not doing now, in failing miserably at recruitment? What is missing, currently, apart from chasing up the recruitment timescale?

Expressions of interest are running at quite high levels. It is a combination of partly how we go through and sequence the medical checks and how we take up background reference checks. Some of the speeding up is making conditional offers, rather than waiting until every box has been ticked.

Sorry to interrupt, but what I am having trouble getting my head around is that, five years ago, recruitment was a lot better than it is now. What is it that has changed? I do not quite understand.

Five years ago, it was probably worse. It then got better and then it really plummeted during Covid, and we have not seen the recovery since then.

Permanent Secretary, I have the numbers in front of me. Five years ago it was actually quite good: 95% is the figure that I have in front of me. Then it went to 88%, to 98%, and it just slumped in 2023 to 68% and now 63%. The point that Derek Twigg is making is that it is nosediving. What is going to be done to rectify that?

Where we got to five years ago reflected a focused improvement on the operation of the contract from when it had initially been let. There was a reset in around 2018 or 2019. It was before my time with the Department, but I can confirm that for you. It is a combination of just really grinding through the process of checks on health, on background, on qualifications, on security, and that process is taking longer than we would like. Some of that will speed up through the new commercial arrangements and how we are incentivising performance. Some of it is about factors that are not directly related to the contract. I would be happy to set out a fuller note.

We would be very grateful for that written note.

It is just a quick question from me. You will have seen that Lord Robertson, who is leading the SDR, has said that we need to cut troops by 20,000 if we do not increase defence spending or scrap the aircraft carriers. Is that something you concur with?

I have seen the reporting. When Lord Robertson was in front of this Committee a couple of weeks ago, he made the point that he was not yet at the position where he was making recommendations, and so I would rather wait and see what recommendations the externally led review makes to us, rather than picking up on press reporting.

Then it is not something you would say is accurate or likely?

It is a piece of press reporting. I would be surprised, given the importance that the current Government have attached to recruitment and retention of armed forces personnel, if we were likely to get recommendations to reduce the number of armed forces personnel.

I just wanted to move on to the Haythornthwaite review. What is the cost to implement that, where are we with it and is cost the main barrier to implementing it?

The Haythornthwaite review was published just over 15 months ago by the previous Government. We have been taking a phased approach to its implementation. At this point, I do not have an overall cost for implementation of all of its 67 recommendations. In practice, we will take it forward alongside priorities for people from our new ministerial team. The recommendation in the people space from the SDR is that we need to recast an overall defence people plan. I am pretty comfortable and confident that that will be broadly consistent with the direction of travel that the Haythornthwaite review has set out and we may, at some point, be able to bridge to performance against individual recommendations. It is an important part of the departmental thinking. Rick Haythornthwaite has met the new ministerial team to share his thoughts, but there are some themes for us, some of which I touched on at the previous hearing. One is flexibility of service and how we think about personnel coming into the uniform, stepping out into other careers and coming back, about veterans sometimes coming back into service in what is known as a zig-zag career. Thinking about the total reward offer, what are the elements of the package that most help us recruit and retain personnel in the armed forces? That will be different for different people at different stages of their career, depending on their family circumstances and their priorities. We are thinking about how we can get some more flexibility into that. Moving forward, we will need greater recognition of skills and to make sure that we are recognising the training and skills development of personnel in the armed forces. That is a long-winded answer, Chair, I am sorry, but it is about bringing the themes and the direction of travel of the Haythornthwaite review, into the plan for defence people that this Government want to set out, not least informed by the strategic defence review.

In essence, you will be using the Haythornthwaite review to address the critical skills gaps and the personnel shortages.

There are three major methods by which parliamentary scrutiny is conducted over defence. In the past, the main one had been the major projects report, which was stopped in the mid-2010s, just prior to the unfunded and ill-considered 2015 SDR. Then it was the equipment plan, which you stopped publishing two years ago and which covers about £300 billion-worth of public funding. Last year, the NAO published the report and I note from the report that there was a gap in the affordability of about £16.9 billion, about 6% of the funding. Neither you nor the NAO are going to publish this report again this year. Finally, the last vehicle was the Infrastructure and Projects Authority report, which is late by six months presently. I put to you that we have a problem with accountability. What are you going to do to address this?

You will have heard from the Defence Secretary when he was here before the Committee that the ministerial team has absolutely taken on board and has as a priority improving our engagement with Parliament, including our engagement with this Committee. We have already run three briefings in the MOD for parliamentarians on Ukraine. We have extended the number of spaces on the armed forces parliamentary scheme. There is a backdrop of wanting to do more and to do better. On the specific reports, yes, the major projects report was stopped some time back, although most of the relevant information was then covered in either the departmental annual report and accounts, publication of the equipment plan or the IPA review of the Government major programme portfolio. On those two specifically, the IPA is part of the Cabinet Office, not the Ministry of Defence. It normally reports on programme status as at the end of March each year. Our input and returns to that document for the position as at March 2024 are with the Cabinet Office. It got caught up in the general election and then the return of Parliament. We are engaging with the Cabinet Office on timelines for publication. My understanding is that it expects to publish that in due course.

Do you think that approach is perhaps why we learn of major changes in the programme with no lead-in, such as today’s announcement about the recovery of the housing enterprise?

I will take that one first. There will be a full written ministerial statement in the House, which I guess will go live pretty much as soon as this hearing finishes, unless it has gone live already.

It has.

Good. The timing of that announcement and the degree of confidentiality around the work to secure that deal is really down to its market‑sensitive nature. We exchanged contracts last night and it was reported to the markets as the markets opened at 7 am this morning. Under any kind of system of parliamentary scrutiny, that market sensitivity is something that we would need to factor in, but now the deal is done, or at least contracts are exchanged to be finalised in January, there will be an opportunity for Ministers and officials to talk through what the deal means. If I could just go back to our equipment plan, the Minister for Defence Procurement and Industry has written to this Committee and the PAC with a clear commitment that we will get back to publishing the equipment plan. It is just that we are in a world of the externally led strategic defence review and in the process of the second half of the spending review. The Prime Minister, Chancellor and Defence Secretary are clear that a pathway to 2.5% of GDP for the defence budget will be set in the spring. The uncertainty around the precise profile of the budget and what, in capability terms, we want to deliver, given the increased threats and instability in the world that we are asking our armed forces to meet, means that it is just a work in progress. That kind of snapshot now would not be particularly useful. As I said last time, I am really keen to get input from the Committee on what would be helpful in a future publication because previous snapshots, which are about six to nine months out of date by the time they have been through departmental and NAO scrutiny and publication, may not be the most suitable thing for you anyway.

Could we get a written note, please, on this, for the Committee, so that we can then investigate the value for money aspects of this? Would that be possible?

On the accommodation deal, yes. I would expect to publish an accounting officer assessment, but we can send you a separate note. In essence, in value for money terms, we think we have got a good price but, more to the point, it opens up the pathway for us to invest in estate, whereas, under the previous arrangements, improvements that we made to any of these 36,000 properties improved the property value to our private partner and, over time, therefore increased the rent that we would pay. It frees up the ability to think through where we want to improve the quality of the existing estate, where we want to knock down and rebuild, where we want to knock down and sell surplus land for other housing. It also means that we will be saving around £230 million a year in rent. That is the basis of the value for money argument, but I am happy to set out a note.

