'In-year savings': the curse that is crippling the armed forces, and what to do about it

Ministers like to say that Britain is moving to a war footing. And yet in September, the Army cancelled every exercise involving more than 90 soldiers for the rest of the financial year. The saving was about £30m; a rounding error for a department spending more than £68bn a year. This is the curse of in-year savings: the annual scramble to drag day-to-day spending back inside its limit before March 31. It is both a crisis and a routine, and it’s felt by, almost without exception, the people who train and fight rather than the offices that manage them. The mechanics are dull, but they matter. The Treasury gives the Ministry of Defence two pots of cash. Capital, or CDEL, buys things: ships, tanks, aircraft. Maybe some drones. Resource, or RDEL, runs them: pay, fuel, ammunition, maintenance, training. Both limits are annual and hard; money cannot easily move between pots or years. So when running costs overshoot – as fuel, pay and support contracts have – the only fix is to stop spending in the same year. Equipment programmes are contracted and politically protected, whereas training can be switched off in a week. None of this year’s cull was a surprise. In June the Chief of the Defence Staff (CDS) told peers his main worry was day-to-day funding and that, without more, the forces would do less. Within three months, here we are. And we must not forget that CDS public prediction was given days after the then Defence Secretary resigned , saying the Defence Investment Plan settlement “falls well short of what is required for defence and the country at this dangerous time” as he did so. The pattern holds across all three Services. The Army, which has bet its future on Ajax , has stopped collective training for units not about to deploy and cut four to six days from each reservist’s year. Because annual camp had already happened, the loss falls on what little remained. The Royal Navy and RAF reserves were told to find savings too. At RAF Marham, home of the F-35B stealth fighter force, the junior ranks’ mess is shut and the accommodation lacks reliable hot water. Overall, the Royal Navy’s recruit and retain numbers are better than they have been for years. Yet trained strength fell by about 220 last year and is 16 per cent below its 2012 level, with more than 4,500 staff yet to qualify to deploy. The fleet is the smallest in modern history and yet we still cannot crew all six Type 45 destroyers because of refit backlogs and shortages of qualified people. In other words, the bodies are there; the training that turns them into a ship’s company is not. “Sailors-per-ship” is a more important figure to watch than “sailors” and it is going the wrong way. Then there is the case of Norfolk, Virginia, where a British general recently took command of Nato’s Atlantic headquarters in September. To date, Britain has filled 44 of its 71 posts there. The ministry’s tepid response to this is that its fill rate across Nato is among the highest in the alliance. I wondered whether there has ever been a more meaningless metric. Back in the real world, if we cannot staff the commands we ask for, at what point do we stop being given them? The financial sums as they stand were never going to add up. Luke Pollard, the readiness minister, said in a written answer this month that the department must find £10.7bn of “efficiencies” by 2029-30 : £1.4bn this year, £2.6bn next, then £3.5bn and £3.2bn. More than three-fifths fall beyond the current spending review, i.e. on somebody else’s watch. The National Audit Office has long questioned whether such efficiencies ever become real savings. When they do not, the gap is closed in-year, and we have seen what in-year means: less training. The result is new equipment on order and not enough trained people to use it. So how do we unpick this long-standing mess? First, consequences. Nobody in Main Building or the front-line commands has ever lost a job for presiding over this ritual, and the single services are not innocent: each protects its own headquarters and sacrifices its own capability. A few sackings would concentrate minds, “pour encourager les autres”, as Voltaire had it, even if the execution he alluded to might be a little extreme. Second, a longer horizon. France sets its defence budget in a seven-year military programming law, voted by parliament, which fixes the spending path so the forces can plan manpower and training against it. The current one commits €436bn (£375 billion) to 2030. Britain should legislate a ten-year defence budget with the resource line ring-fenced, so a fuel spike in one year does not stop tanks training the next. When people ask how France is able to get more bang for its defence buck – which it does – this is a major reason. Third, let underspends carry forward. Treasury annuality is a rule, not a law of nature. A senior friend of mine summed it up succinctly: “The pushers of this ‘jam tomorrow if we can just take a bit of famine today’ theology are now amongst the highest ranks. A theology which is clung to despite several iterations of proven failure.” Grim, but unarguable. In sum, none of the corrective measures outlined here will happen. The Defence Secretary resigned in June and the needle barely moved. He is now the Chancellor and there is no sign of change from there either. So long as it remains in the Treasury’s interest to run defence year by year and the decision makers that could force this to improve either fear anything that challenges the status quo, then nothing will change. The Chancellor has three days until his Budget to show that he is serious about fixing this. Meanwhile the services will protect their back offices and ministers will answer questions about efficiency targets as though the target were the achievement. Next autumn there will be another round of cancelled exercises and another speech about a war footing. This cycle of cuts and waffle is about the only thing in British defence right now that is reliable.