Liam Fox's successor Philip Hammond faces MoD challenge

A year after the strategic review, Philip Hammond says Defence is on a more stable footing

The new Secretary of State for Defence, Philip Hammond, has taken the helm of one of the most complex departments in Whitehall at a time of immense change, a year after the Strategic Defence and Security Review (SDSR), with UK forces fighting campaigns on two fronts, in Afghanistan and Libya.

One of his first tasks was to give a report on Afghanistan to Parliament, in which he said that progress on security had been meaningful but was "not irreversible". He will now be responsible for helping decide at what rate British forces reduce their presence in Helmand to finish combat operations by the end of 2014, and how that is portrayed.

In the SDSR, plus the additional cuts made in July, Mr Hammond also inherited a work in progress, for which his financial skills will come in very useful. The review set out the broad direction of defence for the UK's forces and began to tackle the funding gap between the MoD's aspirations and the available budget.

But he will need to navigate its implementation carefully, not least after criticism that it was driven more by savings than strategy. He also faces the challenge of trying to shore up morale within the Armed Forces and civilians at the MoD during many years of staff cuts, while continuing to re-establish the MoD's own credibility within Whitehall.

The review outlined £5bn in reductions over three years, a budget cut of some 7.5%, which has already led to the scrapping of some high-profile equipment, from the new Nimrod MRA4 spy planes, to the Harrier force, and the flagship aircraft carrier, HMS Ark Royal.

A competition to sell HMS Ark Royal has been carried out, with a final decision on her ultimate fate to be made later this year. The MoD is still negotiating the sale of the remaining Harrier fleet, while the Tornado fleet was also reduced, with two Tornado squadrons, XIII and 14 Squadron, disbanded in June.

Service personnel cuts

Service personnel are being cut by 29,000, as well as 32,000 civil servants to go by 2020. The civilian workforce has already fallen by over 5% from around 85,800 civilian personnel in April 2010. The Royal Navy and RAF cuts of some 5,000 each have already started, while the regular Army will be reduced to 82,000 by 2020, from 101,000 now.

The MoD hopes to balance that reduction with the increased use of Territorial Army reservists, although the crucial details of how that will function in practice remain to be worked out. By 2020, the MOD envisages a total land force of around 120,000, with a ratio of 70:30 regulars to reservists, with £1.5bn to be spent on building up the reserves over the decade.

Another transformation begun by Liam Fox was the re-organisation of the MoD itself, including a new 'joint force command', as well as a shake-up for procurement, with the naming and shaming of offenders who go over budget on major projects. He won a commitment for an increase in the MoD's equipment and support budget by 1% a year in real terms between 2015 and 2020 to fund future military equipment.

That increase will help, but the 'black hole' of £38bn which Liam Fox identified in the MoD's future plans has not been entirely eliminated. Industry will also be looking to the new man at the top to see whether more efforts can be made to keep highly-skilled defence jobs in the UK.

Philip Hammond says: "Dealing with the defence deficit was a national security priority and tough action had to be, and was, taken. Now - one year later - I am pleased to say that Defence is back on a more stable footing. The future equipment programme is no longer an unfunded aspiration but one that provides real money for real equipment. The military equipment and support budget will also rise in real terms by over £3 billion beyond 2015, and this funding boost has already helped secure an order for 14 extra Chinook helicopters."

'Formidable force'

One year on from the SDSR, the Chief of the Defence Staff General Sir David Richards has this assessment:

"We have had to take some tough decisions, but as we move towards Future Force 2020 we will remain a formidable fighting force on the world stage. We will remain capable of sustaining our operations in Afghanistan and as we have shown in Libya, our adaptable armed forces will continue to rise to the challenges they face."

The challenge now will be for Philip Hammond to implement what his predecessor began, with little appetite within the MoD for a significant change in course. A period of stability is what most hope for from the new man with a reputation as a "safe pair of hands", although that is likely to be tested, not least by events, as those in charge at the MoD have found to their cost over the years.

Many in defence also warn that as the UK shrinks its forces, it must look too at shrinking its aspirations on the world stage, and assess very carefully where the UK's real strategic interests and alliances lie.