Thank you. I will just go back to the remark you made about the timeliness of the data and how useful that is for us. We have already heard from one of the questioners that perhaps the SDR team is using data to make its decisions. It is quite fundamental that there is some vehicle. I posit that a gap of £16.9 billion is something that we should be discussing openly, and our party has quite enjoyed discussing a similar sized gap routinely in the House. Therefore, it is something that you should be discussing with us. The second part of accountability and scrutiny is readiness and MILCAP. I note that, last time, in the Ready for War? paper from the previous session, we accepted that you stopped reporting “serious and critical weaknesses in force elements”. We had an exceptional visit to DE&S last week, and I want to thank them and put on record our view on the exceptional output that DE&S provides. I would offer publicly that I think DE&S should be a force element at readiness, bearing in mind that it underpins the elements that make a force element at readiness sustainable. Use of forces is part of understanding just how sustainable those forces are. I note—and we may explore later—that, for example, Typhoons are not aligned to their NATO capabilities. That actually may compound what we observe as a headline figure. For example, if there are 120 Typhoons that are multirole, some open source may be committed to ADX; some may be committed to FBX. Those are the two NATO codes. One of those is air defence; one of those is strike. We cannot get or have not had any assessment of those kind of thoughts. We also have not seen, more critically, any concerns about multi-attribution of forces, noting that we have read within Ready for War? that there are insufficient numbers, so you must be multi-attributing. We also note that, last time, about 20% of your deployed forces were considered sustainable. Noting those rotation patterns, that is something entirely questionable. With the military strategic headquarters being established, how are you going to present those risks that I have highlighted? Maybe there will be things that we explore later.

First of all, just to go back to your previous point, as I mentioned to the Committee last time, the SDR review team are getting support from my team, DG finance’s team and, in fact, the chief executive of DE&S’s team every day. The fact that there may not be an equipment plan in front of them does not mean that they are not getting the most up-to-date data that we have available to support their decision making and analysis. I will just reassure you on that first point. The subject of readiness is something that you are very close to, from your previous work in our team. You will know that we are going through the NATO planning process at the moment. We were in Brussels the week before last on that, agreeing our targets, not only from a capability perspective, but from a readiness perspective. You know they are at “NATO Secret”. We can make those available to you as we are working through that process. We are currently at stage 3. We go to stage 4 and 5 later in 2025. In terms of our own readiness for broader tasks, again, you know that there is a process that I run with the deputy chief of defence staff for military strategy and operations. You know that that is at “UK Secret” but, again, it is something that we can share with you. You would not expect us to declare the readiness of our force elements in an open forum. That would be an odd thing to do. To your point about multi-attribution, absolutely; we have said before that, through the SDR, there are four major roles that we are balancing off. We are providing advice to Lord Robertson and his team on those, whether that be in support of NATO, as you have mentioned, global contingent forces, forces for homeland defence—where there may well be, in many cases, an overlap with NATO—and, as I mentioned before, forces to compete in the so-called grey zone or hybrid warfare. The reason I mention that is that it plays directly to your question. We will multi-attribute our forces and we declare that to NATO. We say where those forces are attributed, but it does not mean that, come the moment when they are needed under article 3, 4 or 5, they cannot be reassigned to those NATO tasks. That is the whole point of, as you know, being ready for a range of tasks. I hope that answers the range of questions you asked.

It is more the scrutiny. It is not the specifics of the number. It is that the context that you have brought out just now is not in the readiness report. It does not highlight the other challenges that you have, as a military officer, in being able to address and manage risk, and whether that is communicated not only within the Department, but more broadly to us. We cannot advocate for you if we are not aware of the things that conflict and compete with your ability to generate those. It is not the numbers. It is the logic behind things.

I get that and I answered that by saying that we, as you know from where you have worked before, have a framework to express the readiness of our force elements. They are at a classification that we wish to share with you, but cannot be shared today.

How do you think we can communicate that? We had an excellent session—

I will take advice on how we do that, Chair, but clearly you know that we have that data in terms of force elements. We cannot share it today in this Committee, but we can share it.

We will definitely take you up, General, on your kind offer for those secret and classified briefings, because that will be very useful for our Committee members.

We have a whole team on it, as you know.

I wonder if DE&S would. We did get an exceptional briefing, which gave us really good understanding of what the support aspects behind the force elements of readiness look like.

As we discussed last week on your visit, we are keen to be as transparent and open with you as we can be. We have had conversations with this Committee previously at higher classifications. We can then discuss how we can find a way of you representing that to the public. We can always give you a written answer, even if there is not a standard report, which can help us share the tone of those things, to allow you to get the headline messages out. We are seeking to avoid, for obvious reasons, giving immediate indications of absolute readiness of particular forces, because that would not help. Is there an opportunity at some point to talk about the recent wargame and what we are doing with industry on readiness? If not, would it be appropriate to do that now?

I want to bring in Emma Lewell-Buck first and then no doubt we will be coming back on to that as well.

Permanent Secretary, you have just mentioned, in relation to the IPA report, that the information is with the Cabinet Office. I was just wondering if you could update us on how much of the MOD’s major Government projects portfolio is in the red, amber and green.

I do not particularly want to pre-empt that publication, although, depending on when we get a clear idea of timelines, we may be able to give the Committee a private update. In headline terms, the number of reds has increased by a couple, from five to seven. Otherwise, it is broadly static.

We have all the answers. We can go through all the numbers. For the latest report from March 2023, we have it all here. We can go through that if you wish to but, as the Permanent Secretary said, against the reds we have decreased slightly. We can go into those if you wish.

We have the numbers from last time. It was for a comparison of what the numbers are this time, because we have not seen the unpublished report yet. I know the Permanent Secretary said the information is with the Cabinet Office, so I am just curious. You are saying that seven now are in the red.

In terms of declared, again, for classification, as you know, there were five declared reds in March 2023 and we are predicting—we will see the report—against those declared that will probably go to seven.

What about the amber and the green?

There is a slight decrease in the amber, because the overall number of projects has gone down by one. Greens are about the same.

Did you say the amber has increased or decreased?

Amber has decreased by a balancing figure, so it is two up on red, down on the ambers by a couple. It is, if I may, worth describing to the Committee some of the dynamics that are going on behind programmes, because I think that would be of interest to you, but also of general interest. Globally, we are going through some extraordinary dynamics across the automotive, aerospace and defence sectors. Those dynamics are affecting both skills and supply chain very significantly and that is knocking on to the delivery of all big programmes across all sectors globally. When I discuss the dynamics of programme management with my counterparts in the Conference of National Armaments Directors, they are all seeing the same underlying dynamics. Those dynamics are these. In Covid, there was a dramatic reduction in the aerospace industry’s capacity. That is because it was a matter of business survival. The same was true in automotive. As a consequence, a lot of factories were shut and a lot of talent, particularly talent that was close to retirement, moved out of the sector. During Covid, in some ways the defence sector benefited a bit through gaining access to that capacity. As we came out of Covid, the automotive industry had a big backlog of activity to fill and so did the aerospace industry in particular, because people are now going back on holiday at a scale of pre-Covid levels, creating incredible demand on the whole industrial supply chain. That has pushed out the lead times on components from two weeks to, in some cases, two years. It has created an incredible skills shortage across the whole sector, as we have talked about. The knock-on consequence of that in defence has been that our industrial suppliers have found it harder to get components and harder to get skills. They are having to work really hard to hold the delivery schedules on programmes and deliver programmes to cost. I am actually really pleased that our headline data is as good as we have just described it because, relative to what is going on globally, that is quite a good performance. The challenge we now have to address through the whole sector is how we start to ramp up skills. There is a very strong skills shortage. You have challenged me on that before, and quite rightly so. We are trying to get together with the former DSF, now the Defence Growth Partnership, which is the defence industry’s joint council. We are trying to get together with that community to work out how we work better with academia to stimulate more people coming into the defence sector. How do we continue to ramp up apprenticeships and graduate roles coming in at the bottom end of the system? I am really pleased to see how active our sector has been in both apprenticeships and skills. I do not know if any of you have had a chance to visit any of the many apprenticeship academies across the country. I was up at two in Scotland, at the shipyards, only a few months ago. There is a real effort to try to get people into the sector at the bottom but, nevertheless, for the next two or three years we are going to find that all three sectors—aerospace, automotive and defence—will have skills and component shortages because of that reduction in capacity that happened.

