Weekly Defence Insights by Ollie Welch NDI

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News from Westminster this week has been dominated by the release of the general election manifestos from each of the principle national parties. Below you will find a summary of each, relating both the EEF commentary against each manifesto in general as well as an in-depth look at the respective proposals on defence. Overall, on defence, there appears to be little in the way of inspiration for addressing the deepening budgetary crisis that MOD finds itself in. Whichever party finds itself in Downing Street come the morning of 9th June, it is evident that work will need to continue to ensure that defence is given the resource it requires to deliver what is expected of it.

CONSERVATIVE (https://www.conservatives.com/manifesto)

 

Commenting on the Conservative manifesto, Terry Scuoler, Chief Executive of EEF, said:

 

“The Prime Minister rightly says that achieving a smooth and orderly Brexit is a priority, but she continues to say no deal is better than a bad deal. The two are incompatible as leaving the EU without a deal is a recipe for chaos. Anyone going into Brexit negotiations will of course need a clear mandate and a strong hand. By setting out how difficult it would be for the UK economy if Brexit is neither smooth, nor orderly, she is saying in effect that Britain must achieve a good deal on trade.

 

“To do that there will inevitably need to be compromise on all sides. It is business-critical for whoever is the Prime Minister to negotiate a deal that allows free and fair trade between the UK and our largest and most important market. Anything else will be failure.

 

“The Conservative Party’s manifesto gives business a clear and welcome commitment to a comprehensive industrial strategy, which we applaud. The Party’s commitment to tackling the vastly uncompetitive energy costs now faced by industry is just one example of the importance of this approach. If elected the Conservative government must work quickly to flesh out these detailed plans and implement them.

 

“Business will also welcome the intention to sticking with current business tax plans which offer stability and predictability for business. As ever, the small print will be important as government seeks to rebalance the fiscal deficit”. 

 

On defence, the Conservative manifesto makes the following commitments:

  • Continue to spend at least 2% GDP on defence and, separately, increase the defence budget by at least 0.5% above inflation in each year of the new parliament

  • Maintain the overall size of the armed forces

  • Invest £178 billion in new military equipment over the next decade

  • Retain the Trident continuous-at-sea nuclear deterrent

  • Royal Navy will receive eight Type-26 anti-submarine frigates, five offshore patrol vessels and the Type-31 light frigate programme

  • Army will get AJAX armoured vehicles, Apache attack helicopters, new drones and weapon systems

  • Royal Air Force will receive the F-35 Lightning II and P-8 Poseidon

 

Comment:

 

The Conservative manifesto is, on paper, the most comprehensive on defence of any of the major parties. It reconfirms the commitment in the 2015 Strategic Defence & Security Review that our armed forces will be resourced to maintain the ability to conduct worldwide, expeditionary operations. It contains the same guarantees that troop numbers will shrink no further and, of course, the renewal of the continuous-at-sea nuclear deterrent through the Dreadnought submarine programme. However, there appears to be little evidence as to how a Conservative government would intend to close the multi-billion pound gap in the MOD’s budget that has opened up since that last review in order to pay for the commitments it made in 2015. Simply maintaining defence spending at the NATO-endorsed 2% GDP does not address this – and the assurance that the defence budget will increase by at least 0.5% above inflation in each year of the new parliament looks insufficient on its own.

 

In terms of investment in new equipment, EEF welcomes the manifesto reiterating plans to invest £178 billion in new military equipment over the next decade - including references to specific pledges from the 2015 SDSR on Type-26 and Type-31 frigates, AJAX armoured vehicles and F-35 Lightning II, all of which are of significant value to the UK defence industry. However, without initiating a proper review of defence with a view to reflecting in the budget the significant changes in landscape since 2015, the manifesto fails to provide the confidence required to ensure this can all be delivered according to plan. Moreover, there is no reiteration of the commitments to driving national prosperity through strategic defence procurement. For UK industry, that is no place to start in terms of investing for the future.

 

 

 

LABOUR (http://www.labour.org.uk/index.php/manifesto2017)

 

Commenting on the Labour manifesto, Terry Scuoler said:

 

“This is a comprehensive and detailed plan which contains some sensible individual measures which are worthy of further debate as part of an industrial strategy, as well as ongoing support for key elements of social care. These have to be seen, however, in the context of whether the overall economic plans will be positive for growth, job creation and investment, both UK generated and from overseas.

 

“Here, it falls down badly with policies that are from a bygone age and an overly interventionist approach. Given the potential impact of Brexit, sending out signals to business promising significant tax hikes and increasing red tape is hardly likely to generate the investment and economic growth we vitally need. Overall we have to ask, do the proposals have credibility in terms of cost and are they practical to implement. The answer is clearly no”.

