Commentary Magazine


Topic: Ministry of Defense

Re: Not Your Father’s Tories

Max Boot is worried about the future of Britain’s armed forces under the Conservatives, should they be so lucky as to win the election on Thursday. He’s right to worry, but this isn’t a Conservative problem. It’s a British problem. As a letter in today’s Times from three senior British security officials makes clear, the plans of the Liberal Democrats – who stand a chance of forming a part of a coalition government – are even worse: they encompass, amidst much else, a profound skepticism about the United States, an abandonment of the UK’s nuclear deterrent, and a refusal to even contemplate pre-emptive military action against Iran.

The Conservative emphasis, as Max notes, is on the need to save money in defense through reform. There is something to be said for this. Since 2004, the size of the Ministry of Defense’s civilian ranks has shrunk by 19 percent. Yet expenditures on civilians are up by 13 percent, and rose almost twice as fast over that period as the cost of an actual member of the forces. This is because the cuts on the civilian side have come exclusively out of the lower salary ranks, while the bureaucracy at the top has grown.

In short, the picture here is identifiably the same as it is elsewhere under Labour: more top-down control, more bureaucracy, more spending on senior officials, more waste, more disguised debts, and fewer actual capabilities.  From this point of view, Liam Fox’s promise to scrutinize the top ranks of the forces is encouraging, because it puts the emphasis on one of the areas where Labour has failed to contain costs.

But at the end of the day, reform will not be enough. Indeed, Britain’s last Strategic Defense Review, in 1998, was premised on the idea that savings from procurement reform would fill the acknowledged gap between Britain’s means and its ends. Those savings, predictably, failed to materialize. As I point out in a forthcoming article from the Royal United Services Institute, the gap between Britain’s budget and its procurement programs alone to 2038-2039 is now on the order of 300 billion pounds. And the RUSI report that Max cites estimating an 11 percent real decline in defense spending to 2016-2017 is wildly optimistic: the highly respected Institute for Fiscal Studies puts the level of implied cuts at 6 percent per year by 2015.

All of that is really bad news. But here’s the worst of it: Britain is going to justify its cuts by drawing on the arguments the Obama Administration is using to justify cuts on this side of the Atlantic. Both states accept that defense budgets will decline in the coming decade. Both states blame the size of today’s defense budgets, in part, on the competitive extravagance of the armed services. Finally, both argue that defense acquisition reform is vital because the nature of war has changed: failure to reform will therefore result in defeat as well as waste. So, sure, worry about the British forces. But worry about ours as well.

Max Boot is worried about the future of Britain’s armed forces under the Conservatives, should they be so lucky as to win the election on Thursday. He’s right to worry, but this isn’t a Conservative problem. It’s a British problem. As a letter in today’s Times from three senior British security officials makes clear, the plans of the Liberal Democrats – who stand a chance of forming a part of a coalition government – are even worse: they encompass, amidst much else, a profound skepticism about the United States, an abandonment of the UK’s nuclear deterrent, and a refusal to even contemplate pre-emptive military action against Iran.

The Conservative emphasis, as Max notes, is on the need to save money in defense through reform. There is something to be said for this. Since 2004, the size of the Ministry of Defense’s civilian ranks has shrunk by 19 percent. Yet expenditures on civilians are up by 13 percent, and rose almost twice as fast over that period as the cost of an actual member of the forces. This is because the cuts on the civilian side have come exclusively out of the lower salary ranks, while the bureaucracy at the top has grown.

In short, the picture here is identifiably the same as it is elsewhere under Labour: more top-down control, more bureaucracy, more spending on senior officials, more waste, more disguised debts, and fewer actual capabilities.  From this point of view, Liam Fox’s promise to scrutinize the top ranks of the forces is encouraging, because it puts the emphasis on one of the areas where Labour has failed to contain costs.

But at the end of the day, reform will not be enough. Indeed, Britain’s last Strategic Defense Review, in 1998, was premised on the idea that savings from procurement reform would fill the acknowledged gap between Britain’s means and its ends. Those savings, predictably, failed to materialize. As I point out in a forthcoming article from the Royal United Services Institute, the gap between Britain’s budget and its procurement programs alone to 2038-2039 is now on the order of 300 billion pounds. And the RUSI report that Max cites estimating an 11 percent real decline in defense spending to 2016-2017 is wildly optimistic: the highly respected Institute for Fiscal Studies puts the level of implied cuts at 6 percent per year by 2015.

