Trident Needs a Risk Assessment

Trident Needs a Risk Assessment

Trident News

Rumours are swirling around Britain's Trident renewal project as Parliament prepares for key announcements and a possible vote on the issue in the next two weeks. According to reports, it seems that:

  • the Strategic Defence and Security Review (SDSR) will be published on 23 November, with Trident cost updates;
  • the Comprehensive Spending Review on 25 November will give us the results of the interdepartmental budget battles currently in their final stages;
  • the Scottish National Party's opposition day debate on 27 November could well see a vote on Trident renewal; and
  • the Main Gate decision on Trident renewal is said to be sitting on the Prime Minister's desk to be taken at his convenience and judgement over the coming months - there is no absolute commitment to take it to Parliament, but a debate and vote is expected soon after the decision.

Trident Costs

The SDSR will include official updates on the expected capital costs of the Trident renewal project. These will rise significantly from previous estimates, kept artificially low and based upon the original back-of-the-envelope guesstimates in the 2006 White Paper putting the cost of the Trident renewal project at £15-20bn. With the Parliamentary arithmetic clearly on the side of a comfortable majority in favour of renewal, the government may well be ready to take a hit now and raise the budget, to as much as £40bn (2016 prices). This may sound modest when compared to many estimates you've heard quoted elsewhere.

It is common for those opposed to the project to estimate total overall capital and running costs over the lifetime of the project. Even before the news of escalating costs has surfaced, Conservative Chair of the Foreign Affairs Committee, Crispin Blunt, released his estimate of £167bn, based on official figures and vague estimates linked to GDP. However, as I wrote a couple of weeks ago, this did not follow the usual rules governing Treasury estimates of future cost and benefit, which would have led to a figure closer to the more 'normal' range of £80-100bn.

Perhaps more pertinent than overall future costs in the 20-50 years' timeframe is the implication of rising Trident capital costs for the defence procurement budget over the next 15-odd years. I estimated for the Trident Commission they would swallow a full third of the budget (report, p.18), using previous government figures. New figures could mean Trident accounting for a full half of the budget just a time when conventional capabilities would experience tight budgetary squeeze.

Who takes the credit and bears the risk?

HM Treasury (HMT) may be preparing to take overall oversight responsibility in an implied vote of no confidence in the Ministry of Defence (MoD)'s ability to control escalating costs. But poor management practices in MoD Main Building are only a small part of the story. HM Treasury hubris may yet come to haunt them.

HMT's decision to take the project under their wing may actually be deeply welcome within MoD. The chief civil servant in charge of MoD in evidence to a parliamentary committee, has already recently described Trident renewal as a 'monster' keeping him up at night, and threatening to suck the life out of other projects. This project has huge risks, driven by unexpected complexities in integrating emerging technologies and vulnerabilities, along with monopoly contractors and the perception of an immovable in-service date (2028 for the first submarine). Designers have to account for technologies and threats that currently may only be theoretical, but which could become acute realities within the timeframe of the project. Underwater drones, for example, could easily end up impossible to counter for large, slow and vulnerable ballistic missile submarines, rendering the whole Trident renewal project irrelevant.

Civil servants move on, and the longer the project continues the more institutional commitment to its specifics build up. There is every incentive on the part of contractors and the Ministry to delay cost increases to later stages in the life of the project.

Differences of opinion between MoD and HMT over Trident spend are not new. One of George Osborne's early actions as Chancellor was to face down Defence Secretary Liam Fox and ensure that the Trident capital spend would come out of MoD's own budget (as it had in the original Trident procurement project). This appeared to give MoD every incentive not only to control costs, but also to assess the value of Trident in relation to other alternative defence and security assets. Such an opportunity has nevertheless been denied MoD in two successive National Security and Defence reviews, because decisions on the system, the detail of the submarines, their patrolling cycles and the posture, is all determined centrally by the Cabinet.

Of course, even if MoD had retained full control of the project there was never any guarantee that they would be fully accountable for costs. When the project's costs escalate, is there really any possibility that HMT will stand firm and force delays or cancellations to capabilities deemed essential to British national security? MoD is already seen as cut to the bone by the British political elite, hence the guarantee that it will now receive 2% GDP in future. HMT may well have already concluded that cost escalation is inevitable, and that it is better to keep this monster close and have some level of formal control over this escalation.

Fiduciary responsibility

Financial risks are only a fraction of the broader risks associated with this project. The public debate has so far been characterised as a simple 'yes-no' proposition. But there are serious fiduciary responsibilities that remain deeply unclear. Ministers and Parliament should demonstrate greater commitment to their public role by demanding a full risk assessment on the project. This should cover financial, technical, diplomatic, military and security risks. It should be received before any final commitment on the Main Gate investment decision.

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