SDSR 2017?

As parliament broke for its summer holidays this year, so began the normal cycle of government trying to slip out all the bad news and controversial decisions that it has up its sleeve, while opposition parties got into a frenzy about how terrible it all is while conveniently forgetting it's the exact same thing they used to do when in power and pretending that they would never do something so underhanded themselves if given the chance. Except this year's round of "Have I Got Bad News For You" got tongues really wagging as it was announced that the Cabinet Office is implementing a review of national security policy, including in its scope the progress of the commitments set out in the 2015 Strategic Defence and Security Review (SDSR).

That in turn has prompted many to express concerns that we might be looking at a "Next Steps" type situation, which might involve further cuts to defence. (Insert topical joke comparing the anachronistic nature of the parliamentary summer break to the nature of some elements of the armed forces and/or the thinking that underlies them). And there is perhaps a reason to be concerned. Although the main thrust of this review would seem to be focused on updating the UK's security posture in light of this years terrorist attacks in Manchester and London, as well as just a general assessment of the progress of the SDSR, there are underlying issues which could cause a re-think for defence. And by "re-think" I of course mean "more cuts".

The government was planning to borrow a bit over £50 billion in the 2017/18 financial year to cover its expenses, which apparently now qualifies as austerity. (Insert commentary about how language has lost its meaning in the modern era due to the constant and ridiculous use of political hyperbole). However borrowing over the course of the first quarter alone has been higher than expected and at this rate the government will be on track to borrow over £60bn by April of next year. It's also worth noting that annual government expenditure currently includes more than £50bn in debt interest payments, such is the magnitude of the last 20 years of financial maleficence by various chancellors. (Insert commentary about fiscal responsibility here).

On this basis then it's clear that the government still has a lot of work to do in repairing the UK's finances and additional cuts to defence could be seen as a way to ease the government's load, especially if it needed to find extra money down the back of the sofa to fund increases for other security measures such as more money for The Security Service, which is the shite name currently used for MI5 and rendered utterly pointless by their insistence on using MI5 as their home web address and talking about "being MI5" and "MI5 insights" etc. (Insert commentary about corporate messaging and creating brand confusion here).

Further compounding this problem is the reduction in the value of the pound brought on by the Brexit vote, especially when considering the future major purchases of US products such as the P-8 Poseidon and F-35 Lightning. Under normal circumstances you'd expect a big organisation such as the MoD to have taken a sizable hedge position in the dollar prior to the Brexit vote, just in case, given the scale of its potential exposure to currency risk. But then this is the MoD we're talking about, so nothing is certain. We'll find out soon enough I guess.

To give you some idea of the scale of the potential currency problem, back in 2014 the pound was worth (at its peak for that year) about $1.71. It's now sitting at about $1.31. And yet people still insist on questioning the impact of currency exchange rates on imports and exports, and underplaying the importance of a weak pound to things like the UK balance of trade, despite it being what our American cousins might call "Economics 101".

Oh, and then there's the small matter of the equipment fund being underfunded and another emerging black hole in the MoD's finances, despite prior assurances that the MoD had more than enough headroom to cope with any unexpected changes. Time passes, things change, but the MoD seems perpetually incapable of sorting its finances. (Insert additional commentary about fiscal responsibility here).

But there is a catch to all this. Indeed, there are multiple catches. Firstly, the government has spent much time and effort promoting how much it spends on defence, including making a big song and dance about how its spending 2% of GDP in line with NATO guidelines. To cut back spending now would rather deflate the governments bubble. Secondly, as always with these things, how would the government distribute the funding cuts in a manner that was fair and equitable? (Insert preferred service centric argument here).

This last point is perhaps more complicated than its been for a long time. The Royal Navy is preparing the way to bring into service the first of its new aircraft carriers, while work has now begun on the first of the new Type 26 frigates. Yet at the same time the navy's personnel situation is under severe strain, with question marks not just over retention rates but whether it even has enough manpower to keep the ships it currently has at sea, let alone future ones. 

