This is an introductory session with the National Armaments Director at the Ministry of Defence. A very warm welcome indeed to Mr Rupert Pearce. It is also a pleasure to have with us Lieutenant General Anna-Lee Reilly, director general for core delivery at Defence Equipment and Support within the Ministry of Defence. A very warm welcome also to Mr Jim Carter, director general for commercial and industry at the Ministry of Defence. It is a pleasure to have with us two colleagues, Sir Geoffrey Clifton-Brown and Mr Clive Betts, as guests from the Public Accounts Committee. Thank you, Mr Pearce, for the one-to-one introductory session we had. Thank you for making that time available. I am also very pleased that you have decided to give public evidence to our Committee. Without further ado, let me start today’s questions. Mr Pearce, what qualifications do you bring to the role of National Armaments Director? Is your lack of a defence background relevant or important?

The short answer to the second part of your question is that it is probably a bit of both. On my relevant background, there are three pieces to my career that I think will bring value to the MoD. The first is that for 13 years I was a lawyer in private practice. I was a partner in a City law firm called Linklaters—it is still one of our most successful law firms—where I did M&A and corporate finance. That obviously brings a comfort with contracts and complex transactions and—hopefully still—a forensic ability to look at complex issues and pull them to pieces; and I can see that a lot of what we do in the MoD is extremely complex. Procurement, of course, is a creature of contracts, so a facility with contracts and the ability to work with lawyers and procurement specialists will be important. Secondly, in the middle part of my career, I spent 16 years in the UK space industry, working for a company called Inmarsat, which went public just after I joined. About six years later, I became CEO, and I was CEO for just under a decade. I took the company into the FTSE 100. The company was then acquired, on my watch, by a private equity buy-out and then sold to an American company, Viasat. Through those 16 years, we did a lot of procurement. We procured about $1,500 million a year of new equipment and new capabilities: satellites, ground infrastructure and terminals. It was also a very international business. We worked in over 150 countries. We worked through a supply chain to market of over 600 companies. So this was a complex company, but we also served Governments. We supplied satellite services to over 60 different Governments around the world, so in one way I got to see how procurement was done in over 60 different countries, including some of our current adversaries. We did a lot of business in China, for example, but we also did a lot of business in the US. My largest Government customer was their Defence Department, and we saw a lot about how they buy. We also did a lot of development work with them. One of the things that the US DoD do very well is work with smaller companies and with new technology to rapidly prototype it in co-development cycles. I stood up an entire organisation behind a firewall in the US, because we had to be American to participate in those programmes, and I saw how the DoD rapidly spiralled development in collaboration with their suppliers. That is a model I would like to take forward in the UK. The third part of my career, before and after Inmarsat, was in venture capital, investing in high-tech start-ups, on both sides of the Atlantic. Most latterly, I have been the chair of three or four boards of high-growth companies, and I have been a venture partner with three different venture firms in the UK and the US. That gives me a perspective on novel technologies that are cutting-edge today, and on how to grow companies fast and help them reach their full potential. One of our ambitions inside the MoD is to really up our game in terms of attracting new technologies, specifically from British companies, and to be able to play a proactive role in fostering those technologies and pulling them through on the back of our demand signals, our ability to work with those companies on the battlefield, and, of course, our ability to fund them through long-term contracts and to crowd in capital around our relationship with them. Those are the three main areas that I hope will be relevant. I am not a defence insider, but I have sold to Government. I think what people were looking for in hiring me was a bit of disruption and a bit of a changed mentality. We have a lot of defence industry experts, and I bring a slightly different perspective. I am really looking forward to working with the more experienced defence insiders to bring that fresh perspective and to find the right balance.

The reason I asked that question, knowing full well that you do not have direct defence involvement—as you said, you are not a defence insider—is that, as I intimated during our one-to-one session, the fact that you have come from business may actually be of benefit. I have run a business; not having any previous parliamentary or Westminster experience does not mean that the likes of myself or other colleagues are not good parliamentarians. Obviously, only time will tell what success you have in your role, but you have our very best wishes. Let me come on to the objectives or targets that you have been given to reform defence acquisition. We are all aware that there are various perennial procurement problems within defence, which Members have been raising for years and years in the Chamber. Can you outline for us the objectives or targets? Are they as demanding and urgent as the rapidly deteriorating international environment requires?

I think that they are. One of the reasons I was so keen to join and take on this role is that we live in very dangerous times, and we need to do more to bolster the deterrence of our Armed Forces and, of course, the ability of our Armed Forces, if necessary, to fight and to win on the battlefield alongside our NATO allies. When I look at the SDR and the defence industrial strategy, I see an urgent plan to move at pace to deliver three things. The first is a transformation of the capabilities of our Armed Forces, at pace, to make sure that we learn the lessons of Ukraine, adopt them and fill the gaps that have emerged in our Armed Forces’ capabilities as a result of both years of under-investment—naturally, through a peace dividend—and emptying our warehouses of anything we could provide to our Ukrainian friends to help them defend their country. The second thing that we are trying to do at pace is recognise that our defence industrial base is a key capability for us to be able to fight and to win, and is therefore a component of our deterrence as well. It is really important that we look across our supply chain and make sure that it is strong, vibrant and resilient, and that it can switch to wartime readiness when necessary. I joke that every contract we sign going forward should have a schedule in it that says, “In time of war…”, but it is very important that we do have defence industrial partners that can flex and can deliver sustainably, at pace, in time of war. That is an urgent task as well; it is not just about procuring the right equipment for our Armed Forces, but about making sure that the people doing the providing are strong, are robust, are resilient to things like cyber-attack, and can support us in time of war. Thirdly, the SDR and the defence industrial strategy are an exercise in industrial strategy. The MoD is one of the few organs of Government that can spend money consistently and at scale into the UK economy to make a difference to the UK economy. The amount of money that we can contribute, if spent strategically, can really help to ignite growth in our economy. It is very important that we use this opportunity to equip our Armed Forces, at a time of peril, in a way that delivers growth. That is why, in the DIS and in the SDR, we have ambitions to design in for export, so that people supplying capabilities to us get a chance not just to supply the MoD, but perhaps to serve 31 other nations in NATO with those capabilities and beyond. I think you have already seen some of the early signals of our ability to switch up our exports in some of the deals we have won, for example in Turkey with the big Typhoon deal, and in Norway with the frigates deal. But this also takes us into the realm of trying to work hard to have a better interface with SMEs. SMEs are the bedrock of the UK economy. We need to serve them better. That does not mean that the primes are bad; it means that we can augment the primes with richer, more direct relationships with SMEs. Finally, the other big challenge is: can we be a force for good in driving innovation in the UK economy? Can we export some of our defence tech to companies in the UK to do more with it outside the defence sector? Can we bring in dual-use technology, whereby we help to found a company with a defence exploitation of their technology, but maybe in a few years we are a small part of its business and it has been able to take its technology into other markets? There is a real acceleration capability that we can bring to UK innovation. Those are the big pillars, and I do sense an urgency in MoD to get this done, driven by how dangerous the times are that we live in and therefore the urgent need to deliver on each of those big ambitions.

Without a shadow of a doubt, the role that you have for the national endeavour is incredibly important, given that the strategic defence review has created the £11 billion “Invest” annual budget. I could ask you about that—or about the defence investment plan, or the lack thereof, or a lot of other things—but I just wanted you to set out the stall. Now that we have been given the context, I want to advise our panellists that we will go through about five different sections. There will be questions on, for example, defence acquisition—namely people, processes and industry, so please try to cater for that first in any responses you have—and then we will move on to capability gaps. Then we will spend quite some time going through the defence investment plan in detail, so I do not want to steal anybody’s sandwiches on that—please do not refer to that at the outset; it will be coming. We will then move on to lessons from Ukraine and homeland defence, and then we will go into detail on financing and “Invest”. That is the rough sequence; no doubt, as is traditional in the Defence Committee, there will be googlies along the way. I will let you bat those in your own style, but let us move on to defence acquisition, people, processes and industry, with Calvin Bailey.

In the next section, we would like to attain an understanding of your initial impressions of the people who are working in defence acquisition, the processes in place to support them, and the industry that you will be working alongside and with. We visited DE&S at some point last year and got an impressive briefing there. It is worth noting that some of DE&S’s metrics are quite incredible. Just to put some of them out there, about 49% of large Cat A contracts are on time globally, but for DE&S the figure is much higher, at about 60%. Its achievement rates for smaller contracts are similarly impressive, with about 0.5% of global projects delivered to cost, compared with about 8.5% in DE&S. There is a really good story out there—it is one that we have observed—but the phrase that always sticks in my mind when talking about this side of the business is: culture eats defence reform for breakfast. Can you tell us your initial impressions and give an example of why my last statement is so true?

I completely agree that culture eats strategy for breakfast. We can have a great plan and a great DIS, but if we have the wrong culture, it will be very difficult to get the plan to go. People need to take ownership at every level of the plan, make it their own and drive it forward themselves. It cannot be just a few people at the top with a great idea; it needs to be embraced by the whole organisation. I do not want to say a cultural renewal—there are a lot of very good things about the culture inside the MoD, which I can talk about in a second—but a cultural development will be necessary. That is something we are planning for as part of defence reform and inside the NAD Group itself. I am happy to talk more about that if you would like me to follow up. My first impressions have been extremely positive. One of the things I have been blown away by is the quality and motivation of the people. They are very smart, very team-oriented and very motivated and passionate about getting the job done, and they work really hard. It is a wonderful environment to come into and have the privilege to lead. I am not sure whether that was my expectation and perspective coming in, because I did not know a lot about the public sector, but I am very proud to be in charge of 28,000 great people. Sometimes, those people are fighting their way through a labyrinthine process that does not help them to get the results they want. It is testament to their hard work that, in the main, they deliver very good outcomes. What we want to do now is improve that, bring up the pace and attack the new challenges inherent in the SDR and the DIS. To do that, we are trying to drive simplification of processes, more powerful delegations to the smart people who get stuff done and more aggressive prioritisation of their ambitions. Above all, we are trying to drive a better balance between the amount of stuff we need to get done and the resources we have to do it. We are obviously focused on improving productivity across the MoD and we have hard targets to do that inside the NAD Group. One of the ways we will get to that is by driving digitalisation through our back office so that people can move more quickly through the digitalisation processes. Once we have liberated that, we will get a step up in productivity. But the application of hard work is not in doubt.

