by Jim Murphy and Michael Dugher
Yesterday Labour launched a report into defence procurement, which we commissioned last year to come up with radical ideas for the future. This is an independent report to the shadow defence team, which we will carefully consider as part of our policy review, which reports to Ed Miliband in 2012.
During a 10 month consultation our review team met with dozens of companies and with countless officials, politicians, trade unions and academics, including taking evidence from overseas. It has been extensive, open and ambitious and is precisely the sort of exercise Labour should engage with in order to reconnect with the country and develop bold proposals for future policy.
Our starting point of this exercise was simple: defence is vital for our nation and effective procurement is essential for our defence. It helps ensure that our forces have the equipment they need when they need it, able to carry out the tasks required of them.
We know that Labour made huge strides in government – the equipment programme was advanced and our personnel were better cared for. We know also that the reforms we introduced to procurement did not lead to lasting change and tackle the systemic problems which built up over different governments’ terms in office.
The review’s focus was to look at how the system could be improved to ensure equipment matches need, planning is effective, procurement is aligned to UK industrial, science and technology policies, and that equipment is delivered on time and to budget. The report meets both benchmarks of success – honest in its analysis and hard-headed in its proposals.
The review proposes taking on the “conspiracy of optimism” – perpetual and consensual under-estimation of cost and time projections in order to agree contracts – by introducing a system whereby projects are cancelled if time and budget estimations are exceeded by 20%. This requires preparedness to invest early to make savings later.
Several proposals begin to shape a new defence industrial strategy. Identifying which capabilities should be based in the UK and which purchased overseas in defence reviews would provide clarity and certainty for industry. It is suggested also that we should apply a new “UK control test” to imports, so we only purchase abroad what we can maintain in the UK, making maintenance cheaper and boosting our industrial base.
Procurement is in essence the process by which frontline need is met, and procurement systems must provide for 100% of frontline requirements without any compromise. Sometimes, however, additional requirements to those needed are added, pushing back delivery dates. The search for the “exquisite” can delay deployment of the excellent and a necessary culture change where design is to cost is a significant insight from the Team.
These are just some of the proposals recommended which we will study carefully as we form our comprehensive review of defence policy. It is notable, however, that in commissioning the review we are now leading this debate. Consider the Tory position. After nearly a year and a half in office, decision after decision has made it strikingly apparent that this Government has no real industrial strategy. Whether it’s on Sheffield forge masters, Bombardier train manufacturing in Derby, the government has given up at home. In their green paper equipment, support and technology for UK defence and security, published last December, their complete lack of ambition was laid bare for all when it stated: “our default position is to use open competition in the global market, to buy off-the-shelf where we can”.
The government says they want to see a private-sector led recovery – we all do – but our real fear is that the government’s laissez-faire approach, and Liam Fox’s almost dogmatic devotion to buying off-the-shelf, could see one of our best performing manufacturing sectors wither on the vine. This comes after an SDSR which has uncosted efficiency savings and has left gaps in both the budget and the equipment programme.
Labour knows that if we are to sustain world-class capabilities at home we need to provide the conditions that support a strong, sustainable defence industry. And why is this so important? Defence manufacturing plays a vital part in our economy and the UK is a world leader in this field. Over 100,000 people (including 25,000 graduates) are employed directly by the defence industry. If you add indirect employment down the supply chain, this number grows to over three hundred thousand, accounting for over 10 per cent of our whole manufacturing base. The industry is also a massive wealth creator for our economy. In 2010 alone, it registered 22.1 billion pounds in turnover and export sales amounted to 9.5 billion pounds – some 43 per cent of total export revenues.
If you were to design, from scratch, an industry-of-the-future that offered large numbers of well-paid, highly-skilled jobs, with large numbers of apprenticeships and huge opportunities for young graduates – an industry that contributed greatly to our export wealth and our national income – you would come up with something that looks very much like our defence industry.
In short, effective and efficient defence procurement is essential for the UK’s security and economy. Failures in the system are organisational not political, but now there is one political party getting to grips with the issues. A strong defence posture is necessary for Britain to be a secure and influential nation. The proposals are in yesterday’s report are an indispensable contribution to the debate about how that is achieved. Labour is listening and learning and is once again a party of ideas. We are facing up to the problems of the past, but looking forward to the future. That is what this defence procurement report was all about.
Jim Murphy is the Labour MP for East Renfrewshire and shadow secretary of state for defence.
Michael Dugher is Labour MP for Barnsley East, a shadow defence minister and parliamentary private secretary to Ed Miliband
