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Ladies and Gentlemen,
Against the backdrop of the most difficult economic situation to face the country since the 1970s and an inherited budget deficit which is the biggest in our peacetime history, the Coalition Government has been getting to grips with the long-term challenges facing Defence.
An overheated Defence programme with a £38bn black hole at its heart.
And, after a decade of enduring operations, the need to reform our Armed Forces to face the future.
The Strategic Defence and Security Review has set us on a course to a sustainable future.
But the implementation of this vision of a formidable, adaptable and flexible Future Force 2020 requires transformation in every corner of the Defence establishment.
A transformation that is underway, with tough decisions already taken over the last year or so, on the shape of Defence Reform, on the balance of Regular and Reserve forces, and size of the Regular Army.
Last month, the decision to procure the STOVL variant of the Joint Strike Fighter for the Carriers currently being built, delivered the last piece of the jigsaw that allowed the defence budget finally to be brought back into balance.
And with an end to enduring operations in Afghanistan now in sight, our attention turns to recovering capabilities that have been subordinated for a decade to the needs of Operations TELIC and HERRICK; planning in detail the shift to a smaller Army with its focus moving from campaigns to contingency.
Army 2020, as we call it, will deliver a new structure designed to meet the needs of a smaller, more flexible and agile Army.
Set on a firm foundation, in terms of both men and materiel.
Well trained, well equipped, and crucially, fully funded.
So today, in opening this conference with the Chief of the General Staff, I want to talk about some of the drivers of this transformation.
You will of course appreciate that decisions on the future structure of the Army are yet to be finalised, and I so cannot and will not go into specific detail until that process is complete, whereupon I will make a full announcement to Parliament.
But I want to set out the key underpinnings today.
Sustainability: making sure the Army is put on a stable financial footing so that everyone involved can be confident about its future.
Capability: making the best use of resources by maximising military effect at the front-line - reforming to prepare for the conflicts of tomorrow.
And thirdly, integration: making sure that all elements of the Army are useable and complementary to each other.
And properly interoperable with the Navy, the RAF, and the Marines, and with our Allies.
In particular, getting the Regular-Reserve balance right as we transition to the lower regular manning levels of Future Force 2020.
I also want this morning to address the issue of continuity.
Retaining the regimental system that has served the British Army so well.
Protecting the proud links to the past, while making sure the Army reflects the Britain of today and is focussed firmly on the challenges of the future.
FACING THE FUTURE
But first, let me set this coming transformation in context, because while we can look ahead to a move from campaigns to contingency, we are not yet there.
The National Security Strategy sets out the analysis of the environment we can expect to operate in.
Multi-polar, unpredictable, with diverse threats.
A future in which no single country can protect all aspects of its national security acting alone.
We will need to meet threats as they evolve, upstream and at distance, rather than waiting for them come to us.
That requires the UK's Armed Forces to be intelligent, flexible and adaptable, both in approaching the fight and during the fight.
With an expeditionary capability and a theatre-entry capability.
Future Force 2020 is about transforming to face this future.
But I should be clear; our first priority at the moment remains the mission in Afghanistan.
The success of this mission is a national security imperative - preventing Afghanistan from again being used as a safe haven for international terrorists and posing a threat to the UK and its allies.
And we owe it to all those who have given so much, over the decade since operations began, to make sure that, as we draw down in concert with our Allies, we do so achieving that central aim.
HERRICK has been a joint operation, with critical contributions from all parts of Defence, but the Army has provided the bulk of the forces on the ground.
And the Army has taken the bulk of the casualties.
Protecting the Army's contribution to Afghanistan has meant that the transformation required by the SDSR has been felt to date more keenly by the other services, particularly in regard to the move to the lower manning levels of Future Force 2020.
That means that, for the Army, some of the most difficult decisions are still to come.
As we move towards 2014, and an end to this enduring stabilisation operation, the pace of transformation in the Army will quicken, as we reconfigure to meet the needs of the adaptable posture with a smaller force of 82,000 regular soldiers.
Many aspects of this change will be welcomed and there is a widespread understanding of the need for it.
This is a process after all being driven by the Army itself - not imposed upon it.
The experience now embedded in this battle-hardened generation of service men and women is arguably greater than at any time since the Second World War.
So we must make sure we retain the skills and qualities that they have developed and that have served us so well over the last decade.
But the transformation to a smaller, more flexible, agile force will see some valued colleagues leave and some units disband.
