Briefing
02/02/2012 Interel Defence Insight - 2 February 2012 Interel Consultant Tom Page has published his weekly Defence Insight Bulletin. To view the bulletin please see here:  ../easnet.dll/GetDoc For further information on the publication please do not hesitate to contact Tom by email: tom.page@interelconsulting.co.uk
23/12/2011 That’s 2011 over, what’s next in 2012? Well what a year it’s been! Dictators have fallen, wars fought, major contracts signed, important announcements made, resignations tendered; and even with all that there’s still a whole lot more on the horizon for 2012. The White Paper is perhaps the most hotly anticipated item on next year’s agenda. Originally due earlier this year, it was delayed, delayed and delayed again, and even as recently as Monday there was still no definite date of publication, with Peter Luff saying in the Chamber; ‘I had hoped to announce them in the White Paper that I was due to publish this month, but the pressure of Christmas business has delayed that until the new year.’ It is hoped that this paper will finally provide a real industrial strategy for defence, as well as define what the Government means when it says sovereignty – manufacturing capability, for example, or just operational, we will have to wait and see. Bernard Gray’s plans for his reform of DE&S are also due, which could have huge ramifications for the MoD’s relationship with the defence industry. The earlier part of 2012 will enable more comprehensive views to be formed of Philip Hammond’s style and handling of his new Department. Since his appointment a few weeks ago, his time was concerned with operational issues such as the draw down from Operation Ellamy, but now that has been addressed his attention will move to internal MoD issues such as departmental reform, which also means he will come under far closer scrutiny. On the international scene, it will be interesting to see how the military cooperation between Britain and France progresses. Developments on collaboration over unmanned aerial vehicles and a major naval exercise are expected next year, but how relations at the very top will be affected by David Cameron’s recent use of the British veto remains to be seen. The industrial side of things also looks set to be busy. Brazil and India will both decide what type of fighter aircraft they will want to buy, which will have huge ramifications for the Typhoon, Rafale and F-35 programmes, to name but a few. Britain is also yet to confirm whether it will go ahead with the procurement of the Scout Vehicle for the British Army, nor has it confirmed how many F-35 Cs it will order or what the rest of the carrier air group (AWACs and supply aircraft, for example) will consist of. In addition, 2012 should see some more concrete details emerge about the build and capabilities of the Type-26 frigate, which could also affect the outcome of Brazil’s plans for its navy. Financial pressures will also play a dominant role next year, both within the MoD and across industry. The MoD will hope to cling onto its planned 1% increase in the equipment budget, while industry will continue to feel the ramifications of a reduction in defence spending in both Europe and the US. All in all, 2012 has plenty of potential to be just as eventful as 2011, and given the unexpected surprises that cropped up this year, who knows what could emerge in the next. And so with all that to look forward to, I wish you a Merry Christmas and a Happy New Year. Tom Page, Consultant, Interel Consulting UK
12/12/2011 Sir Stephen Sherbourne joins Interel as Chairman Margaret Thatcher’s former Political Secretary, Sir Stephen Sherbourne, is to join Interel Consulting UK as Chairman on January 1st. Sir Stephen was previously Chief of Staff to Michael Howard as Leader of the Opposition and before that he was a Director of Tim Bell’s Chime Communications and Chairman of Bell Pottinger Public Affairs. Sir Stephen will be succeeding Chairman, Andrew Dunlop, who founded the company as Politics International in 1991 and who is now leaving to pursue a portfolio career. Interel’s clients include Expedia, SABMiller, PayPoint, Saab, General Dynamics, Finmeccanica, Babcock, QinetiQ, Invensys, Virgin Money and McAfee. Sir Stephen’s first public outing as Interel Chairman takes place this week when Interel is hosting a drinks reception in The Reform Club to mark Andrew’s last weeks with the company. The reception will attended by many of the clients and friends have worked alongside Andrew over the last 30 years. George McGregor, Interel Managing Director, said: “We are delighted to welcome Stephen to the company. He is a hugely respected figure in the world of public affairs and politics. His counsel will be invaluable both to our clients and to Interel.” Sir Stephen said: “Interel is a company which offers genuine international reach coupled with an ethos of personal client service. The world is changing fast and so is the world of politics. Interel has the right people with the right skills and, most important, the right culture.” Andrew Dunlop said: “Interel continues to grow from strength to strength and Stephen’s contribution will provide considerable fire power. It is an excellent move for the company and I am very glad to be leaving it in such capable hands.”
26/10/2011 Report from the Road Ahead Group - Moving On: Fairer Motoring Taxes, Investment for Growth and Jobs THE ROAD AHEAD GROUP “Moving On: Fairer Motoring Taxes, Investment for Growth and Jobs” A major roads report published today recommends a new network capacity fund to cut road congestion, create jobs and get Britain moving. A new deal for motorists would give drivers who travel off-peak and on less congested roads a discount off their next vehicle excise duty payment. Rural and off-peak motorists would qualify for the maximum discount when they renew their annual tax disc. Driving occasionally at peak times on congested sections would mean a lower discount, while frequent users of peak capacity would use up their discount entitlements and pay the full rate of duty. All drivers would still be able to go anywhere, any time – the decision would be up to them. The discount entitlements used for peak travel would be paid directly into a new “network capacity fund”, to be used solely for investment to improve Britain’s overcrowded road network. The new system would be monitored by a linked system of cameras, as used for the central London congestion charge. This new approach to funding investment would be attractive to pension, infrastructure and other capital funds and could prove very attractive – and timely – to the Coalition Government. The Road Ahead Group, which involves some of the biggest transport interests in Britain today, calls its highly topical report “Moving On: Fairer Motoring Taxes and Investment for Growth and Jobs”. The Group is a coalition of companies and organisations promoting a new approach to investment in the strategic road network. It brings together the Freight Transport Association, May Gurney Integrated Services plc, Vinci plc, Ringway/Eurovia Group Ltd, Midland Expressway Ltd, Berwin Leighton Paisner LLP and Interel Consulting UK Ltd. The Group brought in Brian Wadsworth as Road Ahead Group Director to work out the new scheme and compile the report. Brian was formerly Director of Strategic Roads, Planning and National Networks at the Department of Transport. He recommends simple charges to vehicle excise duty, making motoring taxes fairer, with a new "network capacity fund" to pay for vital road investment.  The report's proposals would - make motoring taxes fairer, by discounting off-peak use use   - use main roads better, rewarding smarter journey choices - give peak time users more capacity and better journeys - boost the economy, saving billions a year in congestion costs - create hundreds of jobs in infrastructure projects and thousands across the wider economy. The annual vehicle tax disc would continue to give unrestricted access to the road network with just one transaction and nothing more to pay. Mr Wadsworth said today “Traffic jams are a costly drag on our economy and will get worse if we don’t change course. Doing nothing doesn’t save money – quite the contrary. The changes we propose to vehicle excise duty would boost road network capacity, ease congestion and make motoring taxes fairer. They’re affordable, straightforward and would help to get Britain moving and back to work. If the Government is looking for a way to invest for growth and jobs, here it is.” For further details, please contact: road.ahead@interelconsulting.co.uk (0207 592 3800) brian.wadsworth@interelconsulting.co.uk (mob. 07788 917138) The report is available electronically at: www.RACFoundation.org www.interelconsulting.co.uk
19/10/2011 Interel's Tom Page appointed to the RUSI Under-35 Forum Interel's Tom Page has been selected as one of 7 members to sit on the Steering Committee of RUSI's Under-35 Forum. The Committee will arrange thought-provoking events and lectures as well as ensuring the day-to-day running of the Forum, which is intended to provide unique events and educational opportunities for young members of one of the world's foremost defence and security think-tanks.
