Defence Investment Plan

My Lords, I thank the Minister for both the briefing and prior sight of the defence investment plan, which he provided to me and my colleague, the noble Earl, Lord Minto, yesterday. I doubt any plan was so dogged by delay and preceded by such drama as this one, but that doleful prelude was eclipsed by the gloom and scepticism that engulfed the plan when it became public. To quote my honourable friend in the other place, Mr James Cartlidge, it is “too little, too late”. The threat we face is now. This plan, lacking in significant detail, is for the next four years. It was intended to deliver the recommendations in the SDR. It does not. It should have laid out a path to the 3% of GDP needed before the end of this Parliament, never mind during the next one. It does not. As for a path to NATO’s target of 3.5% of GDP by 2035, that apparently remains in the mists of the Prime Minister’s imagination: undiscernible and shortly to disappear. The Prime Minister criticises the previous Government for not spending enough, but I point out to your Lordships that my party responded to the threat as we understood it then, in the wake of a searing economic challenge inherited from a Labour Government in 2010. However, despite austerity, we kept the RAF Lossiemouth air base open; ordered the vital Poseidon planes that operate from there; ordered eight Type 26 frigates and five Type 31 frigates, which are being built now; launched the Global Combat Air Programme to produce the next-generation fighter; and commissioned the Dreadnought programme to renew our nuclear deterrent. I am not going to speculate on Mr Burnham’s Harry Potter powers to wave a magic wand to fix this deficient defence investment plan. Given his projected political strategy to date, fixing defence is not on any wish list I have seen. However, I know that none of this is the Minister’s making. He is here to answer questions, which I know he will do with his customary loyalty, integrity and courtesy. I will start with the Secretary of State’s foreword to the plan. If we strip out the roseate language, £298 billion is to be spent over the next four years. Some £283 billion of that is not new money; it is simply what is required to keep the doors open, pay the people turning up and ensure that the day-to-day bills are paid. The crux question is: how much is needed on top of that? The Chief of the Defence Staff, Sir Richard Knighton, says that £28 billion of additional money is needed over the next four years to do what must be done to keep us safe. My party is prepared to answer that call and fund it by reinstating the two-child benefit cap, reallocating up to £50 billion currently being spent on welfare and costly net-zero projects, and scrapping Labour’s catastrophic Chagos deal. This Government are not prepared to answer that call and will short-change defence by the £13 billion that they were never going to provide. That is completely unacceptable. The former Secretary of State, John Healey, has said that this plan leaves the country “less safe”. The authors of the strategic defence review have said that the funding package is “not enough”. What will it take for the Government to listen to the service chiefs, the retired senior officers, and indeed members of their own party, and find the money that they all say is needed to keep us safe? Even the inadequate £15 billion that the Government are going to provide immediately starts to fall apart under scrutiny. We know from the Chancellor that £4.7 billion is not there. According to the accompanying funding explainer, it is to be allocated at the Autumn Budget, presumably by a new Prime Minister and a new and as yet unknown Chancellor. If this were not bad enough, page 73 of the Defence Investment Plan is revealing. It discloses that £10.7 billion of the £15 billion is to come from “defence efficiencies” over four years. So, as we speak, that money is not there either. This is accountancy smoke and mirrors. On the defence efficiencies, £1.1 billion is to come from “reform and service redesign”—so what reform, what redesign and what details can the Minister provide? Some £3.3 billion is to come through “workforce and resourcing”. What does that mean and what detail is available? Some £2 billion is to come through “infrastructure”. What infrastructure? How is that money to be provided? Some £0.2 billion is to come through “digital”—how? Some £3.7 billion is to come through “acquisition and supply chain”. How has that figure been arrived at, and what underpins that estimate? The more alert among your Lordships will have noticed that that totals £10.3 billion, not the £10.7 billion that is at the head of the defence reform efficiencies. So we have another £400 million whistling into the blue yonder. Separately, the plan also states that £1.1 billion will come from asset sales, so what assets will the Government flog off? Unless the questions I have posed can be answered, this plan is meaningless. NATO, the MoD, politicians and the public need clarity about how much money is being given, when it is coming and how it is being provided. Smoke and mirrors and Treasury trickery do not cut it.

