Political Editor of the Sun heading to the more dollar-esque pastures of Portland Public Relations. You may remember a few weeks ago that we revealed the company had hired Michael Portillo – in a vivid sign of the PR industry wanting to snap up Tories.
Of course we wouldn’t dare to suggest that GPW had Conservative tendencies; but the Sun did rise on Cameron in the middle of Labour party conference.
We’ll have more on this soon. But basically Lord Drayson is going to implement all of the recommendations in the Gray review, apart from a (very radical) plan to to outsource management of the £13bn defence equipment and support budget. He wants to implement it all within 6 months. That means a defence review in every parliament, a 10 year capital budget and a big organisational shake-up that is the MoD equivalent of the storming of the Bastille.
Drayson also admits there is already a hole in the budget plans for 2010 (which is the current “planning round”). They will have to decide on programmes to cut or scale back before Christmas. The “long term” decisions will be left for the strategic defence review. Flagging up the cuts is quite bold stuff and will have industry chiefs reaching for their panic pills.
More from Gray. He argues that the “odds are stacked” against anyone in the defence world who wants to balance a budget. It is something “approaching an iron law of nature” for military chiefs to request to spend 25 per cent more than the available budget. Yet there is nothing in the MoD structure to stop the services from satisfying the “powerful urge” to overbid — adding more kit to the shopping list, while cutting nothing from it.
Now just consider the lot of the poor DCDS (Capability) — the officer in charge of controlling these cost pressures. If this ambitious officer was doing his job, he’d be telling his superiors on the Defence Management Board to show some restraint and axe old projects. Yet his superiors, who can make or ruin his career, have an “effective veto” on any recommendation to cut back. Hardly an incentive to speak truth to power.
One of the most clear and well argued sections of the Gray report explains why the Ministry of Defence convinced itself it could buy more kit than it could afford.
During the 1998 strategic defence review, plans were made with little consideration of the price tag. Politicians were then too weak-willed to tackle the “double think” that allowed officials and the armed forces to go on a shopping spree without the money to pay for it. Here is the key passage:
The Bernard Gray review into defence procurement is finally out. It is as damning as billed. Most of the conclusions were leaked over the summer. But seeing the raw findings is shocking. The graph below is a terrifying summary of the financial mess at the Ministry of Defence. What it tells you is that, on a best case scenario, the MoD can’t afford between a quarter and a third of all the equipment it plans to buy over the next decade. In the worst case scenario (which is more realistic given the national debt problems), Britain can’t afford about half of it: in 2020 the MoD would have about £5bn to spend and about £10bn of commitments. To put it in balance would mean dropping or massively scaling back the aircraft carriers, joint strike fighter, most other aircraft programmes, a much less ambitious or delayed Trident.
How did this happen? Well, the story is all in the difference between the purple line (the 2005 equipment plans) and the black line (2009). Officials underestimate costs to get projects signed-off (in four years the planned commitments soared by almost £100bn), then push everything to the right (delay it) when there is no money to pay for it. Something will have to give. But can the Treasury afford to wait for a strategic defence review next year?
George Osborne has taken a lot of flak from the City over his plan to scrap the Financial Services Authority. But, somewhat surprisingly, he’s winning support from the continent. The “twin peaks” regime has been given the blessing of Jacques de Larosière, the French former central banker and the EU’s guru on financial supervision.
“I really think that in our present world it’s good to have the central bank in charge of supervision.”