07/09/2011 Credit Rating Agencies Opinion Piece Credit rating agencies (CRAs) have found themselves in the headlines recently for all the wrong reasons. The dust is only just beginning to settle following Standard & Poor’s decision to downgrade America’s triple A rating while the world economy remains in a precarious position. Interel’s John Fearn looks at CRAs and the rights and wrongs of their influence on the markets. In Europe, politicians from several different member states have accused the CRAs of exacerbating the Eurozone sovereign debt crisis with their rating downgrades of individual member states. Further abroad, Moody’s downgrade of Japan’s rating during a time of market volatility and the decision of S&P to strip the US of its triple ‘A’ rating in early August ensured that the ire of some policy-makers and commentators remained focused on the CRAs. Economically, the US downgrade caused only short-term panic in the stock markets but it had more impact politically as Obama became the first US president in history to preside over a ratings downgrade. It is no surprise that S&P came under severe and sustained attack from senior politicians in the Obama administration and around the world. Deven Sharma, the former president of S&P who left the company shortly after its controversial decision to downgrade the US, hit back at criticism saying that politicians should not ‘shoot the messenger’ for delivering bad news that has ultimately been caused by fiscal mismanagement. But which side is right? Do CRAs offer impartial verdicts that can simply be symptoms of economic woe or are they a pernicious influence on the markets creating self-fulfilling prophecies in order to pursue private interests? The Big Three, their influence on markets and the holy grail of competition The short answer is of course a little of both. They are private, for-profit companies which in many cases use an issuer-pays model – where the company selling the debt pays the CRA to rate its product – that results in an unavoidable conflict of interest. There is no doubt that this model contributed to the role CRAs played in the global financial crisis of 2007-08 when they consistently overrated the quality of structured asset-backed securities that fuelled the sub-prime mortgage bubble. Of course, they weren’t the only ones; most of the financial services industry, including banks’ risk analysts and regulators, also did so. Governments’ concerns peak when CRAs rate countries rather than finance products. It is in this sphere that the EU particularly has been critical, saying that a small number of profit-seeking commercial companies should not have the power of life and death over nation states. When critics talk of CRAs they really mean the Big Three – Standard & Poor’s, Moody’s and Fitch – which are estimated by analysts to have a combined US market share of about 95 per cent based on spending by issuers. The accepted wisdom goes that this concentration of market power gives these private companies undue influence over market sentiment and the corollary power to affect countries’ ability to access affordable finance. This argument seems persuasive when you consider that S&P was not the first CRA to lower its rating of the US’ ability to repay its debt. That honour went to Egan Jones, a US-based firm that prides itself on being ahead of the pack, yet Egan Jones’ decision did not spark investor panic in the same way as that of S&P. Policy-makers have been guilty in the past of encouraging this oligopoly and barriers to new entrants in the CRA sector are high. For example, the regulatory system in the US actively prescribes that companies should use a CRA authorised by the Securities and Exchange Commission yet it is difficult for challengers to obtain that authorisation. In another case, as the EU tried to engineer a bailout for Greece, the European Central Bank said it would only support a rollover of Greek debt if it did not lead to a rating of default by the CRAs. In the UK, the Chief Secretary to the Treasury Danny Alexander recently held up S&P’s decision to keep the UK’s triple ‘A’ rating as an endorsement of Government policy. There are other CRAs operating in the market but when global leaders pay such close attention to the Big Three it is no wonder that some elements of the market take CRA decisions to heart. One of the arguments against the ratings agencies put forward by Eurozone officials is that because none of the major CRAs are based in Europe, they are biased against Europe. These same Eurozone officials would like to see an ‘independent’ not-for-profit European rating agency to moderate the influence of the Big Three. This idea may seem attractive but it flawed in two important ways. First, the underlying premise that CRAs are biased one way or another is counter-intuitive and it is inconsistent to accuse CRAs of acting only in self-interest and then accuse them of regional bias. They have shown no difference in approach to rating Eurozone sovereign debts or the US – as shown by the S&P downgrade – and in an age of globalised financial markets it is highly unlikely that parochial interests come into play. Secondly, it would take many years for a European not-for-profit agency to gain credibility, if it ever could. A CRA risks irrelevance if its ratings are so different from the other agencies or if the markets feel outside influences are affecting its judgments. Misdiagnosing the problem Greater competition in the sector would be a positive development but an unquestioning faith in competition to cure all ills is misplaced. Taking the US downgrade as an example, S&P was the only one of the Big Three to downgrade the US and, in S&P’s own words, it was a ‘mild step’ that did not denote a major concern. Competitive pressures had produced a plurality of views (mostly in favour of retaining the highest possible rating) yet the markets did not immediately react rationally to this range of opinion, although investor confidence soon returned to US treasuries without any change to the US rating. There are steps that the industry and regulators can take to address these problems. More needs to be done to remove the rules and regulations that tacitly support the oligopoly of the Big Three and therefore encourage more competition. Conflicts of interest in the business models should be addressed, perhaps with tweaks to regulations surrounding the issuer-pays approach. Everyone in the financial services community – firms, regulators, governments – should re-evaluate their dependence on CRAs and take more individual responsibility by strengthening their own risk analysis functions and intellectual economic capacity. These are long term processes but they should still be pursued. The unpalatable truth for those policy-makers who see CRAs as easy targets is that rating decisions may exacerbate deeper and more serious market concerns about the lack of political leadership and flat-lining economies, as well as reflect the activities of bond traders and currency speculators, but they are the not the causes of volatility. Member states’ governments have found it politically difficult to introduce austerity programmes, the Sarkozy-Merkel plan for stabilising Eurozone economies was met with a lukewarm response, GDP figures in the US and across Europe have done nothing to boost investor confidence and speculators continue to bet against the struggling economies. Politicians need to realise that using rating judgments when it suits them, and complaining when it doesn’t, is not a realistic approach to dealing with the underlying economic problems. They need to spend more time focusing on tackling those problems and less time on hyping up the negative impact of decisions that many in the wider finance community have already reached themselves.
