Alphen, Netherlands. 12 September. On Friday I had the distinct honour of addressing Airbus senior management at a swanky resort outside Geneva on European security and the need for a return to the principles of worst-case planning. The speech was against a backdrop of more European defence wishful-thinking last week from Jean-Claude Juncker and Federica Mogherini as they again try to use defence to counter Brexit without actually enhancing European defence. As ever with such meetings some of the most important conversations were informal. Perhaps the most important idea that emerged for me was the need for a new defence innovation partnership in Europe.
What do I mean by that? The July NATO Wales Summit Declaration referred to some modest increase in European defence expenditure in 2016. However, it is very modest and still bears little or no relation to the investment needed to render deterrence and defence credible, let alone maintain the ability to project power efficiently and effectively with the Americans. Worse, Jean-Claude Juncker only called for a more integrated EU ‘defence’ to promote his federalist agenda, whilst the more pragmatic Mogherini wants to see if Britain’s departure from the EU could lead to a more efficient investment by EU member-states in an EU-centric security and defence effort.
The problem with all such pronouncements is that they all assume the same essential defence ‘contract’ with the European defence and technological industrial base (EDTIB). In my evidence to the House of Commons Defence Select Committee late last year I highlighted the appalling waste of taxpayer’s money this ‘contract’ creates with Europeans getting far too little return on their defence investment.
The problem is that much of Europe’s defence investment has little to do with defence. Rather, it is a way a) maintain a taxpayer’s subsidy to keep inefficient defence industries in business; b) preserve a hi-tech research base when in fact the civilian sector is often far ahead; c) preserve jobs in key political constituencies; or d) a combination of all of the above. This shameful waste of taxpayer’s money is often compounded by the pretence that competition takes place between Europe’s few big defence contractors for the relatively few ‘big ticket’ defence projects on offer. In fact, such is the byzantine relationship between government and defence industries in most European countries that false competition is usually simply a metaphor for government trying to shift the risk of defence innovation onto the manufacturer and then the manufacturer claiming the cost back via cost overruns. Inevitably, it is the taxpayer who ends up footing the often exorbitant bill, although on some other politician’s watch.
There have been many attempts to overcome these problems but all have failed, for various by and large political reasons. The European Defence Agency being the most obvious of these failures through no particular fault of its own. As a consequence there are still too many metal-bashing defence industries in Europe bashing metal on very similar bits of over-priced, under-performing bits of defence metal. Production runs are simply not long enough nor big enough to produce the necessary economies of scale. Or, the inflated cost of such platforms are made worse by what I call the Christmas Tree effect – the hanging of too many systems onto platforms rendering both the platform and the system sub-optimal because systems integration is rendered impossible by governments constantly changing the requirement.
What is needed is a new European Defence Innovation Partnership, which would necessarily include the post-Brexit Brits, with the whole idea of false competition needs to be abandoned. Now, I am not suggesting a return to the appallingly wasteful ‘cost plus’ or ‘juste retour‘models of partnership. Nor am I suggesting any more Smart Procurement nonsense by which governments mortgage their defence future by delaying fronting up to the cost of defence present.
To make such a partnership reality companies like Airbus, which struck me as surprisingly nimble by defence-industrial standards, need to form a standing partnership with other big European prime defence contractors, such as EADS, Thales, and Bae Systems. Having formed such an alliance they need to be brought into discussions about defence requirement far earlier in the in planning/political cycle than is the case today so that a new balance can be struck between defence capability and defence affordability. Thereafter, the entire industrial/service supply chain needs to be exploited, not just the bespoke defence supply chain. And, where possible, as much hardware and software as possible bought off the shelf.
Take the new British super-carriers HMS Queen Elizabeth and HMS Prince of Wales. Much of the press focus is on what many see as the inflated cost of the two ships at £6bn. The reason for that is simple; at the outset of the project politicians and businessmen told porky pies to Parliament about the cost of the project and how long it would take to realise. If they had told the truth the carriers would have been sunk at birth.
In fact, the construction of the two carriers by the Aircraft Carrier Alliance is a story of innovation and points to the future. The ships were built in sections across the UK, with the each section then floated on barges to Rosyth where they were assembled. To realise the project the prime contractors Bae Systems and Thales UK had to make use of much existing expertise from the declining North Sea oil industry and exploit a much wider supply chain than has been traditionally the case for such projects. This helped lead to the Defence Growth Partnership and attempts by the British to generate much more defence capability for each pound spent.
However, if ever a real Defence Innovation Partnership is to be realised politicians must begin to answer a question they have been dodging since the end of the Cold War; what does the defence of Europe require, not how much defence of Europe can we afford.
Thank you, Airbus!