Andy, I am sorry to interrupt you. Are you saying you envisage that the number in the red, those seven, will keep going up?

We have to work really hard to keep it down; let us put it that way.

For the record, amber has gone down two. It has gone from 41 to 39 of the declared programmes from March 2023 to March 2024, as Mr Start has said, and then five to seven on the red in terms of the declared programmes.

It is a collective effort for both Government and industry to work together, to make sure that we continue to deliver those really difficult, complicated programmes. The point I am making to you is that it has got harder.

We know from last time that there were four projects in the grey category, which is unpublished for national security reasons. How many are in that category this time?

I have the numbers here, but I am nervous about declaring that number. We can certainly provide that to you in closed session.

Has it gone up or down, Lieutenant, can you tell us?

In terms of those that are greyed out, has the red gone up or down? Is that the question?

Yes.

It has gone up.

We are a bit curious, as you can imagine, looking at the Clyde infrastructure project. That went from green to amber to red and then grey last year. Are we right to be concerned that perhaps national security is being used as a cover-up for project failure?

We can talk about the Clyde infrastructure programme. There are a number of issues with the Clyde infrastructure programme. That is why it is at red. One of them is, as Mr Start has just describe, the right skills that we need. It is not easy to attract those types of skills in that part of the country all of the time. That is always a challenge. There has been an issue over specifying the requirement as we have developed our nuclear enterprise. That has been tricky. The third reason is that the whole of the Clyde infrastructure programme is being grown from an infrastructure base that is fragile. Therefore, we are encountering infrastructure problems on the Clyde, in both Faslane and Coulport, which are probably worse than the project envisaged when the CIP was set up.

My question was a bit wider. We are concerned that projects are moving into grey to cover up for their failure so that we cannot get the detail.

I resist that.

How could we have confidence that that is not the case, though?

We can have other sessions to go into any of the detail of any of the programmes, but we cannot go into the detail of certain programmes in an open forum. I can reassure you that there is no drive from the Department’s side to turn programmes grey so that they cannot be scrutinised. They can be scrutinised, but just in the appropriate way.

Through the Chair, could we perhaps have a private session with you around some of those grey projects?

I will leave that to the Permanent Secretary and the Chair to decide.

Definitely, that would be very helpful. Thank you very much.

I note your comments around the equipment plan and it is great to hear that we are going to have an equipment plan moving forward, but we do know that you are managing a budget of £300 billion of taxpayers’ money going towards defence procurement and support. Could you give the Committee the topline info for the next 10 years? What is the allocated budget and what are the forecast costs?

Do you want to have a go at that? Sorry, my hesitation is just that the 10-year programme is the end state for us of the work flowing out of the SDR in terms of the capability choices that the Government want to make, alongside the funding allocation over that period. The current spending review will run until the end of the decade. We will then be making assumptions about what the budget might be in the 2030s and what share of that will be allocated to the equipment programme. My point about it being a work in progress is that it is genuinely quite hard for us to give you much of the headlines at the moment. In terms of big handfuls of where in our current programme spend goes, that might be a helpful illustration. That is for DG finance or CDS military capability. I will leave it to the panel.

I would add, as we have discussed on the panel, that we do have a challenging financial position. As the Permanent Secretary set out, the long-term management of that will be set through the strategic defence review findings and the second phase of the spending review. I did want to highlight the fact that the autumn Budget earlier this year allocated an additional £2.9 billion to defence next year and that includes £1.9 billion of capital expenditure. That is the second largest capital increase across Whitehall. That has been very welcome in terms of underpinning our financial plans for next year and represents a 2.7% real-terms increase, which helps address some of the inflationary pressures that we do see in the short term. As the Permanent Secretary sets out, the longer-term pathway for us will be through the strategic defence review, the spending review and agreeing the trajectory to the 2.5% that will underpin our long-term financial planning.

We had Lord Robertson in front of us two weeks ago and he told us, “We are pretty rigorous in costing all of what we are doing.” It is clear to us that these figures exist. For us, it is just about the pathway to us being able to have visibility and to understand the numbers that you are working with.

I absolutely understand that. To build on the general’s earlier point, we have not shared a secret version of a 10-year equipment programme with the SDR reviewers. We are responding to questions from them such as, “If we recommended X, what would that cost? If we recommended Y, what would that mean in terms of equipment, people or wider resourcing?” We are answering a range of specific questions from them, as well, of course, as providing them with some sort of broader financial context. The marrying together in the first instance of their recommendations to Ministers is a matter for the external review team. My expectation is that there will then be a lot of departmental work to translate their recommendations into detailed capability choices for Ministers. That is not to say that there is not, as the general says, good daily engagement. I have been really heartened by the richness of the Department’s engagement with the externally led review during its review and challenge phase, but we are still at the point where the reviewers are synthesising their recommendations. They will be testing those with Ministers in the first part of 2025. The content of the programme, how the direction from the SDR might be delivered, how much that costs and how that sits against budgets is really all a work in progress.

Can I just ask what we are currently spending in terms of GDP on defence?

It is 2.3% or possibly 2.29% of GDP.

If you strip out the money we have put in for Ukraine, what is left to directly fund the UK military?

Very broadly, £3 billion of expenditure equates to 0.1% of GDP. We are assuming £3 billion of expenditure on support for Ukraine this year, so 2.29% is reduced to 2.19% if you exclude that £3 billion of support.

Lord Robertson told us, regarding the SDR, “We can only say to the Government what 2.5% of GDP can produce.” This, to us, implies 2.5% of expenditure being focused directly on delivering capability for our armed forces. The conflict in Ukraine is ongoing. Will that funding be in addition to the 2.5%?

In the way in which NATO spend is counted, the spend that we make on operations, both in support of Ukraine and, indeed, elsewhere, counts towards our declarations to NATO. This Government have confirmed that we will support Ukraine for as long as it takes. While we are spending that sort of money on Ukraine, it will count against the 2.5% target. If and when we got to the point that we were not spending £3 billion a year on Ukraine, then there would be more money available for direct spend on the UK armed forces. It is worth saying, of course, that the spend that we are making, the support that we are giving to our Ukrainian partners to keep them in the fight, directly supports UK national interests in terms of the engagement they are having with Russia and the impact that is having on the capability of the Russian military. It is not unreasonable to include it in our spend targets.

No; it is in our national interest to support Ukraine. The previous Government said that it was going to reach 2.5%. I assume, while the Ukraine war was ongoing, that would have been included in the 2.5%. It would not have been 2.5% spent directly on the British military.

No, the basis for Ukraine would be the same under—

That is what your understanding is from the current Government: that it will still be 2.5% including Ukraine and not 2.5% spent directly on the British military?

The cost of operations wherever counts towards the NATO spend target.

Building on that theme, we had the review team in and I thought—slightly disappointingly, from my point of view—they acknowledged that their riding instructions are 2.5% and that is it. The idea that it was Treasury-led rather than threat-based was something that we had a discussion about. To a certain extent, I thought, “That must be good for the programmes, because we can programme that 2.5%”, but then they said two other interesting things. They said that they were not required to seek consensus and that they felt no obligation to fill in legacy holes in the programme, some of which have been around for 40 years. That suggested to me that they might be coming up with something quite radical, which will require a seismic shift in the way in which the building approaches the review. I think it was General Barrons who said he considered the greatest risk inherent in the SDR was the building getting at it, giving it a swift ignoring and going—I think his phrase was—“back to normal jogging”. In terms of cultural approach, are you ready for what might come? You can always say, “Let’s see what comes”, but, in terms of preparing the Department for this review, which might be quite radical, where do you think you are at?