31/08/2011 Who's Who at Number 10 and the Office of the DPM Over the summer both the Prime Minister and the Deputy Prime Minister have been making a series of appointments aimed at bolstering the policy, political and media firepower in Downing Street. As we enter into the next crucial phase of Coalition Government, in which the full impact of the deficit reduction strategy will start to be felt and the electoral cycle starts to shift towards 2015, Interel is publishing a guide of the people who matter at the heart of Government.
12/08/2011 Interel Defence Insight Wish you were here – a summer holiday for Fox to forget? The summer break is supposed to be the quiet period for politicians, or at least the silly season filled with trivial matters given far more media attention than they deserve. However, it’s been nothing of the sort this time around; with the global markets falling to the lowest levels since the 2008 recession, and riots in cities across Britain, politicians seem to have been caught off guard. While David Cameron and Boris Johnson were criticised for not coming back to the UK early enough, Liam Fox also came in for some surprise criticism while on holiday. This criticism was not, however, for lack of appearance in the country in the face of the crisis, but instead for taking 5 staff with him on ‘jaunt to Spain’ at the taxpayer’s expense, according to The Sun. This embarrassing news will only add to the pressures already weighing down on the shoulders of the Defence Secretary. On the return of Parliament proper in September, Fox will still have to face questions and calls for a re-opening of the SDSR from defence-minded Members on both sides of the House following last week’s criticism of the SDSR and NSS by the Defence Select Committee. Couple this to little sign of an end or even real progress being made in Libya, and the continuing stream of news reports and publications from the press and think-tanks about Britain’s declining military standing, and Liam Fox will perhaps wish he could stay on holiday, although perhaps without his staff. As MPs return to Westminster following the end of the summer recess, all eyes will be on the upcoming White Paper and Bernard Gray’s report on reform of DE&S. However, that leaves a lot of time in-between during which the Defence Secretary will be open to further criticism. Liam Fox has always been considered a good political fighter, however, he will have to do even more of it unless some major good news stories start coming out of the MoD press office very soon.
08/08/2011 Defence Select Committee report into the SDSR & NSS The Defence Select Committee has published the findings of its inquiry into last year’s Strategic Defence and Security Review and the National Security Strategy. This has been one of the most closely-watched inquiries undertaken by the Committee, as it will either give validation or criticism to the Government’s approach to both the management of the UK’s defences and the country’s strategic aims and ambitions. In the event, the report is highly critical of the NSS and SDSR, and is rather surprisingly harsh in its tone towards the Government. It concludes that cuts to the UK’s defence have left British Forces unable to carry out their missions in Afghanistan and Libya effectively, and that there is ‘mounting concern’ that the military has fallen below the ‘minimum utility’ needed to conduct present and future operations. There is also suggestion that expenditure savings have overridden state security. In a personal attack on the Prime Minister, the Committee rejects David Cameron’s assertion that the UK has a full spectrum defence capability, adding that this view has also been rejected by the single Service Chiefs and indeed the Armed Forces Minister, who recently acknowledged that the UK has not had a full spectrum capability for many years. On the NSS, the report states that despite the Government’s assertion to the contrary, the Committee concludes ‘that a period of strategic shrinkage is inevitable.’ It also states that the Government ‘…appears to believe that the UK can maintain its influence while reducing spending … We do not agree.’ The current operation in Libya provided further opportunity for criticism of the Government;  ‘We can only conclude that the Government has postponed the sensible aspiration of bringing commitments and resources into line, in that it has taken on the new commitment of Libya while reducing the resources available to the Ministry of Defence.’ With regards to the SDSR, the report is equally as harsh, with the Committee voicing concerns ‘at the lack of information in the SDSR on the levels of funding required to deliver Future Force 2020 and the increase in defence spending that this would represent.’ Other issues of concern included: • Scrapping of the Nimrod MRA4 - ‘…it appears to be a clear example of the need to make large savings overriding the strategic security of the UK and the capability requirements of the Armed Forces.’ • Deletion of the Harrier fleet - ‘We regret that it has been removed from service.’ • Suspension of UK carrier strike capability – concern at the ‘scale of the challenge the MoD faces’ in regenerating the capability. • Withdrawal from Germany - ‘…given that half of UK Forces are due to return by 2015, we are concerned that the plans are not further advanced.’ • 1% real terms funding increase - concern that it is ‘is simply a reallocation of resources and does not represent the real terms increase in funding required to deliver Future Force 2020.’ Given this swathe of criticism across almost all aspects of the Government’s plans for Britain’s defence and strategic ambitions since taking office, it will be very interesting to see the Government’s response. In many ways it is fortunate for the Government that the report was published during the recess as it provides time for a full rebuke to be carefully drafted.
04/08/2011 Interel Shortlisted for Consultancy of the Year  Interel has been shortlisted for Public Affairs Consultancy of the Year 2011. The award entry was submitted by Interel Consulting UK and based on the outstanding success since its launch in July 2010 which saw new hires, new clients and increased turnover. During the year George McGregor was promoted internally to MD and Andrew Dunlop became Executive Chairman. The energised team won a series of major blue chip clients including Expedia, Amey, Finmeccanica and McAfee in the first six months of trading and added a slew of major names including Rio Tinto and Bank of America to the roster over the course of the year. The team was then strengthened with five additional consultants including senior advisors from the Conservative and Liberal Democrat election teams. Last year Interel won the coveted Private Sector Campaign of the Year for its work with PayPoint to protect electronic bill payment market, in a campaign which increased the client’s market capitalisation by 33%. This year’s winners will be announced at a ceremony to take place in London in November hosted by Public Affairs News. George McGregor, Interel Consulting UK Managing Director, said: "We are delighted to have been shortlisted and look forward to building on what has been a great year to deliver outstanding results for our clients." Fred Lofthagan, Interel CEO, said: “This is great news for the company following on from the announcement of our Management Buy Out. It demonstrates the enthusiasm and drive amongst our team to make Interel a truly great company”.
