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Strategic Defence and Security Review

The value-for-money study on Trident has begun, as has the SDSR, and it will be concluded long before the SDSR. I hope that it will be concluded before the summer recess. I want to be as open as I can about the backdrop to the SDSR. To take one aspect, the defence budget itself, the future programme is entirely unaffordable, especially if we try to do what we will need to do in future while simultaneously doing everything in the way that we do it today. The legacy that the new Government have inherited means that even if defence spending kept pace with inflation, we would face a deficit of many billions of pounds over the life of this Parliament and more over the next decade. To make things worse, there are additional systemic pressures on the defence budget that exacerbate the situation, including the trend of pay increases above inflation. The previous Government's approach was too often characterised by delay-to-spend rather than invest-to-save. The decision to slow the rate of the Queen Elizabeth class carriers in 2009, for example, increased the overall costs by more than £600 million at a stroke. The bottom line is this: no matter how hard we bear down on the costs of administration and drive up efficiency, we cannot expect to bridge the gap by those means alone. The problem is structural, so the response must be structural to put defence on a stable footing. The Ministry of Defence, as a Department of State, must itself face wide-ranging reform. We intend to reorganise the whole organisation into three pillars: first, strategy and policy; secondly, the armed forces; and thirdly, procurement and estates. We intend to create a more efficient and leaner centre, in which everyone knows what they are responsible for and to whom they are accountable, with clear deadlines and budgetary discipline. Major reform of our procurement practices will be accompanied by a number of industrial consultations that I will shortly outline to Parliament. As much as structural reform is required, however, I am equally determined that the armed forces be reconfigured to meet the needs of the evolving security environment and satisfy the expectations of this country. Although the SDSR is necessarily financially aware, it is policy-based, and I wish to set that policy out to the House.