DEFENCE SUPPORT FOR THE 21ST CENTURY
169. The Strategic Defence Review has highlighted the future central importance of deployed operations and high technology equipment. Supporting and sustaining such operations and equipment, and exploiting to the full the military opportunities offered by new technology, depend vitally on our support and headquarter functions. Far from being an inessential 'tail', they are an integral component of our military capability. The Review has therefore sought to ensure that this is firmly focused on future needs and provided in the most effective and efficient manner, making use of modern techniques and, increasingly, on a Joint Service basis.
170. MOD has a good record on efficiency and innovation in achieving cost effective support. Over the decade, efficiency savings have accumulated to over £4Bn annually. Much of this achievement is attributable to internal improvements in the 'business' of defence support, including the creation of 44 Defence Agencies. The greater involvement of the private sector has also played a major role, whether through market testing and contracting out, the involvement of private finance or Public/Private Partnership. The Review has demonstrated the scope to achieve yet more, pursuing efficiency not on the basis of dogma but on a case-by-case judgement of what meets the operational need in the most cost-effective manner.
171. The Review has included a comprehensive and rigorous drive to generate additional efficiencies to help fund high priority improvements and further to improve value for money. Much of the work was carried out within the main operating divisions to which the bulk of the defence budget is allocated. Other work ranged across their boundaries. In addition to the Smart Procurement initiative, the examination focused on the organisation of MOD and the Armed Forces; the rationalisation of support tasks (pursuing a defence-wide approach wherever sensible); and our assets and infrastructure.
Organisation
172. The Review has incorporated a number of organisational studies aimed at rationalisation, reducing overheads and reinforcing the Joint Service approach to defence.
173. The Review has emphasised that we need to have a clearer long term vision of the way in which we expect our forces and their methods of operation to develop. It is also essential that this is a truly Joint Service vision. We will therefore be creating a Joint Defence Centre as the focus for this work. In particular, it will be responsible for the development of defence doctrine, providing the joint framework for more specific single Service doctrine. We intend this to become an international centre of excellence and we see one of its main roles as leading Britain's contribution to the development of military doctrine for peace support operations discussed in Chapter 3.
174. The Permanent Joint Headquarters established in 1996 has conclusively proved its worth in the planning and conduct of operations, for example in Operation Bolton, our contribution to the response to Iraqi confrontation with the UN in Spring 1998. The responsibilities of the Chief of Joint Operations will be enhanced. The post will have increased authority for enhancing the training and preparedness of the Joint Rapid Reaction Forces and will have a greater voice in stating joint warfare requirements. Budgetary authority and responsibility will also be increased and the post will become a Top Level Budget holder in its own right.
175. Changes flowing from the Review will have a significant impact on the organisation of the MOD Head Office. These include the need to create a new central 'customer' for equipment and a streamlining of the budgetary structure. Together with a number of more minor efficiency gains in individual areas such as research management, defence intelligence, and information and communications services, these will result in a further slimming of the central organisation.
176. The Review has also identified scope for some wider organisational improvements and efficiencies. The Army's administrative structure in the UK will be reshaped. The administrative structure of Territorial, Auxiliary and Volunteer Reserve Associations will be adjusted to match that of the Regular Army. This will produce a closer linkage between the administration of Regular and Reserve forces as well as some running cost savings. We will be consulting widely on these and other changes to the TA.
Defence Support Activity
177. The Joint Service approach is fundamental to defence, not only in operations but in supporting them and preparing for them. As a result, many support activities are already undertaken on a defence-wide basis, either through a joint organisation or through a lead Service acting on behalf of all three. The Review will extend this approach, balancing it with the specific needs of the individual Services.
178. A new post of Chief of Defence Logistics will be created to assume overall control of the three separate logistics organisations currently supporting the Navy, Army and RAF, in order to develop them into a single organisation. This will be structured in a way which continues to respond to the specific needs of the individual Services but will also allow the maximum scope for the rationalisation of functions and processes on a defence-wide basis. This will be particularly important if we are to realise the benefits of smart procurement in the logistics area.
179. The Review has included a thorough re-examination of the structure and performance of the existing 44 Defence Agencies. This will contribute to the process of continuous development and to the achievement of substantial new efficiency gains crucial for the affordability of the defence programme. A significant part of these will be achieved through the further development of public/private partnerships.
180. The Review also identified opportunities for greater cost-effectiveness by changing the structure of a number of existing Agencies. We intend to concentrate responsibility for all storage and distribution across defence in a single Agency from the early years of the next century. As preparatory steps, it is planned that a single Storage and Distribution Agency for all defence non-explosive stores will be set up in April 1999 (with closure of Naval Stores Depots at Rosyth and Colerne generating early savings), while defence-wide responsibility for the storage, processing and distribution of explosives will be concentrated in the Naval Bases and Supply Agency.
181. A single Agency will also be created to repair and overhaul all military aircraft. This will amalgamate the Naval Aircraft Repair Organisation (responsible for helicopters) with the bulk of the RAF Maintenance Group Defence Agency (fixed wing aircraft). The new Agency will become a Trading Fund as soon as practical.