02/08/2011 Renewing Labour Sam Blyth Consultant The phone hacking scandal which has dominated the last few weeks has acted as a much needed catalyst for both the Labour Party and its leader Ed Miliband. Prior to the news breaking of the dealings at News Corp, Miliband and his party were at best treading water and at worst drowning in a sea of mediocrity as they struggled to define themselves in Opposition and as the third most interesting party in the Commons. Now the wind is very much in the sails of the Labour Party. They are leading public opinion, outmanoeuvring an embattled Prime Minister and are throwing caution to the wind as they round on a once hegemonic Murdoch press. However, as a number of commentators have pointed out, this media storm is just that – a storm, and all storms eventually die out. Come 2015 and the next General Election, any number of issues are likely to take precedence in the public mind ahead of a scandal that happened back in the summer of 2011. Writing in the Observer, Andrew Rawnsley has said that he can think of at least 10 subjects that will be much more important to voters. He argues that “crime, employment, the environment, Europe, health, inflation, immigration, schools, tax and unemployment will move many more crosses in boxes.” He is correct in this assumption and in arguing that Miliband: “will make a mistake if he concludes that his performance in recent days, impressive though it has been, has answered all the criticisms and doubts about Labour and himself. He and his party are still in need of a persuasive vision and plausible positions, especially on the economy, before they look like a credible alternative government.” Therefore, in order to maintain the impetus provided by the hacking scandal bounce, if there even is one considering the poll ratings of each party have hardly budged over the last few weeks, Miliband and his party need to use it as a springboard to talking about the wider issues in Britain’s society and how the Coalition Government is failing to address the wants and the needs of the British public. Policy Review A good place for Labour to start is in its much-needed policy review. Launched shortly after Miliband became Labour leader, the review is similar in tone to the one launched by David Cameron when he became Conservative leader. Its aims are to revive a tired and inward looking party in order to make it fit to govern. Miliband tasked the shadow cabinet to lead the policy review in areas ranging from local schooling through to sustaining the UK’s commercial competitive advantage and asked party members and the public to become involved in setting out the future policy direction of the party. These views were encapsulated in an interim report by Liam Byrne who Miliband has given responsibility for the review. A Better Future for Britain gives a summation of what the public and party have said, how the party has reacted and how it plans to respond to the suggestions made with a view to further discussion at the Party Conference in September. It details Labour’s response to four key areas of policy: the economy, concerns about the future for the “Next Generation”, communities and Britain’s place in the world. The overriding concern for those responding to the policy review was the economy and jobs. Unsurprisingly, the document lambasts the current Government for cutting spending to schools, hospitals and police claiming that its plan is simply to “cut spending and increase taxes for people already struggling to get by.” In response, Labour says that its policy will be based around growth and jobs and that fairness will be “hardwired” into the system with support for middle earners and the lower paid. A Better Future for Britain argues that the public are concerned that the next generation will be worse off than the current one. It gives examples of people’s views on the prospects for their children suggesting that there is a need for Government to support higher education but also give a variety of options, including apprenticeships to help young people make their way in the world. Once again, the review attacks the Government for not helping Britain’s youth. Indeed, it comments: “Since coming to power the Government has singled out young people and families to bear the brunt of their cuts.” In response, Labour argue that their focus is on driving up standards in education and giving young people the opportunity to make their way in the world through providing affordable housing, although the paper does not go into specifics about how this would be achieved. Community is a key area for Labour. The review document states that the “Labour Party was founded through a belief in community and our shared responsibility to one another.” Included in their vision of community are institutions such as the NHS which Labour accuses the Government of undermining. In this light, Labour contends that the core of the policy review is to protect national institutions. However, it also calls for changes to the wider-community commenting that there should be a greater drive for responsibility throughout the system. The last section of the interim review concerns Britain’s place in the world. Unsurprisingly, the review found a large amount of concern surrounding Britain’s involvement in places such as Afghanistan and Libya. Labour argue that they will continue to support NATO and the current Government but will scrutinise its policies to ensure maximum support for Britain’s military forces. Similarly, Labour propose to scrutinise the Government’s commitment to overseas aid and are committed to helping the private sector to be force for good in developing countries through transparent practices. Refounding Labour When Ed Miliband won the party leadership in 2010, he said that Labour had lost the election not only because they had lost touch with the public, hence the public consultation on the policy review, but also because the party leadership had lost touch with the party members. As a consequence, he asked Peter Hain to conduct a root and branch evaluation of the party and its structure to identify how it could become a cohesive unit once again. Taking its cue from successfully run Labour campaigns at the 2010 General Election, such as Gisela Stuart’s campaign in Birmingham Edgbaston, the Obama campaign playbook in the States and from countless meetings with left-leaning, Labour supporting think tanks such as Compass and the Fabian Society, the Refounding Labour document argues that Labour needs to change how it operates to avoid being outflanked by the Liberal Democrats and Conservatives and being consigned to the political wilderness for a generation. It calls for local Labour groups to be more flexible and engaged with both the local community and local supporters. This includes ensuring that the party is both open and welcoming to new members and that structures that may have been in place for generations are reconsidered so as to allow fresh voices and fresh political talent to emerge. Taking pages straight from the Obama campaign playbook, the Refounding Labour document calls for far greater use of new and social media and for community-driven campaigning. The paper admits that Labour, along with other parties, has been slow to realise the potential of new media in garnering support for the party and for its policies. However, it calls for Labour to use tools such as Facebook and Twitter to encourage civic and political participation from those who may otherwise not engage as much as they may have liked. As has already been considered above, Labour see community as crucial to their past, present and future. However, it acknowledges that community has been somewhat side-lined by the leadership whilst the party was in power. Now in Opposition and faced by Cameron’s Big Society, some would say somewhat cynically, Labour have refound their enthusiasm for community. Looking at Gisela Stuart’s campaign in Birmingham, which she won against the odds, and the community-driven focus of Obama’s successful run to the White House, the Refounding Labour document contends that Labour needs to reach out to community groups to advance shared interests and create “a genuine community organising movement”. Moving away from local party issues, Refounding Labour also considers reviewing national leadership structures. Notably, it acknowledges that there needs to be a reappraisal of the leadership election contests through taking multiple votes away from MPs and ensuring people vote in the contest. Additionally, it suggests that the National Executive should be adjusted to take into account changes to the nature of politics in Britain, particularly the devolution of powers to Scotland and Wales. Challenging Party Philosophy Running throughout the debates about policy and organisational structure is a questioning of the philosophy that governs the Labour Party. After all, it is only natural for a party that has been in power for thirteen years only to suffer one of its worst electoral defeats to question its very foundation. Leading this debate is the Labour peer Maurice Glasman. In his essay, Labour as a radical tradition, Glasman argues that, following defeat, “Labour has no shared interpretation of history.” At the same time, he says the movement itself is characterised paradoxically as: “robustly national and international, conservative and reforming, Christian and secular, republican and monarchical, democratic and elitist, radical and traditional, and it is most transformative and effective when it defies the status quo in the name of ancient as well as modern values.” It is these ancient and modern values, Glasman contests, that need to form the basis of a renewed Labour Party, in touch with its past, if it is to successful reengage with the public and start winning elections again. He defines these values as those which are: “rooted in relationships, in practices that strengthen an ethical life. Practices like reciprocity, which gives substantive form to freedom and equality in an active relationship of give and take. Mutuality, where we share the benefits and burdens of association. And then if trust is established, solidarity, where we actively share our fate with other people.” In other words, Glasman suggests that Labour should be based in community. Critics have labelled this Labour identity as ‘Blue Labour’ with its views based on traditional conservative values. However, the idea of working through community is evident throughout the Labour Party’s past, its present – indeed, membership cards allude to the “common endeavour” – and its future, with both the policy and organisational reviews arguing strongly in favour of community based activism. Yet the extent to which Glasman actually believes his own vision of community has been called into question by remarks he has made surrounding immigration to the UK. In an interview published in the Fabian Review, Glasman said that Britain needed to “draw the line” on immigration adding that “Britain is not an outpost of the UN. We have to put the people in this country first.” Whilst this assessment may fit into the more national, conservative and traditional assessment of Labour values it does not fit so well with the Labour Party’s 21st century vision of community. This has been indicated by the reaction to the interview by Miliband and the party quickly insisted that Glasman’s views were his own and that they did not represent Labour Party policy. This difference of opinion highlights the on-going debate within the party about what it stands for and how it plans to move forward. This debate is vital if Labour is ever to be electorally viable again. Conclusions Labour stands at a crossroads. Out of power for the first time in thirteen years, but with a glimmer of hope emanating from the hacking scandal, the party and its leader Ed Miliband have an opportunity to redefine who they are and how they operate. It is evident that things need to change within the party. The policy and organisational reviews launched by Miliband go some way to starting this project. In order to successfully navigate these reviews, the party needs a relevant philosophy backed up by history. Glasman’s community vision is a good starting place for this philosophical review and is self-evident throughout the two reviews. Whether Miliband can finish the work started by the reviews in time for the next election is hard to tell. However, in starting this process he may well have rescued Labour from itself.
