The National Audit Office have released a report examining what they call the ‘affordability gap’ of the MoD’s equipment plan.

The following numbers are the key points raised by the report, which can be found here.

£179.7bn
Total size of the Ministry of Defence’s (the Department’s) 10-year equipment and support budget, including contingency

£4.9bn
The minimum size of the affordability gap in the Department’s Equipment Plan, after contingency

£15.9bn
Additional affordability gap if all identified financial risks materialise and no assumed savings are achieved

£20.8bn is the potential affordability gap (£4.9 billion + £15.9 billion)

Costs not included in the Plan

£9.6 billion
Excess of the Department’s forecast project costs over the 2017 budget, that are not included in the Plan

£1.3 billion
The Department’s forecast cost of buying five Type 31e frigates not included in the Plan

£6 billion is the Centrally held contingency, £4.9 billion the minimum affordability gap.

Further risks to affordability

£3.2 billion
Estimated potential understatement of costs in the Plan as calculated by the Department’s Cost Assurance and Analysis Service

£4.6 billion
Potential increase in costs if the Department had used the exchange rate prevailing at the start of the Plan period (1 April 2017) to forecast costs

£8.1 billion
Remaining savings assumed within the Plan that the Department must achieve over the next 10 years

£15.9 billion is the additional affordability gap if all identified financial risks materialise and no assumed savings are achieved

£20.8 billion is the total potential affordability gap.

George Allison
George Allison
George has a degree in Cyber Security from Glasgow Caledonian University and has a keen interest in naval and cyber security matters and has appeared on national radio and television to discuss current events. George is on Twitter at @geoallison
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27 COMMENTS

  1. Oh dear. If the leaked brexit assessment is correct we are stuffed. 2% of GDP (least worse case scenario) is £40 billion and we can all guess where the axe will fall. Westminster will have us armed with wooden swords and bathtubs for the Navy.

    • Project fear lives on. There were three scenarios tested, none of which were of the Governments future EU trade relationship target so……. My eyes are on the House of Lords who are very open about their mission to stop BREXIT happening.

      • There is no target for a future relationship because the tories cannot decide among themselves what they want.

        The EU has stated several times that there are only four options: stay, leave, Norway or Canada.

        Leave would decimate the economy and downsizing the military would be the least of the UK’s worries. Norway or Canada would both badly affect the economy.

        Lucky for you it looks like the can will be kicked so far down the road that by the time we actually get around doing it Brexit will be dead and buried.

        • David – Given the Labour Party is equally riven by the same argument and ‘Brexit’ was decided on a non-partisan basis you make a straw man argument. The Government has stated very clearly what its objectives are: A Free Trade Deal, we leave in March 2019 and there will be a transition period of about 2 years.
          But you act like a typical Remainer who takes everything the EU says as ‘gospel’ and which cannot be argued. The UK does not have to accept anything as it will be a free Sovereign nation again. Your confirmation bias creates a false presumption but the choice is actually this: A Free Trade Deal that benefits both or WTO Rules trading which will not be as good but will benefit the UK better than the EU for one simple reason: We run a trade deficit worth £70 Bn (nett). The EU will raise their ‘EU External Tariff’ against us and we will respond in like kind. Nett gain to us at least £7 Bn a year. (This is the ‘EU External Tariff’ the UK has to pay NOW on all non-EU imports and can be as high as 28% like on New Zealand lamb)

          And as for those ‘leaked documents’ they never ever made a Minister’s desk. And of course we don’t know who wrote them and at what level of competence the author was. But as long as its ‘Brexit Negative’ thats OK for Remainers to peddle as ‘fact’.

          • Thinking that any FTA would even be close enough to substitute for being in the single market that was partly tailored to suit the needs of a post industrial British economy is simply wishful thinking.