All of that is really bad news. But here’s the worst of it: Britain is going to justify its cuts by drawing on the arguments the Obama Administration is using to justify cuts on this side of the Atlantic. Both states accept that defense budgets will decline in the coming decade. Both states blame the size of today’s defense budgets, in part, on the competitive extravagance of the armed services. Finally, both argue that defense acquisition reform is vital because the nature of war has changed: failure to reform will therefore result in defeat as well as waste. So, sure, worry about the British forces. But worry about ours as well.

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Not Your Father’s Tories

In the British general election to be held on Thursday, the latest polls show the Conservative Party in the lead. Normally, that would gladden the hearts of American conservatives, who have long regarded the Tories as their closest compatriots overseas. But this is not your father’s Conservative Party. It has been remade as a “centrist” (i.e., liberal) party by David Cameron. Nowhere is this clearer than in the area of defense. The Tories have been opportunistically attacking the Labor government for not doing enough for the troops. But what are the Tories going to do? If this Reuters report is to be believed, they will slash defense spending, which is already too low, to meet British commitments around the world:

The Royal United Services Institute (RUSI) think tank in London has said the most optimistic scenario would mean the Ministry of Defense could face a cut in its budget of around 11 percent in real terms over the six years to 2016/17.

The Tories claim they can make such cuts while enhancing military capabilities by slashing wasteful spending. Count me as skeptical. The British defense budget has already been cut to the bone, with the Royal Navy down to its lowest size in centuries. There is a desperate need to spend more — not less. If the Conservatives carry out this catastrophic program, it will have serious repercussions for the U.S. because we will be able to count on even less support from our closest ally. That, in turn, will mean more unilateral operations in places like Afghanistan.

In the British general election to be held on Thursday, the latest polls show the Conservative Party in the lead. Normally, that would gladden the hearts of American conservatives, who have long regarded the Tories as their closest compatriots overseas. But this is not your father’s Conservative Party. It has been remade as a “centrist” (i.e., liberal) party by David Cameron. Nowhere is this clearer than in the area of defense. The Tories have been opportunistically attacking the Labor government for not doing enough for the troops. But what are the Tories going to do? If this Reuters report is to be believed, they will slash defense spending, which is already too low, to meet British commitments around the world:

The Royal United Services Institute (RUSI) think tank in London has said the most optimistic scenario would mean the Ministry of Defense could face a cut in its budget of around 11 percent in real terms over the six years to 2016/17.

The Tories claim they can make such cuts while enhancing military capabilities by slashing wasteful spending. Count me as skeptical. The British defense budget has already been cut to the bone, with the Royal Navy down to its lowest size in centuries. There is a desperate need to spend more — not less. If the Conservatives carry out this catastrophic program, it will have serious repercussions for the U.S. because we will be able to count on even less support from our closest ally. That, in turn, will mean more unilateral operations in places like Afghanistan.

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The Conservative Party and British National Security

In a major speech on Friday at Chatham House, David Cameron set out how the Conservative party would approach the issue of national security should it win the forthcoming general election. His theme was the value of connection — both domestically, with an emphasis on what Britain has to gain from better joined-up government, and abroad, emphasizing Britain’s need to see conflicts as a whole, and to respond to threats before they become crises.

There’s nothing that can be said against the idea that government should be better coordinated, or more forward-looking. Of course, advancing this idea while out of power is simpler than achieving it while in power. The creation of a National Security Council is not likely to persuade the Foreign Office, the Treasury, the Ministry of Defense, and all the other players in Whitehall to abandon their institutional interests, just as the American NSC has palpably failed to achieve this in Washington.

Aaron Friedberg’s short, superb study of the collapse of strategic planning in the U.S. is very relevant here. It argues that the task of the NSC is to be “an aid to the collective thinking of the highest echelons of the government … [not] a mechanism for the production of operational plans.” It may be that Cameron’s vision of the role of his NSC leans a little more toward the vision of NSC as planner in chief than Friedberg would wish.

On the other hand, Cameron is clearly right to argue that the existing system in Britain treats national security as, at best, a second-order concern; that it has allowed development aid and post-conflict planning to become disconnected from the national interest or to go AWOL entirely; and that, in an age of Islamist terror, security must begin at home. If a British NSC can assist Prime Minister Cameron and his cabinet in implementing policies based on these preferences — and especially on the last one — it will be a good deal more than a step in the right direction.

For my money, the most interesting parts of Cameron’s speech – and the accompanying Green Paper that the speech launched — were those that dealt not with machinery but with attitudes. It’s always easy for politicians — especially newly elected ones — to blame the system: President Obama has done a good deal of this, especially recently. But this is not helpful: systems are always less than optimal, and, especially in a war with a determined and intelligent enemy, they are always going to fail.