 

On defence, the Labour manifesto makes the following commitments:

 

  • An immediate Strategic Defence and Security Review

  • Spend a minimum 2% GDP on defence, including a guarantee that the Armed Forces will have the necessary range of equipment to fulfil their role

  • Commitment to publish a Defence Industrial Strategy, including a National Shipbuilding Strategy, which will include procurement processes that support British defence manufacturers and the steel industry, development and innovation, and skills sustainment

  • Proceed with Trident renewal accompanied by a promise to lead multilateral efforts with international partners and the UN to achieve a nuclear-free world

  • Cyber security will be placed at the heart of defence and security strategy and a charter established for all companies working with MOD

  • Cease arms exports to countries where there is a concern they will be used to violate international humanitarian law

 

Comment:

 

Labour’s commitment to continuing, as a minimum, to meet the NATO commitment to spend 2% GDP on defence is reassuring, provided that this is a baseline from which to grow. We welcome Labour’s promise of a new Strategic Defence and Security Review; much has changed since 2015 and the affordability of the existing defence programme based on current budgets is far from clear. However, the cautions of our military commanders must be heeded to avoid this becoming a further exercise in slashing equipment programmes in order to balance the budget. The review must aim to close the growing gap between the legitimate expectations of the armed forces, based on the commitments made in the 2015, and the funding that is currently available to deliver this. The promise of a Defence Industrial Strategy is therefore also welcome, which must properly recognise that the UK defence industry is not only a major contributor to the economy, but also ensures that our Armed Forces are equipped with the best tools for the job now and in the future.

 

We welcome Labour’s specific reiteration of its commitment to continue with the programme to renew the UK’s nuclear deterrent. Not only is at the heart of the UK’s national defence posture, it is a driver for the economy, supporting thousands of highly-skilled jobs throughout the UK supply chain; skills that are necessary across defence to ensure our Armed Forces can continue to rely on the industry that sustains it.

 

We support policies, including the refusal of specific export licences, where these are shown to be against the national interest or in contravention of international law. However, Labour’s proposal to put human rights considerations into such decisions is vague. The existing licensing regime is already robust in its safeguards against UK exports being used for such purposes. Government should not seek to stand in the way of legitimate export opportunities that are both good for the economy and, in many cases, promote the UK’s broader diplomatic objectives.

 

 

LIBERAL DEMOCRAT (http://www.libdems.org.uk/manifesto)

 

Commenting on the Liberal Democrat manifesto, Terry Scuoler said:

 

“Business needs clarity and certainty about the future relationship with the EU and another referendum is surely unrealistic and would cause massive further uncertainty. However, it’s clear that in voting to leave the EU, there was no real discussion about how to go about it while protecting the nation’s economic interests. A so-called hard Brexit would be disastrous for business. Companies want a clear commitment to achieving a seamless trading relationship with our EU partners, with no tariffs and a straightforward and simple customs arrangement.

 

“The Liberal Democrats also rightly point to the importance of high-skilled migration and there are themes in the manifesto which would fit comfortably under the umbrella of an industrial strategy, from infrastructure commitments to supporting the Catapult programme.  

 

“Right now, however, amidst all the electoral clutter business wants to see how the political parties are going to promote the investment, growth and jobs we badly need. This manifesto has a number of measures which would be negative for investment whilst adding yet more burdens to businesses, especially larger ones.”

 

On defence, the Liberal Democrat manifesto makes the following commitments:

 

  • Spend 2% of GDP on defence, with a focus on addressing critical skills shortages by recruiting STEM graduates to be armed forces engineers, providing ‘golden handshakes’ of up to £10,000

  • Investment in security and intelligence services and acting to counter cyberattacks

  • Maintain a minimum nuclear deterrent, reducing the Dreadnought programme to three submarines instead of four and replacing continuous at-sea deterrence with measures such as unpredictable and irregular patrolling patterns

  • Work to lead international nuclear disarmament efforts

  • Controlling arms exports to countries listed as human rights priority countries by the Foreign Office and suspend arms sales to Saudi Arabia

Comment:

 

The Liberal Democrat’s commitment to spending 2% GDP on defence further demonstrates that this is the new political baseline, though unlike the Conservatives and Labour, there is no suggestion that the Liberal Democrat’s view that as a bare minimum from which to grow – indeed one reading of their manifesto would suggest they consider it to be a cap.  Committing to improve our national cyber defence capabilities, and address critical skills shortages in the sector is therefore laudable, though it is unclear from where the investment would be found. The manifesto also fails to acknowledge that a strategic approach is required to addressing systematic failings in procurement policy to ensure that the Armed Forces can rely on UK defence manufacturers to continue delivering the kit required into the future.

 

The Liberal Democrat proposals on reducing the Dreadnought programme to a posture of ‘minimum nuclear deterrence’ does not add up. Economically, we are sceptical that the economic savings to be had from investing in three submarines rather than four are significant. Moreover, only a continuous at-sea deterrent provides the necessary level of surety-in-response to provide any deterrence at all. This is not a programme that can be ‘salami-sliced’.

 

We support policies, including the refusal of specific export licences, where these are shown to be against the national interest or in contravention of international law. However, we are concerned that Saudi Arabia would be uniquely singled out by an incoming Liberal Democrat government for blanket suspension. This would be damaging to the UK’s diplomatic objectives in the Middle East region and detrimental to the credibility of a world-leading industry sector that makes a significant contribution to the economy.

 

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