The obvious answer to such a dilemma is to just give the navy more funding. But from where, especially if the plan is to cut spending, not increase it? One might argue (if one were in posh mode) that the army would be a ready source of cash for additional bodies. The army might have something to say about that though, not least because it would effectively reward the navy for not managing its budget and manpower properly. Under such circumstances the army could make a reasonable claim that it was being punished unfairly for a lack of planning by others.

 

And the army has enough problems of its own right now. 

With Afghanistan off the table, the army is searching for a role in the future forces structure. While it is deploying a battle group to the Baltics to help deter against little green men from Russia, it otherwise finds itself as something of a spectator of late. It has enough infantry battalions to be able to form almost 4 complete light divisions, but barely enough supporting elements for one. It can scrape together just enough tanks for an armoured division - at least in an all out effort and putting everything else on hold - yet other chunks of its vehicle fleet are almost old enough now to claim the state pension.

In short, it lacks the ability to re-fight the cold war and yet also lacks the ability to fight the current ones. As Russia has surged ahead with the development of ground based electronic warfare, drone integration, anti-armour artillery and flexible, fast deploying formation structures, the British army is stuck somewhere between the old army of the Rhine and Wellington's peninsular army. It would be instructive at this point to compare what the army can contribute to something like the ongoing fight against ISIS to what the RAF brings.

The RAF has Typhoons and Tornadoes dropping bombs and blasting off Brimstone missiles like they were going out of fashion. It has tanker assets supporting coalition operations. It has transport assets providing airlift of supplies. It has Airseeker available to do its secret squirrel airborne electron hoovering act. It has Sentinel for tracking ground movements. It has Reaper drones for observation and strike. Virtually all of the major components of its force are capable of pitching in one way or another. It has in effect adapted quite well to the modern operating conditions, albeit at the expense of some gaps in "conventional" capability, such as lacking an anti-radar weapon for suppression of enemy air defences.

The army is no slouch by any means, able to offer Iraqi forces support ranging from medical services and training to counter-IED expertise, frontline special forces support to tactical training for low level infantry units. But you get the sense that with a slight change of tack this whole Adaptable Force concept could be a lot more, well, adaptable. If the army possessed something like the US HIMARS mobile rocket system for example it might be able to offer Iraqi forces more than just a guiding hand and a pat on the back. While the RAF and the RN have built in a degree of operational flexibility to their force structures over time, the army does seem to be a little left behind.

The army it would appear needs a major re-think of its force design and a major program of recapitalisation. Supposedly part of the remedy for that will be the new Strike Brigades, even though nobody seems to know what that actually means in practice yet aside from it incorporating the new FRES tracked reconnaissance vehicle along with some kind of medium weight 8x8 wheeled APC, with the German Boxer looking like the leading candidate at the minute. (Insert commentary about the ridiculous nature of having a wheeled vehicle for strategic mobility mixed into a formation with tracked vehicles here).

Thus it might be reasonable to argue that the army needs all the funding it can get to keep its own house in order. On paper I think it's difficult to argue that the army doesn't have some room to absorb some cuts, but I think beyond any required savings being passed to the treasury the army would have a good case for retaining any further money from efficiency savings in order to sort itself out. That perhaps is another post for another day.

As mentioned earlier I think the RAF is in fairly decent shape, with the introduction of the new Lightning II and the Poseidon maritime patrol aircraft being covered by the coming retirement of Tornado and Sentinel, with Sentinel's capability likely being shifted to another platform. There are still gaps, such as the previously mentioned lack of a SEAD capability, but overall the RAF seems set for the future. 

Where then does the RN get the manpower funding it needs? I suspect the difficult answer is going to be from somewhere within its own budget. With all the talk earlier in the year about cuts and reshuffling in the Royal Marines, it's possible that more "reshuffling" (cuts) might be considered in order to make the RN's numbers add up. Such is the price of poor accounting I guess.

This of course all assumes that the review will recommend more cuts to defence. It's entirely plausible that this will be something a lot more innocent and maybe even positive for the forces. The timing of the announcement doesn't bode well however. More pertinently, even if we assume that no major changes are planned, that doesn't mean that no major changes are required.