UK Strategic Defence Review in a changing world

 The much-trailed UK Strategic Defence Review (SDR) was published yesterday. It was timely for me as I was participating in a European seminar on how Europe should respond to the new strategic situation.

There is a lot of narrative (some have called it a think piece) in the Defence Review, rather than detailed plans. It's undoubtedly a coherent read, probably the best I have read, and for the critics who focus on detail, the hint is in the title - it’s strategic. It will inform further plans.  The commitments include:

·       £1.5bn to build six new factories to enable an "always on" munitions production capacity.

·       Building up to 7,000 long-range weapons, including missiles or drones.

·       A "cyber and electromagnetic command" to boost the military's defensive and offensive capabilities in cyberspace.

·       £1.5bn to 2029 to fund repairs to military housing.

·       £1bn on technology to speed up the delivery of targeting information to soldiers.

 

There was no commitment to significantly increase the number of full-time soldiers, which is sensible given the need to concentrate on meeting the current targets. The same certainly applies to the Royal Navy, which is struggling to staff the surface fleet. Improvements in pay and conditions, as well as the investment in service housing, are crucial to meeting those targets.

 Unlike previous defence reviews, there was less emphasis on shiny new equipment. Even the headlines, such as the latest attack submarines, are primarily about replacing existing weapon systems. However, there are still some tough decisions to be made if the UK is to bridge the gap between policy rhetoric and strategic reality. For example, as a recent University of Exeter study asks, “Does an aircraft carrier or a defunct amphibious force with limited air and aviation assets really deter adversaries from acting against the UK or its allies?” Ukraine’s Operation Spider Web has rightly been described as “a defining moment in modern warfare.” One of the big ideas in the SDR, the integrated force with a digital targeting web, is a recognition of the need for change.

 Everyone in Europe has woken up to the need for stockpiles, a problem I highlighted last year and one that dates back to the Cold War. Hopefully, the ‘just in time’ era is finally over. The investment in munitions manufacturing is crucial, as at present, we barely produce as much ammunition annually as Russia fires off in Ukraine each day. Strengthening our industrial base is something I highlighted in a paper on defence procurement for Prospect, which has broadly welcomed the SDR. Britain cannot afford to rely on uncertain supply lines during a war. The section on defence procurement is a move in the right direction, but we need to see what this means in practice in the later plans. The detailed emphasis on skills, workforce planning and people is very welcome.

 There is a bit of spin on the concept of ‘military Keynesianism’. Jobs and other economic spin-offs, not least R&D, are a welcome by-product, but other forms of public spending deliver higher economic multipliers. However, not as egregious as the Scottish Government pulling the plug on a high-tech training and research centre, led by Rolls-Royce, which has rightly been described as industrial sabotage. Or the excitable performance from the Tory Shadow Defence Minister in the Commons, who has forgotten that this review is starting to tidy up the mess they left behind.

The SDR gives a credible and detailed breakdown of the threats facing the UK. There is a welcome shift from the imperial strategy of the Johnson Government. It also reflects a much stronger relationship with our European partners. This was evident in the seminar I participated in, where most countries reported similar policy shifts. However, almost everyone indicated that this is not a massive shift – the proposed changes are relatively modest, relying on Russia’s need to rebuild after the Ukraine war. For example, the spending commitments in the UK and Europe are not huge and are spread out over many years. In the UK, 20% of the MoD budget is spent on Defence Nuclear Enterprise, which, whatever position you take on those weapons, is a big chunk out of conventional capacity. Even the much-vaunted German policy is not quite as substantial as the spin. Current and immediate funding plans won’t do much more than paper over the cracks caused by 30 years of underinvestment. Lord Dannatt’s comment may be a little harsh, but he has a point.

 There was a concern at my seminar, particularly from countries in Eastern Europe, that this may be misguided. The Russian economy has been militarised to an extent that is not fully appreciated in the West. If a peace deal is agreed, then they would be in a position to attack the Baltic states reasonably quickly. Putin, like Netanyahu, is in a political cycle that almost requires continuous war. The PM is also doing his best to ‘strengthen our bridge to the US’. However, there are few people in Europe at present who regard the USA as a reliable partner, at least while Trump is in office. The PM’s ‘sovereign warhead programme’ may be a tacit recognition of that reality, along with new delivery options. The SDR is typically vague on these issues for the usual reasons, but it ducks the issue of just how independent our nuclear deterrent is.