15/07/2011 Interel completes management buyout from Hasgrove Plc Top 10 European communications consultancy moves into next phase of growth Interel, leading international consulting group specialising in public affairs, strategic communications and association management today announced the completion of a management buyout from its AIM listed parent Hasgrove Plc. The award-winning top ten European communications group will continue to build the business through its offices in Brussels, Berlin, London, Paris, Prague and Washington DC and affiliates around the globe. The new Board will be led by Fredrik Lofthagen, current CEO, and non–executive chairman Emmanuel van Innis, a member of the Executive Committee of GDFSuez. The Board is underpinned by Interel’s leadership team consisting of 20 senior and junior managers, who together make up the majority of the company’s share capital. George McGregor will continue as Managing Director of Interel Consulting UK in London and will join the Group Executive Committee as a participant of the buyout. Strong local management will be a key plank part of the strategic growth plan. Commenting on today's announcement, Interel Group CEO Fredrik Lofthagen said: “This is without a doubt the most important milestone in the company’s history since its inception 28 years ago.” “The MBO will drive us into the next phase of growth and represents not only our faith in the company but also our confidence in the market and the potential for a company like ours to do great things.” “We have a deep seated conviction that owner managed businesses do better than those that are part of larger holding structures and my thanks goes to the management team and stakeholders who share that vision for the future.” “There is no doubt that Hasgrove has helped catapult the company into the European top ten allowing us to further build out our pan-European capabilities. And we are delighted that we have been able to part way amicably in a deal that presents opportunities for both parties.” George McGregor, Managing Director of Interel Consulting UK, added: “This is a hugely exciting time for our clients, our staff and the company as a whole. Interel is a leading player in the UK communications market and the MBO demonstrates not just our belief in the company but also in our ability to lead the strategic communications industry at a time when our clients are facing a multitude of new challenges and a requirement for agile communications based on precision market knowledge coupled with genuine international reach and experience”
11/07/2011 Interel round-table with David Laws MP - Has the Coalition changed politics for good? David Laws took on the challenge of answering the question, “Has the Coalition changed politics for good?” at a round-table organised by Interel Consulting (5th July). The Liberal Democrat MP, a key figure at the heart of coalition negotiations in May 2010, gave his reflections on the first year in office of the coalition and its impact on the future of British politics.  Laws argued that the formation of the coalition had buried the long-standing assumption that there was a natural centre-left alignment in British politics. Future coalitions, he said, were more likely to be decided on the basis of hard-headed negotiations and parliamentary arithmetic. He felt that the Government had already proven that coalitions can deliver strong government and stand for more than “lowest common denominator” policies. He conceded that the failure to win voting reform would leave the Liberal Democrats with a huge challenge at the next general election. He was optimistic, however, that the party would ultimately benefit from facing up to tough economic decisions, and demonstrating that Liberal Democrats could be trusted with the levers of power.   Interel Consulting's Managing Director George McGregor and David Laws MP   David Laws MP speaking at the roundtable event
02/06/2011 George McGregor's article in PR Week   Whether he’s flipping burgers with Obama or ordering bombings in Libya, David Cameron continues to walk on water as far as the British press are concerned. But some in his Cabinet are starting to flounder with the list of colleagues getting the wrong sort of headlines growing each week.   Only the Chancellor has been surefooted, winning a reputation as a man with a plan. Meanwhile Nick Clegg’s credibility has drained since the AV referendum and tuition fees debacles, and his ill thought out initiatives such as ‘alarm clock Britain’ and ‘muscular liberalism’ haven’t helped. Experience tells us that political luck never lasts forever. While the PM basks in the glow of Obamamania he should consider, carefully, six key points to get the Coalition back on track: • Stay focussed on the deficit. It’s why you were elected and it’s the only area the Coalition displays common purpose. • Risk a reshuffle and give Nick Clegg a big spending department, perhaps Health. He is adrift with the constitutional affairs brief. His political vulnerability is your political vulnerability. • Don’t bend at the first sign of trouble; your Government is getting a reputation for u-turns from sentencing to coastguards to forestry. • Prepare the ground for any difficult decisions – communicate a problem clearly and consistently and only then present the solution. • Ditch the Big Society. It’s well intended but nebulous and reminds people that beyond the deficit they don’t really know what you stand for. Your Government needs a narrative. • Finally, sort out No.10. The balance between political and policy advisers seems to oscillate between the extremes.   George McGregor is Managing Director of Interel Consulting
31/05/2011 Why the UK is essential to Obama With this week’s State visit by President Obama many in the media turned to the age old subject of the ‘Special Relationship’. This subject dominated coverage in the UK as Obama, who had previously been seen as somewhat frosty toward Britain, used his stay to redefine the Anglo-American relationship. He said that the relationship was not only special but was in fact essential for the promotion of shared values throughout the globe. This appeased a media and political elite who were wooed more than ever by the President’s rhetoric and would have pleased the Prime Minister no end as he tried to get in as many photo opportunities with Obama as possible to ensure a post-visit poll bounce. However, whilst it may seem that Obama was doing Cameron and the UK a favour by addressing the special relationship question, it can be argued that it actually served the President’s domestic interests more. With the build-up to the 2012 Presidential election already gathering steam, Obama’s trip to the UK and Ireland, in addition to the meeting of the G8 in France will serve as useful reminders of the President’s statesmanship. The G8 summit is all about hard politics, but the trips to London, Dublin and Obama’s “homecoming” trip to Moneygall were much more about connecting with the American electorate on a more folksy level. Sipping a pint of Guinness and having dinner with the Queen were two images designed to connect with two distinct voting groups back home. Irish Americans have voted Democrat for decades. However, there is never any harm in reconnecting with the base in as painless a manner as having a pint in a traditional Irish pub. That image alone will resonate strongly with the nearly 36 million American voters who claim Irish heritage. Sitting next to the Queen, and being surrounding with all the pomp and ceremony that brings, will score points with not only the Anglophiles on the other side of the Atlantic but also traditionalists who view the Royals with dignity and respect. The image of the Obama’s chatting with the Duke and Duchess of Cambridge will also appeal to the celebrity and Royal obsessed masses throughout the States. The trip to the British Isles has been made even more successful for Obama by the contrast it has painted with the Republicans at home. Whilst Obama was having a barbeque in the Downing Street Gardens, the Republicans were losing a special election in New York State. The Republican challengers to Obama’s presidency were also floundering under the weight of an internal ideological battle and a lack of Obama-like star quality leaving the prospect of Sarah Palin running for the party nomination a distinct, if unwanted, possibility. Overall, the last few days could hardly have gone better for Obama’s run to 2012. On a purely political basis, the State visits to Britain and Ireland coupled with the killing of Osama Bin Laden a few weeks ago may well come to return Obama to the White House in November next year.
