Q41 Chair: What would give? Practically everything else has given anyway.
Ursula Brennan: The thing that we are trying to do is get the programme back in balance. When you say "in balance", that is against a set of forward assumptions. Unlike other people, we have to plan a very long way ahead.
Q42 Chair: I do understand all that, I am just questioning-
Ursula Brennan: So, if the assumptions change, we would be in a better place than we were last year or the year before-or anywhere, frankly, over the last decade-in that we will not start from an overhang of unaffordable commitments, we will have a set of choices from a baseline that matches, but has now gone down. We would have to take the kind of choices that we have been taking, saying that if the assumptions change, if Ministers decide they want to spend less on defence, then we will buy less from Defence, and we will cancel things.
Q43 Chair: But you would buy this anyway?
Ursula Brennan: I do not want to say what choices Ministers will make, faced with a different set of planning assumptions in 2015 or 2016.
Q44 Chair: In that context is it sensible to have spent £2 billion, which does not arise here, on a nuclear warhead?
Ursula Brennan: Ministers have been clear that there is a commitment to continuous at-sea deterrence, and we are continuing to invest in the long lead items of investment that we need to keep that programme going.
Q45 Chair: Were there a decision not to go ahead with the successor to Trident, how much of that £2 billion that we have spent on the warhead is preparing for the next generation rather than this one?
Bernard Gray: The reason I am looking slightly quizzical is that we are spending money on the infrastructure to support the warhead programme.
Q46 Chair: There is some design expenditure.
Bernard Gray: There is some design work, but that is not anything like the order of magnitude of the number we are talking about here. The sum of money I think you are talking about relates to the infrastructure works to maintain our nuclear weapons facilities-which were built, broadly speaking, in the 1950s and 1960s-as being fit for purpose for handling hazardous materials in the 2020s and beyond. We have had a process, over most of the last decade, of renewing that infrastructure. That is what is going on.
Q47 Chris Heaton-Harris: I just wanted to ask you about the cost of boats 5 and 6. I can understand what you said about the initial three boats being underpriced; you said they underestimated the complexity of what they were doing. You saw the man hour sheets and everything, so you can work out why you have got to that cost on boat 4. I am concerned by the words in the Report that say, "initial items only". This is page 28, figure 14. You have a figure for the boats of £0.88 billion.
Ross Campbell: If I can interject, that does not represent the cost of a full submarine; that only represents the cost of the long-lead items-things like the nuclear reactor that will power it-which have been approved to date.
Q48 Chris Heaton-Harris: On boats 5 and 6, as things stand now, knowing the costs that you do, do they fall in your broadly balanced budget term? They are all going to work out fine; you are not going to come up needing another £0.5 billion.
Vice Admiral Lambert: Yes, the programme that we have for the future has seven Astute submarines, the deterrent coming in in 2028, and that is within the broadly balanced programme.
Bernard Gray: We have a forecast assumption for what the last four boats will cost us in our programme. We will clearly be in negotiation over coming months and years, depending on which boat, for what their prices will be.
Q49 Chair: Your forward programme at the moment is based on an assumption that there will be a real terms increase in the Defence budget?
Ursula Brennan: In the Equipment Programme or within the whole of the Defence budget?
Bernard Gray: A 1% increase in the Equipment Programme from the end of the CSR period is the planning assumption that we have been given by the Treasury. One helpful point to add: the Commodore also mentioned the cost base reduction work that is going on. There are three main contractors in the initial production of the boats: BAE Systems, Babcock and Rolls Royce, who do the power plant. We are trying to de-duplicate activity between those three companies in order to substantially reduce the cost base going forward for the whole of submarine building. That is a piece of work we started 12 to 18 months ago, and we are now beginning to get into the thick of detailed work with them about that.
Q50 Nick Smith: A while ago we talked about armoured vehicles. I came away thinking a good project had not been taken forward because bigger, more expensive projects, and overspends on those big, expensive projects, crowded out other quite chunky, but smaller, proposals. How are you trying to ensure you have a balanced approach to procurement for the future, so that does not happen?
Vice Admiral Lambert: If I can start on that, we are trying, with a whole series of programmes, to get to a point where we have more choice. In the aircraft world, if we go ahead with joint strike fighter, we can buy as many or as few as we like moving forward, and that will give us more choice in the future if the circumstances around the world change and we need more tanks and less aeroplanes. We are doing that as a first step. With the armoured fighting vehicle programme, as we brought to the Committee last time, we are looking at a spending envelope, and trying to keep the spend of the armoured fighting vehicles within that spending envelope, so they do not get crowded out. We are still working that through.
Bernard Gray: As a general process, part of the problem that the ground vehicles face is that the lead times for aircraft and ships are much longer than they are for ground vehicles. If the Equipment Programme is allowed to get overlarge, the ships and the aircraft tend to be contracted for, and the ground vehicles are not. Therefore, in contractual terms it is an easier thing to delay or put off a decision about ground vehicles than it is to reopen a contract about sea or air systems. That has been a characteristic: one of the downsides of having an overlarge Equipment Programme is the ground systems get squeezed. One of the benefits of getting it back into balance is that you do not put that pressure on shorter lead time programme.