The Prime Minister claimed his defence blueprint would deliver “A battle-ready, armour-clad nation with the strongest alliances, and the most advanced capabilities – equipped for the decades to come.” I’m not convinced that the UK, or our European allies, are at that stage, but there has been a welcome and significant gear shift. 

Political change has to be more than a slogan

The elections in England ought to be a wake-up call to political parties, particularly about the disillusionment many voters feel about our politics. The warning signs were present in the opinion polls and surveys from ERS; others have highlighted the need to rebuild trust in politics. The More In Common think tank reported that their focus groups were brimming with a level of “anger, despondency or misery about the state of Britain that doesn’t feel sustainable”. It is not an accident that in the local elections, 61% of the most deprived wards were previously held by Labour. Now, roughly 85% are held by Reform.

Some take a more relaxed position, arguing that many voters treat politics like buying a new soap powder. Reform is just the latest shiny brand; after all, we have been here before with UKIP. The ‘red wall’ seats are often viewed as a barometer of opinion, but as academic interviews have shown, the dissatisfaction in these areas goes much deeper. People interviewed generally loathed politics, “They don’t [do] what they say, they don’t keep to what they say they’re going to do. They tell lies.” Roughly one-third of the residents interviewed understood politics largely or predominantly through the frame of corruption. From the expenses scandal, Boris Johnson partying during the pandemic, to the current government ministers accepting donations and Taylor Swift concert tickets. This is one of the reasons that action on political donations is so necessary.

I don’t believe the soap powder analysis works because broader attitudes are in play, and Reform is doing much better than UKIP ever managed. I was in Romania two weeks ago, meeting researchers I had worked with for a European think tank. They were understandably focused on their elections and the growing strength of the far-right Alliance for the Union of Romanians, which subsequently took 40% of the vote in the presidential elections. They pointed to surrounding states, with leaders like Orban and Vučić, taking similar populist positions. These leaders are also starting to make territorial claims. You don’t need to be a historian of the Balkans like me to know where this leads. The hope that Germany would be a stabilising influence is gone, while Chancellor Merz attempts to ape the far-right Alternative für Deutschland (AfD) party.

You might argue that Mark Carney’s Canada win and Anthony Albanese's victory in Australia prove that there is an alternative narrative. However, these were wins based on a nationalistic response to Donald Trump, which won’t be available to all centralist politicians. Having said that, a new poll found that voters regard Donald Trump as a bigger threat to the UK than terrorists, so linking Farage’s blind obedience to Trump might be part of a strategy. Nothing beats the Trump administration when it comes to corruption. 62% of all Brits, including 60% of Labour-Leave voters and 53% of Labour-Reform Switchers, back joining forces with the EU over the US.

For UK Labour, the usual post-election honeymoon was very short. Keir Starmer is now the most unpopular PM in recent history after a series of policy decisions that, if not avoided, could have been mitigated. The many good things the new government has done, including employment rights, minimum wage, trade deals and funding for public services, are being drowned out by some poor and politically inept decisions. Many of us suggested thresholds for the Winter Fuel Payment at the time, along with different approaches to WASPI compensation. However, listening is not something this government does well, and No.10 has rejected changes, and internal debate has been closed down. The benefit cuts may not be as electorally unpopular, but the consequences will play out over years.

Aping Reform won’t work, as one of the ‘Red Wall’ voter interviews said, “Sometimes I just think, these people, they say what they think we want to hear. And I find that quite annoying. That, I find, that as if they think we’re thick.” In any case, Labour is probably more at risk from the left, with the Greens and Liberal Democrats doing well in the elections. If Labour seeks to ape Reform, voters will largely opt for the real deal and vote for Reform, while alienating supporters who despair at the party adopting Reform-like positioning. A study by Persuasion UK found that of potential Labour switchers, only 11% said they would consider voting for Reform. By contrast, 29% would consider the Greens, and 41% the Liberal Democrats. If all of the ‘Reform-curious’ abandoned Labour for Reform (many won't because they don’t support Reform polices), Labour would lose 123 seats, but they would keep a parliamentary majority. On the other hand, if the Liberal Democrats and Green Curious switched, Labour would lose 250 and the election.