I will not say, “Let’s see what comes”, tempting though it is. Let me build on my previous point. If I had a concern in the reverse direction, when the review was set up, it was that, in the first phase of information gathering, the Department was invited to submit, alongside lots of other partners, the industry and think tanks, our thoughts on the 24—subsequently split out into 30-odd—propositions that the review was looking for input on. We did that by the end of August. There has been a really rich engagement between the Department and the review and challenge panels. Some of the feedback to me from externals is about the quality and imagination of departmental thinking, which this externally led review has prompted. I am feeling more optimistic about the fact that, although externally led, the Department—and I do not particularly mean the Chief of Defence Staff and me on a daily basis—in policy teams, capability teams, frontline commands, Mr Start’s organisation, have been engaged in kicking around a whole bunch of ideas that the review and challenge panels will put to the external review team. They are then in that synthesis phase and we are helping them with that as well. It is possible there will be some radical recommendations. I am not necessarily expecting, at the end, for them to be a surprise, because key parts of the Department have been on this journey with them. I just do not know exactly what they are going to recommend at this stage. Getting into implementation is going to be absolutely critical. That is the implementation of the SDR, alongside our input into the spending review, work on the defence industrial strategy and work on the defence reform changes to the Department, so that we will be implementing measures through the new construct of the Department of State, the military strategic headquarters, the new national armaments director and the Defence Nuclear Enterprise. We have to get that right. We cannot just drift into it. I have been heartened by and feeling quite positive about the level of engagement the Department has. We will hit the ground running.

Just to reinforce that, the engagement has been fantastic. In my space, which is the industry and acquisitions space, we have a phenomenal number of inputs from individual companies, the trade associations, the unions, the DSF and others in terms of what they were looking to change. There has been a huge amount of agreement that there is a massive opportunity for us to seize. You will not find the Department resisting that. In the space of acquisition reform, you will see the Department embracing it. I have been in defence for two and a half years, from a long industrial background, and I have seen that culture change quite dramatically. Look at the scale of engagement that we had in changing my organisation of DE&S, with over 1,500 people from across academia, all the think tanks, industry and defence engaged in redesigning our organisation. We are a phenomenally different organisation today from the one that we were. There has been no lack of desire to change, to deliver a better output. If you cut anybody in defence through the middle, you will find just a passion to keep the nation safe and help it prosper. That culture is certainly alive and kicking in my organisation. I have seen through the defence reform change a real appetite, both from the Department and from the political leadership, to make defence better. I am quite excited about that.

Can I just add three examples to that? You are getting at a cultural issue here that those in the military you are probably referring to are traditionalist, wish to protect what they have and see the review as a threat. First of all, everyone in this business would accept that the programme of record is largely what it was pre-February 2022. It would be amazing if the programme of record pre-February 2022 is the programme of record we need for the future. We are absolutely on this shift now to warfighting deterrence and to warfighting if necessary. Let me give three examples of this innovative nature that both the Permanent Secretary and Mr Start have been speaking about. Within the Army, Project Asgard, which you may have heard of, is CGS’s drive to be innovative in Estonia or wherever, learning lessons from Ukraine, particularly through AI-enabled capability and putting more money into that. He was not doing that two or three years ago. He is absolutely doing it now and we will see how that plays out through the independent review. In Air Command, in the air environment, there are these so-called ACPs—autonomous collaborative platforms—or loyal wingmen, if you like to use the vernacular. We are now really working closely with our key allies, particularly the US and Australia, and potentially other partners such as Japan. That is the future in terms of a network-enabled, autonomous air intelligence and strike capability. If the First Sea Lord were here, he would absolutely be promoting his whole autonomous portfolio, from seabed through to underwater through to surface through to air-enabled capability. Innovation is alive and well, because the battlespace we are seeing in front of our very eyes globally is changing so much. That culture is alive and well, and the review will reflect that.

I would like to pick up on the comments you just made, General, about warfighting mindset and the shift to that approach, because the Secretary-General of NATO, within the last week, made similar remarks, talking about the need for NATO countries to shift to a warfighting mindset. It would seem to me that a warfighting mindset would be incompatible with a country spending as little as 2.19% on its own defences. Let us explore the gap between this increasing rhetoric from some military and defence figures around a warfighting mindset and then the actual amounts of money we are talking about, because you have been scrutinised this morning around some of the challenges that defence has, which largely stem from challenges with funding. How can we close this gap between the idea that we, as a country, are under threat and need to respond to that, and such a limited pot of money? I will come to Mr Start first.

There is no question that the world is dramatically more dangerous than it was for most of my working career. You can see that in the stats and in the number of concurrent conflicts. You can see that in what has been said publicly about grey zone conflict. As a nation, we have a political choice about how much we are prepared to do about that. You can see countries across NATO in very different places. If you look at the countries that are closest to Russia, you will see how much they have decided to spend on their defence. We, as a country, need to make our choice. That is a political decision. It is not a decision for the Department. For us as officials, our job, and Rob’s job specifically, is, within the budget that the Government deem to be affordable and what the general public think they want to spend on defence, to make that spend as appropriate and effective as possible. Rob is presenting choices about how we absolutely squeeze the maximum value out of it and how we pivot things that we have done during a relatively benign couple of decades to being in a position to warfight. That means shifting our posture. It is certainly about making sure that we spend more on munitions and you can see that we are really actively going after that. It is also about prioritisation. We are very clear and open about the fact that there is a rising threat. We are very clear and open that we will seek to do the best we can with whatever the country decides it can afford.

Sorry, I am just going to challenge that. The MOD is not clear and open about the fact that there is a rising threat. There are challenges with classification on that. General Magowan, do you think that the Cabinet, outside of the Defence Secretary, understands the threat to the UK at the moment?

That is not a question for me. My first point is that CDS has been very clear about the nature of the threat, and the increasing threat, in his latest RUSI speech and before that. There is no doubt that publicly we have been doing all we can to impress upon people, whether they be in the Cabinet or in the public domain, that there is an increasing threat. Like you, I have just read the NATO Secretary-General’s speech. If you put that against our Chief of Defence Staff’s recent speech, they would look pretty similar. We are doing what we can to educate people generally on the nature of the threat. I would ask the Cabinet, rather than me.

Permanent Secretary, the idea that we might have more money to spend on defence than 2.5% in the future is not debated much because, currently, people are asking about the 2.5% figure. Do you get the sense that the level of threat that you understand to this country requires more than 2.5% to be spent in order to be in a genuine warfighting mindset?

Again, I would say that is a political choice. The Government’s commitment is to set a pathway to 2.5% in the spring. We will see how quickly we get to that level. It is in the nature of a range of our defence programmes, and the nuclear deterrent is probably the principal one, that we think not one Parliament ahead, but two or three. We think in decades. Understanding where defence spending might go by the end of the 2030s, say, is a different question from where defence spending goes in this Parliament. We have been a bit too guilty in the Department previously of simply playing against one line of numbers. Into the 2030s, I would like to illustrate for Ministers the kind of capability choices you get for some different budget scenarios, but that would be for political decision and not necessarily now. We will see where it goes. I can see the geopolitical trends, but I would be foolhardy to say that I have a complete crystal ball on what the world is going to look like in 2035 or 2040.

Sure—anyone would be. How you assess threat leads to your understanding of risk, impact and likeliness. Recently, at RUSI, the Chief of Defence Staff said, “We are still too slow. We are still too cautious. Too risk averse. There is still too much hierarchy and process.”. If I can come to Ms Blackmore, you are the director general for finance in the MOD. Previously, you have worked in industry, at BT, RBS and KPMG. They have a different risk appetite from the MOD. Can you talk a bit about how you look at risk in the MOD?