Do you observe any structural challenges? I am going to put some to you. I am very much of a post Haddon-Cave environment and observed a system that debilitates its ability to regulate its own equipment. That has almost been proved by the excellent work in Ukraine. Extracted from the regulatory environment, we can clear drones almost instantly, yet the regulatory framework here prevents manufacturers from operating in our own airspace. There are other big examples. I would like to hear about Wedgetail. How is it that we brought in a military aviation authority that cannot clear its own aeroplanes?

I think you are right; there are issues there, and the acid test is what we have achieved in Ukraine. I know we are going to talk about Ukraine separately, so I will not go on too much here. The people delivering equipment into Ukraine moved at the speed of light and made a massive contribution to our Ukrainian friends, which we are all very proud of. General Reilly was one of the leaders there. I brought her along partly to talk about that, because it is so instructive about what can be achieved if we lessen the permissions and do not throw sand into the gears of the machine. But that was to operate in wartime at warfighting pace and the risks you take on when you do that are quite large. In this case, they were risks that Ukraine was willing to assume.

Some of our failings are not wartime risks. Not being able to clear our own weapons on to F-35s is not about wartime risk; it is about a system that is not capable of integrating its own munitions from its own weapons manufacturers with an aircraft that it produces itself. Not being able to have the same clearances on an Airbus A400M as the French is just profligate and wasteful.

I was talking about the change of philosophy from spending money slowly and ideally not at all, which is a peacetime dividend, to gearing up to being wartime-ready. That is going to require a different set of permissions, a different pace, a different agility; we need to have a culture that supports that, and a system that supports that. Those things are coming hand in hand with the creation of the NAD Group, so that we can move at the pace we need to move—if not at the pace of supporting Ukraine, certainly close to that. What you are talking about is, of course, a different issue, which is thinking systemically. It is very easy to get caught in silos and not think across them. Again, that is something we are dealing with structurally through our introduction of portfolios. To date, in this year alone, we have signed over 2,000 contracts, which is a lot of programmes under way. Many of those are interconnected. Today, we do not have a robust system to coalesce those into a portfolio, to think systemically across the portfolio, to veer and haul between different priorities and to understand the interrelationship between them. That can give rise to outcomes where you have a platform, but no munitions, or the munitions are catching up. I think that the structural changes we are putting in place will improve that, but we have to be very vigilant, step back from these procurements and think systemically. Anna-Lee, would you like to add some comments?

The only thing to add on your regulation point is that we have clearly learned a lot from our operations in Ukraine and how we have delivered capabilities across there. We are looking at regulation in terms of both weapons and capabilities across the board. One of the programmes we have running is the weapons improvement programme, which looks at things like what you are talking about—mutual recognition of other forces’ data, so that we can bring that across and recognise it, and we have safe platforms in service. That is definitely something we are getting after—learning the lessons from F-35 and taking them forward.

My concern—this comes into your area, Mr Carter—is that it is baked into the system already. You are inheriting programmes that have a legacy of failure and blockage within them. You have platforms that are not able to operate seamlessly alongside the same platforms from other nations, and that is going to be baked into the DIP if you do not recognise it already.

I was going to comment on the regulatory reform that is under way under the single-source contracting regulations, which is absolutely seeking to achieve some of those DIS outputs—driving productivity, incentivising industry effectively and driving pace. On your broader comment, I suppose for me a key pillar of the SDR around NATO first leads us to make sure that we are taking advantage of those multinational opportunities and are thinking interoperably. I think that that is an inherent part of the SDR.

Mr Bailey, you make absolutely the right point, which is that our inheritance of troubled in-flight programmes is not magically solved by the changes we are making. Jim can wax lyrical about segmentation of procurement, about the new Office for Small Business Growth, and about commercial pathways, and I am happy to talk about the way in which options in commissioning will actually drive greater simplicity in our approach to procurement. There are a lot of things we can talk about, which you have written very wisely about in previous ATCC reports, notably on the broken procurement system, and I agree with a lot of what is in there. The changes we are putting in place are designed—going forward—to improve the way we build and manage those programmes. Separately, however, we have to get after some of the larger, more troubled programmes. There are programmes out there of very long duration—15 or 20 years sometimes. They are exquisite in the sense that we are not just leading edge but bleeding edge, which I understand if we are trying to outmatch our adversaries—sometimes we want to be at the very cutting edge of technology, because it matters—but these are, by their very nature, highly complicated programmes that can move in and out of trouble. Some of them are red and some are amber, and they require robust management and a lot of attention. General Reilly is in charge of a lot of that. We are happy to talk programme by programme about any of that, but the new structure does not magically solve that. We just have a block and tackle with a lot of effort.

Thank you for coming. There is a lot of concern across the defence world and the wider country about the lack of readiness in our defence forces—the MoD and the armed services. On the other side, there is concern about the lack of a demand signal that would prime investment. Is that your view?

I will leave the question of military readiness to CDS, who is more qualified than I am to talk about that, particularly two months in. Where I can comment is in terms of demand signals.

You don’t share the concern about readiness?

I will always be concerned about readiness, but I am not expert enough to be able to break that down and talk about areas where we are less or more confident. That is a military matter. I am responsible for the demand signals. We intend that, when published, the DIP—the defence investment plan—will very much send those demand signals to industry. And to our adversaries, of course. I think it is the first time in nearly 20 years that we have done a true bottom-up build of a 10-year programme. It is a very exciting document which, when published, will be the catalyst for exciting discussions between us and industry.

If you don’t have a sense of defence readiness, how can you guide priorities?

I am not saying I do not have a sense of it.

What is your resting assumption about defence readiness that is guiding your priorities?

We need to invest quickly in many areas to improve our readiness. We are not where we need to be, particularly in terms of warfighting readiness. I distinguish between the capabilities we need, which is one thing, but we also need standing behind the capabilities, the ability to support and sustain in an actual war. Those two things are not where we need them to be.

Do you draw a distinction between what you might call platform investment over a long period and consumables investment?

Absolutely.

Obviously, we have seen examples around the world where consumables investment is now such that in a war context it can be a matter of a few days between the order and the supply. Is that the kind of framework you intend to move towards for this country?

Yes, 100%. That is one of the lessons we can learn from Ukraine. I will hand over to General Reilly in a second to amplify that. It is now an article of faith that, in terms of readiness, 40% of what we need to have is consumable, 40% is attritable and 20% is sustained. It is a mixed model of what you need to put on the battlefield, but that is a complete change from where we were five years ago, before the evidence of Ukraine. One thing we have benefited from enormously as a country is that, because of our strong support of Ukraine and engagement with the Ukrainian armed forces, we have learned a huge amount about what the modern battlefield now looks like, and what readiness means for us. Anna-Lee, would you like to comment on that?

I would just expand on the three-layered system. Looking at the Army, for example, we have this idea of the survival systems—the 20%—so some of the exquisite programmes we have talked about: Challenger 3, Boxer, Ajax. The attritable layer—the 40%—are mid-cost elements that may or may not be crewed. The consumables are what we see being so successful in Ukraine right now. The ability to procure each of those three different segments in different ways is the piece on trying to accelerate how we do that.

We will come to Kindred later, but I have a limited amount of time so want to focus on a couple of things now. Do you think it is a strategic weakness for the UK that we are not taking drones investment as seriously as the Germans are, with Stark, Quantum and Helsing?

We are taking drones very seriously.

In terms of domestic production, backing our own champions, capability and long-term resilience.

Fair enough; you can always do more. I was up in Swindon a few weeks ago, opening the new Stark factory there, which is pretty exciting. I was also walked around a very large warehouse, which we intend to be the foundation stone of our drone centre of excellence. We hope that will attract more manufacturers to the Swindon area and be the fulcrum for driving drone innovation and interoperability. We are putting a lot of money behind that. We have spent £140 million this year on drones—£30 million on counter-UAS capabilities. We can always do more, but we are not doing nothing; we are doing quite a lot.

Okay. I was thinking about domestic capability rather than working with foreign players who are testing and developing capability here. Obviously, in a war context, you cannot predict what will happen to your ability to control a domestic supply chain. You have emphasised the importance of domestic supply chains. Some people think that when you fight a war, it is a war between supply chains.

I totally agree with that, and it is absolutely part of our strategy that we locate our supply chain in the UK. Sovereignty matters. Operational independence really matters. That does not mean that every company has to be British, but it certainly means that we have to answer those questions robustly. Stark is a good example; it is a German company that has, none the less, established a big capability in the UK and is growing jobs, skills and IP here, which we are very pleased about.

The Committee will know that I have a personal interest, if not a Committee interest, in this area. Can you tell me how the quad is supposed to work? How it is supposed to work is actually very opaque. For example, you have said that you are responsible for platforms, exquisite technologies and long-term development; but the whole structure of the nuclear defence side is not under your remit.

That is absolutely right.

Why is that, and why does it make sense for nuclear but not for other platforms?

Maybe that is not the right question for me, since I am the recipient of the structure.

How do you interpret that? Is it a source of frustration that you will not have the same level of control?

No, actually it isn’t, partly because the head of Defence Nuclear is an exceptionally talented, capable individual who I really enjoy working with—

But we can’t build structures based on individuals.

