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For Britain’s defence industry, the White Paper on the future of science
and technology will come at a critical time. The Cold War has ended, forcing
a worldwide change in military thinking and arms procurement policy, along
with demands for large cuts in defence expenditure. At the same time, military
manufacturers are finding that to build sophisticated new weapons they
must make increasing use of advanced electronic components drawn from the
civil sector. As a result, the long-standing distinction between purely
military and purely civil research and development is blurring.

These changes make military planning difficult but they also provide
an opportunity for science minister William Waldegrave to rethink fundamentally
the relations between the R&D in the military and civil sectors. Next
Monday, 30 November, is the deadline set by Waldegrave for his office to
receive submissions for the White Paper. Many analysts will argue that he
should now break with tradition and ensure that the Office of Science and
Technology tackles the defence sector along with the civil sector. To be
effective, the OST now needs to be equipped with powers to mobilise the
whole of government investment in science and technology towards the greater
national good. Britain still has enormous technological skills in the defence
industry but they could easily be lost if the government misjudges the way
defence technology is moving.

There is certain to be opposition in the Ministry of Defence to any
intrusion by the OST. But there are many within the ministry who would argue
that it is in their interests to accept a bigger role in the regeneration
of the national technology base within a more coordinated framework. As
defence and civil technology increasingly overlap, support for ‘dual use’
technology could provide dividends for both the MoD and the Department
of Trade and Industry. But this will only happen if British government abandons
its traditional distaste for cross-departmental organisation. The need for
change is now very urgent as the recession and demands for a peace dividend
are already forcing defence firms to cut jobs, while the government has
done little so far to help them convert the most valuable of their skills
for use in the civil sector.

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WHERE THE POUNDS GO

The first step in a rethink of the role of the defence sector is to
work out how much Britain spends on defence and where. This is not as simple
as it might seem. Recent reports by the House of Lords Select Committee
on Science and Technology and the National Audit Office show that there
are major inaccuracies in the official figures for defence R&D, leading
to an overestimate of spending according to the so-called Frascati definitions
laid down by the OECD, an organisation which brings together the world’s
leading industrial nations.

If the official figures are taken as the best currently available, they
show that the MOD provided £2.6 billion for R&D in 1992/93,
or 46.4 per cent of total government spending on R&D. Of this, £440
million is for research, and £2.1 billion for development. The total
represents a 6 per cent rise in real terms from the 1990/91 level. Looking
over a longer period, defence R&D expenditure has declined by about
19 per cent since a peak in 1985/1986 and is projected to fall some 4 per
cent below the 1990/91 level by 1994/95.

Even accepting uncertainties in the statistics, expenditure on defence
R&D remains very high in comparison with other countries. Cabinet Office
figures for 1990, showing the percentage of government funded R&D going
to defence, put Britain (at 44 per cent) behind the US (63 per cent), but
ahead of France (40 per cent), Sweden (24 per cent), Germany (14 per cent),
Italy (6 per cent), and Japan (5 per cent).

The reasons for Britain’s high level of expenditure are historical.
Maintaining an empire required substantial armed forces and the independent
development and production of the arms for those forces. Complete self-sufficiency
in weapons development and production ended in the 1960s, with the purchase
of missiles for the nuclear force from the US, but even today Britain still
equips forces for a wider range of roles than most other countries, and
is more capable of developing and producing the necessary equipment than
any other country apart from the US, Russia and, in some respects, France.
It has great strength both in the MoD’s Defence Research Agency, which employs
some 3600 scientists, and in the design, development and production skills
of the major defence contractors, and their thousands of subcontractors.

END OF AN ERA

The question for Britain is how best to use these skills in a rapidly
changing world. Since 1989, the revolutions of eastern Europe and the break-up
of the former Soviet Union have changed the international security scene
profoundly. When the threat came only from the Soviet Union, it was possible
to plan fairly straightforwardly. Moreover, because of the scale of forces
assembled to deal with that threat, lesser defence problems (such as the
Falklands) could be tackled with some configuration of forces drawn from
the large total. But the Soviet Union has disintegrated. Not only is it
now difficult to know what to plan for, but the total of forces available
will be much smaller than in the past, thus reducing the scope for coping
with new emergencies. If each country could be sure that it would meet all
eventualities alongside the same set of allies, then a division of labour
might be agreed. But a brief tour through Western Europe shows that each
of the big nations is caught by the same policy uncertainties. In response,
all are trying to keep as many technological options open as possible, while
at the same time trying to reduce the size of their armed forces.

One result is that cuts in the numbers of military personnel have had
little effect on the type of new equipment planned by the larger European
states. Important exceptions are the increased emphasis on the so-called
C₃I (command, control, communications and intelligence), space
surveillance and communications, and defence against weapons of mass destruction,
and some reductions in nuclear weapons programmes, especially in France.
But most major programmes are being kept in place, albeit stretched out
in time and with cuts in the planned volume of production.