They are very different industries and very different risk profiles. You are absolutely correct to say that one of the challenges for us in the Department is how we understand our risk position, how we understand our risk appetite and how we ensure that we have in place agile processes to deliver the critical capabilities that we need, acknowledging the risk position that we face within the Department. The Secretary of State launched a defence reform programme when he arrived, which is really critical for us in being able to ensure that we are structured with the right processes and the right controls in place to support that agile delivery, with a laser-sharp focus on what impact we are trying to achieve and what risk is appropriate to take in order to deliver those outcomes. That programme of reform is going to be really important to us as a Department in order to move to a place, which we have talked about in the Committee today, of being able to deliver against that rising threat level.

Can I address one point? It is just to make sure that we are not talking at cross-purposes here. You have named a number of companies, effectively implying that we are a risk-averse organisation and a risk-averse armed forces. Could I ask you about your marines on the ground? Do they lack the appetite to take operational and tactical risk?

The risk that we are talking about is—

I just want to make sure that we are not putting a message out there about a lack of risk among our frontline troops.

Thank you, General. Risk to the UK is across many domains and factors. You can be so risk averse that you then do not invest in the capabilities that, in the long term, in 10 or 20 years’ time, it turns out you needed to invest in, to not expose yourself. Mr Smart, do you think risk aversion in defence procurement slows us down too much or are we in the right space on making sure we have the right checks and balances before procuring?

There are a couple of dynamics. Let me just park risk for a second and talk about process. Through the changes we have made over the last two and a half years, we have recognised that the process we had, which was really designed for a much more benign world, was no longer appropriate and we need to have a more efficient and speedy acquisition system. We need to go, in particular, for faster decisions and then spiralling up. You can see that within the integrated procurement model. Within the suggestions we have made to the SDR, we have suggested further changes, which will accelerate the pace with which we make acquisition decisions and get to the point of contract. I think the expression Mr Jopp used earlier on was “normal jogging”. We want our normal jogging to be faster. We can be very fast. Some of the things we did for Ukraine and have done for urgent operational requirements we have done in a matter of days, getting things on contract. Big, complicated programmes will always take time, but we need to make them much quicker than they have been. We are working on the process, which has nothing to do with risk. It has to do with making sure that you align the preparatory work and the checking work together, to be efficient. We have an efficiency opportunity and we are going after that. As I said, we have made changes already and we have made further recommendations as part of the SDR and defence reform. In terms of risk, there is a necessary shift in the perception of risk by all of us within Government to recognise that the world is more dangerous. In a broadly benign world, as it has been for much of the last 30 years, you can take much longer to make decisions than you can in today’s world. There is a need for a shift of risk perception, and we are tending to see that. It will need to continue and be moderated with what is going on in the world.

Picking up on the words my colleague, Fred Thomas, has just shared with you from the Chief of Defence Staff—in particular, “There is still too much hierarchy and process”—I wondered if you have any thoughts about the large numbers of senior civil servant-grade civilians and star-ranked military officers. Is the Department too top-heavy?

This is a challenging dynamic. We have just gone through a process within my organisation to reduce the size of the top-level team in my management team by about 20%. That would imply that I did think that we could be smaller, be flatter and get more speed out of that organisation. When I say “I”, the organisational design process that we went through to redesign DE&S—the biggest change of DE&S in a decade—we did in a collaborative way, and the conclusion was that we needed a flatter structure in order to be able to deliver more speed and more efficiency. There are places where there is opportunity for us to have less at the top and more particularly in the middle. As we automate more at the bottom and we bring in more digital toolsets, you will need a lot more people to work on the programmes. In fact, in the restructuring of my organisation, we have allocated hundreds of thousands more hours to delivery by stripping out process and by flattening the structures. We have been able to do that within DE&S. There are opportunities to do that in the wider Department, as we simplify the wider Department through defence reform. So there are opportunities, but there are a number of counterpoints. In the civil service space, we do some really complicated things with our international partners and you need some pretty competent and capable people to do that. In order to get people of that capability into the civil service, we have to have a level of seniority and pay that is at least within range of the sorts of ranges that would be in the private sector. Otherwise, we will not get the talented individuals. That will tend to drive you towards higher grade counts and, as a nation, we want the most capable people in our civil service doing those really complicated things that are important for the nation. There is a balancing act. We absolutely have to keep focusing on flatter, leaner, more focused structures, with maximum amounts of automation, and, at the same time, we have to focus on getting really talented people in. I will let the general speak for a moment but, in the military space, we know we need to play a stronger role in NATO. In order to play a stronger role in NATO, we need to place senior officers in the right place. The more influence we can get within NATO, the better for our nation and the better for NATO. The same is true for strengthening our relationships with our international allies. That requires people of a sufficiently senior rank. We degrade the country’s influence if we focus on reducing the star count at the top, if those star counts are driving global influence.

The Ministry of Defence is a large operational delivery Department, with just under 60,000 civil servants. The number of SCS we have, just under 1%, benchmarks well against the DWPs and HMRCs of this world. In percentage terms, it is quite a thin top layer. Nevertheless, the number of SCS posts has grown over the last five years, partly for the reasons that Mr Start sets out. There has been some particular growth in and around the nuclear enterprise, as we have put that on a more sustainable footing. There has been particular growth as we have converted some external hires, particularly in the digital space, into permanent civil servants. There has been a range of task and finish groups that have needed senior leadership. We probably need to be a bit better at the “finish” bit of task and finish. That has accounted for much of the growth. We are now getting into our strategic workforce planning, which we need to do to ensure that we can deliver against this Government’s ambitions and deliver the SDR with the kind of enthusiasm that Mr Jopp was looking for. As we think about our return to the Treasury in the second half of the spending review, that sort of strategic workforce planning will need to look at spans and layers. There are definitely lots of layers in the Department. Thinking about how we simplify our processes, not least to support the kind of pace of decision making that gets behind the risk appetite question, we will be having a look at senior numbers, but—to go back to where I started—I do not have a target in mind.

The SDR promises improved capabilities in the future, but last year the MOD scrapped tranche 1 of its Typhoons and, more recently, the two amphibious assault ships, plus numerous helicopters, drones and Royal Navy ships have all been decommissioned. What impact does this have on our capabilities and our future deterrent in the short term, General?

The Secretary of State outlined to the House the implications of the six retirements that you have just mentioned. Three of those involved vessels that were no longer seaworthy, so we were spending money against capabilities that were never going to be used operationally. There was a pretty strong case with regard to the retirement of those three classes of ship, and one in particular, in terms of Type 23, rather than the whole class. You touched on LPDs. In terms of the drones you are talking about, we have learned through Ukraine that the capability represented by that particular class, Watchkeeper, was no longer fit for operational purpose. That is why we are working really closely with the Army and ensuring it is funded to deliver drone capability in 2025 to replace the Watchkeeper drone that has been retired. That has saved us quite a lot of money, in terms of that long tail of RDEL in support of Watchkeeper. The other two are associated with rotary wing: Puma in Cyprus and Puma in Brunei, primarily in support of training in Brunei and in support of a range of tasks, including support to the Cypriot Government on firefighting in Cyprus. Before replacement capability comes in, in 2026-27, we are looking at a range of capabilities. Right now—this week, in fact—we are providing advice to the Secretary of State on how we might plug those gaps. We are confident we will plug those gaps, in different ways, before the replacement for Puma in Cyprus and Brunei comes into play. The last one is CH-47 Chinook. This is retiring the oldest and most expensive 14 CH-47s, as we see in the so-called extended-range Chinook towards the end of this decade. We thought that was a prudent thing to do. We should be looking to the future in terms of those capabilities rather than reaching back and, in practical terms, investing in exceptionally old aircraft. We can manage the operational risk accordingly. The last point you made, at the very beginning, was about Typhoon tranche 1. That decision was made some time ago. That was a straight, ruthless balance of investment decision. When that retires in 2027, tranche 2 aircraft will replace those in the Falklands—that is where those tranche 1s are right now. Reducing our combat mass is not something that we would necessarily want to do, but we are increasing the combat mass through F-35 in the shorter term and through GCAP in the longer term. Either way, that was a straight balance of investment decision.