Uncertainty can be debilitating and impacts not just on those inside the service but on families and local communities too.
I cannot protect people from the inevitability of change.
What I can do is eliminate the uncertainty as quickly as possible so people can plan for the future and get on with their lives.
So we will act as swiftly as we can.
Because of this important human impact, it is vital that the need for change and the direction of change is fully understood.
So let me turn to the strategic issues I set out a few moments ago: sustainability; capability; and integration.
Army 2020 is led by the need to recover the Army from a decade of enduring operations and transform it to face the future.
But all of us here recognise the reality that this process is not taking place in a vacuum.
The wider national interest requires that we build for the future with strict financial discipline.
Tackling the fiscal deficit and returning the economy to sustainable growth are themselves strategic imperatives.
And whatever the circumstances facing the country as a whole, sorting out the huge imbalance in the Defence budget would have been necessary in any event.
Eliminating the black hole and putting the Defence Budget and Equipment plan back into balance.
Making certain the Armed Forces have confidence that projects in the programme are funded and will be delivered.
Some of this has been painful: the manpower reductions; the allowance revisions; the platform deletions.
But they were all necessary and we have now brought the Defence Budget back into balance for the first time in a generation.
Supporting an affordable, fully-funded core programme of just under £152bn over 10 years, which, together with the £8 billion of available unallocated headroom, delivers the equipment for Future Force 2020 and supports our current commitments.
And as we move forward, you will see a new financial discipline in the way we manage that Equipment Plan.
Focusing on long-term value rather than on short-term cash management.
Building-in proper contingency for the future so that the whole programme doesn't get blown off course because a project runs over its budget.
Our Core Committed Equipment Programme includes a £4.5 billion programme of new armoured fighting vehicles for the Army such as Scout, and a £1 billion upgrade of Warrior.
We will now be looking at where we can bring forward further projects that enhance Army capabilities and are judged necessary on the basis of military priority.
Taking into account the recovery of platforms from Afghanistan that have been procured through the Urgent Operational Requirements system.
But this isn't just some kind of book-keeping exercise.
Efficiency and the successful application of military force are not mutually exclusive concepts.
Indeed, military productivity, which binds them together, is a key concept in the future management of our Armed Forces.
The value that our Armed Forces produce for the country is based on their capability to deliver standing military tasks and project formidable power when national security requires it.
That, not balancing the books, is the raison d'être for our Armed Forces and the Ministry of Defence.
But within the current financial climate, the capabilities we deliver must be efficiently produced.
So let me turn to how we produce capability in an environment of constrained resources.
As I have set out here at RUSI before, I am determined the move to Future Force 2020 will strengthen our future Defence capability.
Maintaining critical skills and capabilities that would be irrecoverable if we lost them.
Retaining the ability to scale up in the future if the threat demands it and the means permit it.
But I am also determined that we rethink the way we deliver every aspect of military effect in order to maximise capability at the front-line.
Embracing joint forces.
Thinking innovatively about how combat service support is provided.
Using more systematically the skills available in the Reserve and from our contractors.
Working closely with partners to operate logistics more rationally through Alliance structures.
Looking, sometimes, to others to provide the tail, where Britain is providing the teeth.
Improving command and control to provide a stronger linkage between strategic objective and tactical effect.
Building manoeuvre around mechanised infantry.
With firepower geared to precision, rather than suppression.
Structures much more aligned to operation in a coalition and much more aligned to the comprehensive approach across government.
Embracing the 'whole force concept', built on three pillars:
The Armed Forces, both Regular and Reserve; the civilians who work alongside them; and the contractors who support them on operations.
This brings me to the third strategic issues I want to talk about today - the integration of Regular and Reserve forces.
Reserve Forces currently make a significant contribution to operations.
Over the last decade some 25,000 members of the Reserve have served in Iraq or Afghanistan, including over 18,000 members of the Territorial Army.
And in Afghanistan today 679 members of the Territorial Army are currently serving in roles as diverse as infantry, medic, and explosive ordnance disposal.
But as the independent report, led by the Vice Chief of the Defence Staff, concluded, the Reserve has witnessed a significant decline and, by historic standards, forms too small a part of our overall military capability.
By some estimates, the Territorial Army has a trained strength as low as 15,000.
So Army 2020 provides the opportunity to transform the role of Reserve Forces in delivering capability on operations.
We will be investing an additional £1.8bn over the next ten years in our Reserve Forces.
Allowing a progressive adjustment of the Regular/Reserve balance, while maintaining the land forces capability set out in the SDSR.
