In his first major speech since becoming U.K. Secretary of State for Defense, Philip Hammond addressed hot policy issues, including moving the budget toward ambitious programs to renew the forces for a strong future.

Hammond’s priority is a successful conclusion of the combat mission in Afghanistan, he said. The goal is not a “perfect” Afghanistan, but one able to maintain its own security and prevent the return of international terror groups.

Resetting the budget would not be easy nor pain-free, the Conservative party politician told a sold out audience at the Royal United Services Institute in London yesterday. Hammond succeeded Liam Fox–who resigned amid a furor over allegations he allowed a friend undue access to the Defense Ministry–in mid-October.

“Future Force 2020 must be a force fit for the challenges of future warfare and the real world risks we are likely to face,” he said. “But it must be built on a Defense program that is affordable now and sustainable into the future.”

The U.K. contribution to Libya cost less than expected, he said. The operation cost approximately $331 million, comprised of about $226 million in operating costs and $104 million in munition replenishment.

In the aftermath of the successful Libyan operation, some call for a rethinking of the Defense and Security review, while the political opposition “carps over the tough decisions we have had to take–decisions that they ducked because they were too difficult and politically uncomfortable,” he said. “It is their legacy that constrains our ability to invest in new capabilities,” he said.

For example, he said, “They promised new Chinook helicopters, yet they had no money for them. They committed to Trident replacement–but omitted to include the cost of it in their budget plan.They tied up their unaffordable shipbuilding program in unbreakable contracts. They, in effect, had a fantasy defense program.”

In another swipe at political opponents, he said the opposition now agrees that the MoD budget needs to be put on a stable footing, but “refuse to say what they would cut.”

To be fair, he said taking apart the Strategic Defense and Security Review piece by piece is not an option.

“But I have no doubt that the Armed Forces that will emerge from the implementation of the SDSR will be formidable, flexible and adaptable–structured to defend the country and project power abroad–equipped with some of the best and most advanced technology in the world–a superbly trained and disciplined Force that will punch above what will anyway be a very considerable weight,” he said.

In that vein, Hammond announced he’s accepted the recommendation to allow women to serve on submarines, starting in 2013. In the United States, Women do serve on submarines.

Hammond’s vision is not one of retrenchment but an “ambitious program of renewal” after a decade of continuous operations and budgetary incontinence.

He said he expects his approach would be to “neither compromise current operations nor constrain future defense capability–that means we will not remove critical skills and capabilities that are irrecoverable–so that we retain the ability to scale up in the future if the threat demands it and the means permit it.”

Hammond’s first rule: “we must not preclude our successors from doing more.” The second rule is that “future strength lies in partnership and we must guard those assets, capabilities and competencies that allow us to add value to our most important alliances.”

Thus, “we will not carelessly throw away core competencies that may be essential to our defense in the future or which make us attractive alliance partners today. But operational effectiveness has to remain the watchword for everything we do and we will continue to learn from our experience. We will change and adapt with the evidence and the circumstances.”