Systems, in the end, matter less than leadership that acknowledges when it’s in a war and demands that responsible people take decisions and accept responsibility for them. The problem is ultimately one of culture. That was exactly the note on which Cameron ended, and while, again, it is obviously more pleasant to call for responsibility when out of office than it is to accept responsibility once in it, Cameron’s speech was a refreshing change from Gordon Brown’s determination to evade responsibility for all the errors for which, as chancellor of the exchequer and then as prime minister, he bears a central responsibility.

In a major speech on Friday at Chatham House, David Cameron set out how the Conservative party would approach the issue of national security should it win the forthcoming general election. His theme was the value of connection — both domestically, with an emphasis on what Britain has to gain from better joined-up government, and abroad, emphasizing Britain’s need to see conflicts as a whole, and to respond to threats before they become crises.

There’s nothing that can be said against the idea that government should be better coordinated, or more forward-looking. Of course, advancing this idea while out of power is simpler than achieving it while in power. The creation of a National Security Council is not likely to persuade the Foreign Office, the Treasury, the Ministry of Defense, and all the other players in Whitehall to abandon their institutional interests, just as the American NSC has palpably failed to achieve this in Washington.

Aaron Friedberg’s short, superb study of the collapse of strategic planning in the U.S. is very relevant here. It argues that the task of the NSC is to be “an aid to the collective thinking of the highest echelons of the government … [not] a mechanism for the production of operational plans.” It may be that Cameron’s vision of the role of his NSC leans a little more toward the vision of NSC as planner in chief than Friedberg would wish.

On the other hand, Cameron is clearly right to argue that the existing system in Britain treats national security as, at best, a second-order concern; that it has allowed development aid and post-conflict planning to become disconnected from the national interest or to go AWOL entirely; and that, in an age of Islamist terror, security must begin at home. If a British NSC can assist Prime Minister Cameron and his cabinet in implementing policies based on these preferences — and especially on the last one — it will be a good deal more than a step in the right direction.

For my money, the most interesting parts of Cameron’s speech – and the accompanying Green Paper that the speech launched — were those that dealt not with machinery but with attitudes. It’s always easy for politicians — especially newly elected ones — to blame the system: President Obama has done a good deal of this, especially recently. But this is not helpful: systems are always less than optimal, and, especially in a war with a determined and intelligent enemy, they are always going to fail.

Systems, in the end, matter less than leadership that acknowledges when it’s in a war and demands that responsible people take decisions and accept responsibility for them. The problem is ultimately one of culture. That was exactly the note on which Cameron ended, and while, again, it is obviously more pleasant to call for responsibility when out of office than it is to accept responsibility once in it, Cameron’s speech was a refreshing change from Gordon Brown’s determination to evade responsibility for all the errors for which, as chancellor of the exchequer and then as prime minister, he bears a central responsibility.

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The Next Defense Crunch in Britain

Contracting out in defense is an important public and political issue in both the United States and Britain. When based on the proper principles, contracting out allows the government to draw on private-sector skills and resources to deliver services more efficiently. But in Britain, Labour’s sketchy accounting methods for the cost of these contracts has created another snare for Britain’s defenses.

These contracts, of course, commit the government to future costs. But because Labour has played accounting games that put these contracts on the department books but not the national ones, Britain’s total future obligations  will be larger than those shown on the country’s overall accounts.

Defense isn’t the only department that’s contracted out, of course. Health has done the same thing.  But all the major political parties in Britain are committed to ring-fencing expenditure on health. But the big future obligations certain to show up on defense departmental accounts ensure that when it comes time to examine which departments need to scale back their future spending, the weight will fall even more heavily on defense.

In essence, the Labour government has created another affordability crisis in defense – one that it can now use as yet one more reason to reduce defense spending even further.  Already, over the past few months, the case – a largely spurious one – has been made by Bernard Gray’s report on procurement for imposing more cuts on the Ministry of Defense, on the grounds that its future spending plans are unaffordable.

Even on its own merits, this is a painful confession of governmental incompetence: Labour has been in power since 1997, and yet it now argues that the Ministry has somehow, mysteriously, developed plans it cannot afford to fund.  It’s now setting itself up to play the same game all over again: use the contract spending to which it had once agreed to accuse the Ministry of unaffordable future profligacy.  That would be a bad move at any time, but it’s particularly unbearable when British forces are operating alongside U.S. ones in Afghanistan.

Could it happen here?  Well, not easily.  U.S. policy requires programs to be fully funded up front, so the costs are on the books. The purpose of the U.S.’s Military Housing Privatization Initiative – to improve military housing – is similar to some of Britain’s deals, but by and large the MHPI has been well-administered, successful, and properly accounted for.