No, we can’t, but you asked me why I felt comfortable with how it works today. When you look at the renewal of the Defence Nuclear enterprise, it is largely separated from the rest of the MoD in terms of its capabilities and ambitions. Remember that I am two months in, but I think it does make a lot of sense at first blush, two months in, to have Defence Nuclear focused 100% on the renewal of our continuous at-sea deterrent. There are some areas where the NAD Group provides support into Defence Nuclear—for example, around some defence infrastructure—and I am very happy about that. Alongside Defence Nuclear, you have my group, which we are talking about, and then Military Strategic Headquarters, which is everything in terms of military operations and readiness. I think that makes sense. The Permanent Under-Secretary, Jeremy Pocklington, is responsible for supporting Ministers and for some of the cross-cutting strategic, financial and HR capabilities. I can see how that works. From my selfish perspective, it gives me control over a lot of the assets that I need to get my job done, but of course there are interactions between pieces of the quad. My customer is the Armed Forces—my other customer is industry, but let us ignore those for a second—and we have to pay a lot of attention to what our Armed Forces are doing. We are not establishing some sort of air gap between us and them. It is a continuous process—

Right, but you are trying to make rapid acceleration part of the normal tempo of activity, so it will inevitably bring you into some conflict with the existing mechanisms, whether they are at the platform level, the user level or the MoD level. How do you get the right level of challenge, engagement and focus on structures that may have been used to a different arrangement?

One of the things that has really changed is that we are moving from a position where requirements were set by the frontline commands and then, essentially, handed over the transom to DE&S, to a position where problem sets are handed to the NAD Group and it is responsible for driving the capability’s outcomes. So a lot of the brains trust for how we solve a problem well is now coalesced in my group, and we are being asked to think about issues other than just, “What kind of exquisite piece of equipment would the Armed Forces like?” We have to design for exports. We have to think about whether we can drive innovation through the UK economy. We will need to bring SMEs to the table. We need to think about issues like sovereignty and control, and things like that, as well as the fact that we now have a mandate to up our game in terms of pace, which probably pushes against the more exquisite and towards shopping rather than developing, as I like to say, and thinking about whether a consumables proposition delivers the kind of mass and lethality in aggregate that guides us away from something we might have done before. Those capabilities all sit in the NAD Group now, and we will be bringing around the table our experts in the Armed Forces and our experts in industry, so it becomes more of a collegiate conversation. I hope that that will be a better system.

To respond to this idea that we are taking drones as seriously as the Germans, in hard terms Germany will be sending troops out to Lithuania with €350 million-worth of one-way effectors; we will not be doing that with our troops in Estonia any time soon. Our troops in Estonia do not have that capability. In terms of actual fielded capability, we are nowhere near them. To continue this line, which we continually get from the MoD, and we had it from the previous CDS, that we are doing these things and we have these capabilities does not help anyone. We don’t. We are not doing them anywhere near quick enough. That is the reality. Mr Pearce, you had a successful career in the space industry. You said your biggest client was the US Department of Defence and that you are a big fan of how they work with commercial technology companies in spiral development. Are you concerned that the structures they have to do that are almost the complete opposite of the structure you are coming into? They have an organisation outside the procurement pyramid that deals directly with frontline command customers and commercial technology customers to work up solutions, whereas the quad structure is going to be a demand signal from MSHQ—outside your remit—up/along to you in the NAD and then further down into UKDI. Are you worried that that is completely opposite to the successful model that you have seen and worked with in the US?

I am worried about a lot of things, but it is very interesting. I met the chief scientist of the DoW last week in Washington—we were out there to talk about AUKUS—and he is bringing the DIU back into the Pentagon, integrating it under his group with DARPA. So I do think the story of DIUx, which I assume is what you are talking about, is a very exciting story, but the Pentagon is bringing it back into control, not leaving it out there as a quasi-independent body, which I also find interesting. I think they want to drive greater consistency in their procurement and in their efforts around innovation. I am not sure that is necessarily the right model today. I want to comment briefly on the way in which innovation support will get initiated. We have set up a new body called UK Defence Innovation, which will sit along DSTL doing the horizon scanning on novel technologies in the UK and supporting those novel technologies. In some areas, things will be initiated by our frontline commanders if they come across something, but they will throw it over the transom at us. It is the job of UK Defence Innovation and DSTL to go and find these technologies. The early-stage technologies might be in an academic arena or in an R&D arena. Later-stage technologies might be something in someone’s garage or something that has got early funding from VCs. We need to find those technologies in a strategic way. We are sending signals out to the market right now about the kind of areas we are interested in. When we bring it in, we will have control over the rapid capability units of the frontline commands to put technology in their hands, give them the chance to play with that technology and foster it and co-develop it with the young companies that bring it to us. We can fuel that with cash. UKDI has £400 million this year to splash on fostering those rapid iteration cycles. As we mature those technologies, we can bring them in to solve capabilities and go under contract with companies Separately, alongside that, we will have a body whose sole task is to crowd in private capital around our demand signals, and our support to young companies to make sure their ambition is not held back by lack of capital. We will bring the City of London to these young companies to rapidly accelerate them. When you look at that in aggregate, there is quite an exciting vision for mobilising and driving innovation in the UK.

There is a bit of a disconnect, because General Barrons, one of the authors of the SDR, sat where Lieutenant General Reilly is sitting and said the answer was going to be 2.5%—now what’s the question? He said he had absolutely no requirement to fill in the legacy holes in legacy programmes with the vision that the SDR was going to lay out. You don’t have that luxury; you have to fill in those holes. To what extent are you being torn back into the contact battle of readiness, such that the money gets soaked up in there, rather than being able to do the transform function you referred to in your opening remarks?

That is a brilliant question, and that is at the heart of all strategy. All strategy is about how you get there, as much as what it looks like when you have got there. We have to deal with the issues of today while we build the Armed Forces of tomorrow. There absolutely is a tension. That is a normal tension in any change programme. When we come out with a DIP, you will see that reflected in the fact that we have to sustain and enhance our readiness today with what we have and what is available in the next couple of years. We have to keep the pace up there, and we have to transform over the top, if you like, to create the Armed Forces of tomorrow. Those things are somewhat in tension, but they are always going to be, because like any change programme, you can’t just focus on the day after tomorrow; you have to live for tomorrow as well.

We now move on to capability gaps. I want to delve into that for the next 20 or 30 minutes.

Can you give us an update on the Ajax issues? How could the vehicles be declared operationally capable with those issues still in place?

Probably the most important thing about the Ajax problems we have encountered recently is that when we saw our colleagues injured, we immediately stopped the deployment and brought the Ajaxes back to base. We are very committed to safety and looking after our warfighters—our brave men and women. It is now a question of getting to the bottom of the problem and the root cause, and figuring out what we do next. As you will appreciate, we now have four separate investigations going on—one by the Army, one by the Defence Accident Investigation Branch, a ministerial review and an independent oversight wrapped over the top of that. We are trying to be systematic, we are trying to be data-driven and we are going to independently verify everything we do, step by step, until we have more clarity and answers for you in terms of what went wrong, why it went wrong and what we are going to do about it. Anna-Lee, would you like to add anything?

I think it is a bit early to tell. We need to wait for those investigations to bear fruit, as Minister Pollard said in the House yesterday, and then we can make a judgment on next steps. At the moment, we are taking this incredibly seriously, as the National Armaments Director said. The point to raise is that our work with General Dynamics continues. It is really important that they are involved in the solution. Other industry partners are also involved, which is really good to see, as is academia, so this is a whole-force effort in trying to find a solution to what went wrong and what happened.

I realise there are ongoing investigations, but when a vehicle is vibrating to the extent that it is making people ill and disconnecting pieces of equipment, surely anybody who tested it before declaring it operationally viable would have seen those issues. Why was that not picked up before that declaration was made?

I don’t know, is the short answer. It is one of the most tested vehicles of all time, so it is strange indeed that we are encountering these problems. Is it an individual vehicle issue? Is it a systemic issue? We don’t know yet, and that is the point of the investigations. By the way, I would like to pay tribute to General Dynamics. It is very easy in these kinds of situations for your counterparty to pull back and deal only through lawyers, and they are not doing that. They are leaning in and offering every assistance to try to get to the root cause of these issues and understand the nature of the problem. From their perspective, this is the most tested vehicle they have ever had in their history. The problems we have got are not for want of testing and evaluation. I think there were 40,000—

42,000.

Yes, 42,000 km of testing. That is a lot of testing. We are all very bemused about this, to be honest. Hopefully, the investigations will be very focused and we will get to the bottom of it.

Who carried out the vibration analysis on the equipment?

All vibration analysis and testing was completed in accordance with the Health and Safety Executive. Of course, you will remember that there have been issues with this previously; therefore, it has been completed both internally and externally with independent oversight all the way through this programme.

So you have had independent analysis carried out. It has not been done by just General Dynamics.

No.

Is an outside company coming in to do that, or has it already been done?

In the first instance, for all the testing that was previously done—the 42,000 km that we referred to—that has been across the board. What we are talking about now is independent verification coming in for externals. The incident that you are talking about on 22 November with the 30 soldiers is now being reviewed both internally, by Defence and the Army, and externally, by an independent panel of experts. We have put the whole wrapper around this, and we are trying to find the solution as quickly as possible.

You have just said that it is the most tested piece of equipment. Has that testing been done by a company whose expertise lies in vibration analysis?

Yes, and I can get back to you with the details.

That would be very helpful.

I reassure you that as soon as we have the fruits of the investigation, we will of course bring that back to you.

Thank you. Jim Carter, who is going to pay for this? We would very much like to know where the bill is going to lie. Also, are there any ongoing costs with something that is so unreliable? We know that two thirds of the overall costs of any piece of equipment are in the servicing and ongoing changes. Who is going to pay for this?

Just before Jim answers, I would like to say that there is a third component, which is perhaps a bit lost. It is not enough that the Ajax is safe; it also has to be operationally capable. If we end up in a situation where it is only operationally safe if 15 things happen in synchronisation inside the cabin, it is going to be tough to put it on the battlefield without constraining its operational capabilities. We must make sure that we properly support our warfighters on the battlefield, so that they are able to be agile and effective. That is one of our considerations here.

