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Armed Forces: Future Defence Policy

My Lords, I start by declaring interests. I work for two defence contractors, one an American one, and I also work for a helicopter operator that works in and out of Kabul. I suspect that our defence forces have never been in quite such dire straits as they are at the moment, with overstretch and enormous problems in the procurement budget. I start with the 1998 Strategic Defence Review. Like all previous defence reviews, it decided that we should envisage threats that involved all three forces, and has since been regarded as a bit of a coup by the Royal Navy, in that the concept of projected force meant that we had to have aircraft carriers and, with them, the Joint Strike Fighter and Type 45 destroyers to defend them, in addition to our existing commitment to the Eurofighter and a large shopping list of other procurement projects. That was a very expensive defence review—at its initial printing, it was extremely expensive. I do not accept the Minister’s claim that post-9/11 everything changed and became much more expensive. It was expensive in 1998. If it subsequently became much more expensive after 9/11, why did we not have another defence review? As we have already been told by the noble and gallant Lord, Lord Guthrie, it was thought adequate that if we got that through the Cabinet, somehow the money would be forthcoming. On Monday, a number of us attended a dinner of the UK Defence Forum, which was addressed by two members of the procurement executive from Australia. They said that the Australians have been working for the past 10 years on a budget that now rolls forward 10 years and tells them how much money is available for Australian defence. It is quite extraordinary that when the 1998 Strategic Defence Review was produced, it was not costed and agreed that the money would be forthcoming from the Treasury before it was published. We have just been through a period of extraordinary prosperity in terms of the benign decade when money was clearly available. As the noble and gallant Lord, Lord Guthrie, said, during that time, it was possible for the health budget to go up from just over £30 billion to over £100 billion, but that did not apply to defence. There was the usual rhetoric from the Treasury that there was terrible waste and enormous potential for savings. The Minister also referred to defence inflation running at 10 per cent. I think we would all agree that that is a reasonable figure for the rate at which defence inflation runs. Why then was it not funded by the Treasury? It is not a new eventuality. Defence inflation has been running at 10 per cent for some time. Another provision of the 1998 Strategic Defence Review was the commitment that we could provide one continuing medium-sized operation at a time. That was Afghanistan, which we went into in 2003. In 2005, we went into Iraq, and that was a second continuing medium-sized conflict, which totally changed the concept of the original Strategic Defence Review and meant that we needed a significant increase in defence expenditure. The money was there at that time, but the political will was not. I am told that twice the then Chief of the Defence Staff, the noble and gallant Lord, Lord Guthrie, went to see the Prime Minister, as was his right. As the Chief of the Defence Staff, he had made himself extremely useful to the Prime Minister, and he might have thought that Tony Blair owed him a favour in return. However, each time the noble and gallant Lord made his plea for a significant increase in the defence budget, he was told, "Charles, you know that I cannot interfere with Treasury matters, you must go and talk to Gordon Brown". I liken this slightly to a woman walking into a police station to complain of rape being told to go and talk to her rapist. I am also told that the second time that happened, the noble and gallant Lord got back to his office in the Ministry of Defence and was informed that it had had a message from the Treasury stating that he had to be reminded that his pension was discretionary. I sincerely hope that this story is true because it has all the hallmarks of one of Gordon Brown’s attack dogs: vicious, intimidating and wholly inaccurate. There is no way that his pension could have been cut, except under the most exceptional circumstances. The 1998 Strategic Defence Review was a series of extremely bad calls. Nobody comes out of it well, least of all the Government. Let us now learn. As we face the forthcoming Strategic Defence Review, let us take a page out of the book of the Australians and see what funds are available. I would like to ask the Minister about the contingency fund no longer paying the £3 billion cost of Afghanistan. I gather that it comes back into the defence budget, which effectively means a cut in the funds already available. Can he tell us precisely how that is going to happen? We will end up with smaller defence forces than we have today. Nobody thinks that we are going to see the increases that we failed to get in the past. However, let us ensure that when we have smaller forces, they are properly equipped and can do their jobs properly. We owe our Armed Forces nothing less.