I would be more interested in the short term. I understand getting rid of redundant kit, but what are your thoughts on the short-term capability for deterrence right now? Not planning for the future but, right now, what has that done to impact on that?

Those particular measures are manageable. We have been here in the Committee before, and Mr Twigg and I had this conversation last time. We are concerned about our overall readiness. We are concerned about our ability to sustain the fight. From a military capability perspective, as Mr Start mentioned it, that is why we are impressing this upon the Secretary of State. He is absolutely responding, and rightly so. In fact, he is driving it. He is leading it himself, understandably so, to ensure that we have more sustainment, particularly in terms of munitions, but also in those capabilities that enable us to fight, whether they be medical, the ability to respond to chemical and biological attack, or ensuring that our networks are up to date, so we can prosecute operations in the way we are seeing in some parts of the world, particularly, but not exclusively, in Ukraine. Absolutely, there are areas where we are carrying operational risk that is uncomfortable. That is why we are pre-empting that through some early investment. That, I am sure, will be at the leading edge of the SDR. We will see how that plays out.

Just very quickly on your reference to deterrence, for me, deterrence works at a number of levels. It is a combination of our independent nuclear deterrent, our allies and partners, and particularly our membership of NATO. Yes, it is about the military capability that we have. It is also about the political willingness to use that capability, as well as the outlook of members of our armed forces, as the general alluded to previously. It is also about the resilience of the homeland base. In the statement of intent about the new defence industrial strategy, one of the lenses that we will be looking at is about the deterrent effect of having a defence industry with the right capability and capacity. When we are thinking about deterrence overall, it is about the combination of all of those factors, rather than just one part.

Just to add to that, our Chief of Defence Staff has been on record saying, “We did not have Finland and Sweden in the alliance before Russia invaded Ukraine”. He has also been on record, as Mr Williams and I are articulating, stating that deterrence is working strategically, because Putin is contained in Ukraine. It is not in the way we want him to be contained, but he is contained in Ukraine and, therefore, the deterrence of the alliance and our contribution to the alliance, particularly through CASD—the continuous at-sea deterrent—is working. But we do have concerns.

Earlier this year, the Chief of the General Staff said that he wants to double the capability within three years and triple it by the end of the decade. That is specifically the Army’s fighting power. Having given at least 60 of the AS-90 Howitzers to Ukraine and having only had 14 back from Sweden, how achievable do you think that goal is?

That is his aspiration. That is our aspiration. That is the Defence Secretary’s aspiration, for all the reasons we have said. If we are going to deter as an alliance, if we are going to deter as a nation as part of that alliance, we have to demonstrate that we have the lethality and the resilience to stay in the fight. What CGS is talking about, as you have just mentioned—double 2027, triple 2030—is an absolute part of his advice that he is putting to the review and that we are supporting. You make the case in terms of AS-90 and the retirement and the gifting of AS-90 to Ukraine. The interim Swedish capability, as you have just alluded to, is Archer, which is going to be operational almost now, in early 2025. The long-term commitment is not fully confirmed, but Mr Start’s team are in close negotiations with the German Government and with Rheinmetall on this so-called RCH 155. To respond to the delta that we felt, we decided to take operational risk in the British armed forces, rather than take risk at the frontline with Ukraine. The reason why RCH 155 is so important—we have mentioned this in the Committee before—is that part of that deterrence is industrial resilience. That partnership through RCH 155, if it comes fully to fruition, will see significant investment by Rheinmetall. It is already invested, but it will see further investment in the UK to support that programme.

How achievable do you think it is in three years?

Firstly, we deter as NATO and, as we have just talked about, NATO has got much stronger. There is a real opportunity within NATO. NATO maximises its deterrent when it standardises its equipment and it is interoperable and interchangeable. Therefore, we are pushing for some of these things, like the RCH 155, where it is a standardised capability on the back of a standardised Boxer vehicle with interchangeable modules on the back. Because there will be well over 1,000 Boxer vehicles across NATO, that makes NATO much more effective when we collaborate with our allies and standardise the solutions. I am really pleased to say that, around Boxer, we have not only done that, but we have also done it in such a way that we are strengthening the UK defence industry and UK supply chains, because we are building both in the UK and in Germany. That collaboration with Germany, through the recent agreement, is only strengthening, which makes NATO stronger, makes our industrial resilience stronger and makes us able to sustain the fight for longer when we have those kind of capabilities.

The problem, gents, is that the member’s question has not quite been answered. How achievable is the three-year goal? That is the key question.

I am just coming to that and I apologise for being slow. We have learned as a consequence of Ukraine that there are technologies that can be brought to bear that are completely different from the traditional way that we would have fought. The Chief of the General Staff’s ambition is achievable in that, by strengthening the sorts of munitions we have, augmenting them with UAVs, better situational awareness and intelligence, and other new tech and capabilities that we have now identified are available, you can make the fighting force far more lethal. On top of that, we will make sure that we have some of our more traditional assets modernised and renewed. It is not easy to achieve the timeframes he has, but we can certainly make a massive difference in quite a short period of time through digitisation, integration and making sure that the sensors we have can trigger effectors, i.e. missiles, bombs, bullets, guns and things, from other places. If we can cross‑connect those, we can create much more lethality without having to have huge amounts more kit.

Can I just get a quick yes or no? Is it achievable in three years?

Let me answer it this way. Achieving that doubling by 2027 and tripling by 2030 is a choice. That means prioritising lethality to meet the targets the CGS has laid out. From a military capability perspective, lethality is at the top of the priority list. That is all we can say right now.

Technically and programmatically, yes, but it is part of the wider SDR choices that they have to make, in terms of where they choose to put the money.

I would like to welcome General Magowan’s amplification of the cuts that we were very supportive of last time; perhaps we did not get after the importance of our positive impact to RDEL. It is very welcome to hear that publicly. The deletion of capability is not just about the immediate impacts that are managed by the general. Just to use an example, the deletion of C-130J, while it was replaced by a better piece of equipment, had a massive impact on the defence industrial capacity, our leadership in a niche part of the industry and, more importantly, our ability to grow and maintain skills. Have you any concerns similarly with the medium-lift helicopter programme?

I dispute what you have just said, by the way, because A400 has delivered capacity through Airbus as opposed to Boeing. That is not denigrating Boeing’s commitment to UK industrial resilience—in fact, we have presented a paper here from Boeing on what it is doing—but Airbus has been supported through that A400 contract and continues to be so.

Sorry, what I was saying was that, by deleting the C-130J—I could have spoken about subs—we effectively lost an industry in Marshall Aerospace and the skills that were grown over in Cambridge. We lost part of our industrial capacity. It was not the capability. The capability decision was a defence decision.

That is what I have just said. Airbus has increased its capability and capacity as a result of the A400 contacts. Anyway, you were talking about NMH.

Yes. It is the industrial capacity that comes from NMH.

That is playing out now. We have been public. There is one bidder left and that bidder has significant investment in the UK. The criteria for that competition have been very clear. It must be designed and built in the United Kingdom, if we are talking about NMH.

General, just picking up on the Pumas in Brunei and Cyprus, a couple of weeks ago the Secretary of State announced that that was ending. You have said that he is being briefed this week on options to fill that capability gap. Presumably that means that you know that all those options are cheaper than Puma because, otherwise, it would have been like putting H-hour before the planning, to announce it before he had made a decision on those options.

Correct.