23/05/2011 Interel's Ben Jones at a meeting of the European Security and Defence Assembly To celebrate the 60th and final session of the European Security and Defence Assembly, a debate was held on May 10th on Europe's foreign, security and defence policies. Present at the event were Françoise Hostalier, Rapporteur for the ESDA, Member of the National Assembly, France, Member of the French National Defence Committee, Former Minister and Honorary President of the Parliaments Security Defence Europe Association, Alvaro de Vasconcelos, Director of the European Union Institute for Security Studies, a representative of the Libyan Transitional National Council and Ben Jones, Senior Consultant at Interel Consulting UK. Ben, who is also the author of the recently published paper on Franco-British military co-operation explained that although the action taken by the two countries in response to the Libyan crisis was not the direct result of the Franco-British Treaty of 2 November 2010, the treaty nonetheless paved the way for them to act by strengthening high-level contacts and the climate of confidence between them. To view more on the event please see here. Interel's Ben Jones speaking at the event
06/05/2011 Election result - Can the Coalition survive Election result - Can the coalition survive By GEORGE McGREGOR Yesterday's "Super-Thursday" was touted as a potential political game-changer. The most political drama you can have without watching a general election. Although there was none of the spectacle of big political beasts getting booted from office (except Scotland), all eyes were on the first real electoral test for the coalition and the referendum on AV. David Cameron can take some comfort while the slow but steady accumulation of Liberal Democrat power over the last two decades has dissipated. In Scotland, Alex Salmond looks set to lead the SNP to majority government and a referendum on independence while Ed Miliband, despite a decent showing, is struggling to be part of the story. If, as expected, the AV referendum is a No vote, then David Cameron will be at the peak of his power as Leader of the Conservative party and British politics and the coalition will enter a new edgier phase.      George McGregor - Managing Director Liberal Democrats The top story is undoubtedly the mauling that Nick Clegg and the Liberal Democrats have received from Labour in the North but also in seats in the South from their coalition bedfellows. The nightmare scenario that some Liberal Democrats have feared appears to be playing out. Stoics expected bad news but, the severity of the vote in towns like Liverpool and Sheffield came as a shock suggesting that the Lib Dem leadership may have underestimated that capacity of the urban north to neither forgive nor forget the Tories. What will really concern the Liberal Democrats, however, is the striking swing to the Conservatives in a number of two-way Lib Dem-Tory councils. Norman Lamb's North Norfolk patch saw a stunning swing to the Conservatives. Lib Dems will be very concerned as to why it is Clegg's party that is taking the lion's share of the blame for unpopular cuts. And in Scotland, the Liberal Democrats performed abysmally in their core Westminster seats in share of the vote across the nation, while in Wales they came behind the BNP in several seats. Conservatives David Cameron will be more than happy with his local elections performance. To do relatively well at a time of deep public spending cuts is remarkable. His party appears to be holding its own in Wales and Scotland but has failed to build any sort of base in the north of England which will be crucial for overall majority at Westminster. Labour On course to win a thousand seats and with a decent share of the vote at 37%, Labour will be happy enough with its English performance. Perhaps it is too early for a strong Labour recovery in the South of England, but they will be content to have sowed a few seeds, elbowing their way back on to some southern English Councils. They will be pleased with a big swing in Gravesham, Kent, where they have taken control of the council. The fly in the ointment for Ed Miliband is Labour's performance in Scotland. Scotland A Tsunami of popular support for the SNP saw Labour's poorest performance north of the border in 80 years. Salmond's success stems from their strategy of focusing on governing competently rather than picking the fights with Westminster which many had predicted. Labour had a weak campaign which targeted Cameron rather than Salmond and by the time strategists had resurrected the threat of divorce from the UK it was too late. A weak leader who only kept his seat by 151 votes saw Labour's benches decimated with several big hitters from the class of '99 joining the ranks of Scotland's unemployed. Huge challenges for the SNP lie ahead, in terms of how they handle the cuts agenda from Westminster, but a referendum on independence is now almost certain along with a change in policy on to the minimum pricing on alcohol. The scale of their victory will also now free them from the unionist parties blocking their annual budget. Wales Labour did better in Wales regaining several heartlands with the tantalising possibility that they will secure enough seats to dispense with their coalition partners, Paild Cymru AV Referendum With all polls pointing to a solid No victory in the AV referendum, there seems little doubt that it will only serve to draw out the agony for the Liberal Democrats. The AV referendum was always going to be lose-lose for the coalition, but few expected the protagonists to end up warring at the Cabinet table. The next few days will be very tough for Nick Clegg. There will be calls for resignation but a recent poll of membership for Lib Dem Voice found that 65% of members surveyed believe that the party is "on the right course". The strength of Clegg's position is that the party membership bought into coalition and knew it would be tough. Where the leadership is vulnerable is on the charge that the party got too close to the Conservatives, sacrificing its independent identity. Many on the right of the Conservative party hope that David Cameron will use his good poll performance and referendum victory to marginalise the Liberal Democrats, and even go for an early election. But that seems based more on hope than experience. George Osborne is said to have remarked that the five-year fixed term provides a stable timeframe for the economy to come right. More than that, David Cameron will continue use Liberal Democrat support to demonstrate he has "decontaminated" the Tory brand. He will point to his party's performance up to now, and claim vindication for his strategy, but he will need to boost a battered Nick Clegg. Both men have little choice but to check back into the relationship clinic. The inevitable re-launch will not be a rose garden affair. And to the chagrin of the Tory right, the entente cordiale will spring from an issue dear to the Liberal Democrats - support for Clegg's plans for an elected House of Lords. This would satisfy the Liberal Democrats as a win on reform and a vital cushion for future electoral blows. For Cameron, it would help him get coalition relations back on an even keel as quickly as possible. But none of this will be easy to deliver. Cameron's biggest problem next week will be the vulnerability of the Liberal Democrats. Yet the logic of the coalition still drives them into each other's arms. The Disraelian cries of "Damn your principles! Stick to your party!" will be ringing in their ears. Nick Clegg will heed that call, but realistically the two have little choice but stick to coalition. George McGregor Managing Director
