In my just-published eight-page submission to the House of Commons Defence Committee's Defence Acquisition and Procurement Inquiry, I took advantage of the Committee's invitation for evidence on these themes to set out how and why British defence industry continues to be rendered dysfunctional, whose interests this serves (those of the central bankers directed by the Bank for International Settlements), what the other repercussions of the policy have been, and how the nation can get out of this death spiral.
The evidence is now covered by parliamentary privilege and is on the record. It builds upon my quarter of a century's experience as an engineer, my five years of experience lobbying Admirals, Generals, Lords and MPs, and my recent British Constitution Group talk on the betrayal of HM Armed Forces.
This evidence has been accepted by the Defence Select Committee and is published on their website.
I would urge everyone to read the submission in full. The text is reproduced below.
Our exit from the EU is immaterial as things stand in defence manufacturing terms. It does offer us great opportunities to get British defence engineering back on its feet—because being under the increasingly stifling EU umbrella has been deleterious to our defence engineering—but MoD policymakers and BAE Systems are both in a woefully inadequate state to revive it anyway.
The SDSRs are not understood until it is grasped that they served EU, not British, aims.
As EU military integration continues apace with or without Britain, the EU will inevitably have a single military purchasing budget before long. This is as was planned by Americans and Europeans in the 1940s. Only those defence manufacturers which satisfy the requirements of those holding the purse strings of that EU single defence budget will survive.
The current MoD procurement system is too bloated and inefficient to recognise that the current BAE Systems is likewise bloated and inefficient. BAE Systems is no longer coming up with good, timely equipment which it can feasibly produce in bulk, and is particularly not coming up with such equipment on its own without the MoD involvement, a bureaucratic kiss of death.
In the paramount national interest, BAE Systems’ raison d’être has to revert from that of taking the MoD’s money to that of making good defence equipment. Present-day BAE Systems is by no stretch of the imagination a competitor with Lockheed Martin or Boeing, or even with EADS, which is poised to take it over and asset-strip it.
We now have a two- to two-and-a-half-decade defence manufacturing cycle in Britain. This is entirely unfit for purpose and ensures that HM Armed Forces have, without fail, obsolete equipment in the field.
Without getting defence procurement and acquisition right in our own nation autonomously, we will have no sovereignty, independent warfighting ability or consumer goods manufacturing left.
35,000 people who bear the label of “Defence Equipment and Support”—more people than serve in the Royal Navy and RAF combined—produce nothing, an unaffordable inefficiency.
Our twentieth-century defence manufacturing history, of which most current policymakers and many politicians are blissfully unaware, provides the key to renewed military equipment success and national prosperity.
This submission is written by David Ellis on behalf of Strategic Defence Initiatives, a defence industry and investment policy research company solely dedicated to promoting British interests, British manufacturing and British engineering, with close attention paid to the interests of the Crown and the British military. The submission is offered out of concern that the profundity of and the reasons for the current desperate state of British defence industry are not well grasped at this crucial juncture.
My quarter of a century in engineering has been in the production of one-off engine projects for numerous applications, which have sold nationally and internationally. The majority of these projects required the combination of many specialist areas of engineering into a single product which had to be a workable engine. The majority of the firms with which I have dealt in my career used to do MoD work until the SDSR 2010 obliterated them. HM Government may think that cancelling a squadron of Harriers or scrapping a couple of ships saves money; my life experience is that it does not, and that is why I am writing this submission. Rather, such cuts cost the nation the engineering expertise in the West Midlands (my part of the country) and nationally, so that we can no longer produce timely goods. I have seen that the replacement model to fill the void after these defence cuts, that of the Local Enterprise Partnership, merely serves to feed itself rather than our economy, because an LEP makes nothing and hence cannot foster production. Instead, the simple expedient of Army, Navy and Air Force procurement can be the driver for British engineering firms and hence British economic growth. Rather than reinvent the wheel, I set out below that we need to return to the success of our twentieth-century defence manufacturing model. A contemporary example of how successful this model can be for the nation at large is that of WITT Energy, which capitalises on motion-to-energy conversion technology first pioneered for defence.
[Committee question:] How well is defence acquisition reform working?
It is working extremely badly. The whole of defence industry policy is currently geared towards pan-European defence systems, manufacture and acquisition. In order to revert to Britain having a healthy defence industry, the whole of defence policy and the money flows for acquisition will have to be re-reformed back to the status quo ante of promoting the purchase of equipment designed and manufactured in our own country. This needs to start with the most basic material of all, steel, whose continued British manufacture HM Government has now decided not to invest in.