The Future Reserves must be structured to provide, as they do today, some niche specialists capabilities that simply aren't cost-effective to maintain on a full time basis - for example in areas of cyber, medical, or intelligence.
But the Future Reserve must also be able to provide on a routine basis, those capabilities across the spectrum of tasks requiring less intensive complex training.
The integrated Army concept means, for instance, that light infantry battalions will be reinforced on deployment through a permanent partnership with reserve units.
And for less complex tasks a Reserve unit could, in the future, form the basis of an operational deployment with augmentations from Regular Forces - particularly on homeland resilience duties.
This is a fundamental change in role requiring a fundamental shift in approach: a New Deal for Reserves.
A higher quality Reserve that will have a far greater expectation of use and whose level of contribution will be planned, programmed, and properly resourced.
Requiring more commitment from individual reservists to training and to force preparation.
Forging a new relationship between the Armed Forces, individual reservists and their employers.
Understanding the needs of employers in this challenging economic environment and working with them as a priority to make sure that the availability the Armed Forces require is delivered to mutual benefit.
I have talked about some of the big strategic issues facing the Army.
The financial discipline required to squeeze every ounce of capability from the resources available.
The shape of an adaptable force that meets the needs of an uncertain future.
The whole force concept and the integration of Regular and Reserves.
But I also understand that people worry about how, in the midst of all this change, we will maintain a strong thread of continuity.
Retaining the ethos, traditions and connections that are part of what makes the British Army so effective - particularly, a regimental system and regionally-focussed recruiting.
These are perhaps the most emotionally charged issues across Army 2020.
Of course, a Regular Army of 82,000 will have a different structure to one of 102,000.
And some units will inevitably be lost or will merge.
We have to change and adapt - and that means letting go as well as building anew.
But let me be clear, we value the history and the heritage because they deliver tangible military benefits in the modern British Army.
Not because we are slaves to history and heritage, but because they are building blocks for the future.
So that, in the words of Field Marshall Viscount Slim, "tradition, instead of being a pair of handcuffs that fetters you, will be a handrail to steady and guide you in steep places."
Let me say it clearly: There is no question, as some have suggested, of abandoning the regimental system in the British Army.
But that does not mean that we can avoid difficult decisions as the Army gets smaller.
And in making those decisions, the military voice must prevail; ensuring that the Army remains the capable and agile force envisaged in the SDSR.
Putting the generation of coherent capability first.
The truth is, that even with a reduced Regular manning requirement, the Army faces a major recruitment challenge.
Looking forward to 2020, the Army will recruit against the backdrop of, we hope and expect, a growing economy, and without the recruiting-sergeant of an enduring overseas operation.
Demographic changes suggest particular challenges in some regions to supply the number of recruits to the infantry that are required.
Against a background of an increasing UK population overall, it is projected there will be around 12% fewer males by 2020 in the typical infantry recruiting age range.
Although all regions face this decline, there is some local variation: in particular, the south and south east of England will see the lowest decline.
So while we are determined to maintain an effective regimental system, it must be based on the realities of today, and the primacy of capability.
That means focussing on analysis of recruitment performance, demographic trends and future recruiting needs.
Taking account of regional identities, previous mergers, disbandments and deletions.
Designed to support proper career advancement for soldiers and officers alike.
These are the criteria against which our decisions must be made.
And on which I expect to make announcements to Parliament in the coming weeks, as soon as the CGS has completed that important piece of analytical work.
Ladies and Gentlemen, the Army has seen several transformations since the end of World War II; the transition from a wartime structure to the Cold War; from conscription to a professional force; and the downsizing at the end of the Cold War in Options for Change and Frontline First.
And now it is embarking on another.
The battle-hardened structure, grown used to the predictable cycles of deployment imposed by TELIC and HERRICK, will need to re-learn the skills of agility and flexibility as we move from campaigns to contingency.
Building the balanced, capable and adaptable force structure required to face the future.
Protecting capability and prioritising combat effect.
Embracing the whole force concept and integrating the reserves.
And through it all, maintaining its identity in the face of significant change.
The values of the Army have sustained it through countless previous transformations; they have sustained it over the last decade of enduring campaigns.
And those same values - courage, discipline, respect, integrity, loyalty, selflessness - will sustain it through this transformation.
And, no doubt, through many further iterations in the decades and centuries ahead as this most enduring of British institutions looks confidently to a future in which it continues to adapt to an ever changing world.