I will come back to that in a second, but I just want an answer on who is going to pay for it.

The Committee will understand that I cannot get into the commercial details of the contract, but it is a firm-price contract that General Dynamics is responsible for delivering. Subject to the investigation, we will be applying the contract terms to make sure that it is carried through.

General Dynamics will be responsible for this?

At this stage, General Dynamics is not in breach of its contract. The investigation will give us further facts and details, which may give us rights under the contract. We will cross that bridge when we get to it. I have read the contract; it looks like a very robust, good, well-drafted contract, and our procurement lawyers are very good. Let us get to the heart of the real facts first, and then we will decide what our legal and contractual rights are. As I think the Secretary of State said, we rule nothing in and nothing out. We have strong rights in our contract, and we will enforce those rights in the relevant circumstances.

Coming back to your last comment before we moved on to the question of who pays, are you saying that this needs to be a workable model, so if it is not going to work, we will not be using it?

It would be a real shame to arrive at a situation where the vehicle is safe only if it is very difficult to operate. We have to remember that we are putting brave men and women on to the battlefield in this vehicle, and they have to be able to deliver their operations effectively and safely. Those two things have to go together. That is all I am saying.

What are your thoughts on how long it has taken to get to this point? We have a huge capability gap without this, and it is already well beyond where it should have been for delivery. Surely this should have been picked up some time ago.

First of all, we have to remember that this is one of the most highly capable infantry fighting vehicles on the planet.

Not currently.

Let us assume that we can get to a place of operational agility and safety—we are not giving up on that yet, at all. Its raw capabilities are exceptional, so this could be an incredible platform for our Armed Forces on the battlefield, and it has tremendous export potential. This is an incredible programme. Yes, it has been troubled, but its ambition has been incredible over the past few years. That is probably one of the reasons why it has taken so long to get to where we are today. We can obviously talk about philosophy of procurement and how you might get there in a different way in the future, but we are where we are. We must not forget that it is a very attractive asset, but we have to make sure it is safe, and throughout its development life, safety has been taken very, very seriously indeed. It is bemusing that, after over 40,000 km of testing and independent verification that it is safe, we have had this incident. We will get to the bottom of it and come back to you with next steps.

The PAC has had a lot of hearings on Ajax, and it seems that one thread goes across it. Let us learn from a particular project of the general: there has been a culture of over-optimism, in General Dynamics and particularly within your organisation, DE&S. CROs and SROs did not know who they were reporting to and were not believed. One thing that needs fixing right now is this culture of over-optimism. Let us have realistic reporting from those people who were in charge.

I have obviously read those reports. Although I have only been around for two months, so it is hard to make a sweeping judgment, I have no reason to believe that the HCDC’s judgment is wrong. I have seen that it is very easy to get over-optimistic on long-term programmes. It is very easy for an SRO to wish that things would go well and to under-invest in plan B and plan C, and not stick up their hand and say, “We have a problem, and we need to do something about it” and summon support. The same is true on the supplier side as well. It is human nature, and I have seen that in my large procurements in the private sector as well. There are things we can do to address that systemically. It starts with making sure that we have a culture where people are actively encouraged to own up when they sense a problem, and to stick their hand up and ask for help. We must learn to fail, to fail fast, to fix, to learn and to reward people who have that radical honesty around what is going on. We must not let things drift, and we must not hope that things will turn up. The Mr Micawber strategy does not get you very far—things never do turn up, and your options erode while you are hoping that they will turn up. I am not saying that is how we behave—I do not know enough at this stage—but I absolutely agree with you that we must deal with over-optimism. It is a human trait, and we can deal with that systemically.

The first thing to say is that I completely agree with you. It is incredibly important that we hoover up insights from wherever they come in a programme like this, whether it is the most junior warfighter or the most senior general. We must have a culture that rewards people for sticking up their hand, whether we call it whistleblowing or whatever. We need insights from across the board from people who are involved with this vehicle. I agree. It is evident from the report of Mr Sheldon KC that there were opportunities in the development programme that were missed because it was difficult to speak truth to power. We must improve those processes. How can we get better if we do not listen to the voice of experience in that way? As I said earlier, we will work as hard as we can to create a culture where people are encouraged to stick up their hand and say, “I’m worried that this is not going well.” Just to correct you on the tracks, I think there has been an evaluation in the past about installing rubber tracks. At the moment, Ajax does not have rubber tracks; it has metal tracks, which are seen as operationally superior. It is not yet proven that the tracks are the problem. Again, we are going through an investigation. We may have news on that. Maybe we need to look harder at that area. The programme has been very troubled, but it is at the leading edge of development. We have developed a unique fighting machine. Whether that was a good decision in hindsight is a different question. Personally, going forward I am minded to try to build things that are simple and less at the bleeding edge—maybe at the leading edge or even a bit back from the leading edge. I believe in buying off the shelf wherever possible and, if necessary, doing spiral development on the back of that so that we have a more incremental approach to development. But that is a very facile thing to say. There are cases where we knowingly take on a big challenge like Ajax because it is the right thing to do for our warfighters, even though we know we have years of struggle ahead of us.

Let us start with Boxer. I was up in Telford with RBSL, and in Stockport with KNDS and Minister Pollard last month. They are rolling off the production line, which is great to see. Sixty-eight have been delivered contractually so far. That is phenomenal. They have had issues with schedule, which they are working on. That links to Ajax as well. We have a long-atrophied armoured vehicle production in the UK that we have restarted from scratch. With Ajax, we have cutting-edge capability. Yes, Boxer is produced globally, but now we are producing it in the UK for the first time and getting it up and running, which is phenomenal to see, but that takes time because of both skills and the supply chain issues we have had. It is great to see Boxer on track. If you have not been up to either site, I thoroughly recommend it. You can see Challenger 3 at Telford as well. There have been some great first steps on Challenger 3. It will be absolutely cutting-edge capability when it comes into service. It is still early days, but we are really impressed by what is happening so far.

It is impressive, isn’t it?

The answer to that is probably yes. These are global issues that affected all the supply chains for Boxer. You have to remember that it is being manufactured elsewhere in the world as well. The war in Ukraine has had an effect, as have post-covid recovery and skills. We are building the skill base. It was so impressive to see so many jobs being created, apprenticeships at both sites, welding academies—really bringing that skill base back. Of course, all that takes time. It is good to see the commitment of both companies to increasing the Boxers coming off the line, which is phenomenal. To do that, they have made some significant investment in both sites. They have streamlined and leaned their production facilities and used really simple production manufacturing techniques that they brought across from Germany, which has been super impressive to see. Hopefully, we will see the number of Boxers increase.

We granted in kind the Archer[1] self-propelled artillery vehicle to Ukraine, which was absolutely the right thing to do at the time. One of the success stories—maybe we will get on to this when we talk about Ukraine—was our ability to use the streamlined process that we have used for procurement for Ukraine to replenish our own capabilities. About £1.1 billion has been spent so far. There is a segue to Jim for procurement segmentation, which is really important, because that is how we try to take that and push it across to meet our SDR promises. On Mobile Fires in particular, we went to Sweden and we bought the Archer 6x6—14 of them. We did that in 10 weeks, and it was a huge success, with a joint Army and DE&S team. That was operational in Operation Cabrit this year, which was brilliant to see.

There is a lot of ground still to cover, and we only have about an hour left. Concise responses would be greatly appreciated, and I ask Members for more concise questioning.

Mr Pearce, I very much want you to succeed, and rather than just wanting it, I have tried to do something about it. I have asked both our procurement Ministers whether, given your relatively colossal pay packet—relative to the civil service—the National Armaments Director will be empowered to tear up the book when it comes to defence procurement. None of us on the Defence Committee wants to have the NAD in a year’s time saying to us, “I wanted to change things, but they wouldn’t let me.” Both procurement Ministers have said not only that he will be so empowered, but that he will be held to account for doing so. I hope that that gives you the freedom and the political cover to do exactly what you want. On the conspiracy of optimism that Sir Geoffrey was talking about, and on your call for radical honesty, one of the most important relationships will be between you and the military. There is a conspiracy of optimism, and it starts at the very top. There is rampant entryism, inasmuch as service chiefs cannot get their favourite project into the programme without saying that it will cost a great deal less than it really will. Otherwise, they do not get into the programme. You will then be presented with the demand signal, and you will have to have a fairly brutal conversation with the service chiefs on a regular basis. Do you feel empowered to have those brutal conversations, and do you think your call for radical honesty should apply to the service chiefs as well?

Yes and yes. I do believe we are empowered—I am empowered—to run an organisation that drives optimism bias out of our decision making. Entryism is a perfectly understandable thing, but the fruits of it are very nasty to taste, aren’t they, because the chickens come home to roost? If it should cost x, it usually does cost x, not y. If, to make the programme look cheaper than it should be, you start engaging in compound assumptions that are overly optimistic, they unwind very badly for you, whether you are saying, “Let’s just dial down the in-life support,” which is 70% of the overall cost of something through life, or, “We will do it in half the time.” We have to tackle all of those at source, and that is why the new system takes that decision making away from the frontline commands and even from MSHQ. They send problem sets to us, and we fix them in a way that will hopefully be more consistent, with less optimism bias, less entryism and less desire to try to cram something down below a level at which it gets the green light. If it is really going to cost something, let’s have a grown-up conversation about that. Let’s make sure that we properly consider in-life support as part of the overall cost. Let’s build in proper contingency. Let’s build in proper resource; in many of the programmes we are looking at that are troubled, I am consistently hearing, “We have not got enough resource to support proper management of the programme.” We have to fix that, and we have to bring our budgets back into balance in that respect. That is a lot to do, and we would not have a chance of getting it right if we had not been vested with the power to get that done. Jim can talk eloquently about a lot of the very practical steps where we alter procurement, but it starts with seizing control over the design. Once you have that, you have a chance to drive a completely different set of conversations.