So, what about Scotland? Some argue that we are different and Scottish voters won’t buy Farage and his snake oil. However, polling and actual votes tell a different story. Some ultra-nationalists are salivating at the thought of Prime Minister Farage, hoping that this will get independence over the line. In fairness, while rightly calculating that Reform will likely do more damage to the Tories and Labour, John Swinney still understands the broader risks to our politics.

Welsh Labour has long adopted a more detached strategy from UK Labour than the Scottish Labour Party and has achieved better results, although that may be waning. Eluned Morgan has said she will pursue a left-wing “red Welsh way” and draw a clear dividing line between Welsh Labour and the national party.

Scottish Labour is struggling to differentiate its message from the unpopularity of the UK government. With independence further down the voters' priorities, focusing on the SNP’s poor record on public service delivery is a fair attack line. Again, I think the Scottish Government has done many good things, but consistently prioritised process over delivery. However, good attack lines are not enough. If anyone in Scottish Labour thinks trading pledge cards on waiting lists and GP appointments is enough, they are seriously deluded. Scottish Labour also needs a positive message to differentiate itself from the SNP. My suggestion is to devolve real power to communities. This combines how to respond to the far-right while contrasting Scottish Labour’s support for localism with SNP centralism. Even UK Labour is likely to have second thoughts about their centralisation of local government in England, with huge Tory/Reform-leaning populations blocking government policy. Suddenly, directly elected mayors have all the downsides that many of us have highlighted for years.

Scotland has some of the largest councils in the world, with an average population of 170,000, against a European average of just 10,000. It’s time to give real powers to actual communities of place. Giving them the resources to fix their high streets, fill the potholes, reopen the libraries and sports centres, and clean up our public spaces. These are the issues that mattered to voters last week.

For Scottish Labour to shift the dial, three things have to happen. First, the UK government has to change its approach to some key voters' concerns. Second, there has to be outright confrontation against the far right, with no more appeasement. Third, Scottish Labour’s positive vision should be about empowering communities. When politics has become detached and alienated from people’s lives, we must return our politics to them. 

And a few more ideas in this new book.

It's health inequalities stupid!

Benjamin Franklin famously said that ‘nothing is certain except death and taxes’. Well, it used to be pretty certain that this generation would live longer than the last – but no more. Life expectancy was improving until 2011 when it started to decline in Scotland.

This was my opening pitch when moving the Socialist Health Association Scotland motion on health inequalities at the recent Scottish Labour Party conference. The key point is that as health inequalities underpin most of the challenges facing our health and care systems, political parties should put radical action on health inequalities at the heart of their manifestos.

Let's start with why we should be concerned that life expectancy in Scotland is no longer rising. While deaths relating to COVID-19 play a part in explaining recent falls, the deviation from the long-run trend dates back to the early 2010s. More people in Scotland are in relative poverty, more are likely to be inactive due to long-term illnesses, and food insecurity, homelessness, and fuel poverty are all higher than they were. The SHERU report found that key outcomes related to health and inequalities are not significantly improving and are, in some cases, worsening.  The biggest difference in female healthy life expectancy is between the Orkney Islands (77.5 years) and North Ayrshire (54.0 years) – over 23 years difference.  A gap that applies to almost all the leading causes of death.

This isn't an easy debate for political parties. The health debate in Scotland focuses almost entirely on the NHS, partially driven by a less than edifying parliamentary scrap each week, but it reflects how the public thinks about health. Health equals the NHS. It is of course vital that we continue to make the case for the NHS when you have Farage and his Reform private company arguing for privatisation. The US healthcare corporations who have created the most expensive and inefficient healthcare system in the world are rubbing their hands with glee – and they have Trump to press their case through trade deals.

However, the actual pressure on our health and social care system comes from poor health outcomes caused by inequalities. When household income is too low to afford essential goods and services like food and warm homes, participation in everyday social activities leads to greater social isolation. This is not about behavioural factors – it’s about the big issues like income support, wages, employment rights, housing, air pollution, crime and fuel poverty. I remember running a fuel poverty course for health visitors who vented their frustration at returning time and time again to the same families with the same health problems caused by cold, damp housing.