My Lords, this is clearly a very delayed and extremely underfunded plan. As we have heard, at £15 billion it falls well short of the £28 billion requested by the defence chief to keep our country secure. But we know that it actually falls even shorter than that, as nearly £5 billion is unfunded and some £11 billion or more relies on undetermined efficiency savings. So, after months of paralysis, resignations and Cabinet chaos, the Government have short-changed the Armed Forces. However, we should remember that it was the Conservatives who hollowed out our military, leaving the Army and Navy smaller than they had been for hundreds of years. The Tories failed to look after service personnel properly, through a lack of suitable housing and poor mental health support—that was unforgivable. This Statement is a long way from solving these vital issues and many others. It is a political choice made by Sir Keir Starmer and the Treasury, and it leaves us less safe. Furthermore, it undermines our reputation as a leader in NATO. Last year, all NATO countries pledged substantially to increase investment so that we all hit 3.5% of GDP by 2035. But, even if the missing money is found, the share of GDP that we spend on defence by the end of the decade will be only 2.7%. In media interviews today, the Procurement Minister, Luke Pollard, said that the spending review next year will describe a pathway to 3.5%. That review will need to find an extra £25 billion per year to get to our stated target. Given where we are starting from, this is hardly credible. This lack of credibility is not just a domestic phenomenon. When I attend NATO Parliamentary Assembly meetings, I can sense the reputation of the UK falling back. This is more than just worrying. So I will suggest some ways to increase investment and leverage what resources we have more effectively. The Liberal Democrats’ plan for defence bonds would provide an additional £20 billion at least, funnelling in private sector investment. This is not pie in the sky. Poland’s armed forces support fund, for example, was established in 2022, with the main source of funds being issuing bonds. For context, last year Poland spent 4.7% of its GDP on defence. There are better ways of leveraging our existing defence spend. The UK could take part in the nascent defence, security and resilience bank. This ticks a number of important boxes: it would be multilateral; it would work with a greater number of allies; it would help project financing to span election cycles; and it would cost-effectively pull in private finance, multiplying our state investment by many times. The Canadian Prime Minister, Mark Carney, is a major proponent of this initiative. He met with Sir Keir’s envoy, Gordon Brown, last month to discuss it but, disappointingly, there seems to have been no progress. The Government could also take bolder steps towards working with our European allies. Last month, the Lib Dems announced a plan for a UK-EU defence pact, including our intention to join Security Action for Europe—the SAFE programme. Andy Burnham is quoted as having said favourable things about both defence bonds and the DSR bank. He has also been historically in favour of closer relations with the EU. Does the Minister agree that the new Burnham-led Government should issue defence bonds, work with Canada to deliver the DSR and join the SAFE initiative in Europe? There are also ways of making our spend on big ticket items go a bit further. For example, GCAP currently involves the UK, Japan and Italy. Canada, Saudi and possibly Germany have been mooted as additional partners. Can the Minister confirm that, through adding to the GCAP group, money could be diverted to other UK defence needs? Much has been made of the headline spend of £5 billion for advanced uncrewed systems over the rest of this Parliament. I am sure this is welcome, as these systems are at the heart of modern warfare. However, to put this into context, the three-year £5 billion investment is only a tiny percentage of the plan’s £298 billion spend over four years. We welcome the commitment to establish six new energetics factories by 2030. However, the nine-month delay in publishing this spending plan has frozen procurement and put many SMEs in peril. Now that we have a funding plan, how will the Government change the procurement process to give SMEs the certainty to invest and the cash flow to thrive? Finally, last year’s strategic defence review rightly stated that national resilience cannot be bought with military equipment alone. It stressed the need for a comprehensive national conversation to shift our mindset and prepare the wider British public, local government and business for the hybrid, cyber and non-traditional threats that we already face. This is a whole of society challenge that spans far beyond the MoD, so what concrete progress is the Minister making with his government colleagues to initiate this national conversation?