I think your analysis is absolutely on the money; it is delightful that you have had a chance to put that on the record. You have acknowledged that you have the freedom to do exactly what you need to do, and I am sure we all look forward to seeing you in a year’s time.

I look forward to bringing back, hopefully, a great year of success. It is incredibly important that we move at pace now, because time is not our friend. We have to remember that our Russian adversaries are very dangerous right now, so moving at pace is key.

We have seen rates of ammunition and complex weapon expenditure in Ukraine. I am interested in how long the UK could sustain a fight on a comparable tempo, based on our stockpiles as they are now.

I don’t know the answer to that. Do you, General?

I am afraid it is classified. It would not be something that I could discuss here; I am sorry.

Our plan, obviously, is to dramatically increase our industrial capacity for munitions in the UK. We have ringfenced £1.5 billion to encourage the establishment of at least six factories across the UK, supplying munitions and energetics. That programme is going very well, and we expect to make announcements in the first half of next year, in terms of new builds and developments. It is something that we are getting after in spades.

Presumably you are thinking about what you have on day one, versus how you would then ramp up supply.

Absolutely. In all these relationships, we need to improve our readiness, which is about our core capabilities on day one, but we also need to dramatically improve our ability to flex our supply chain when war actually breaks out, so that we have somebody who can supply us with munitions at warfighting pace on a sustainable basis.

Let’s move on to the defence investment plan.

Clearly it is important that we have an overall plan to determine what weapons we buy and when we buy them, to get the best value for money and to make sure that they are available for our Armed Forces. Where is the defence investment plan?

We are working flat out to finalise it. It is in its final stages, and we will bring it out as soon as it is done.

Do you accept that this is not really a great position to be in, not having an investment plan in place? There is really nothing there now, is there? We have not had anything in the last couple of years that lays out our overall expenditure now and for the next 10 years.

There are two things to say. First, this is a very important thing to get right: it is the first bottom-up rebuild of our ambitions for at least two decades, and it is a very complex document. We have talked about the tensions between readiness and reform; we are working through that on a line-by-line basis, programme by programme. It is a very, very complicated, multi-dimensional document. It is very important to get it right; I would rather be a bit late than wrong. The other thing that is worth saying is that it is not stopping us doing a lot of stuff outside the DIP. A huge amount of activity, in terms of both SDR deliverables and DIS deliverables, is ongoing right now. You have seen us win multiple exports awards; you have seen us announce the creation of UKDI, for example; and there are a number of other things that I could talk about. It is not that everything halts until the DIP lands, but yes, I am with you: we need to get the DIP out as soon as we can.

Is one of the challenges that you face in the job trying to get to a point where speed and effectiveness are not opposite ends of a spectrum, but actually come together?

I fully agree with you. I arrived two months ago, towards the final phase of the DIP programme, and I am very pleased that I did, because I have had a chance to get into it and influence it. As I say, we are working flat out to get it out the door as soon as possible.

I have one additional point. You used the phrase “send signals to industry” about what is going to happen, so industry can obviously prepare what it does to deliver what you want. How far are you working with colleagues in other Departments to try to ensure that your demands going forward, in terms of the weapons and munitions that you need, fit in with our industrial strategy in this country to ensure that we build and deliver things, and with Departments such as DESNZ, in terms of civil nuclear and how that fits in with military nuclear?

That is a great question, and the answer is that we are doing everything that we can to be part of an alliance across Government in many different areas. For example, we are working consistently with DSIT around innovation in areas like green energy, AI and other areas in which they have a strategy, of which defence is part. We are working very closely there. With the Department for Energy Security and Net Zero, again, we have a role to play because of all the land that we have. We can site everything from reactors to green energy storage capabilities on MoD land and help those programmes develop. We obviously have an energy programme, which is looking to green the MoD both at home and operationally, and that also plays into its goals as well. We try to work across Government as much as we can.

Mr Pearce, would you not concede that the Ministry of Defence has failed to deliver with respect to the defence investment plan? The Secretary of State himself is on record as saying that it would be delivered to us in the autumn. I know that there will be some who will try to stretch that interpretation by waiting for winter solstice, which is coming up on Sunday, but Christmas is next week, and we are not in that position. As Mr Betts rightly pointed out, there is no demand signal to industry and everybody else. Would you concede that the Ministry of Defence and Ministers have failed in that regard?

I think you heard from MinDRI on this just yesterday. I will repeat what he said, which is that we are working as hard and as fast as we can to get this out and done. It is an incredibly important document. It is super-important to get it right and to get that plan in suitable balance between readiness and reform. It will be a very exciting document when it comes out: it will show where this Government’s unique investment in MoD is going to be put to work.

I completely appreciate that. As you say, you do not want to get it wrong. None of us wants you to get it wrong, but the fact of the matter is that we just do not seem to have that pace of work. Given the threats that we are facing, we are asking everybody to step forward, and the Prime Minister will hopefully be leading that national conversation, but at the same time the Government does not seem able to agree on the money involved. It cannot deliver that defence investment plan in time. It means that things are moving very slowly, rather than moving at pace, given the threats from adversaries.

I cannot say anything other than that we are working as fast as we can. I see an enormous amount of effort going in—real sprints going in—to get the last details done. We are talking about days now, not weeks or months. We are very close.

We look forward to seeing that in the new year, as soon as we come back.

In response to my colleague, it was great that you said that the lack of the DIP is not stopping you from doing things, but as the Chair says, it is stopping that demand signal. It is also stopping us doing our vital key role of scrutinising the Department. You will be aware that the last equipment plan was in 2023. At the time, the NAO found the plan to be unaffordable, for the fourth year in a row. That plan had the largest deficit since 2012, when the plan first started being produced. Since these are programmes costing billions of pounds of taxpayers’ money and they should be subject to parliamentary scrutiny, after this two-year gap will the defence investment plan be more or less detailed than that equipment plan? Can we expect it to drill down into individual programmes, or not?

The answer is yes. I absolutely hear what you say. It is obviously our intention that the DIP solves for that problem and gives you a strong baseline to interrogate us, ask questions of us and challenge us based on a very detailed plan with a very clear path forward. We take that very seriously, and we are committed to transparency with this group. You have talked about, essentially, previous equipment plans being out of balance. You are right: that is one of the things we have to solve for here, to make sure that that is not something we either inherit or create as this plan rolls forward. There has been a lot of very good discussion about how you keep something in balance and how you resource effectively for our ambition, both financially and in terms of human capital. That is something that will come out very strongly in the DIP.

Will this defence investment plan be in balance? I have sat on this Committee for a long time, and time after time I see failed programmes and I see programmes costing more than they should. Every time, someone comes along and says, “No, we’ve got it right—we’ve got to get it right”, and you get the same old buzzwords. Then you see it, and there is another deficit, and it is undeliverable. How confident are you that this time it will be different?

I am confident. It is not born of experience, because I am new, but we have had very good conversations, in the formation of DIP, around this precise issue. It is not made easy by annuality, because in an ideal world you would want to be able to move capital across years, because stuff moves on you. That is just life, but we have to do the best we can with that lack of manoeuvre. The key is to resource properly financially and in terms of human resources, and to be very disciplined in doing a few things really well, as opposed to consistently taking on too much and hoping for the best. The DIP is the place where those trades and discussions get mobilised. All I can say is that at the quad level, it has been a very good conversation.

To be clear, the DIP will be resourced properly and financially. Is that what you are saying?

Correct.

Interesting. Thank you.

Mr Pearce, I just want to confirm something and have it put on the record. During our one-to-one meeting, you intimated that we would have an annual report on the largest individual defence acquisition projects. You can sense the frustration about the lack of transparency and accountability, which runs counter to what the Secretary of State intimated when he took charge. For the record, can you please confirm to us that we will have that annual report on the largest individual defence acquisition projects, for us and the National Audit Office?

I think that is the NISTA report that comes out every year, of which the largest defence programmes are a significant component.

No, it is not. I know that the Chair of the Public Accounts Committee would like to come in on this point.

You know very well that that NISTA plan is very short on detail. It covers only the very largest projects. That is not a satisfactory answer, if I may say so.

I agree 100%, and that is why I raised it with you, Mr Pearce. I came away from that meeting very pleased that we would be having transparency on those individual projects, because at the moment that transparency just is not there. For the record, can you please commit to that annual report on the largest individual defence acquisition projects?

I cannot commit on the record to that. I have to talk to the Secretary of State and make sure that he is completely comfortable with what I propose. I am very committed to transparency; I have no issue with that at all.

That runs counter to what we have discussed and to what you had previously intimated to me. We need that in writing because, at the moment, there is a serious gap in how we can scrutinise. I know that frustration is also felt by the Public Accounts Committee and the National Audit Office—and as yet, there has been nothing to assuage those concerns.

I hear you, and I am not trying to be difficult at all—I just do not want to get over my skis here, that’s all. I am very happy with transparency and accountability; that is the world I have come from. I have to apprise myself of what you will automatically get, and then we can have a chat about whether it is sufficient or not. Understanding that NISTA does not do it for you is interesting, so let’s have the conversation about what would do it. I am very open to that.

Rest assured: since 2023, as Emma Lewell pointed out, there has been a lack of an annual plan or anything for anybody to get their teeth into.

I will.

Yes. As things roll forward, both of those things will be inherent in the plan. Naturally, we will be getting out of stuff that we are not focused on any more and getting into the new. We are balancing ongoing readiness with the transformation that brings in new capabilities. All of those are going to have puts and takes that are somewhat intentioned, because we are trying to build for tomorrow while sustaining for today. Those are some of the bigger structural tectonic plates of the DIP that are entirely normal when you are engaging in a period of change. It is a judgment call about what you do when, and what you stop doing when. All of that will come out as we publish a DIP, and that will come with an explainer that contextualises the programmes and the puts and takes of those decisions.