What issues, risks and uncertainties exist within the Equipment Plan?
There are extensive issues, risks and uncertainties. We are locked into an EU and pan-European model which prevents us from producing our own equipment for our own Armed Forces, let alone for our customers worldwide. BAE Systems, effectively the only defence manufacturing company left in Britain (by design through decades of MoD policy), is not pitching workable equipment to the MoD any more. That is to say, the MoD’s only British equipment provider of significance is not currently able to present itself as a vendor with equipment which works from the time that it is pitched, which HM Government is prepared to purchase and endorse, and which BAE Systems can readily produce if the equipment it offers is ordered.
BAE Systems’ current degenerate business model as per para. 4 above can be described as the failed British Leyland model familiar to engineers: a model in which the product is of decreasing quality and trading on its manufacturer’s past reputation after the engineering expertise working under that brand name has been hollowed out. In the past five years, numerous current and former Heads of Service, particularly Admirals, have informed SDI that they are heartily sick of seeing hypothesis and hyperbole delivered (at the cost of millions of pounds) to the MoD instead of a tangible, feasible BAE Systems product. Egregious examples are the Daring-class destroyer project as it developed, and its bungled predecessor, the Horizon-class frigate project, from the stage of its very inception. Horizon was doomed or ever a keel was laid, because (to use a car engineering analogy again) it was a Morgan sports car model: every single vessel was bespoke, there was no repeatable engineering core to the frame, and there was in fact no “class” of vessels other than for marketing purposes.
This being so, the core risk in and around the Equipment Plan is the risk (not theoretical but now one with a track record) of the procurers and acquirers being hoodwinked because they lack engineering expertise. The MoD no longer has engineering acumen and has turned into another kind of creature than it used to be. It is not doing what it should be doing. SDI is particularly concerned at the apparently very low number of professional engineers employeed as MoD civil servants.
How is our increasingly dysfunctional and moribund defence equipment manufacturing to be turned around? This can only be achieved by the (re-)introduction of an American-style free-market model. The U.S. Government is prepared to feed its defence industry with dollar flows and with exacting but clearly set production requirements, and regards this as its duty to the citizens which appointed it to defend the realm. Can HM Government afford to behave any differently towards British defence industry; indeed, is it legitimate for HM Government not to do so?
Do we need a new Defence Industrial Strategy?
We need a defence industrial strategy because we do not have one now to begin with. Britain has in recent years had no industrial strategy that takes into account how we would as a nation manufacture military equipment, because such fundamental matters as steel purchasing for British defence industry are already being done on a pan-European basis.
BAE Systems is in a parlous state. An engineer’s honest judgement of the chief reason for this is that it has come to disregard its primary function of producing good equipment, due to its monopoly position (the planned outcome of the 1957 (Sandys) Defence White Paper and subsequent policy papers) and due to its having come to take for granted the MoD’s greatly excessive involvement in ensuring that its products are up to scratch. The MoD must stand back and insist upon BAE Systems coming up with workable equipment on its own. The heavy-handed MoD involvement in Nimrod was more or less a repeat of the TSR 2 débâcle: massive interference threw up massive production problems. (In the end, of course, HM Government bought a Boeing product instead.)
BAE Systems’ products are now of such poor reliability, fitness-for-purpose and timeliness that SDI sources are informing us that HM Forces will end up buying American equipment off-the-shelf by default anyway if matters do not improve urgently. Preserving the status quo in our defence industrial strategy is thus not an option because it will lead to BAE Systems, i.e. British defence industry, withering on the vine. Buying American equipment (including the particular types which the Committee is seeking comment on as case studies) instead of producing our own will hasten our own demise in many ways. It will kill off any hope of our own engineering being resuscitated.
To judge how far our defence industries have fallen, and hence to realise how urgently necessary a new strategy is, we may cite the example of Vickers Shipbuilding and Engineering, Ltd (VSEL)’s submarines. These were known for never developing faults. When BAE took over submarine production from VSEL, the poor design and proneness to faults of the new submarines caused great unhappiness with their operators, and the protracted timescales and cost of their production gave budget holders major headaches. At the heart of this downfall, in engineering terms, was the greatly excessive MoD “constant meddling” (as SDI sources have put it) in BAE Systems’ submarine production. Production management by MoD reached such a pitch as to do HM Forces out of an efficient working model for submarine production, which had previously been perfectly well delivered in the VSEL era. The story of De Haviland’s design of the Mosquito and that of Jaguar 220 are both case studies of men producing their brainchild in their own garages to demonstrably workable specification before production order money was involved at all. With neither the sobering aspect of risk nor the prospect of rich dividend, there is no incentive to produce engineering of genius.