I thank the noble Lord, Lord Fox, and the noble Baroness, Lady Goldie, for their contributions and important questions. I will start by dealing with the question of spending, which goes to the heart of what both noble Lords were saying. Let me put on record some of the things that were said about the defence investment plan. I will make only one political point—that there will be a 27% real-terms increase in defence spending between 2023-24 and 2029-30—because all of us have at heart the security and defence of our nation and how best we should do this. As both noble Lords and the House will know, the Government have set out plans for an agreed £15 billion increase in spending. This is outside the normal spending review process. That is not necessarily the way that Governments normally do things, but I gently remind the noble Baroness that it is not unheard of for Governments to take action outside the new spending process and to refer to the next Budget as the place where the detail will be confirmed. Indeed, the previous Government announced their five-year NHS plan in 2018 outside the Budget and the spending review. What did they say when challenged about it? I think the noble Baroness and the noble Lord, Lord Fox, will know: “We will be able to explain exactly where every penny is coming from, but we will do it in the next Budget”. I will also refer to when the Conservatives published the integrated defence review in 2020. What did they do? They said that they would set out the funding at the next spending review. So, let us drop the idea that this is an abnormal process. It is important that the Government have taken the decision outside the spending the review to reprioritise and reallocate spending between spending reviews. We have said that we will lay out the process for the 3% in the next Parliament. We will come back to the 3% and, indeed, the 3.5% at the next spending review, which will be next year. That is not an abnormal process; that process of taking action outside the spending review is one that Governments have taken over the past few Parliaments. That is an important point to make. Indeed, the foreword by the Secretary of State refers to the commitment until 2035 as a “promise”. It is laid out in there. He and I would expect all of us to be held to account with respect to that. The noble Baroness, Lady Goldie, and the noble Lord, Lord Fox, mentioned defence savings. I will be clear about the efficiencies, or the savings—whatever we want to call it. The allegation seems to be that the efficiencies are to be taken out of the spending power that the department would have. To be clear, the increase in our spending power is not conditional on these efficiency savings. That is a really important statement for us to make. Who would expect the Treasury, under any political party, not to require a department to have some sort of target for tackling fraud? Who would not see the use of increased efficiency through the use of AI or better technology as bringing about savings that could be reinvested? Who would not expect the Treasury to say, “We would wish you to find efficiencies through an increased reliance on consultancy”? Who would not expect efficiencies to be dealt with? Many noble Lords opposite have called on me in the past to find a way to make sure that we have the most efficient use of the workforce that we have. The noble Lord, Lord Fox, asked me about housing. Over the next 10 years, the Government, having spent nearly £6 billion to bring Annington Homes back into public ownership, will spend nearly £9 billion over the next 10 years on improving military housing. That is hugely significant. The noble Lord, Lord Fox, mentioned reputation. I often say that this country faces challenges, but the idea that this country is not respected in Europe or across the globe is not true. In fact, this country is hugely respected in Europe and across the globe. Do not take my word for it: read what the Secretary-General, Mark Rutte, said about the defence investment plan. He welcomed it; noble Lords can read that in today’s and yesterday’s papers. With respect to the important contribution that we make to NATO—I do not want to risk the ire of the noble Baroness, Lady Bennett—I just remind everyone that one of the most important contributions that our country makes is through the nuclear deterrent. That is a huge contribution that we make to the security of NATO and of Europe, and to our defence. On GCAP, of course there is always a need to look at new partners. A few weeks ago, the noble Lord, Lord Fox, and many other noble Lords questioned whether GCAP would actually be in the document. Now the accusation is that we are spending it too late—it is over £8 billion-worth of money—and that it is not being spent quickly enough. A huge amount of money has gone into GCAP. Of course the Government will negotiate on new partners, but that has to be agreed not only with us but with Italy and Japan. That is important for us as well. There is a whole section on SMEs in the defence investment plan; it is not only on the big primes but on the SMEs. I say to the noble Baroness, Lady Goldie, that all the chiefs are content with the defence investment plan and have been involved in bringing it forward. A number of noble Lords asked me about private finance initiatives and how we can bring that on board. I know that the Government are looking at the Defence, Security and Resilience Bank and whether that is a good way forward rather than necessarily defence bonds, which count as borrowing. No decisions have been taken about that, but we are of course looking at alternative ways of bringing that in. I say to the noble Lord that we tried very hard to get into SAFE, but we failed—we could not get into it. So it is not a question of trying to get into it; we tried and we will try again, but we were not successful. But in the meantime, the country will obviously continue to do what it can to build up its own defences. The defence investment plan is a huge contribution to the defence of this country. It points to a way forward, it is transformative and it improves our readiness. For any investment plan brought before this House and indeed this country, that is quite an important statement of where we are.

