The map of Whitehall has changed considerably in the months since Stephen Lovegrove left the Department of Energy and Climate Change to become Ministry of Defence perm sec. He tells Colin Marrs about the Brexit help his department can offer, the MoD’s role in boosting Britain’s industry and the staffing cuts he’s tasked with making. Photos by Paul Heartfield
Back in April 2016, shortly after Stephen Lovegrove had swapped the top job at the Department of Energy and Climate Change for the role of permanent secretary at the Ministry of Defence, he resolved to brighten up his new office. Six photographic etchings by Young British Artist Tacita Dean – part of The Government Art Collection – now provide a backdrop to the perm sec’s desk. With European security top of the departmental inbox, the symbolism of the artwork is striking. Haunting silhouettes of Berlin landmarks are reflected from the orange-tinted windows of the now-demolished East German Palace of the Republic.
Russia’s growing influence in 2016 – both in Eastern Europe and on the wider world stage – is, of course, just one of a number of profound global threats on the MoD’s radar at the beginning of 2017. However, while media commentators might be in full hand-wringing mode about the uncertainty hanging over the existing global order, Lovegrove is unfazed.
“I wouldn’t say the current situation is unique,” he says. “Certainly in my lifetime there have been environments which have felt more perilous than this one. But I think that the four themes that were identified in the 2015 Strategic Defence and Security Review are absolutely right, and are only becoming more apparent.”
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Those themes – including state-based threats (“and by that, obviously one is thinking of countries such as Russia”, Lovegrove says), terrorism, cyber threats, and, to quote the SDSR, the “erosion of the rules-based international order” – leave no room for complacency in the MoD. But, when asked about the global uptick in populist sentiment – which contributed to Britain’s vote to leave the European Union and to the election of Donald Trump in the United States – the defence ministry’s perm sec says that political populism is not – yet – a significant threat to stability in itself.
“I would be very concerned if there was a sense of rising nationalism which undermined the rules-based order and allowed for conflicts to emerge more quickly – and for the dominant paradigm to become one of power and force rather than rules,” he says. “But I think it’s a bit early to say that this is going to happen.”
EU membership is operationally irrelevant to the multinational and binational arrangements through which the UK currently insures itself, Lovegrove stresses. And, to demonstrate the primacy of NATO over the EU in the UK’s military relationships, he points to a map showing the flag configurations of recent NATO deployments in Poland and the Baltic states. “These are obviously all European countries, but you will see that of the four lead nations, two of them – Canada and the USA – are not European nations. And, before too long, three of them won’t be.”
While we’re on the subject of NATO, what does Lovegrove make of the Defence Committee’s claim – put forward in a report in April – that the UK was only achieving its NATO target of spending 2% of GDP on defence by including dubious items, including £1bn of pension payments. “There are no accounting tricks whatsoever,” Lovegrove says firmly. “There are rules as to what you can count and rules as to what you can’t count. And we are totally within the rules.”
While the MoD has some thinking to do on how it deals with activities currently governed by European agreements – including airworthiness regulations and defence research funding – Lovegrove says that the administrative burden of an EU exit is much less onerous for his department than for others. “We are not in the kind of position of our colleagues in DEFRA, for instance, who have an enormous suite of their policies being absolutely, directly affected,” he says.
“I wouldn’t describe the process of leaving the EU as like a war, but I certainly do believe this is a national endeavour which absolutely everyone in government is going to have to play a very full part in”
Lovegrove admits that, due to the large amount of equipment the MoD buys from overseas, it is more exposed to foreign currency fluctuations than any other department. But recent reports that the department is facing extra costs of up to £700m due to the post-Brexit drop in value of the pound are very wide of the mark, he says.
“We are perfectly aware of the fact that we buy a lot in foreign currencies, and as a result have hedging strategies in place,” he says. “Yes, there have been some small effects, which you can see because the fall in the pound has been quite sharp, but they have been a small fraction – a very small fraction – of what they would have been if we’d been unhedged. Obviously, there’s a cost to that, but it’s an insurance.”
"National endeavour"
While it is not bearing the brunt of leaving the EU, the department is standing by to lend its expertise in strategic planning to fellow civil servants directly responsible for Brexit negotiations. “I have discussed with colleagues in the Department for Exiting the European Union that we will try and make sure some of our expertise and knowledge of scenario testing and red-teaming [a process of planning and policy challenge] is actually used by colleagues who are dealing with Brexit, because that’s a very complex, dynamic set of considerations,” Lovegrove says.
“We haven’t quite got to that point yet because, obviously, we’re at the base camp of Brexit – as we read about on a daily basis – but when there’s more to go on we will happily make available those techniques and those facilities to test some of the scenarios.”
The MoD perm sec says that adopting military planning techniques would not compare to changes to the machinery of government made during World War II. “Well I wouldn’t describe it like a war,” he says, “But I certainly do believe that this is a national endeavour which absolutely everybody involved in government is going to have to play a very full part in. There are certain ways of thinking and organising yourself that people in this department might be able to contribute to.”
The department, according to Lovegrove, also has a big role to play helping central government policymakers develop the industrial strategy to which Theresa May’s government is committed in the post-Brexit world. But greater freedoms to directly invest in military manufacturing have to be carefully weighed against an ongoing spending squeeze on the MoD’s budget, he says.
“There is a balance between having a vibrant, indigenous defence industry and wanting to make sure we’ve got the best kit at the best price ”
Lovegrove welcomes the thrust of Sir John Parker’s recent report, written to inform the National Shipbuilding Strategy, which recommended the UK builds its warships at domestic shipyards to achieve both national security and socio-economic aims. “Where the rules allow the department to buy from British suppliers, it will,” Lovegrove insists.