SDI had been hearing from well-placed sources for months that Lockheed Martin was preparing to put in an aggressive bid for BAE Systems to asset-strip it. EADS has now jumped the transatlantic gun by placing its own bid for BAE Systems (having previously called off merger plans with BAE Systems in 2012). EADS represents the lion’s share of Continental Europe’s defence industries. Because military union (alias “defence union”) is a key component of full political union as has been long aspired to by master policymakers of the EEC/EU, if these key UK and Continental defence industries are intertwined, then we will have no autonomy as a nation, any more than we would if our physical forces were intertwined. Intertwining of defence industries will inevitably occasion the intertwining of policies and budgets (operational and capital) throughout the sector.
The retention of BAE Systems as a British-owned company therefore represents a sine qua non of our national sovereignty. In addition, however, BAE Systems as currently independently composed is the only vehicle through which Britain can sell her key defence-industry assets globally. This is because any merged incarnation of BAE Systems will no longer be producing integral equipment but mere components piecemeal, such as the wing of an aircraft.
BAE Systems’ existence (just as, before it, was the existence of a diverse British defence industry) is also the platform from which new and innovative engineering, including in non-military applications, is developed in Britain. Defence engineering is in every sense the apex of design and specification which spins off the entire tree of engineering below it from which we derive the consumer goods which make our lives comfortable and which keep our nation in commerce. It is not overly simplistic to assert that we have lost the British car industry because of our current defence acquisition policy. The former British car industry depended on British defence industries for knowledge, brand trust, tooling, production facilities, capital and ideas. Since (with a time lag) HM Government stopped insisting on the availability of quality British defence equipment, Britain now lacks the knowledge to manufacture cars. Sadly, few contemporary British policymakers understand or appreciate engineering enough to grasp the connection and the inevitability of this causal relationship. Switching off the money flows to defence equipment production entails consequences for our domestic economy and our prosperity.
Post-Levene, can the frontline commands meet their resource management obligations and requirements setting?
They cannot, because the whole of defence policy across Europe is now geared towards managing defence on a pan-European basis. Lord Levene’s report will have been of very limited applicability, and will have been overtaken by events, if he did not grasp that key fact thoroughly when writing it. It is insufficiently clear to SDI, including from the Levene Report, whether Lord Levene and those working for him were aware that the master policy since the Second World War has required European military union by means of a single-point budget (a budget which includes the management of defence services for the EU member states and other European nations which have become intricated in this arrangement). “Our whole concept for the unification of Europe was that it would first contribute to economic unification. Then we hoped to secure an economic-military unity and finally a political unity.”—W. Averell Harriman, United States coordinator of the Marshall Plan (recollecting the policy as it stood in 1948-1950)
The SDSRs heretofore (allowing for the sake of argument that they were produced in bona fide as a genuinely British review of defence and defence procurement policy) are now, by the same token, obsolete and unfit for purpose. The entire vector of those SDSRs has been one of continual cuts to British defence industries and blurring with foreign defence industries until an acceptable blend rate is achieved for the defence industries and the national military forces across Europe to be merged. The currently-serving British heads of services have been gearing up to do defence on a joint European basis, without the nation or even many MPs being aware of the fact. We are now facing the question, which can only be answered by being put to the people as a general election issue, of whether we wish to retain HM Armed Services on a national basis as a force able to operate on its own if needed. The two options differ starkly in terms of defence constellation and the constellation of underlying defence industries. The requisite management styles (the focus of the Levene Report) of each of the two options likewise differ totally.
Does the emerging acquisition system offer value for money?
It does not. The system is so bureaucratic and top-heavy that no viable British acquisition model is emerging. Far too many people in the acquisition system are “flying desks” rather than operating machinery. British defence industry is haemorrhaging engineering, manufacturing, machines and machine tooling at an unsustainable rate. In order for this to be reversed so that we can be competitive and have functioning national defence industries which make timely goods and market them on time, there is only one course of action to follow: to revert to the pre-1957 model whereby we have healthy operational companies which can make defence products (whether or not they group together to make a whole aircraft or ship) quickly. Currently, it takes 20 to 25 years for the acquisition process to result in a product not (sic) to be made! The bureaucracy and the operational frameworks in which our defence acquisition is undertaken are far too long-winded. By contrast, consider the speed with which the P.1 version of the Lightning was rolled out in the early 1950s. Because it was a world-beater ready for market on time, overseas air forces rushed to buy it, providing money for further British aircraft engineering development.