RESEARCH AND DEVELOPMENT

Bigger changes are emerging at the level of planning for R&D with
governments backing a new argument that high levels of technological competence
should be maintained, even if new products are not actually built. In September
1991, Britain’s minister for defence procurement at that time, Alan Clark,
referred to the importance of developing a ‘reconstitution capability’,
and suggested that R&D might be given greater priority within the defence
budget. He explained that he was not proposing a flood of new money, but
rather was wondering ‘whether we should not be researching new technologies
and demonstrating them, while not automatically taking them into full development
as before. We would therefore be thinking in terms of giving pure research,
and technology demonstration, greater priority’. It was no surprise, then,
that Britain’s 1992 defence estimates said that priorities in the defence
research programme have been reviewed in the light of force restructuring,
and that particular importance is attached to technology demonstrator programmes.

These developments suggest that defence R&D will not be cut at the
same rate as the rest of the defence budget. So far, this seems to be the
position in Britain, as in France and the US. Nevertheless, in absolute
terms cuts are being made. Two months ago, for example, it was reported
that 2000 jobs are to go, mainly in the Southeast, when the Defence Research
Agency closes 17 sites. The aim is to cut running costs by £90 million
per year. In the defence industry, cuts in production orders have taken
a heavy toll in jobs, and the cloud hanging over the European Fighter Aircraft
project threatens the heart of both production and design capabilities in
a large slice of the aircraft, avionics and missile sectors.

The impact of these cuts has been magnified by the lack of any systematic
policy on the future of defence R&D, and the failure to realise that
the relationship between major contractors and their subcontractors has
changed. Increasingly, the prime contractor, at the top of a hierarchy of
subcontractors, controls design and management and acts as systems integrator
and final assembler, importing most of the subassemblies from its subcontractors.
The complexity of the technologies that make up subassemblies means that
the fraction of value added by the suppliers is growing, increasing the
dependence of the prime contractor on suppliers and squeezing profit margins.
That means, as the chairman of Vickers Defence Systems (the British tank
manufacturer), warned in May 1990, that companies face threats, ‘not only
from their direct competitors but also from suppliers developing technologies
that form the core of the final product’. This is particularly significant
in electronics, where economies of scale give an increasing advantage to
the major civil suppliers over small defence suppliers, and where it has
already been accepted for some years that, in the field of very large scale
integration, military electronics must use components manufactured by non-defence
companies, albeit in modified form.

In the future, more and more defence equipment is likely to be developed
on the back of non-military technologies, giving their developers a chance
to move into defence markets. This is already happening, as shown by IBM’s
recent success in taking over as prime contractor for integrating the different
electronics systems in the Anglo-Italian EH101 multiple-role helicopter
project.

While the movement of nonmilitary manufacturers into the defence market
increases the pressure on the traditional defence companies, it also provides
an opportunity for government to escape from its own dilemma of how to develop
advanced technologies at a time when it is increasingly unable to pay for
them. The key lies in encouraging companies to identify and develop so-called
‘dual use’ technologies which can serve both military and civil ends. The
solution also helps tackle the related problem of keeping technologies available
without necessarily going to the expense of producing new defence equipment.

In the US and elsewhere there has already been an enormous debate over
support for dual-use technologies and over the related problem of identifying
and encouraging so-called ‘critical technologies’. Defence firms cannot,
however, be expected to live by R&D alone. All firms needs production
for survival, suggesting that government encouragement of dual-use and critical
technologies must be accompanied by a shift of defence procurement out of
pure defence firms to something more like the Japanese model. Using that
model, success will come by placing most defence production within companies
whose main business is not defence, and which draw on a general technology
base, rather than on segregated civil and military technologies. Such a
technology base, suitably fostered by the MoD and other sources, could provide
the capability to meet defence production needs in the future, while the
mainly nonmilitary production of the firms could provide their principal
sustenance, thus reducing the importance to them of defence business, and
their risk from defence cuts. By the same token, the Defence Research Agency
could be required to take on a broader role, as was recommended in 1989
by the Cabinet’s Advisory Council on Science and Technology.

NEW OPPORTUNITIES

The forthcoming science and technology White Paper, and the creation
of the OST, offer a chance to encourage these developments. The OST needs
to be able to oversee defence as well as civil science and technology, within
government and more generally. It needs to be given the means to break down
some of the existing barriers, such as the Treasury argument that defence
money should not be spent on something that is not exclusively tied to defence
interests. This inhibits the MoD from investing in, for example, methods
of improving UK manufacturing technology in general.

The OST also needs to find ways to get the MoD and the DTI working together
on technological and industrial development; something that would be taken
for granted in most other European countries, but which in Britain we seem
to find difficult. So far, it has proved impossible to shift money saved
from defence production or R&D to civil projects. Ministers take decisions
about R&D in the light of their own departmental requirements rather
than starting from one common R&D budget which they divide. Total government
funding for R&D thus always reflects the sum of decisions by individual
ministries and is not closely coordinated.

There have been attempts in the past to build a strong central office
for science and technology at the heart of the government machine. But
they have always been defeated by fears of excess centralization and by
a Whitehall argument that ministers are responsible for the work of their
departments, so that any intervention from a cross-departmental authority
would undermine the principles of public accountability.

These are matters of judgment and balance. The question today is whether
current circumstances require a shift in the balance from past practices.
Already other nations are looking at ways to move the best of their advanced
defence technologies into the civil sector, and to strengthen defence capabilities
by uniting technologies generic to both the defence and civil sectors. The
White Paper can be an important stimulus to the debate in the UK and to
making the OST a true agent of change.

Philip Gummett is reader in government and technology policy at the
University of Manchester.