There is, however, a caveat – which demonstrates the challenges involved in pursuing a more interventionist industrial strategy. “As a department, we spend about £37bn a year, so small percentage differences on that number are still very big. There is a balance between… having a vibrant, indigenous defence industry which is part of our national resilience, but at the same time wanting to make sure that we’ve got the best kit and we’ve got it at the best price.”
One new organisation helping the department get best value from its spending is the Single Source Regulations Office, the arbitration body set up in 2014 to examine and curb inflated costs on contracts for which there is only one realistic private sector supplier. Lovegrove brushes off press reports that the October departure of Clive Tucker as interim chairman of SSRO was down to disagreements with the department. “There aren’t tensions,” he says. “SSRO is a big change in the way in which the procurement picture for defence is now conducted, but in just two years it has already saved us about £160m. What’s not to like about that?”
Lovegrove arrived in Whitehall in 2004 as chief executive of the Shareholder Executive, joining from a senior media role at Deutsche Bank. His experience in both the private and public sector has helped give him an objective perspective on the SSRO’s role, he says. “I have been lucky enough to work in a number of different industries. And the one thing I would say is that if you are a regulator and you’re not cheesing people off then you are not doing your job right. And more power to their elbow.”
"Evolution"
He is similarly relaxed about the role of the Government Commercial Organisation, which now acts as the direct employer of senior commercial specialists working within departments. “I have got no problem with our commercial people – and neither, by the way, have our commercial people themselves – working for the Cabinet Office and then being seconded back to us. Obviously, I wouldn’t be hugely keen on them being suddenly yanked off projects which were important to us to go to another job, but the arrangements are in place for that not to happen.”
Again, his confidence is born of past experience. “At the Shareholder Executive we were an avowedly cross-governmental resource used by lots of different departments. I never found it very difficult to put departmental interests in the forefront of my mind when I was working [there]. There is an advantage in terms of training and consistency, in morale, and indeed in pay, in having that functional expertise brigaded into a central area, so I’ve got no problems with that at all.”
Lovegrove expresses satisfaction at the corporate performance measurement regime now in place at the MoD. Some in the defence establishment have privately questioned how it is possible to monitor the department’s rapidly moving strategic targets. Sceptics point to the example of 2015’s Joint Force 2025 strategy document, which proposed an increase in the size of UK land forces to 50,000 – up from 30,000 committed to in the previous Future Force 2020 plans.
“We clearly don’t want to have a rhythm whereby everything is being re-evaluated and redesigned on such a frequent basis that nobody can be held to account for it, and, indeed, we don’t want to have complete breaks,” Lovegrove says.
“2025 is an evolution of 2020 and, you know, builds on it. But I think a five-year planning cycle in defence is pretty standard and perfectly reasonable.”
If the reorganisation of the military isn’t tricky enough, the department is also faced with the task of making significant cuts to its civilian workforce. The November 2015 Strategic Defence and Security Review confirmed a commitment to reduce this headcount by almost 30%, to 41,000 by the end of the parliament. More than a year on, it is clear that the options for meeting this objective are still wide open. “In the process of working out the best way of doing that over the next four years, I want to be able to take the broadest possible range of inputs – and that means generating a sort of department-wide conversation as to what that is.”
“Salami-slicing” is ruled out completely (“the idea of getting rid of 30%, for instance, of our cyber capability, would not be a sensible thing to do”). But there is a hint that outsourcing and structural changes will be important in achieving the desired reductions.
“Very significant numbers of people who will no longer be working in the Ministry of Defence will still probably be working for defence under a different kind of employment model,” Lovegrove says. “What we will need to do is to try and work out what are the jobs that can only be done by people working for the Ministry of Defence as opposed to what are the jobs that could be done by somebody else. That’s the real question.”
Lovegrove says his approach to the reorganisation will be guided more by input from colleagues than by any management theory tract.
“There is a book on my desk called Reorg which I am going to start reading as I think about the department now,” Lovegrove says, failing to mention that the book is co-authored by the high-flying consultant Suzanne Heywood, who happens to be married to his boss, the cabinet secretary Sir Jeremy Heywood.
“But I am a strong believer that most of the answers to any problems that you might come across actually exist within the minds of the people who work in the department. And that is not something I would restrict to people at the top of the department – it’s all the way through,” he adds.
"Closely woven fabric"
Lovegrove says he does not feel too uprooted by the move from his previous role as DECC permanent secretary, despite the differences with his old department. “DECC was a very heavily policy-focused department, developing very complicated policies being put in place in order to allow the country to keep the lights on, decarbonise, and hopefully not do it at a great or unnecessary expense,” he says.
“These are complicated intellectual exercises, but were done by about 1,600 people in one building plus about 150 people up in Scotland. In organisational terms, the MoD is hugely more complex. There are 58,000 civilians and 140,000 military personnel, many of whom report to each other, scattered all across the country doing myriad things.”
And, while he describes the atmosphere of his department as being “a closely woven fabric which is very, very strong” (see box) Lovegrove is also eager to remove any perception that the MoD is too inward-looking. “I am keen to remove the insularity, if that exists, wherever I can,” he pledges.
Brexit may provide the perfect opportunity. With the MoD’s finely-honed wargaming skills and scenario-testing expertise – and its permanent secretary’s willingness to share these – Lovegrove and his staff are on standby, ready to equip and support colleagues from across government as they do battle to break our ties with the EU.
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“This building is a strategic headquarters and a department of state at the same time. Civilian people report to military people, military people report to civilian people, and it’s a very embedded, closely woven fabric which is very, very strong. Occasionally it gives rise to odd tensions, as you can imagine, but there are tensions pretty much everywhere.”