We have many strategies in Scotland, beautifully laid out in glossy documents. What we rarely have is measurable action and outcomes. We have some isolated initiatives, like the excellent Scottish Child Payment, but no comprehensive plan to fully meet the statutory target of 10% of children in relative poverty by 2030/31. As the SHERU report and others have highlighted, there is limited evidence that current policies have effectively reduced inequalities.

All of this was highlighted by the Christie Commission over 13 years ago. I was an expert advisor to that Commission, and we calculated that 40% of all public spending was related to failure demand - putting right the impact of inequality. So, when ministers and others talk about public service reform, the solution isn’t going to be found in efficiency targets and the like. It requires preventative spending that tackles inequality before creating the failure demand, which costs much more. I remember talking to a lecturer running a pilot course for single mothers, helping them to keep their children out of care. The course was successful, but no one could fund the £450 per head to continue it. It can cost over £5,000 per week to place a child in a private care home. How bonkers is that!

Despite our economic challenges, we are a rich country, but the investment in preventative spending has to be paid for. This is spending to save, so we need to look at ways of increasing current spending and how long-term investment can be financed. In the short to medium term, the work of Tax Justice Scotland is essential. In the longer term, we might look at what the EU, with the UK, is considering with bonds to pay for increased defence spending. Now, I am all for financing the defence of Ukraine and the rest of Europe against Putin and his useful idiot Trump. But if we can spend to save for that eventuality, we should be able to do the same for health inequalities. This is an investment in our country’s future.

Public Private Partnerships – surely not again!

I thought I wouldn’t need to write about PPP ever again. However, as the Chancellor is considering private finance for new infrastructure projects, a new generation of politicians and officials must be reminded of this bonkers idea.

 

A Public-Private Partnership (PPP) is a funding model for public infrastructure projects. It is an umbrella term for schemes like the Private Finance Initiative in the UK. It encompasses schemes such as the Hub programme and the Non-Profit Distributing (NPD) model in Scotland. The Tories invented PPP, although the Blair/Brown governments massively expanded it. The SNP came to power in 2007 and committed to ending these schemes but simply rebranded them through the work of the Scottish Futures Trust. Even the Tories abandoned them for new projects in 2018.

The Chancellor is considering such models because of the fiscal pressures the UK is currently under. They are proposing to tweak the model with the introduction of ‘value-for-public-money’ clauses. This test looks similar to those in the old model, which was easily circumvented. PPPs claim to offer a way to avoid tax rises (in the immediate) and break fiscal rules. However, whilst PPPs provide a way to get around short-term budgetary rules, they simply push expenditure forward and pressure revenue budgets. New Labour era ministers promote the model despite admitting it ‘is not without its shortcomings’. The industry is already salivating over the prospects of easy profits while claiming they have learned the lessons of PFI.

 

The evidence against using PPP is extensive. This briefing sets out the major problems and risks the UK has encountered through its extensive experiment with PPPs, including how they have:

·       Cost the government more than if it had funded the public infrastructure by borrowing money itself

·       Led to large windfall gains for the private companies involved at public expense

·       Enabled tax avoidance through offshore ownership

·       Led to declining service standards and staffing levels

·       Hollowed out state capacity to design, build, finance and operate infrastructure

·       Eroded democratic accountability

 

This is not just about historical costs; the price continues to be paid. PPP projects in Scotland typically run for 25-30 years, and you can view the cost for each legacy project here. In the UK, over 700 projects have been built using PFI since the early 1990s, worth around £60 billion. They distributed £300 million in dividends to investors from £1 billion in profits between 2005 and 2022. As NIESR points out, “We are spending far more in PFI repayments than the value of the assets and are locked into these contracts for decades to come. Most households wouldn’t take out loans on terms like this, so why did the public sector?”

A study of parliamentary inquiries into PPP scandals examined a consistent pattern of wrongdoing. Over the past decade and a half, billions of taxpayers’ funds have been unaccounted for. This appears to be mainly because private interests have been prioritised over public needs. Other findings showed that companies regularly reduced the quality of a service to maximise profits. Companies sometimes breach the terms of their public-private contracts because it’s in their economic interest. This even has a name – economists call it ‘efficiency breach’. As many of these contracts come to the end of their life, buildings are being handed back with huge maintenance bills.                               