Still, in an era of justified unhappiness about the size of the federal deficit, coupled with the administration’s desire to spend, the attraction of taking costs off the books is obvious.  If the Obama administration starts to question the “on the books” requirement in a major way, the British experience suggests we should start worrying.

Contracting out in defense is an important public and political issue in both the United States and Britain. When based on the proper principles, contracting out allows the government to draw on private-sector skills and resources to deliver services more efficiently. But in Britain, Labour’s sketchy accounting methods for the cost of these contracts has created another snare for Britain’s defenses.

These contracts, of course, commit the government to future costs. But because Labour has played accounting games that put these contracts on the department books but not the national ones, Britain’s total future obligations  will be larger than those shown on the country’s overall accounts.

Defense isn’t the only department that’s contracted out, of course. Health has done the same thing.  But all the major political parties in Britain are committed to ring-fencing expenditure on health. But the big future obligations certain to show up on defense departmental accounts ensure that when it comes time to examine which departments need to scale back their future spending, the weight will fall even more heavily on defense.

In essence, the Labour government has created another affordability crisis in defense – one that it can now use as yet one more reason to reduce defense spending even further.  Already, over the past few months, the case – a largely spurious one – has been made by Bernard Gray’s report on procurement for imposing more cuts on the Ministry of Defense, on the grounds that its future spending plans are unaffordable.

Even on its own merits, this is a painful confession of governmental incompetence: Labour has been in power since 1997, and yet it now argues that the Ministry has somehow, mysteriously, developed plans it cannot afford to fund.  It’s now setting itself up to play the same game all over again: use the contract spending to which it had once agreed to accuse the Ministry of unaffordable future profligacy.  That would be a bad move at any time, but it’s particularly unbearable when British forces are operating alongside U.S. ones in Afghanistan.

Could it happen here?  Well, not easily.  U.S. policy requires programs to be fully funded up front, so the costs are on the books. The purpose of the U.S.’s Military Housing Privatization Initiative – to improve military housing – is similar to some of Britain’s deals, but by and large the MHPI has been well-administered, successful, and properly accounted for.

Still, in an era of justified unhappiness about the size of the federal deficit, coupled with the administration’s desire to spend, the attraction of taking costs off the books is obvious.  If the Obama administration starts to question the “on the books” requirement in a major way, the British experience suggests we should start worrying.

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The Economy Drive

The parlous state of Britain’s economy and budget and the necessity of cuts in government spending should be common knowledge. The British public certainly grasps the situation. Its one manifestation is the data by the polling firm Ipsos-MORI. In its latest monthly “Issues Index,” which invites interviewees to name as many issues of concern as they care to, “Economy/Economic Situation” stands at 49%.

By contrast, issues that Labour might be thought to own, such as “Pollution/Environment” (8%), “Poverty/Inequality” (7%), and “Low Pay” (3%) are of distinctly tertiary importance to the public. Given today’s statement by Pimco’s Head of Global Portfolio Management that Britain stands a better than 80% chance of losing its AAA credit rating, on the grounds that the government’s debt reduction plan “is lacking in conviction and . . . is lacking in details,” focusing on the economy makes a good deal of sense.

As Pimco’s criticism of the government implies, the only man not willing to grasp the nettle of reality is Gordon Brown. Mike Smithson, the proprietor of the lively Political Betting blog, points out that in a weekend interview with Andrew Marr, Brown refused to acknowledge even the possibility of cuts in government spending.  As Smithson puts it, “The interviewing trait where Mr. Brown is at his most vulnerable is when he seeks to deny something that is clearly the case. Less charitable people than me might use the word ‘porkie.’ The problem is that he does this when it is so obvious.”

A big part of dealing with the problem of government spending will be reducing the size and cost of the British civil service. This is a problem in the U.S. as well, as publications such as the Economist and columnists like Michael Barone have pointed out recently, but anything the U.S. does in this context, the UK can do worse. The most recent Sunday Times notes that in 2009, 21.1% of all UK labor was employed by the state, and that – measured by hours on the job, rate of wage inflation, or salary – it is almost always better to be paid by the government than by a private employer. Even in the highest paid job, the private sector pays better salaries, but the government offers a much larger pension.

What’s more, some British ministries have become increasingly top heavy: more generals, fewer privates. In the Ministry of Defense, for instance, the number of workers in the lowest two pay grades has fallen by about 19,000 since 1997, while the upper tiers have increased by 2,000. I have my suspicions about just how real the headcount reductions are – you can achieve seeming miracles by contracting out, as the MoD has done extensively under Labour – but even if you take the cuts seriously, they’ve not stopped total civilian pay from rising 13% from 2003/04 to 2008/09, as against a 12% rise for pay to the forces. The cost of the senior grade pay and pensions must be a major part of that increase, which is particularly scandalous given Labour’s general cheapness when it comes to defense spending, and what should have been the effect of a substantial decrease in the size of the MoD.