My Lords, all European countries are struggling with coming to terms with new realities and what that requires for their defence and equipment to be appropriate to modern warfare. However, irrespective of the money and the percentages spent, if we do not start the national conversation—which we have been talking about for several months, if not years, now—the British public will not accept that they will have to accept cutbacks in other areas to defend our borders and our airspace, and, above all, the sea around us. Let us not forget that we are a nation, and our resilience and our capability to defend ourselves is not just about money; it is all about the support of the people. Can we start with that now?

Indeed, we will come forward with proposals and plans with respect to a national conversation. The noble Baroness is right in her suggestion. We can see—many Members of this House will know this—that some of the ways in which the Government have asked different departments to contribute to this uplift in defence spending are already starting to cause some angst among certain communities. For example, in the east Midlands, where I live, the building of some roads is now being delayed, which is causing people to say, “Where’s the money going? What’s it being spent on?” Of course, having a national conversation is right, and the Government and all of us in here will have to make the case that defence is a priority, and that may require us to reallocate resources from one budget to another. We started that process, but as part of that process we must have the national conversation the noble Baroness refers to.

My Lords, I welcome part of this plan—it obviously has some holes in it, as we have already heard. I also welcome, as I do every time I hear the Minister speak, a great deal of his comments and his profound thinking. However, I wonder today whether the brief he has been given really tells the whole story. Not only have we heard about the deficiencies on the arithmetical and budget side but in the Second World War, for instance, our military spending rose to 69% of our total budget, and here we are, talking about 3% and 3.5%—it may be rather more than that when we look at the unfolding scene. I just wonder whether we should not be a bit more frank with the British people—or whether our briefing or the Government’s words should—in reminding them that we are beginning to move towards a total war footing. The late Lord Skidelsky often reminded this House that this is the way we are going, and we will have to seriously consider the sort of percentages that I am talking about. I am not sure that term comes through at all in the blue paper that we have all been given to read. I am very pleased that we are reaffirming the huge global combat air co-operation between ourselves and Japan and Italy. This link with Japan and Japanese industry is hugely important. It is one of our ways into the giant consumer markets of Asia, which is where all the action is going to be. So good on that, but let us have a brief that honestly faces the fact that we are moving towards a war footing, and that that will cost far more than we are considering now.

I thank the noble Lord for his question and his comments, which come from a great knowledge and experience, and I thank him for his remarks about me. Just to reiterate, the GCAP programme is extremely important, and as he just said, that is outlined in the money allocated within the paper. The debate is about how quickly we move towards increased spending, and I have outlined—without repeating myself—how the next spending review in 2027 will look to 3% but that the absolute commitment is to 3.5% to reflect the change in the security environment in which we are operating. In addition, I mentioned the nuclear deterrent, and across this House we have mentioned the importance of preparing for war, because one of the ways you deter war is to prepare for it.

First, I welcome this Statement, which this House has been waiting on for some time, and share my concerns about the funding, which I hope will be sorted out under new leadership. However, I welcome the fact that there is an emphasis on innovation and supporting small businesses, and I hope to see that coming through. In terms of the detail of the plan, I note that there is £330 million to be spent on investment in critical underwater infrastructure protection to tackle hostile activity within UK waters. I have raised this issue with the Minister before. Can we expect the Republic of Ireland’s Government to pay towards helping with that undersea capability, because, as he knows, it is as important to the Republic of Ireland as it is to the UK?

I cannot give the noble Baroness an assurance about what the Republic will pay for, but let me just say that there has been improved and increasing co-operation between the Republic and ourselves where it is in both our interests to do so. She will know that underwater cables and underwater infrastructure are important to the Republic and to the whole of the UK, so it is in both of our interests to work together. I cannot give her a commitment about paying for that, but I can give her the commitment that there is increasing co-operation and working together to deliver the shared objectives we would all have.

My Lords—

My Lords—

My Lords, I think it is time to hear from the Labour Benches and then we can hear from the Liberal Democrats.

My Lords, I welcome the publication of the defence investment plan and the recognition in it that science, technology and innovation are going to play a very big part in the future. Does my noble friend agree that it is not just a financial challenge that faces the defence investment plan; there is also a credibility challenge? We are going to have to explain to the public more effectively than perhaps we have been able to do so far exactly why we need a funding plan to reach 3% of GDP by 2030 and 3.5% by 2035.