General Reilly, “Learn the lessons from Ukraine” is probably the most popular catchphrase among Defence Ministers across Europe. You know them better than most: Kindred, as this Committee said when we visited DE&S last year, is one of the most awe-inspiring and successful British programmes in the last several decades, I think. You have moved on now.

She is being awe-inspiring elsewhere, now.

You have a slightly more heavily regulated domestic programme to look after. I don’t think that it is policy, but we hear officials and serving uniformed folks very often saying, “We don’t want to make the mistake of preparing for war today, because we don’t know what war tomorrow will look like.” While that may sound wise at the outset, you could also say it is an excuse for not being ready for war today. Could you give us a sense of where you sit in that debate?

It was lovely to host you in DE&S and to show you some of the capabilities. You are right; the work that has been done for the Ukraine capabilities, for Task Force Kindred and Task Force Hirst, which is the support into Ukraine, has been second to none. There are some important lessons: as the National Armaments Director already mentioned, the same people that deliver those programmes for Ukraine also deliver them for the United Kingdom. The team that completed the £1.6 billion lightweight multi-role missile from Thales are the same people that have procured LMMs for the UK and continue to do so. The bit about permissions is really important, because that is what allows us to go fast or slow. We have spoken about how the UK programme in the past has been designed to go slower. In this case, it has been designed to go quicker. For replenishment activity, we have been able to use those same freedoms, as I said earlier. When we replenished NLAWs for the UK after we donated some from various stockpiles, we used those same permissions and we were able to go just as quickly, which is really important. I will divert immediately to Jim on procurement segmentation, and then he can pass back. That is a key SDR promise that will allow us to speed up and allow the people in my teams to deliver that for the UK at the same speed as they have for Ukraine. Jim, do you want to come in?

Thank you, General. This is a core part of the procurement reform pillar of the defence industrial strategy. We were speaking about targets earlier. The SDR makes those targets clear: platforms from six years to two, the modular upgrades from three years to one and three months for commercial exploitation. We are driving the segmentation project. We have some key deliverables by March.

Can you give us a very basic definition of what segmentation is in this context?

It is about tailoring our acquisition approach around those key segments and applying different tailored processes. To bring it to life for you, we have already launched five accelerated commercial pathways: spiral, design to cost, urgent, digital and low-complexity procurement. We are also trialling an SME pathway right now, which will launch formally in line with the Office for Small Business Growth in January.

Do you think these programmes are resourced well enough?

We are making sure that we resource these priorities. We are driving a number of key milestones under the defence industrial strategy and we need to do a bit of sequencing of that.

When you say you are making sure that they are resourced well enough, does that mean, “Yes, they are resourced well enough”?

Yes.

Awesome. General, where do you personally sit—or, if you are not able to comment on that, what are your orders—on this: do we need to be ready for how war is fought today, or do we accept that we are not ready for war today because we are going to invest in what we think it might look like in five years’ time?

You always hear that we talk of not fighting the last war and preparing for the next war. It is important to say that, as laid out in the strategic defence review, we operate in the UK under the NATO umbrella and there is a NATO first philosophy. We would fight in a very different way from the Ukrainians. They are fighting an existential war and do not operate in the same way that we would if we were fighting. We need to be careful to learn the right lessons. That brings us back to the way the Army will be structured, with the exquisite capabilities and then the more disposable capabilities off the back end of it. On the back of that, when it comes to procurement, to bring to life some of the things that Jim was saying, if you take an exquisite capability like a Storm Shadow missile, you know it will take a long time to procure. What we have managed to do brilliantly is procure things through Kindred, with the same DNS teams working on it. In fact, I have three teams working right now to deliver Brakestop, which you might have heard of. Brakestop is a cruise missile with five incredibly simple requirements: range, cost, payload, production quantity—can you ramp up?—and being transportable in an ISO container. The idea is that you buy, you try and you scale. We have the ability to trial in the UK and then take it out to Ukraine. That has been within 12 months, with 27 companies. The first firing of Brakestop was yesterday. With those permissions, we can have the exquisite end—things like Storm Shadow—and the really agile end, which is programmes like Brakestop. That is where the beauty of Kindred comes into the UK programme.

Brakestop sounds really successful, and I am sure you will be able to bring your experience from Kindred into your new role with much success. What is your view on the idea, which seems prevalent in the MoD, that it is not a concern that we would currently be unable to operate in any peer-on-peer war and that we would lose most of our mass extremely quickly if we were in the kind of land fight that Ukraine is in? I think that is generally accepted. You may say that is not the MoD’s position, but do you think it is not too much of a concern because we are not in that position, but that we need to be ready for five or 10 years’ time? Or is your drive to make sure that we are ready for that scenario as soon as possible?

Great question—a perfect question for the Chief of the Defence Staff when he comes in, because that is a cross-military capability question. From my perspective, sitting where I do, this is about supply chains. One of the first things the US National Armaments Director said after the invasion of Ukraine was, “Our supply chains are at war. We just don’t know it yet.” Our procurement agencies are as well, and that is what we are seeing. That is what you see with the strategy on munitions, what you saw in the strategic defence review, and what you will see in the defence investment plan—it is about being ready as quickly as possible and being able to respond.

Yes. It is both, naturally. We have to be readier, and we have to be undertaking a transformation over the top of that as well, in a very small number of years.

We have gained all this knowledge, General Reilly, supporting personnel, including women, on the frontline. The Atherton report from this Committee highlighted real shortcomings in uniform and equipment for our serving women on the frontline. I would like to give you an opportunity to tell us where we have got to: do our serving women have the uniform and the equipment they need to be able to do their jobs and maintain a level of readiness?

I will cover two things on this—combat clothing and body armour. You have picked a subject that is incredibly close to my heart, for obvious reasons. First, we have made real inroads on combat. There is a new, unisex combat, which I have been wearing recently—it fits me much better, I have to say—but there is acknowledgment that we need to go further, because women are not small men, as it turns out. Therefore we need to have separate male and female combat clothing, and that is something that we are absolutely looking at. The biggest challenge, and the most pressing, is clearly body armour, and that has been really difficult. There are two parts to body armour: the scalable tactical vest and the plates that sit within it. The scalable tactical vest has been solved by a lot of companies, and that is great, but the ballistic plates, whether they are armour piercing or just plain ballistic plates, are really challenging because of the curvature and the testing. In fact, I can tell you that we do not even have regulations for testing curved plates, so we are having to design them. The good news is that there is a company called NP Aerospace, which has invested a lot of its own money in the development of female body armour. We have a contract with it to provide 2,000 plates—1,000 armour piercing ones and 1,000 plain ballistic plates—for the armed forces of Ukraine. Testing is ongoing at the moment, and we hope to have them delivered in the early part of next year. If they pass the testing, this will be a global game-changer. A lot of people say they have female body armour, but the plate is the really key issue. Be under no illusion, it is complicated, because of the ballistics involved, but if we can solve that and roll that out to our own Armed Forces, it will certainly make me a lot more comfortable.

So your aim would be to get that rolled out as quickly as possible, if the—

Yes. Then it would go to the Armed Forces, come in as a problem statement, have to be funded and so on—all the usual things with any procurement programme. So let’s get it to the point of need first of all, which is Ukrainian women. There are 10,000 women fighting in Ukraine, and they need that body armour.

I just want to say thank you for your leadership on this. You have clearly really moved the dial, and that is an amazing thing for our women.

Agreed. Thank you, and that is a very important issue that the Committee has looked into and no doubt will continue looking into. We have just under half an hour, and I now want to concentrate on financing issues, particularly the “Invest” programme.

Can we have a look at the £11 billion “Invest” programme? Could you describe to the Committee how that is allocated?

That will be subject to the DIP, so the defence investment plan is the forum—

Sorry, so when is this money due to be spent?

That is an annual figure, so—

So what has it been allocated for this year?

Well, I arrived in mid-October, so I have only been here towards the second half of the year, but it has been allocated towards a whole bunch of new programmes and extant programmes.

Could you give us some of the top-level programmes to which it has been allocated, and how much has been allocated for them?

Sure. We have signed over 2,000 different contracts so far this year alone, so it is a vastly complex effort on money. General Reilly, what would you say were the biggest programmes this year?

What are you using this money for?

The biggest programmes are clearly programmes like - stand fast the Nuclear Enterprise - but programmes like Type 26 and Type 31—

How much money is allocated to that?

Per year? We would have to write to you on that.

Okay. Is there anything else besides those two? Are there any other major programmes that you have allocated this money to?

Type 31 is an enormous frigate programme, and Ajax obviously continues to be a massive programme.

There is Ajax, Boxer and Challenger 3.

How much money has been allocated to Ajax this year?

Again, we will have to write to you on that and break it down.

Is there anything else across the Quad?

Enormous amounts of money were spent on Defence Nuclear—

How has that been managed across the Quad?

Defence Nuclear has a huge programme of—

What has been allocated to that this year?

I do not have that number in my head. Again, we can break this down; it is all in our accounts. The Defence Nuclear Enterprise has an enormous programme of renewing the nuclear submarine fleet, and it is the basis to support the next generation of the nuclear fleet. In the end, there is hundreds of billions of pounds of investment in our national nuclear deterrent—that is a huge component of MoD expenditure.

What about cyber? How much has been allocated for that?

Again, I do not have the number off the top of my head, but we are spending a lot of money on electronic warfare.

How much has been allocated for munitions?

Well, we have a programme to spend £1.5 billion on a whole set of new munitions and energetics factories.

So we know what has been allocated for munitions—that is this figure of £1.5 billion.

That is not spent but allocated.

Right, it has been allocated.

We have spent £140 million on drones this year, of which £30 million was on counter-UAS programmes—or counter-drone technologies.

But you are not sure about the big programmes. You will have to come back to us with what has been allocated.