18/04/2011 Hovering over a decision? ‘Dump jets’ shouts the front page of The Sun today, reporting that the UK’s fleet of 60 Harrier jump jets sit idle and mothballed in a hangar at RAF Cottesmore while the British attacks on Gaddafi’s armour struggles on. Indeed, the RAF is presently only just able to meet its commitments in Libya, fielding just 17 aircraft against the 33 supplied by France. But should the decision to scrap the Harriers, and Britain’s carrier strike capability, be reversed? Could it be reversed even if the decision was made? Well let’s look at the ‘should’ side first. Britain currently fields Tornado GR4 and Typhoon aircraft, based at NATO airfields in Italy. The Tornado, actually saved from the scrap heap in the SDSR through the Harrier’s scrapping, survived due to its role in Afghanistan. The RAF currently has around 8 aircraft there, and the planes have a fairly well regarded air to ground capability. The Typhoons on the other hand, are somewhat more controversial in their participation. Originally designed as an air to air fighter in the 1970s, it has performed very well in this regard over Libya, perhaps helped by the lack of an even slightly capable Libyan air force. However, it is the ground attack role that is the most significant part of the Libyan campaign, and this is where the Typhoon struggles. Indeed, the RAF released in under 24 hours (much quicker than usual) footage of the Typhoon’s first live ground attack operation, bombing two unmanned Libyan tanks, in a desperate attempt to prove the £20.2bn fleet of Typhoons can attack the ground effectively. However, even if the two aircraft are seemingly perfectly capable of doing what is required of them in Libya, it is plainly obvious, and often pointed out by defence commentators and former military figures, that an aircraft carrier in the Mediterranean would be a much more cost effective way of doing things. The Sun points out in fact that current operation in Libya cost £30m a week, while the Harrier fleet and a supporting Invincible class carrier would cost only £40m a year. But could it be done? On the face of it, it seems simple to reintroduce the Harrier. The fleet is still in an airworthy condition and, while HMS Ark Royal has been decommissioned, HMS Illustrious is still in the fleet, currently as a helicopter carrier. However, logistics isn’t the decider of such a decision, politics is. The Harriers were scrapped in a last minute decision by the PM when finalising the SDSR, so to go back on the decision could be seen as an admission of making the wrong decision. There’s also the RAF’s view to consider. It maintains that the Tornado is more capable than the Harrier, and also is keen in light of recent criticism from the NAO and the Public Accounts Committee that Typhoon is up to the task. Therefore it is unlikely to want Harrier back in the picture. However, the Armed Forces are now so over stretched that such a reversal of decision would not be greeted with accusations of u-turn and weakness, but perhaps instead just relief that the UK’s most vital capability, especially in the current climate, was not lost for potentially the next decade. There are currently rumours that Cameron will review the decision, or perhaps return a reduced fleet of 10 Harriers to service. Whatever he does, however, the loss of such a capable and iconic aircraft will continue to haunt the PM if he simply continues to do nothing.
24/03/2011 The wizardry of George Osborne? Last year’s emergency budget, which announced the deepest public spending cuts since World War II, was all about “frontloading the pain” and readying public opinion for the austerity to come. By contrast, the 2011 budget is the coalition’s first major attempt to move the agenda away from cuts and towards recovery. Yesterday George Osborne threw everything at making the case for this shift in narrative. And, like all Chancellors before him, he pulled a rabbit from his straitened Treasury hat, cutting the price of petrol and endearing himself to millions of cash-strapped motorists. Already dubbed the “Ford Focus Budget”, Osborne’s rabbit cornered Ed Miliband leaving him little room to accuse the Government of ignoring “the squeezed middle” of hard-pressed Brits. Osborne flashed some of that wizardry that was previously on display when, in late 2007, he proposed an inheritance tax cut, and frightened Gordon Brown out of an early election. This was a more overtly political budget than most, at times bordering on the glad confidence of a manifesto launch. With this Chancellor it is very difficult to dissect the politician from the policy-maker. Osborne’s speech and announcements were masterful in pre-emptively snuffing out opposition attacks. Fiscally neutral, and with few changes to public spending, Osborne relished the opportunity to paint on a relatively blank canvass, showcasing a proactive Government, intent on moving on from last summer’s forced, and therefore largely reactive spending review. He said, “That we are able now to set off on the route from rescue to reform, and reform to recovery, is because of difficult decisions we’ve already taken.” Ed Miliband chided Osborne for apparently drawing inspiration from a heady mix of Nigel Lawson with Michael Heseltine. For Miliband and much of the country, these are figures from the darkest days of Tory economics. But needing aspects of both characters does point to the dilemma of a Conservative politician in Osborne’s shoes. He does not want to be remembered as the man who got a grip on spending but then put his feet up as ordinary people felt the consequences. He wants to combine Lawson’s supposed fiscal rectitude with a Heseltine-like passion for manufacturing, firing up industry in the regions and pushing British exports around the world. Whatever the policy substance, it is a vital political counter to Labour’s attacks on the “same old laissez faire Tories”. The centrepiece of the entire coalition economic strategy is the elimination of the structural deficit by 2015-16. It is essential to the Government’s fortunes that the plan remains on course and retains economic credibility. In his speech Osborne drew heavily on the endorsement of the Government’s plans by independent domestic and international opinion. The down-graded growth expectations from the Office of Budget Responsibility (OBR), from 2.1% to 1.7% were not particularly helpful to Osborne’s cause. But neither are they sufficiently alarming that the Chancellor will feel under pressure to change course. Indeed the OBR still forecasts that the Government is on target to eliminate the structural deficit one year early. The Chancellor clearly feels comfortable that the economic conditions are sufficiently benign that he can focus on supply-side measures above fiscal policy tools. Yesterday he fired up his growth strategy on “four economic ambitions”: the most competitive tax system in the G20; the best environment in Europe for business; a more balanced economy; and the most flexible, and better educated workforce in Europe. The big headline, which will no doubt calm fluttering hearts at the CBI is the reduction in corporation tax by 2% in 2011-12, falling eventually to 23%. According to the Chancellor, this will leave the UK with the lowest corporation tax in the G20. Osborne relished informing the Labour front-bench that this was not a tax cut for the banks, as the bank levy would be adjusted accordingly to off-set any impact on them. Moving into Heseltine mode, Osborne put a heavy emphasis on rebalancing the economy away from financial services, announcing further investment in apprenticeships, support for SMEs in research and development and 21 new enterprise zones with local tax incentives and less burdensome regulation on planning. The Green Investment Bank will go ahead with 2012 with the ability to borrow from 2015-16. Owners of private jets will, for the first time, be caught by air passenger duties (even they are “in this together” with the rest of us). There will also be a fresh assault on regulation, particularly on planning rules, as well as a drive to streamline the tax code, rivalled only by India in length and complexity, according