Successive opinion polls show that the public wants essential public services to be nationalised, not handed over to private companies to make rip-off profits. The hard lessons of the past should not have to be relearned. We already know that taxpayers and consumers will pay the price.

ScotRail: public ownership is not enough

 The Herald has been running a series of articles on ScotRail since it was taken into partial public ownership as the ‘operator of last resort’. As is often the case, the headlines don’t always reflect the content, which is generally good, and the usual suspects have claimed it shows public ownership doesn’t work.

Last September, I wrote a briefing for the Reid Foundation, All Change on the Railways, which looked at ScotRail and the UK Government reforms. This was a warm-up for Mick Lynch's lecture at the Jimmy Reid Memorial Lecture in October 2024. It is worth remembering that under the Tories, only 85.5% of trains ran on time, and many more failed to run at all, not least because industrial disputes were deliberately left unresolved, wasting £1.25bn of taxpayers' money. This was also the case with Abellio in Scotland. Fragmentation, waste and bureaucracy beset privatised rail. While welcoming the decision to bring ScotRail into public ownership, I highlighted several challenges. These included driver shortages, ageing rolling stock, retiring engineering staff, passenger safety, and the need for an integrated transport and ticketing system. These all reflect years of mismanagement, which cannot be fixed in under three years of partial public ownership. ScotRail still operates under the failed franchise model, which has additional costs baked in.

The usual suspects have focused on increased costs, pointing to the grant increase from £446m pre-pandemic (2019/20) to £737m. However, we also know that Abellio was running at a loss above £100m, which they, or another operator, would insist on to keep the franchise running. Then, there is the need to settle the pay disputes, record inflation rates, and other costs associated with the mess Abellio’s desperate cost-cutting caused. Some of us can remember the shambles of the 2018 winter timetable, with months of cancellations and service disruption. So, while it is right to question any cost increases, they must be contextualised.

There is a lot of confusing data in the articles about passenger satisfaction based on different surveys over varying timelines, with some highly subjective questions. For example, what is the difference between 'sometimes' and 'rarely' in relation to delays and cancellations? However, overall performance and passenger satisfaction continue to be better than the GB average and trains in Scotland are more likely to arrive on time. As someone who regularly uses the train, I have to agree. Much was made of cancellation costs (still better since public ownership), but these are anyway mainly outwith the control of ScotRail, either due to the weather or Network Rail issues. A public service operator should ensure that passengers get home, which often means expensive taxis because coaches are not always available. I can recall several lengthy disputes with Abellio, who fiercely resisted paying the actual cost of their service failures - no MSP to complain to then!

ScotRail is also running 75% more services, and while that is slightly down on the pre-pandemic figures, other rail companies have not achieved similar pandemic recovery numbers. There has been a significant shift to home working, which has been encouraged in Scotland, with no Jacob Rees-Mogg leaving cards in civil service offices!

It is no surprise that passengers think rail fares are too high – they are. The peak rail fares pilot scheme boosted demand for ScotRail services by around 6.8%, short of the 10% target. However, this criterion ignores the policy's wider benefits, including two million car journeys taken off our roads. 

So, in three years of partial public ownership, services have improved marginally as the Abellio shambles have been patched up. However, that is only part of the story; as Transform Scotland says, a clear, coordinated strategy and long-term investment are needed to ensure railways are a “national success story rather than a symbol of missed opportunity". They criticise the ending of the peak fares scheme and point to the need to adapt services to evolving work and leisure patterns, with greater cohesion between improving rail services and facilitating traffic reduction. The Scottish Government has committed to spending over £6 billion on new road capacity on the corridors from Perth and Aberdeen to Inverness. Yet no similar ambition exists for the parallel rail routes. We have an ageing rail infrastructure and one of the oldest train fleets in Britain. If this sounds familiar to ferry users, it should. Transform argues that the strategy should include simplifying fares, prioritising user experience, improving service reliability, and investing strategically.

As I argued last September, the key to the future of our railways and climate change is to get us out of our cars and onto the train. Rail is in a unique position to accommodate transfer away from the car. To achieve that, we need a radical policy shift and investment. Public ownership is an essential step on that journey but not enough.