Yes, I am very happy to break that down for you.

Is this budget under or overspent at this point in the year?

I do not want to comment on that. We are working, as ever, to keep the budget in balance through the year.

I think it is a simple question: is it overspent or underspent at this point?

It is modestly overspent.

What would “modestly” mean?

A small amount of money. We managed to—

I assume that you know what your budget is, or someone does in the Department. How much is it overspent by? Is it £1 billion, £500 million or £200 million?

I think that question is better landed at the PUS or Secretary of State.

So you do not know. Do you have responsibility for managing this budget?

I have taken on responsibility for the NAD group component, which is broadly about—

So you do not know what the actual overspend is at the moment.

I do know what the overspend is.

Can you tell us?

No.

Why can you not tell us?

Because I think it is more appropriate for the person with overall accounting responsibility to be the person who comes and presents to you on that. At this stage in the year—

But they are not here.

No, they are not here. At this stage, I would say—

You are representing the Department at the moment.

I am told that it is perfectly normal at this stage of the year. Remember that I have been in post two months, so I do not know a lot of the history here.

I am interested in the current situation.

I understand. I think there is every likelihood that we will end up in balance by 31 March.

Basically, you will not tell us what that overspend is.

I just don’t think it is my place to do that; I think it is the place of the accounting officer.

But we have established that there is an overspend. Given that, is there any acquisition that has been paused or stopped?

On the investment budget, we have a huge number of programmes that are ongoing, and things are pausing and—

Can you give us an example of anything that has been paused—Type 26, for instance? Has Type 26 been paused?

No; I sat in on the programme update for Type 26, and that programme is, in my view, in robust health—it is going very well.

Has anything else been paused?

Well, Ajax.

We have heard about that. Is there anything else? No acquisition has been stopped at this stage?

I will write to you on that—I will dig out the detail. General, does anything come to mind that we should pull out as a good example of something we have paused or stopped?

I am just surprised that you don’t know whether it has or not. We are talking about the financial situation and programmes, and you cannot tell the Committee whether anything has been paused or stopped.

There are thousands of contracts across thousands of project lines. We can get the information and write to you with it.

So no big contracts have been paused or stopped, apart from Ajax?

One of the problems with trying to save money that way is that it ends up costing you more money down the road.

I am just asking for the information.

Mr Twigg is very much within his rights to ask you for something that is in your remit of work, but the key question for me is: is the alleged £2.6 billion overspend causing you to delay or cancel any programmes?

I don’t know where that number comes from.

I think it has been bandied around, especially in parliamentary debates or discussions that I have been involved in. That is why I used—

That is not a number I recognise.

Is that overspend causing you, Mr Pearce, to cancel or delay any in-year programmes?

No, is the short answer. In terms of the “Invest” budget, we are by and large where we would expect to be at this time of year. We are not going through a ritual cancellation or constraint of programmes, or kicking things into next year. That is not where we are. The cadence of spend on the “Invest” budget seems to be about right.

That was a key question for me that I wanted to get on the record.

Do you know what the “Invest” budget is for next year?

That is for the DIP—the DIP is what will settle that.

So it is part of that. Okay.

Not to press it, but I made the point with General Magowan that the greatest damage done to our defence programme is in the in-year budgetary cycle. In context, that is where the damage was done with E-7. There was £2.1 billion for five jets, and all of a sudden we are down to £1.89 billion for only three jets, and that situation continues. That is where the concern is. Perhaps leave out the specifics, but how are you going to address that? Because that is what you will be walking into—I know you will. I know the Department will be in deep distress, because that is what it puts itself through every year. How will you address that uncontrolled culture? That was my remark about culture eating defence reform for breakfast. That culture pervades, and I have not seen anything in any of the reform or redesign that addresses that particular problem.

That is a very good question, and it is an important thing to get right. You are absolutely right. You cannot overtrade or let your “Invest” budget get out of balance with your resources. Otherwise, you will just pump workflow into next year and get a backlog. As the Committee said earlier, we ran pretty large backlogs in the past. Suffice it to say that getting back into balance, and making sure that we have processes that better deal with that going forward, has been a very important component of the discussion in the formation of the DIP. That has mainly been robust conversations about the reality of should cost and the resourcing needed to support the number of programmes that we have going. There is very much a desire among the quad for a fresh start and to build the right kind of processes going forward. Of course, we may have a DIP in balance on day one, but what happens on day three when things change? Priorities and needs change, and what we need to do, through the NAD group, is broker a proper grown-up conversation about the new that needs to be resourced, and if we do not have the resources, what does not get done or needs to be switched off, not just carried forward. You talked about delay and stopping things—we need to get better at changing and stopping things, rather than trying to do everything all at once. I can assure you that there have been some very good conversations about that in the context of the reset that is the defence investment plan. Through the medium of the NAD group, my goal is to ensure that, as things change and new priorities emerge, we deal with that holistically. The NAD group now has the power, because it has the “Invest” budget and the people who initiate programmes, to push things back into balance through consequential decisions if we bring something new in. We either have to resource up for that, or if we cannot do that, we need to stop doing other things to create the resources for the new.

The concern is that, in 2010, that is where the large part of the damage of the last 14 years was done, in correcting the system by clearing the programme down to bring it into budget and never being able to recover the programmes that were taken out. That is the worry that we have immediately.

I agree. You are focusing on exactly the right issue. As we go forward, and we seek to get a better system, which is what we are trying to do with the defence reform, you have every right to interrogate us on how it is going and whether we are getting across this problem more effectively than last time.

Mr Pearce, you mentioned that certain changes need to be brought about, but would you also not agree that it is the level of change from the original specification that has often led to extortionate costs? We need to get a handle on that, so can you commit to make sure that we get the right spec at the outset rather than having lots of changes?

Of course we will do everything we can to ensure that is the case—that we get appropriate design at the outset. Absolutely, that is the foundation stone of a good programme, but many of these programmes run for many years and, often, our market environment changes and things have to be addressed. Those are very difficult things to get right.

Will you be pushing for a large contingency within the defence investment plan? Based on what you just said and discussions within Parliament about an overspend, is your intention to have that big contingency within DIP?

I think it is appropriate to have a contingency in the DIP or to flow down contingencies into the way we design new programmes. Contingency is a sensible measure for risk that is difficult to quantify. I agree with that as a tool, and something that allows proper management of risk—

But you won’t be asking for an above average contingency; it will be similar to what it has been before?

I do not know the answer to that, but I would say that we need a contingency that is appropriate in the circumstances.

In response to my colleague Derek Twigg, did I hear you say that you have been told that the shortfall is perfectly normal for this time of year?

I merely wanted to comment that I do not see anything unusual going on at this time of the year in terms of where we are on budgets and performance.

To help me out, and for anyone listening, why is it normal that there would be a shortfall at this time of year?

In my experience of budgets in the private sector, I see budgets go in and out of being under budget or over budget, whether it is capex or opex. It is not necessarily a big deal; it does not always last until the end of the year, either because there are things that you can easily do about it, or because it is just part of the in-year cycle. That is all I was commenting on. I do not have the many years of experience yet to see what is usual and normal inside MoD, and of course the whole system is changing as well, as we break MoD into its four elements, so that is an additional complexity. I was hesitant about commenting on our financial position in year for the MoD as a whole, because that is not my job. My job is to manage the NAD group budget, and we have an accounting officer who reports overall on MoD—that was all. I do not see anything particularly unusual in terms of where we are at this point of the year.

Thanks for clarifying.

I think we will be. We have a very strong plan endorsed by CDS and the military strategic headquarters, to enhance our readiness and transform our capabilities in line with the modern warfare that we learned about from Ukraine. I am not saying that it is easy to do that; it is challenging, and we have to move very quickly because the threat vectors are enormous. But as General Reilly said, remember that we are not alone in this—we are fighting alongside our 31 other NATO allies to support us. It is an aggregate capability that we should be looking at in terms of both readiness and capabilities. I am confident that we have a strong plan to deliver what needs to be delivered.

Absolutely, I would agree. The construct that we are now implementing in defence reform really strengthens our ability to get the right capabilities in and do so quickly. I have been in defence for 30 years, and I am excited about how we deliver this. For the first time, I have a prioritised list of programmes, so I know where to move my resources to support the main effort of the MSHQ. We are making real inroads into this. It is going to be exciting to have the Committee get us back in a year’s time and hold us accountable for what we are saying we will deliver.

Well apart from drinking from the fire hose of an extremely complicated organisation and a very complex plan—which is a challenge I enjoy—it comes back to culture. We have the people to succeed and deliver this plan inside the MoD. They are just terrific people, and I cannot emphasise that enough, but if we are going to shift gears, we need to behave in a slightly different way. We need to be more open to intelligent risk taking and fixing stuff. We need to revolutionise procurement, and that is an uncomfortable thing. Change is uncomfortable for people. You can change things all you like, but people will not deploy those changes unless you have the right culture to empower them and encourage them to do so and to play as a team. That is the biggest challenge ahead. I have done that before and it is extremely rewarding when you get it right because you see people thriving in a new environment, making it their own, buying into it and driving it forward in ways that as a leader, you could not even dream of. When change gets adopted by an organisation, it is really exciting. It is daunting as a challenge, but if we get this right, we can revolutionise the MoD’s ability to move at pace.

Thank you very much, I will.

The Ukraine war has shown us that modern conflict is as much a test of factory capacity and balance sheets as it is of the actual platforms. Rupert, with your VC background, what changes do you think we need in the way the world of UK defence finance works to be able to invest at scale to increase capacity rather than wait until there is a crisis?