General, I do not want to go through the exchanges we have had previously on capability in terms of resilience and force generation, but can I ask you something specifically about the medical support for our frontline armed forces? You referred to it briefly in earlier comments. Are you concerned about the level and depth of medical support and whether it is capable of being provided when needed, should we get into the conflict we talked about previously?

Absolutely; there are a number of people in this room who have operations experience in these parts of the world. We became exceptionally adept—as we needed to—at reaching a casualty in a particular part of the battlespace and getting that particular casualty, or a small number of casualties, back to, in this particular case, Bastion. The whole machinery was focused around that, and rightly so. We were responding to an operational environment in this particular case in Helmand. Now that we are looking to ensure that we meet our deterrence requirements as part of an alliance, it is a national responsibility to ensure that we can protect the force and recover elements of that force who become injured. The numbers associated with that are far in excess, as you know, of something that might have happened in some of the operations we have been involved in since 9/11. That invokes a completely different mindset and a completely different mindset nationally as well. We are seeing this playing out very vividly in Ukraine in terms of a national effort to support casualty evacuation and treatment. That is our challenge, in terms of our response and the advice we are giving the review team, to ensure that we have the sorts of medical capability and capacity we need to meet the challenge we have just discussed.

At the moment, as things stand, there are serious shortcomings in terms of medical support.

Correct.

Permanent Secretary, I just want to come back to points that have been made on the equipment plan. You will be fully aware of the importance of disclosure and transparency, and the worries that we have had about diminishing transparency and disclosure. How much do you care about the concern about consent and preparedness across the wider political world if we do not have transparency? It is certainly worse than it was in the past and certainly well short of optimal now.

It is really important for two reasons. First, if I build on my previous remarks about deterrence, I mentioned in passing that national resilience is part of that. That is not just about investment in infrastructure or how we are thinking about cyber or critical national infrastructure. It is as much about societal readiness for the challenges we might face or the ways in which we might need to commit our armed forces in the future. Finding a way of having a sensible dialogue with the public about the challenges we face, the responses we are making, without scaring the horses unnecessarily, is really important. That was part of the narrative that the CDS was looking to advance in his RUSI speech. It is also important because, in the end, there is only so much money, as you know, that the Government can raise through taxation or borrowing. A spending review is an exercise in collective Cabinet prioritisation. As the Chancellor made clear just a week, 10 days or so ago, decisions to spend more money on defence necessarily mean that there is at least an opportunity cost or a direct impact on money that can be spent elsewhere, so we need to be able to make our case. That is both about the requirement and about building confidence that money that is allocated to defence will be spent in an effective way that gives good value for money. Getting it and doing something sensible with it are two sides of the same coin. Getting that debate going is really important. Transparency with Parliament and with the public is part of that.

Not scaring the horses unnecessarily involves scaring them a bit. The question is this: When we had a Cold War on—many people would say we are entering a new Cold War—defence spending on average was 5% to 7% of GDP. That was not a threat against the homeland in the way that we might have thought of in the Second World War, when it was 50% of GDP, but it was 5% to 7%. We have half of that now. When we have the argument now about 2.5%, we are actually arguing about, in part, the level of deterrence that prevents us from having to get to a 5% to 7% type of Cold War spend. Can we take it that that thinking is firmly embedded in the political conversations that you guys are inevitably having about budget trade-offs?

Yes, you can. It is that, but you can also look at the economic impact of Russia’s invasion of Ukraine or imagine what the economic impact of a conflict of whatever nature over Taiwan might be—I am speculating there. The relative investment in not only defence, but national security, in deterrence to avoid some of those wider economic consequences is a case that makes itself quite readily.

If we think about Ukraine, the NAO has pointed out that we have provided £2.7 billion of military equipment from existing stocks, but we have only agreed £1 billion of replenishment. Does that mean we do not think that needs replenishing or are we planning to replenish it on a much longer basis than would be ideal for those stocks? What does that actually mean? Are we going to have to think about nine years of further backfilling before we get to where we are now?

I might look to my colleagues to the left, who are both setting the requirement and then buying.

The simple answer is that we have gifted a whole bunch of kit that is keeping them in the fight now. We have replaced the most important stocks, particularly in terms of munitions. We have contracts that have increased our production rates of ammunition and increased the stockholdings of complex weapons, but there is no doubt that we need to factor the fact that we have gifted that kit into our longer‑term equipment plan. That is what General Magowan spends his life doing. You cannot simply go shopping for the big equipment that we have given—the tanks, the armoured vehicles and so on. You have to have programmes for that and it will take time. We have to factor that into the longer‑term programme.

What lessons has the MOD learned in relation to the inadequacies of PFI? There have been very significant concerns, even in areas where you had replicable programme capability rather than, as it were, explicit one-offs, that there was inadequate risk transfer, loss of control, loss of transparency. It was essentially a financial fudge, which does not do anyone any good, ultimately. It is still debt that has to be paid. Is that something that you would say you have really thought through and are incorporating into the new work that you are doing?

We are looking at how we might take some of the benefits from the PFIs that went right—and a number of PFIs did go right. When they are properly constructed and well thought through, there is good third-party revenue and there is good opportunity to use underlying industry efficiencies, those kinds of arrangements can be advantageous, but there have also been some very good examples where they were not. We are currently looking at whether there is applicability for the forward programme. No decisions at all have been made. We are still in the foothills of looking at those kind of options. It is really early days.

Thank you for the clarity of that response. Ms Blackmore, the NAO recently criticised processes within the MOD for identifying and reporting losses in 2022-23 and 2023-24. Have you fixed the problem? What was the problem, as you see it, and have you fixed it?

Let me start by saying that the annual audit process is always a really helpful process for us in the Department.

Can we all enjoy the word “helpful”?

We continue to improve our controls and it was very welcome for us to receive an unqualified opinion from the NAO for the second year running. That has followed very extensive work done in the Department and with the NAO to be able to assure the accounts to that position. As you rightly note, the NAO raised an issue with regards to how we reported and disclosed our losses in the accounts. I can confirm that its issue was resolved prior to the publication. Very briefly, the issue that it raised had two constituent parts. The first was in relation to the clarity of the delegations from HMT to MOD. We have worked with HMT to update the delegation letters, to improve the clarity and ensure that all relevant teams in the Department are aware of that. The second issue that the NAO raised was in relation to how we disclosed the losses in our accounts—not how we accounted for them, but the disclosures of the losses. The issue essentially arose because we changed our policy two years ago on the recommendation of the NAO. We used to report our losses only once the final loss was known, which can actually take some time, for all sorts of reasons. We changed the policy so that we reported our loss at the same time that we accounted for the loss. What occurred, and what the NAO pointed out, was that in a small number of areas the Department was operating under the old policy. That has been resolved by talking to all of the relevant accounting teams and we took the opportunity to increase clarity in our internal guidance on that as well.

Great, so we can expect that kind of rapid remedial action in relation to further disclosure of information on equipment, et cetera, filling the gap that we described earlier about loss of disclosure and loss of transparency?

Absolutely, the policy we have in place now is that, when we account for the losses, which is when the decision is made, we will report the disclosure of those losses in the accounts. I would just say that the old policy was not to delay the disclosure or around transparency. It was to be able to give a final value of the loss, which can change over time, as we go through the process.

I am just joining the dots and want to be sure that we are all completely on the same side on that. You cannot have an organisation spending the level of cash that you are spending without escalating interest as the money goes up and as the warfighting capability starts to come under question. I just want to reinforce that point. If you are getting to a world where you can have a clear level of accounts without having a process for reporting losses, that is itself slightly unnerving.

Just to clarify, we absolutely had a policy on how we would report our losses. The issue occurred because a small number of areas were reporting under the old policy, which we had had for many years, but had updated recently on the advice of the NAO.