182. A new Defence Transport and Movements organisation will be formed in April 1999. This will bring together a number of separate staffs, to control all large-scale movements of personnel and materiel by land, sea and air. The Review has also identified new opportunities for commercial exploitation of aspects of the defence movements infrastructure, principally the Marchwood Military Port. The procurement and management of fuels and lubricants will also be centralised, and we expect substantial benefits from greater private sector involvement in the Government pipeline system.
183. The Army equipment support area will be restructured to integrate operational, technical, contract and finance staff into multi-disciplinary groups planning and procuring support for the front line on a fully coherent basis. This will involve the absorption of the Army Technical Support Agency into the new organisation, which is itself a likely Agency candidate. The Army Base Repair Organisation will also be restructured with a view to its becoming a Trading Fund.
Assets and Infrastructure
184. In addition to fighting equipment, the Ministry of Defence holds very substantial assets principally in the form of stocks, land and buildings. Most are essential to defence output. But the Review recognised that insufficient attention had been paid in the past to keeping asset holdings to the minimum necessary level. Comprehensive reviews of stockholdings and the defence estate have identified major savings.
Stockholdings
185. Stocks have been substantially reduced since the end of the Cold War and 50 depots have been closed. Nevertheless, MOD continues to hold some £8 Bn of missiles and ammunition and £11 Bn of other items (mainly spares and repairable equipment). These have been reviewed against changing operational and deployment plans and the principle that we should not hold stocks when industry can be relied upon to deliver within the warning time we judge would be available of a major conflict.
186. In some areas we need to rectify spares shortages. But more flexible provisioning methods which take full account of the costs of holding stock are likely to allow more of our peacetime and training stockholding requirements to be met directly from industry. At the same time, there is scope to expand and accelerate existing plans to dispose of surplus stock. On this basis the Review has set a new target of a 20% or £2.2 Bn reduction in the book value of holdings over the next three years. Although the market value of disposals will be limited, this will allow us to make substantial reductions in storage and distribution infrastructure.
187. Plans were already in place to drive down the cost of our future stock purchases by applying radical new business efficiency measures. But the Review identified scope for taking this further.
188. We will also be looking at the longer term scope for reducing war reserves of ammunition and guided weapons if procurement lead times can be brought below preparation times. This may, for example, involve stocking long lead components and materials rather than complete weapons or paying manufacturers for dormant production capacity, and these approaches may prove significantly cheaper than holding large stocks of complete weapons and avoid the need to replace life-expired stocks.
Defence Estate
189. Substantial savings from the defence estate, flowing from reductions in our force levels since the end of the Cold War, were planned before the Review began. The Review will strengthen strategic management of the defence estate as a whole to ensure that we make the best use of it for defence and maintain the pressure to achieve further rationalisation. But we also conducted a thorough re-examination of existing plans to achieve further early savings.
190. The bulk of the remaining MOD estate is militarily essential and heavily used training land in rural and often remote areas, generally of low commercial value. Many other sites also have relatively low disposal value given the specialised facilities and, in some cases, contamination problems arising from long periods of military use. The Review has therefore focused on high value properties, especially in the London area.
191. Most such sites meet long term operational requirements and cannot be economically replaced elsewhere. We have nonetheless looked very hard at our changing requirements and as a result we believe we should be able to double previously anticipated receipts over the next four years to more than £700M. A wide range of properties across the country will be sold. In London, disposals will include the Duke of York's Headquarters in Chelsea; Chelsea Barracks will be reprovided (notnecessarily on its present site) through a Public / Private Partnership; and we are drawing up a strategic development plan for our estate in the Greater London area.
Impact on the Environment
192. In implementing the Review, we will take environmental factors into account, including environmental appraisal wherever appropriate, and we will also continue to take part in wider Government initiatives such as green transport and energy efficiency. In particular, we will continue to place a very high priority on conservation of the defence estate, both of the natural environment and of historic buildings and archaeological sites. We are increasingly recognised as a caring landlord of an estate that includes about 250 Sites of Special Scientific Interest. The new arrangements for the strategic management of the estate will provide a focus for the further development of our environmental policies. We will consult environmental and conservation bodies as we determine our future rural estate strategy.
Impact on Employment
193. The reduction in the size of the Armed Forces and the drive for greater efficiency throughout the support area has led to considerable reductions in the total number of MOD's civilian employees over the last decade. This Review will not lead to further across-the-board reductions although there will be some reduction in civilian posts arising from specific measures and others may be re-located. There will be full consultation over these issues and staff will be kept informed as detailed implementation plans are developed to minimise uncertainty. Reductions will be achieved as far as possible through normal departures and adjustments to establishment. Compulsory redundancy will be kept to the minimum and appropriate compensation and outplacement help made available. We will also provide a comprehensive package of assistance for staff and their families who have to be relocated.
Efficiency Gains
194. With the changes outlined in this Chapter, taken together with improved procurement, and a very wide range of individual measures built into management plans in all areas and at all levels, the Ministry has incorporated in its forward plans the target of achieving a 3% annual efficiency saving in operating costs over each of the next four years. This is a challenging target which will require us to identify substantial new efficiency gains in the years ahead over and above the measures identified in the Review. But we believe it is right to set such a challenge, to contribute to funding the planned improvements in capability as well as improving value for money in defence.
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