Agreed. By the way, thank you for your report on this, which was instructive. I think it starts with getting the UK finance industry—the City of London, for shorthand—interested in defence and security as an investable proposition. Having already met that community several times over the last couple of months, I am convinced that they see that from two perspectives. First, they see the absolute necessity of investing in this sector to keep our country safe—they see it as a duty, which is great—but they also see it as a very investable sector with great returns. Those are not two boxes that were tickable even a year ago, perhaps, but we have seen things advance a lot. As you know, we set up the Defence Investors Advisory Group to improve the dialogue between the MoD and the finance industry. We will publish the strategy in the first quarter of next year, with the conclusions, but I think the key here is to build something structural and repeatable and easy—in other words, not to treat corporate finance as something that you do occasion by occasion, uniquely and in a bespoke way, but to create products for investment. The DIAG is really helping us get that right. What I want to see across the board, from venture to development to infrastructure and everything in between, is off-the-shelf products ready for investment, readily understood, agreed by Treasury, that work for us and the companies we work with, and, sitting behind those products, communities of investors who want to be in the lead to work with us on the opportunities as they emerge, so that we can institutionalise the business of bringing private capital to our own programmes, to our capabilities acquisition, and above all to the companies that we are looking to grow with. If we get that right, then we will be bringing in the right capital at the right time for companies that are coming into our supply chain, and they will benefit enormously from that. It will derisk their business model, just as we are by providing demand signals and being their customer, and we will set our ambition for their growth much higher than hitherto. My dream is that we create a number of new UK tech unicorns from the fulcrum of the MoD’s needs.

That is really encouraging. It is refreshing to have somebody with your experience in that world come into the world of defence and, hopefully, be able to take us forward. I have been campaigning for a multilateral defence, security and resilience bank. The Defence Secretary has talked about the need for a World Bank for defence. I am interested to know where you are on that.

It is one of the things we will continue to look at with the DIAG and with Treasury. There are a number of good ideas being bandied around in this forum, both on a national basis and on a multinational basis. It is very interesting. I think we need to create products for defence companies across the gamut of debt and mezzanine and equity, and that is one example of that. It is very much in our consideration.

Where are you on how we fight against just feeding the inflation monkey? That is the big issue, isn’t it? If we just continue with the capacity that we have as is, all we are going to do is make things more expensive. How do we fight against that?

As General Reilly said, in our procurement generally, this is something that is costing us. The two things that are costing us are time and the inflation effect of the cost of raw materials and things like that. There are not a lot of tools we can use for that, but one of the tools we can use is to buy multilaterally. The commitment to interoperability in NATO leads naturally to more NATO alliances and collaborations about what we buy and how we buy it. If we can do that together, we have the ability to deal with inflationary pressures in a more effective way, to buy at scale, to get better scale discounts and so on. That is definitely something we are committed to looking at and trying to work through.

When it comes to a pinch point, though, if we are all just buying from the same people, isn’t that going to be an issue?

If we are competing to buy from the same people, we create those pinch points, and you are right: resilience also includes proliferation of supply, geographically and in terms of individual companies. It is a balancing act.

You can also reduce the inflationary pressure by diversity of supply, so growing capacity. A key part of what we are trying to do with the Office for Small Business Growth and others is to bring non-traditional suppliers into defence and grow that. In fact, a key part of our engagement forum, the Defence Industrial Joint Council, is to bring the full voice of the sector, including the investor community that Rupert spoke about, to help bring new blood into defence.

We are grateful for your evidence and I am absolutely with Lincoln Jopp—we want you to succeed. It has been a good hearing, except that we have been very weak on numbers. I hear that there is a real problem in the MoD on numbers, in that the SDR, which has a highly ambitious set of equipment that you are expected to procure, did not cost in the commitment to Ukraine, which is £3 billion a year over three years, did not cost in the Chagos and did not cost in the Afghan resettlement programme. There is a huge shortage there, which I suspect is why we have not heard the defence investment plan yet—there is this tension going on. I am also not sure that we heard the full answer to Derek’s question about delays. I will come on to that in a minute. I have a very simple question, given this tension on finance. You must know what your indicative budget is for next year; otherwise, you cannot plan an £11 billion-a-year programme. What is the indicative budget for next year?

Actually, that isn’t quite yet the case; it will not be the case until the DIP actually lands. You are absolutely right, Sir Geoffrey, that quite a lot of stuff has happened since the announcement of the SDR in the summer. Things have come into the plan—you have identified some of them—including some cost escalation and some new things that need to be adopted as part of that, and that is one of the challenges in forming the DIP. How do we digest that in the DIP, particularly in its early years? I do not think that in my private business life I have ever come across a situation where my ambitions have aligned beautifully with my resources. Strategy is about making that work: prioritising and reprioritising until you have a plan in balance. That is what is going on in the DIP right now.

I am grateful for that candour. I think that another aspect is that you are not going to get a big amount of money—the increase in GDP spending on defence—until 2027. I just find it very hard, as Chair of a Committee that looks at figures, that you do not yet have even an indicative budget for next year. Maybe you are not telling us what it is—that is a different question—but within your internal organisation, how do you organise an £11 billion plan? Here we are in December; you are expecting to start in that new year in April, and you do not have even an indicative figure, or at least not one that you are prepared to tell us.

I do not want to open up the DIP discussions until it is done. Things are moving around. As I say, we are working very hard to get it done. It is nearly there. Fundamentally, the DIP lands, it has a set of ambitions that are costed against resources that I need to deliver, and then I go deliver it. That is at the heart of the defence investment plan, certainly for the NAD. The other side of it is an integrated force plan that also has to be delivered.

We are running out of time, and I have several questions. Let us have short questions with short answers. I want to come back to Derek’s question on delays. We held a hearing on the F-35, the next tranche of which has been delayed. I am urging the National Audit Office to adopt a different way of costing these programmes so that any delay is costed into the programme and we can see the cost of the delay. I am hearing at the moment that because of the budgetary situation there are a number of programmes that are delayed, which inevitably is going to have a cost on those programmes. This is a very unsatisfactory way of proceeding, isn’t it?

Well, yes, in the sense that delay is not a solution. I think what you are saying is that it is a very temporary solution that kicks the can down the road, and I would agree with you. In general, you are delaying something that has a cost associated with it, so you have to run a cost-benefit analysis. I agree with you there, and we have to bear that in mind.

Okay. We are running out of time—the Chair will stop me in a minute. This document produced by this Committee in 2022-23 is all about procurement. It is entitled “It is broke—and it’s time to fix it”. You’ve got it there—you’ve read it! Brilliant.

It’s under my pillow.

Good. Can I ask you two or three questions connected with it, then, please?

Of course.

That document tells us that complicated warships are procured by the Japanese in a third of the time that it takes us to procure them. Why is that?

I need to find out more about why that is, obviously. A new category of warship is about the most complicated thing you can do in procurement. The Type 26 and Type 31 are 15-year programmes, if not actually longer than that; they are arguably 20-year programmes or even longer. I am jumping in at the tail end of the Type 26 and asking a lot of questions about why we are where we are, but I think you are right: as a matter of principle, we need to step back and say, “Who does it better? How do they do it better? Why is it better?” and then not be too proud to adopt the lessons of other nations.

Like you, I had this document under my pillow and was reading it very late at night. It is quite tough reading but there are a lot of lessons in there. I have to say, this Committee did a very good job, and I am not on this Committee.

I agree. What we need to do is be very humble and welcome your insights.

It is worth saying that in the SDR the targets are to take two thirds out of that procurement across those different platforms as well, so it is exactly in line with our targets.

Right. Why is it that the Israelis, with 1,000 people, can do what DE&S does with 12,500 people?

I have no idea, but it is the same point. Just to come back at you a little bit, there are a lot of things in that report that were identified as problems that actually have been adopted by the MoD in the SDR and the DIS, and in the structural changes that we are putting in place. We are on a journey to get better, to deliver on time, to budget to requirements, and to shrink the time that it takes to get some of these procurements away. Time is the thing that we need to focus on more than anything else. That comes through loud and clear in that report, but also in the report on Ajax, which also identified the lack of focus on time as a key determinant, because time is money. Ultimately, if we are going to spend taxpayers’ money wisely, we need to be very cognisant that taking more time does not do that.

The document goes into quite a lot of detail about exquisite procurement as opposed to spiral. In this country, we have done too much exquisite procurement—that is, over-specifying things and mission creep. Ajax is a typical example of that. How are we going to review projects before the contract is issued so that there is a chance that the contract gets it 100% right?

I agree with the issue, and the structural change is to take the design and commissioning out of the hands of the frontline commands and MSHQ and put it into the hands of the NAD group through the options and commissioning team. Maybe next time I turn up, I can bring the CO of that group back to talk about that in more detail, because that is where you get a chance not to fall in love too much with the exquisite and to think about other items like speed, cost, exportability, and of course prioritising the needs of the UK economy. I would love to come back once that is up and running, and we have got a few things under our belt, to talk about the lessons learned from that new approach.

My final question is really important. Article 5 commits NATO to go to the defence—one for all. Article 3 commits each country to securing its own proper defence. Are you satisfied that if we had a peer-to-peer war within General Walker’s three-year horizon, this country would be able to defend itself under article 3?

It is a fundamental question about readiness today.

He put a three-year horizon on it. He said we must be war-ready in three years.

Again, I think that is a question better levelled at the CDS when he comes before the Committee and talks about the military and homeland security capability, and his degree of confidence in where we are today. I believe we have a very strong plan to sustain readiness and improve readiness very quickly. Transformation is going to be a transformation for homeland security as well. It is not just an offensive transformation. If we deliver the ambitions of the DIP, and the ambitions of the DIS and the SDR, I think we will be in good shape.

After we have the DIP and are able to examine it, my Committee would like to invite you to come and talk about it, please.

I would be delighted to do that.

Thank you for your forbearance; we overran by a few minutes. Believe me, there were several more questions that Members had indicated that they wanted to ask. It has been an insightful and fascinating session. Mr Pearce, Lieutenant General Reilly and Mr Carter, thank you very much for your time today. I look forward to future interactions. [1] AS90, not Archer. Archer was the capability subsequently procured from Sweden to replenish the UK’s capabilities