            The UK is a sovereign nation at the moment as well as a member of the European Union. The possibility in the twenty first century for a nation to act independently is very rarely possible – something that Thatcher has realised back in the seventies – so it does worth sharing/pooling it with other state entities to achieve shared goals. One of these goals have always been stable democracies and economic prosperity throughout Europe in light of which the European Union – with the United Kingdom shouldering a serious burden – is a stellar success. You should be proud of it instead of trying to disown it believing the word of phony politicians who cannot even manage a credible government.
            Sovereignty is more about the capacity to ensure the prosperity and security of a country through social policies, taxes, spending available funds, managing education etc. all of which is perfectly possible through the powers of government seated in Westminster.

            An UK outside of the European Union will be still forced to obey the regulations and the rules of the European Single Market with the caveat of not being able to shape or create rules and regulations anymore. This is simply because the profound economic integration of Western Europe which the UK is an embedded part of whether you like or not. In the real world, the free trade agreements that your politicians would like you to believe in do not exist, would be too little to late and in any way could not substitute for the loss of trade in goods, and mainly services in the even of a crash out of the EU.

            When you talk about trading with the EU you still disregard the fact that the European Union is not a country but a political-economic union of sovereign countries and that lost trade would be spread across the individual member states, which by the way have been preparing for this possibility for over a year ago.

            The European Union is far from perfect but much better than the alternative. The British people were sold a farce through a gerrymandered referendum based on lies and misleading half-truths where too many British citizens were denied a vote.

            You call me a remainer as if that meant I do not love the United Kingdom but that cannot be further from the truth. I have always been somewhat eurosceptic but the UK should take leadership in the EU instead of regressing into insignificance.

      • Steven – Mine are as well. That a twit like Adonis, who never achieved anything substantial electorally and then only as a LibDem councillor, can command hours of air time and be allowed to peddle total lies and the BBC ‘et al’ just nod and agree shows the magnitude of the Establishment bias.

        What ‘Their Lordships’ need to keep in mind is that ‘Brexit’ is not Party Policy. It is a democratic decision by the Electorate given at the request of the elected Chamber and Their Lordships in 2016. Those like Adonis and the other Leftie numpties who peddle the ‘Tory Brexit’ mantra are just on a diversion tactic. Although given the Tories were re-elected on a Brexit platform in their Manifesto and this ‘Withdrawal Bill’ is the resulting legislation the PM could just deploy the Parliament Act and the Salisbury Convention and stick the middle digit to them all.

    • John West – You make two mistakes:
      1. You assume the ‘documents’ are accurate and yet have no idea on what premise they were written let alone the competence of the author.
      2. You then quote the numbers without reference to the timeframe (which is kind of relevant).

      The timeframe was 15 years and these ‘experts’ who have been so very wrong on every other ‘forecast’ now tell us that they can accurately say we will be:
      0.133% less growth per quarter than we have now? – WTO
      0.083% less growth per quarter than we have now? – FTA
      0.033% less growth per quarter than we have now? – Stay as we are

      Source (that EU loving champion of the Left) The Guardian:
      “It said national growth would be 8% lower under a no deal scenario, around 5% lower with a free trade agreement with the EU and about 2% lower with a soft Brexit option of single market membership over a 15-year period”

      https://www.theguardian.com/politics/2018/jan/30/brexit-would-damage-uk-growth-says-leaked-cabinet-report

      The price of oil could have a bigger effect …..

    • ee gads man, the .O.D with a plan surely not! have i received a blow to the head which has sent me delusional? m.o.d plan LOL

  2. Costs not included in the Plan
    £1.3 billion – The Department’s forecast cost of buying five Type 31e frigates.
    Looks like the Type 31e ‘frigettes’ programme could be yet another RN cut.

    • This may not be entirely true.

      Upon further reading it is clear that the costs for the T26 have not been updated fully apart from a £0.5bn reduction for the first 5 years (more than enough to pay for T31).

      The report is clear that the costings for T26 have not been updated in time for the report and so there could be an argument that as a result of this the funding for T31 is also not in place at this time – but could well be once the costings for T26 are confirmed.

