December 1 2010 An Indefensible Defence Strategy Liam Fox promised that Octoberâ€™s defence review would be a â€œclean breakâ€ for Britainâ€™s military establishment. There would be cuts, sure enough, but also the promise of a brighter future. Well, cuts there have certainly been: the review imposed real reductions of 8 per cent on the armed forcesâ€™ budget over the next four years. But the brighter future is proving harder to perceive. A particular concern is that the defence secretary has not explained how he will prune the â€œunaffordableâ€ Â£38bn of unfunded equipment orders he inherited. Rather, he has pushed this question out to 2015, beyond the scope of the defence review. However difficult the spending squeeze in Whitehall, this is a poor decision. Procrastinating on these orders makes it impossible for the UK to set out a sensible military procurement strategy for coming years. Britainâ€™s defence industry, which had been looking for clarity from the review, still lacks the tools to plan for the future. That is bad for the armed forces, undermines the defence-industrial base and may ultimately weaken Britain as a military power. Of the giant overhang, the coalition estimated that about Â£20bn related to equipment programmes to be paid for between 2010 and 2020. This has now been shunted into the five years beyond 2015, meaning the shortfall must be absorbed in half the time. Deferring this expenditure will, of course, lead to additional costs. The government will have to pay industry to keep idle capacity ticking over while it waits for the delayed orders to be placed. The final total will be even higher. It is hard to see how this bill can be met. The armed forces and the defence industry are clinging to some vague assurances given by David Cameron that military spending might rise in real terms after 2015. But the scale of the increase needed would be truly heroic. In effect, you would be talking about effectively doubling the rate of equipment spending simply to close the gap. In the absence of a major international crisis, this does not look politically viable. Moreover, a heroic effort would be required simply to deliver the forces the coalition says that it wants for 2020. And it would suffice only if efficiency savings were achieved elsewhere in the defence budget â€“ most notably through the Â£4bn or so reduction in personnel and basing costs that the Ministry of Defence hopes to achieve over the next five years. Any slippage and the gap would widen further. This would only fund the militaryâ€™s legacy wish list â€“ including the Joint Strike Fighter, Trident and the FRES armoured vehicle programme. There would be no scope to respond to any changing military needs â€“ for instance to develop cyber capability or unmanned combat aircraft. The idea these decisions represent the basis of a new, realistic defence strategy is hot air. They offer no possibility to reshape the MoDâ€™s relationship with industry â€“ or to develop new capabilities that the UK may need in future. Indeed, what Mr Fox has done is to ensure a continuation of the constant squeeze the defence industry has faced since 2005, when the UKâ€™s last under-funded defence industrial strategy was triumphantly unveiled. Mr Foxâ€™s policy of dither has several undesirable consequences. First, Britain will continue to pursue a raft of unaffordable defence projects. Some will inevitably be cancelled after large sums have been spent on development. This will lower public confidence in procurement and make it harder to increase military spending at all. Second, the defence industry will remain on a drip-feed, and will doubtless respond by withdrawing further capacity. This may by default erode vital strategic capabilities that Britain wishes to preserve. Third, the MoD will cut the things that are easiest â€“ such as the research budget. This is especially short-sighted as it risks progressively degrading Britainâ€™s ability to develop cutting-edge weaponry. Britain needs a properly worked out defence strategy. This means defining what it wants the armed forces to do, what kit they need and, by extension, what indigenous technologies are required for strategic reasons. The defence review did not adequately answer these questions. Mr Fox must bring more clarity. He must also now identify the programmes that should be cut and create a sensible profile for defence spending, which can be properly funded. Only when he has done this can Mr Fox claim to have delivered the clean break that he originally promised.