Indeed, as I said to the noble Baroness, of course we need a conversation to more fully and carefully explain to the public why we need to increase our expenditure on defence and security and, alongside that, to help them to understand why that might mean changed priorities for budgets within the sort of priorities that people would have. Whether that means less spending on this area or that area of government, I think we would all agree that the increase for defence and security is essential, and there will be difficult decisions ahead. As part of resolving that, we need to talk openly to the British people.

My Lords, one of the unfortunate realities is that the United States is moving away from the defence of Europe. Whether we like it or not, this is not just for this Administration; it is a danger that is likely to happen in future as well as the US looks to the Pacific. We understand that, and we understand that Europe should take more effect of its defence, but there are a number of capabilities that are not replaceable if the United States is not there—strategic airlift, a lot of the space intelligence, ISR and missile defence. I see nothing in this strategy or this expenditure report that tries to replace that. Clearly, one sovereign nation cannot do that, so how does Europe, together perhaps with Canada, ensure that we can defend ourselves into the future?

There is a lot in the strategic defence review and the Defence Investment Plan about building up a greater sovereign capability in some of the areas that the noble Lord has addressed. But I think it is important in every debate to say that the alliance between the United States and our country and the alliance between the United States and Europe, notwithstanding the fact that the President has called for Europe to do more for itself, is absolutely essential to the defence and security of our country. The noble Lord may disagree, but I am telling him what the Government’s view is. The Government’s view—and, I am sure, the view of the vast majority of your Lordships’ House—regards the alliance between ourselves and the United States as absolutely essential for the security of this nation, so we have to be very careful about that. Of course there are challenges and difficulties, but the document refers to how we build up some of the capabilities to which the noble Lord refers. Of course Europe needs to do more, but it also needs to stand with the United States, not only in Europe but across the globe.

My Lords, I share widely the view that this belated DIP comes nowhere near funding the strategic defence review, but the DIP does make clear the Government’s commitment, together with Japan and Italy, to the next-generation Global Combat Air Programme. This is welcome news, given the inevitable withdrawal of the RAF Typhoon air fleet from front-line service due to airframe fatigue and age in the early 2040s. Following the recent break-up between Germany and France on their similar programme, what political approach are the Government making to Germany to get them interested in GCAP?

The noble and gallant Lord is right to point out the importance of GCAP and how it offers a sixth-generation option for us after 2040, when Typhoon is expected to go out of service. There is money in the defence investment plan for the upgrade of Typhoon to ensure that it has the capability that it needs until 2040. Regarding other partners in GCAP, as I said to the noble Lord, Lord Fox, we are open to discussions with anybody who comes to us with proposals or desires to join that programme, but that will be a matter for international negotiation between ourselves, Italy and Japan, although we are not opposed to looking at having further partners as part of that scheme.

My Lords, may I say that this is a disappointment, to put it mildly? I am on the same side as the Minister on this. This, I assume, was what led John Healey to resign—I suspect that it was the same document. Given that, does he think that any other Minister should resign, given the appalling lack of money in the Statement?

There is an additional £1.5 billion, and there are also some changes with respect to the way in which there is a greater emphasis in this document on autonomy, AI and the transformation of the Armed Forces to have more new types of aircraft, vessels and capabilities. For me, that is as important as the amount of money, compared with not spending on new capabilities. But I would just say to the noble Lord that it requires difficult decisions to do that. On replacing the Type 45, we have scrapped the plans that we had in the document in favour of replacing them with new, uncrewed vessels. That requires us to make really big decisions, and there are a number of those sorts of decisions all through the document. Of course there is a debate about the amount of money, which is why I have talked about the 2027 spending review, but it is also about the type of capabilities that we need. The document shows that we are not afraid to make big decisions around that to give us the capabilities that we need in the future as well.

My Lords, is it not clear that this is a welcome step forward, but that it cannot be the end of the story? We have to reaffirm our commitment to 3% by the end of this decade, and 3.5% by the middle of the next decade, as firm commitments of this Labour Government, and that in the period ahead we will carry out the kind of national conversation that was referred to earlier, and find a means of getting there. With due respect to noble Lords opposite, you cannot achieve this just by welfare cuts.