The pension question is particularly interesting and dangerous. The Institute of Directors estimates that the unfunded cost of public-sector pensions in Britain over the next 50 years is about 335 billion pounds. Given the relative sizes of their economies, that’s even larger than the $2 trillion shortfall the U.S. faces, according to the Financial Times. And every time Brown or Obama hires someone else, that shortfall gets a little bigger, and the size of the productive economy gets a little smaller.

It makes me think, first, of the superb “Yes Minister” episode on “The Economy Drive,” in which Sir Humphrey proves to Jim Hacker that, in order to achieve increased efficiency, you have to hire more people. And, second, of Margaret Thatcher.  The UK National Archives have just released some of her early Prime Ministerial memos. Her first priority: cut the civil service by at least 5%, and preferably by 20%. “What,” she asked, “are we doing with 566,000 that can’t be done with 500,000?” An excellent question, then and now.

The parlous state of Britain’s economy and budget and the necessity of cuts in government spending should be common knowledge. The British public certainly grasps the situation. Its one manifestation is the data by the polling firm Ipsos-MORI. In its latest monthly “Issues Index,” which invites interviewees to name as many issues of concern as they care to, “Economy/Economic Situation” stands at 49%.

By contrast, issues that Labour might be thought to own, such as “Pollution/Environment” (8%), “Poverty/Inequality” (7%), and “Low Pay” (3%) are of distinctly tertiary importance to the public. Given today’s statement by Pimco’s Head of Global Portfolio Management that Britain stands a better than 80% chance of losing its AAA credit rating, on the grounds that the government’s debt reduction plan “is lacking in conviction and . . . is lacking in details,” focusing on the economy makes a good deal of sense.

As Pimco’s criticism of the government implies, the only man not willing to grasp the nettle of reality is Gordon Brown. Mike Smithson, the proprietor of the lively Political Betting blog, points out that in a weekend interview with Andrew Marr, Brown refused to acknowledge even the possibility of cuts in government spending.  As Smithson puts it, “The interviewing trait where Mr. Brown is at his most vulnerable is when he seeks to deny something that is clearly the case. Less charitable people than me might use the word ‘porkie.’ The problem is that he does this when it is so obvious.”

A big part of dealing with the problem of government spending will be reducing the size and cost of the British civil service. This is a problem in the U.S. as well, as publications such as the Economist and columnists like Michael Barone have pointed out recently, but anything the U.S. does in this context, the UK can do worse. The most recent Sunday Times notes that in 2009, 21.1% of all UK labor was employed by the state, and that – measured by hours on the job, rate of wage inflation, or salary – it is almost always better to be paid by the government than by a private employer. Even in the highest paid job, the private sector pays better salaries, but the government offers a much larger pension.

What’s more, some British ministries have become increasingly top heavy: more generals, fewer privates. In the Ministry of Defense, for instance, the number of workers in the lowest two pay grades has fallen by about 19,000 since 1997, while the upper tiers have increased by 2,000. I have my suspicions about just how real the headcount reductions are – you can achieve seeming miracles by contracting out, as the MoD has done extensively under Labour – but even if you take the cuts seriously, they’ve not stopped total civilian pay from rising 13% from 2003/04 to 2008/09, as against a 12% rise for pay to the forces. The cost of the senior grade pay and pensions must be a major part of that increase, which is particularly scandalous given Labour’s general cheapness when it comes to defense spending, and what should have been the effect of a substantial decrease in the size of the MoD.

The pension question is particularly interesting and dangerous. The Institute of Directors estimates that the unfunded cost of public-sector pensions in Britain over the next 50 years is about 335 billion pounds. Given the relative sizes of their economies, that’s even larger than the $2 trillion shortfall the U.S. faces, according to the Financial Times. And every time Brown or Obama hires someone else, that shortfall gets a little bigger, and the size of the productive economy gets a little smaller.

It makes me think, first, of the superb “Yes Minister” episode on “The Economy Drive,” in which Sir Humphrey proves to Jim Hacker that, in order to achieve increased efficiency, you have to hire more people. And, second, of Margaret Thatcher.  The UK National Archives have just released some of her early Prime Ministerial memos. Her first priority: cut the civil service by at least 5%, and preferably by 20%. “What,” she asked, “are we doing with 566,000 that can’t be done with 500,000?” An excellent question, then and now.

Read Less




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