Philip Hammond: 'Games humanised the face of armed forces'

The Defence Secretary used to think the private sector was superior – but, he tells Oliver Wright, the Olympics have changed things

Of all the legacies of London 2012 it was perhaps the most incongruous and unexpected. Just a few weeks ago when ministers announced they were calling in the troops to check bags and frisk spectators coming to the Games it looked like an act of desperation by a Government caught on the hop. In many ways it was. But now it all looks rather inspired.

The biggest deployment of uniformed troops on Britain's streets since the Second World War (12,000 in total) was one of the defining and positive images of London in 2012. Army commanders – who back then were complaining about being overstretched and plummeting morale – are now delighted at the force's new profile.

And for their boss, the Conservative Defence Minister Philip Hammond, what started as a rather sorry affair has paid an unexpected political dividend.

Sitting in his office in the Ministry of Defence on Friday, he is the first to admit that he's rather thankful now that G4S failed to measure up to expectations.

"It would be disingenuous not to admit that from our point of view – from the military's point of view – it has been a fantastic opportunity," he says with understated delight. "In two weeks they've been able to do two years' worth of engagement with the public.

"It has humanised the face of the armed forces. In Afghanistan the image is of people in helmets, and kit, and tooled up. But underneath all that are people you can enjoy a drink with in the pub or a bit of banter at the checkpoint."

The episode has curiously had another effect as well: it has changed the Defence Secretary's thinking about the merits of the public sector.

When Mr Hammond was drafted in to replace Liam Fox nearly as year ago many service chiefs approached his appointment with trepidation.

A self-made businessman before entering politics, he had the reputation as something of an ideological bean-counter: someone who believed that the private sector was always more efficient, capable and preferable to the state.

Military commanders feared they would not have a champion in Hammond – prepared to stand up to the Treasury to protect their budgets and always pushing them to do more for less or, worse still, getting someone else in to do it for them.But, Hammond says now, "I came into the MOD from a private-sector background with a starting prejudice that we have to look at the way the private sector does things to know how we should do things in Government.

"But the story of G4S and the military rescue is quite informative. The G4S model says 'Here is a cost envelope within which I have to deliver an outcome and I have to do it incredibly leanly with very little resilience'.

"G4S were literally hiring people and expecting to deploy them three days later. They were trying to build up a management structure overnight and they placed a lot of dependence on the work force – for example getting them to schedule their own shifts by accessing an internet site.

"The military came at it from the exact opposite extreme. 'What's the job that needs to be done? OK, we'll do it. Whatever it takes we'll provide massive resourcing.'

"And that's why everything has operated so smoothly. When you go through these search lanes everything hums. That's because for every three people doing the work there is one watching them and there are two other watching him."

Hammond gives another example. "When I asked a question recently about if we wanted to have a Typhoon aircraft available at point X in the UK – what would it take, the answer was we'd need to deploy four aircraft and 60 engineers. Why four aircraft, I asked? Well, you say one but we always like to have two and we need a back-up aircraft just in case and we'd need the fourth just in case something went catastrophically wrong with the back-up.

"Now if you asked G4S the question they'd have the aircraft and they'd probably fly it in with two blokes in case anything went wrong with it. It is a completely different ethos and way of operating."

So which does he now think is better? "That's the thing that I'm learning – that the application of the lean commercial approach model does have relevance in areas of the MOD but equally you can't look at a warship and say 'How can I bring a lean management model to this?' – because it's doing different things with different levels of resilience that are not generally required in the private sector.

"We don't ask the military to prepare to maybe be able to do something or to have an 80 per cent chance of delivering. We ask the military to be in a position that, if we ask them to do a task, they are absolutely able to do it for us."

You can almost hear him formulating his argument with George Osborne.

There are other things Mr Hammond, 56, has had to learn in his job as Defence Secretary: not least a new language.

"This department has a language all of its own," he says. "Everything has an acronym. I learnt a new one just yesterday. I questioned something in a briefing and I was told, 'Don't worry about that, sir, it has been OBE'd? What was OBE'd? Overtaken by events," he laughs, adding: "The military never uses a full word if they can create an abbreviation."

But even if he learns the language Hammond faces a formidable task putting Britain's military forces on to a more sustainable footing.

He is overseeing a massive cost-cutting exercise which will see the size of the regular armed forces cut from 102,000 to 82,000, while trying to find another 15,000 reservists to fill the gap. Somehow he has to manage the MOD's vast procurement budget and try to ensure that billion-pound equipment overspends are a thing of the past.

Then there is the small matter of successfully managing our exit from Afghanistan and trying and ensure that, as one senior politician put it privately, we don't just leave behind a well-armed, well-trained civil war.

Much of his effort so far has been spent trying to formulate a new strategy for procurement and he recently announced that he had for the first time "balanced the budget" so that the armed forces could live within their means.

Time will tell whether the paper accountancy translates into real savings. But Hammond says he is confident that the financial discipline is now in place to make it work.

"Balancing the budget is not so much an exercise in making the numbers add up – which we've done. It is changing the culture to accept that we can't say, 'I think we need another three frigates and we'll worry about how to pay for them later'.

"Nobody would say that any more. There is a clear understanding that there are set resources and we manage that. The military are seeing there is a way of working within the budget."

In terms of cutting force numbers Hammond is unequivocal that this has to happen in order to ensure that Britain does not end up with what he has described as a "cardboard army".

"There is a moral and a practical dimension to it. You shouldn't send people out to do a job which you cannot afford to equip them to do.

"There are examples around the world where army numbers are bigger than the budgets they can justify. So you have got people in barracks playing cards because they can't organise exercises since they don't have the money or the kit. That is not a position we want to be in."

Hammond is unlikely to be moved in the expected autumn reshuffle – but as a politician he knows that his time to embed these changes will be limited.

And, as if to remind him, in the ministerial waiting room there are pictures of all predecessors going back to 1964 – 20 in all – including six in the last seven years.

So can he do it?

"I'm pretty confident that we are creating an irreversible momentum in this direction," he says.

"We are putting in the checks and balances which will make it very difficult for politician or generals to go back to the bad old days."

Fighting talk. But if he does succeed it will be a truly lasting legacy.

A life in brief: Philip Hammond

Born December 1955 in Epping, Essex. Son of a civil engineer and local government officer

Educated Shenfield school in Brentwood; University College, Oxford.

Family Married with two daughters and a son.

Early career A self-made millionaire, Mr Hammond ran medical equipment companies before entering Parliament. He is worth an estimated £7.5m.

Political career Elected Tory MP for Runnymede and Weybridge in 1997, he held junior posts before being appointed Shadow Treasury Secretary. In the Coalition he was made Transport Secretary and held the job until Liam Fox's resignation promoted him to Defence Secretary.

Future prospects Highly rated by the Tories, he is an obvious choice to succeed as George Osborne as Chancellor.

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