If, as seems on the face of it to be the present policy, Britain is to default to having an off-the-shelf model of acquisition (see para. 10 above), and if we do not want to be haemorraging sums of money so large that they affect the very currency to defence conglomerates in Europe, America or both, then our defence industries unavoidably have to manufacture products quickly that are on time, meet requirements and are of sufficient quality to be interesting to buyers. Our defence industries cannot perform this basic task if our defence acquisition system does not turn the flow of money to British defence manufacturers back on.
Moreover, an off-the-shelf defence solution from the United States inevitably brings with it major software control and permissions issues. From the realm of aviation, Globemaster and F-35 are the two most obvious examples of how HM Armed Forces’ freedom to operate in the national interest has thereby been hamstrung.
It would even be more sensible for Britain to buy Russian equipment than American. This is not a mere devil’s advocate position. If there is any chance that HM Armed Forces are going to be facing Russian-made equipment on the battlefield in the foreseeable future, we would be very well served by being familiar with it before time. Nobody prior to 1982 ever entertained the possibility that HM Armed Forces would be attacked with French (Dassault) military equipment—but they were in the Falklands. Many servicemen’s lives were lost in that war because we had no idea how to fight back against that equipment.
In conjunction with that step, defence policymakers are urgently advised to remove the overbearing oversight and scrutiny which is choking British defence engineering, preventing it from being able to deliver. A prime example of this unsupportable deadweight is the employment of 35,000 people (according to SDI sources) at Defence Equipment and Support (DE&S). That is more people than serve in the whole of the Royal Navy and the Royal Air Force put together, as well as being far more people than work in all three intelligence agencies combined! These tens of thousands are engaged in paperwork and manufacture no equipment at all. That entire set-up needs to be disposed of in a root-and-branch revision of British defence acquisition procedures. If we do not bin DE&S and the entire post-1957 non-British model of British defence acquisition that goes with it, it is impossible that we will ever have a procurement model. The model which Britain currently has is European, not British.
What are the implications of leaving the EU for the viability of the UK-based defence industry?
The fact of the Committee’s asking this very question is in itself encouraging to British defence industry present and future. Theoretically—and if we have any sense as a nation—our leaving the EU presents a truly outstanding opportunity for British defence industry. This is because the opportunity presents itself for us to operate without the EU’s constraints. If done properly, British defence industry will, due to our leaving the EU, again be able to manufacture good products, brought to market in timely fashion, which British and overseas customers will want to buy. However, a rude awakening is needed among policymakers if this promising prospect is to be achieved, as well as at BAE Systems, which need to seize the moment by having knowledgeable engineers with free rein make aircraft and ships that work, proven concepts which can be scaled up to a production run of 30 or 40 without incurring hideous cost and time overruns.
A prerequisite to the proper understanding of this is the aspect that quinquennial reviews, of the SDSR type, are entirely unsuited to the needs of any organisation which is procuring a complex array of precision-engineered equipment in scalable batches and in successive iterations and series. A commercial enterprise which operated this model would not survive. The only sensible interval at which a board responsible for engineering procurement and acquisition should review its requirements and suppliers is weekly (sic).
The above real-life consideration has been obscured by the use of the adjective “strategic” in the title of the SDSRs. In engineering terms, that adjective serves no viable purpose. For reasons set out in our recent article, SDI is increasingly convinced that an accurate name to cover the origins and intentions of these quinquennial reviews would be EU defence and security reviews. The initiative and impulse is continent-wide; the UK is being treated, through the SDSRs and the jargon of “interoperability”, as an interchangeable, not intrinsically valuable or unique, and disposable component being cut to size within that framework.
The rump EU can be expected to respond cleverly and aggressively to our departure by announcing carefully-timed substantial defence spending. If Britain has lost her autonomous defence industry by that not far-off time, we will have ended up handing the EU our defence assets and then having to pay for them, since it will be the EU that decides where the capital budgets for defence are spent. In other words, we may be so outflanked that we end up purchasing back what used to be our own BAE Systems technology with our own money, in a reworking of the 1970s and 1980s junk bond model or the more recent property leaseback model.
How is the SSRO, and the single-source procurement regime, contributing to UK defence?
The SSRO and the SSPR are slowing down British defence production. Our conviction of the reasons for this should be apparent from the foregoing.
How effective is the application of science and technology, and R&D, within the defence environment?
The application of S&T and R&D within defence is not as good as it could and should be. Not enough scientists, technicians and researchers are in the British defence system. The availability of that expertise abroad instead is not a surrogate for a sovereign nation.