In terms of the spending, I have made the point about the 2027 spending review, and that the document lays out that we will come back to the 3% commitment at the 2027 spending review, and, of course, the 3.5% commitment is laid out in the document as well. That lays out what the Government’s plans are.

The noble Lord, Lord Liddle, has just alluded to the elephant in the room, which is that there are no cuts to the £333 billion welfare bill, which would go a long way to helping with additional support for the defence industry. My worry is that most of these cuts are unknown, and they are optimistic efficiencies, but I know that the £2 billion being cut from the BEIS budget is a worry. How is this going to affect Mr Miliband’s ambitions for net zero?

I do not know about the ambitions for net zero. All I can say to the noble Baroness is that, of course, spending is important, and increasing the amount of spending on defence is important. Whatever decisions are made will require the reprioritisation of budgets for what the Government plan to do. That is the reality of finding more money for defence. We are ensuring that everything in the current plans, and the defence investment plan, is funded. The spending review will come back to how it is funded beyond 2029-30, and how that is done will be a matter for that review.

My Lords, I was head of the Treasury’s defence division, and I welcome all this concentration on the money, but the document is actually about investment and where the money is to be spent. Ukraine is making, using, and losing 7 million drones a year. The life cycle of any particular model of drone is under three weeks, because they have to be continually reprogrammed because of countermeasures, so I rather like the emphasis in this document, in section 3.2, on industrial agility. I hope that the Minister can deliver on industrial agility, as it is crucial that the Ministry of Defence gets away from operational requirements that are negotiated for months and fixed for years, and accepts that there has to be an open partnership with business, and a two-way flow of intelligence and innovation. From now on, the weapon is the production facility, the drone is only the bullet and the only constant is change.

I agree with that. In the document, it talks about the need for the transformation of our Armed Forces, and much of that will be around uncrewed capabilities and drones. It is not only about big primes; much of this, including in Ukraine as the example, is delivered by small and medium-sized businesses, which have that particular agility to which the noble Lord refers, and we need to develop that.

My Lords, with the honourable exception of the noble Lord, Lord Kerr, much of our debate today, as in the many months leading up to the defence investment plan, has focused on the bottom line and where the money is coming from; we have, unfortunately, had far less debate about how the money is being spent. I note that less than £10 billion over four years is set aside for homeland defence in areas such as cyber security, air and missile defence, and undersea infrastructure protection. By comparison, about £100 billion is being spent on nuclear submarines and jet fighters, AUKUS subs and cruise missiles. As the leading article in the Guardian said today, we are still binding our force structure to an American-led posture. Is that not deeply dangerous in the current geopolitical circumstances of an unstable, uncertain America?

“No” is the answer to the noble Baroness’s question. Homeland defence runs all the way through the document: how we have better air defence, what we do about improving the use of reserves, and various protections for our critical national infrastructure, which is really important. As I have said before, on our alliance with the United States, the development and maintenance of things such as our nuclear deterrent are really important, not only for our defence and security but for the defence of Europe and beyond, and we should continually reiterate that.

My Lords, I put it to the Minister that it would have been better to have had the conversation with the public before we put out the policy, so that we had rolled the pitch and people understood the nature of the threat. I welcome, therefore, what he is saying about the position going forward, but can we also make sure that the public understand the chronic neglect of our defence capacity that took place under previous Governments—notably the Annington housing and the neglect of maintenance—not least the failure to order nuclear submarines and the six-year delay between 2010 and 2016, which has left us in a very difficult position regarding our deterrent and our crew? Will the Government be making clear who the guilty men and women were?

The catastrophic decision to pick out of what my noble friend said—given the importance that I, the Government and Members across this House attach to this—was the delay in 2010 for a number of years in renewing the nuclear deterrent. That was a really bad decision, and as a result our nuclear submarines are at sea for months and months. That is a problem we have to deal with, as is the fact that renewal of the deterrent, which is included in the defence investment plan, will be later than we would wish. My noble friend talked about Annington Homes. It was a disastrous decision to privatise it, and we have brought it back in at a cost of £6 billion. I know that a number of people who wanted to ask questions were unable to. We have the Armed Forces Bill on Monday, and if noble Lords and Baronesses wish to ask a question then on the defence investment plan, I am perfectly happy for them to do that, so that they do not feel that they have missed the opportunity to ask about something which is massively important to the defence and security of our nation and beyond.