Thank you, DG finance, for your remarks. I would also like to place on record the Committee’s gratitude to the NAO for all of its input and, in particular, my personal gratitude to the Comptroller and Auditor General, who talked me through the various aspects of this. No doubt the Committee will be coming back to certain topics, especially some of the retrospective work that has happened on that.

I wonder whether I might look to Mr Start to talk about the approach that is being taken in DE&S, which is a good example of the approach that we are looking at more generally and then, if you need some capping comments, either Ms Blackmore or I will fill in.

The first question is why we have temporary staff at all. The answer is because programmes move around and demands move around. Having permanent staff for all of those competencies and skillsets would be fiscally inefficient. You have to have some level of temporary staff. Having said that, we have worked really hard to get that down as far as we can. Over the last year, within DE&S, we have roughly halved that number. We have gone down from 957 to five hundred and something. We can get after it with some really focused effort and that is what we have been doing. There is an irreducible minimum below which it becomes inefficient. It is important to recognise that, if you had zero temporary staff, either you would be holding programmes up, and therefore having lots of knock-on costs because you could not get stuff done, or you would be holding large amounts of staff who were sitting around waiting for work. That would be really fiscally irresponsible. There will always be some, but we need to get it down to the right kind of level. We are trying to make sure our overall workforce planning modelling, firstly within DE&S but also more widely in defence, is as accurate as we can make it. The more accurate you can make it, the more tightly you can manage that number. You spoke to consultancy, so I will speak to that for a minute. There are skills that are just not good value for us to have in-house. Therefore, we use specialists outside to come in and provide that skillset when we need it. You also need people who are able to provide a clear, independent view. Some level of consultancy and advice will always be better value. Similar to temporary staff, we have to get it down to the irreducible minimum and, again, that is down to good workforce planning and being strategic. We are trying to do that.

Within the DE&S piece, we are getting to the sort of level we would want to be at long term, as in the point at which it is optimal value. I am going to try to get it down just a little bit more, if I can. The long-term solution is to have as accurate workforce planning as possible, which is about having very good, modern tools for workforce planning. Across the Department, we are modernising our overall IT suite to allow us to do that. Then we have to accept the fact that there will always be an irreducible number of workforce substitutes if we are going to be fiscally efficient. The challenge that you should give us is to put us on the spot and say, “Is the number right?” I would say, in my organisation, which is roughly 11,500 people, we are now running at roughly 500 workforce subs. I can probably get it down a bit more, but probably not much further.

Permanent Secretary, you will be aware that, prior to the election, the previous Defence Committee inquired extensively into the experiences of women and some of the abhorrent behaviour that they unfortunately, very sadly, had to experience. The Committee did not, however, look into the practices, behaviour or culture within the Ministry itself. There have been serious allegations since last year of a toxic culture, including widespread harassment of women, within the Ministry. What is being done to improve workplace culture in the Department?

You are referring particularly, although maybe not uniquely, to a letter that was sent to me and one of our non-executive directors by 60 or so senior women in the Ministry of Defence about their collective experiences. I am really grateful to them for the courage they have shown in raising those issues. The kind of behaviour that they have highlighted—the sexual harassment, the sexual abuse and, indeed, a range of smaller behaviours—if I might say, micro-behaviours—have no part in defence, in the armed forces or in the Ministry of Defence at all. We launched a programme we are calling “Raising our Standards” and that has done a number of things over the past year. I can talk a bit about priorities for the year ahead. We have fundamentally reviewed our civil service complaints procedure. This is not just civil service, but across the armed forces as well. We have looked at how we promote and support people in raising concerns. There has been strong leadership engagement. In the end, this is a leadership challenge, in my view. Senior leadership of the Department has come together to agree that this is an issue that we need to work through and think about the approaches that we need to take, but also making a direct link in future to performance appraisal. We have set up an external challenge panel to advise us on the approach that we are taking. We have also been leaning into work in the single services. You will have seen recently the report into culture in the Royal Navy submarine service, for example, and the cultural blueprint that the Royal Navy has set out. For the year ahead, from a personal perspective, we need to have a really clear focus on behaviours, including reinforcing the positive behaviours that we want to see. That is both a leadership challenge and about how each individual in the Department shows up and how they treat their colleagues around them. There is a degree of individual responsibility here as well. We have to get better data and evidence about the incidents, how complaints are dealt with, how quickly they are dealt with, and be more open in the sanctions that then apply. Using the developments in the service justice system, which flow on from this Committee’s work around women in the armed forces, but also our beefing up of civil service casework, we will make it absolutely clear that we are taking concrete and decisive action to deal with unacceptable behaviour where we find it. Finally, there is a focus, for me, on education and training, so that, at key points in individuals’ careers, we are really making sure that we are getting these messages hammered home. We know what we need to do. Progress over the past year has been slower than I would like and that is a message we are getting both from the external challenge panel and, indeed, from members of staff. This is a priority area for us in 2025, to build on the work that we have done, with a particular focus on the services, to build on the challenge from Committees like this one, and to make sure that we are picking up the lived experience of civil servants in the Department, not just from a gender perspective or in terms of issues of sexual harassment, but sweeping in our race action plan, for example, and our approach to disability. It is a single programme, and just being really relentless about our expectations of the behaviours that we want in the kind of organisation that we want to lead.

I am glad that concrete action is going to be taken. General, you wanted to come in on this particular point.

From what Mr Williams has said, I am typical of those senior leaders who feel very strongly about this. I am in regular touch with the two women who led that letter and that is exactly why we held a women in defence conference yesterday in the main building. Over 300 people were there. We went through the issues that you have discussed and that Mr Williams has discussed, and plotted a path into 2025. That letter remains live and there were four people on that panel.

I am glad to hear that it is being taken seriously and concrete action will be taken. I am also aware, Permanent Secretary, that in May 2024 Prospect and two other civil service trade unions wrote asking for an independent inquiry. I will not delve further into that particular aspect, given the lack of time, but suffice to say that the Committee is expecting to hold a follow-up evidence session in March of next year, so in three months’ time. This is very much a call to those who would like to give evidence to the Committee.

Again, I am aware of the time, so, very briefly, does the MOD have a standardised approach for assessing the social impact for communities in defence contracts? If so, what have been the findings of such analysis?

The answer is yes. The Government have a standardised approach to social value and social value scoring, which has a minimum of 10% on any bid associated with, from memory, five factors. Within defence, we tend to focus on three, which are economic inequality, climate change and equal opportunity. We can go as high as 20%, and have done, particularly when we recognise they are critical national capabilities, such as the national shipbuilding strategy and the land industrial strategy. There are suggestions that we should go further and amend the way that social value is looked at. There have been a series of recommendations from a number of sources into the SDR, so I know that they are under consideration.

Back to the statement of intent on the defence industrial strategy, one of those lines is very definitely about how we use our buying power to spread prosperity and how we build partnerships with industry and with local areas. Our Barrow plan, jointly with other partners in Government, with BAE Systems and with local authorities in Barrow, is a good example of one particular approach that we can take.

It is of big importance for me that we notice that, within that community, we very much have the haves and the have-nots. How are you assessing how it works to deliver that value?

How we do that assessment, for me, is something that we want to work through, building on the approach that Mr Start has set out, through the work to set out our new defence industrial strategy.

Thank you very much. My sincere apologies, Mr Start; we did not quite get into your war readiness wargames, but no doubt you will explain things to the likes of myself over a cuppa at some later stage. You are more than welcome to submit a written note to the Committee. Indeed, I am very grateful to all of your good selves for taking your valuable time to inform not just the Committee, but also the wider public debate and opinions regarding these important matters. I am very grateful for your notes about sending notes, as well as the classified private sessions, where we will definitely take up your offer, General. Thank you very much.