to the Chancellor. Having set out the plan for growth, Osborne’s second objective was more overtly political, and with an eye firmly fixed on today’s headlines. His objective was to demonstrate that the coalition is in touch with Britain’s hard-pressed families and the high cost of living and uncertain economy they face. The pay uplift of £250 for public sector workers earning less than £21,000, combined with the rise in the tax-free income tax allowance will lessen the blow on those on low to mid incomes. As is customary on budget day, the rabbit made its guest appearance at the end of the show. The Chancellor announced not only a cut in fuel duty, but also a new “fair fuel stabiliser”, which will link oil company profits to the price at the petrol pump. This was another neat signal, perhaps, that “we are all in this together”, even oil companies. For Nick Clegg and the Liberal Democrats, they will be able to point to significant influence on this budget. The party’s flagship election policy of taking those who earn under £10,000 completely out of taxation is now at the core of the government’s approach. The setting up of the Green Investment Bank and the focus on rebalancing the economy away from financial services were also given due prominence. Given the sum of the coalition’s parts, this is arguably an ideologically coherent budget, reflecting for the most part a “small l” liberal approach to economic recovery, tempered by an activist ambition for manufacturing, skills and exports. In truth, this was never going to be a difficult budget for the Government or for George Osborne. Given the economic circumstances, public expectations are extremely low and most still blame Labour for the state of the nation’s finances. Yet Osborne has proved highly adept at delivering a very politically astute budget. As for the growth strategy itself, the big question remains the health of the economy. The plan is designed to bolster and support a level of growth that is, for now, no more than an assumption. If the economy grows as forecast, the growth plan and George Osborne will win plaudits and the coalition will have turned the corner on cuts. Without growth as forecast the attention will turn once more to the wisdom of the cuts, and therefore, to the wisdom rather than the wizardry of George Osborne.
28/02/2011 A new engine for European defence? by Ben Jones   Ben Jones, Senior Defence Consultant, is published this week by the European Institute for Security Studies In November 2010, British Prime Minister David Cameron and French President Nicolas Sarkozy announced plans for unprecedented military cooperation between the United Kingdom and France, based on a new Treaty on Defence and Security Cooperation. In the light of the global economic crisis, and coming days after the announcement of cuts to British defence spending, the agreement was immediately dubbed the ‘entente frugale’. While defence cuts have been less severe in France, officials are apprehensive about the outlook after presidential elections in 2012.Yet it would be wrong to see Franco-British defence cooperation as driven purely by a short-term need to balance the books. A number of the projects announced in November were under consideration long before the economic crisis. Since the 1990s, France and the UK have been working ever more closely on defence matters. The treaty should be seen in the context of three long-term trends that challenge the coherence and sustainability of long-standing French and British assumptions. Firstly, defence budgets have not been funded to compensate for the rising cost of military capability. Over time this has led to a steady paring back of equipment and personnel numbers. Broadly flat in real terms, most European countries’ defence budgets now struggle to deliver military capability to match their foreign policy aspirations. Secondly, the relatively benign security situation in Europe leaves it all but impossible to make the political case for more defence spending. Defence, generally ranked low in issue salience polls, is often seen as an easy target for cuts. Finally, flat or lower spending combined with increasingly expensive technology undermines the viability of national, and even multinational, industries. This threatens long-standing preferences for indigenous technological and scientific capability, without which France and the UK fear that they will lose operational autonomy. These trends have, however, emerged in parallel with a long-term convergence in the interests of France and the UK. Indeed it is this convergence that underpins the unprecedented levels of mutual dependence to which they are now prepared to commit. They have pledged to pool elements of their defence industrial bases, to seek to harmonise requirements and doctrines, to buy equipment together and deploy forces together. Their agreement may pave the way towards a new form of defence cooperation – one that is less opportunistic and more planned, providing deeper interoperability and greater savings. Yet this is not a merger of the British and French armed forces. On the contrary, the motivation, at least for now, is to retain access to a full range of capabilities to pursue independent foreign policies. They want to remain militarily credible partners of the United States, both bilaterally and through NATO. In stark contrast to the St. Malo agreement, which was motivated by a desire to improve the European Union’s ability to act autonomously, the benefits to European military capability are in this case welcome, but not central. Whereas St. Malo was a new approach for a new goal, Franco-British defence cooperation is a new approach to the status quo, and the maintenance of national foreign and defence policies. For this reason, the potential impact on wider European defence is not clear. Any agreement leading to the maintenance or improvement of military capabilities available to NATO and the EU is in itself advantageous. But there is no substantive policy linkage. Instead there is a pragmatic assumption that bilateralism between ‘natural partners’ ought to work more effectively than a multilateral approach. Indeed, the assumption in London and Paris is that no other European states can rival the breadth and depth of the relationship that France and the UK have established. Yet the vital interests shared by the UK and France are not so very different from those shared by most European states. With the US increasingly turning its attention to the Asia-Pacific region, European states must rationalise their increasingly fragmented and inefficient military capabilities. Not only in order to act as credible partners of the US, as their foreign policies tend to dictate, but also to develop the crisis management role of the EU, particularly in the European neighbourhood. It is therefore in the interests of Britain and France that they remain engaged leaders at the institutional and strategic levels of European defence cooperation. The impatience both countries feel, with some justification perhaps, regarding the lack of progress of the St. Malo era should not foreclose any opportunities to develop military capability through existing multilateral institutions, particularly those of the EU. Neither should it foreclose thinking about the institutional future of European security. It would be a mistake to oppose any particular method of working or institutional format on ideological grounds. Indeed, what is striking about Franco-British defence cooperation is how successful both countries have been in discarding the ideological baggage of the past. The new pragmatism founded on developing military capabilities through close cooperation should be encouraged and emulated by partners in Europe. But there is a quid pro quo. If there is no credible reciprocation in response to these ambitious plans, then France and the UK can hardly be blamed for retreating into bilateral cooperation.