      This could be a timing issue and as with all audit reports – they have to call it at a point in time…

      The cost of successor and nuclear establish however is eye watering…

  3. As they say in risk management GIGO (garbage in garbage out). It does seem that the commentary and analysis is stuck at 6th form level. In order to form a logical view one would need to look at factors such as;
    The accuracy record of the scrutiniser NAO and their margin of error
    The accuracy of the MOD for costs/savings and their margin of error
    What % of the overall budget these totals give and whether these are significant over a 10 year period in view of other factors i.e. exchange/gdp growth etc

  4. Cut the F-35B order to 96. Leave army numbers untouched. Retain LPDS and grow RN numbers to man a fleet with 10 Type 31 or 5 Type 31 and 5 uparmed River 2. Retain the River 1s. Increase defence budget to cover any gap.

  5. I’m convinced that real opportunities are being overlooked, whereby, a degree of savings can be made by opening up MOD facilities for the public pleasure. With a little flair and careful management considerable opportunities are there for the taking, and in so doing, create valuable income for the MOD.

    Proposal one ARMY.
    Hundreds of miles of military roads/tracks are currently used only by the MOD, when they could be open to the public for on and off-road experiences. Admittedly, some areas will be off limit due to rouge ordinance, but this should not stop opening clear zones. A selection of vehicles could be made available to drive from trucks to possibly light and heavy tanks. There are a number of such private organizations who currently offer just that experience, but with outdated equipment. Current physical fitness sites and training grounds could offer endless permutations for having fun.

    Proposal two RAF.
    RAF transport planes could be leased out to industry for shipping goods when not on military duties? These same planes could also offer flying experiences, and maybe parachuting courses. The same could apply to the helicopter fleets. Flying in Chinooks and smaller machines at low level would surely be very popular, and priced accordingly.

    Proposal three ROYAL NAVY.
    A selection of warships (patrol class and possibly a frigate) could be leased by private agencies, for weekends at sea experience using RN crews to man the vessels. Obviously, numbers may be small but could attract the more wealthy clients to experience life onboard. Such a scheme could be extended to subs where limited trips could be a very tempting prospect. Active service (non-conflict) guests could also be considered to be aboard. Imagine, cruising on one of the QE Class carriers, surely that could be achieved without too much inconvenience even on active duties?

    Admittedly, these proposals could be dismissed as totally impractical, yet, if these ideas were to be considered, in many cases the prices asked could justify the inconvenience of having the public aboard, and generate considerable and much-needed income. Does it go without saying, most if not all would need to sign the Official Secrets Act, and in many cases, off-limit zones would have to apply but that should not necessarily spoil the fun? Time has come to look outside the box. How many of us would just love to do any of the above, if ours funds permitted?

    • these hair brain schemes will raise pennies not to mention security issues.

      lets face it, if we want a proper military not to mention other public services, taxes must go up. No other way, sorry

      • Hair brian yet plausible. You underestimate the value of my proposals, and additional income is welcome no matter how small. When things are tight any ideas that offer an opportunity should be at least explored. As for security being a roadblock, I’m sure much of that is not an issue. I would say, that all the Army proposals are achievable and would prove extremely profitable.
        The RAF using C130’s and Atlas’s for industrial freight is very achievable especially if you can backhaul just as the haulage industry does. I see no real issues there? Admittedly the RN proposals could prove troublesome, but being a cruising guest aboard a carrier, that should be a possibility if only a few in number, it could pay for jollies for the crew…..why not? No, my ideas are not silly they just need people to look at the possibilities, without the dogma of current thinking holding them back.

        • Yeah sorry opening up MOD sites for off road days etc will bring in pocket change. I’m not sure if they open up their firing ranges for target shooting providing you have a FAC, I think they do once a month in NI as its the only 1000 m range in the country. Still it only brings in pocket money in comparison so what the MOD needs. Even when they sell of old equipment its all pocket change in comparison to buying new.

          • Do not accept pocket change. Put MOD assets in the hands of real business-minded entrepreneurs, and you’ll be surprised just how many opportunities lie beneath. Raising taxes or hiking MOD budgets is an easy option, which by the way, ain’t going to happen anytime soon! The idea that such schemes as mine only raises pennies, is to ignore the monetary challenges faced by the owners of fast British estates in post-war years. They could have said not worth opening to the public, and many would have agreed with their caution. However, we all know what a bit of imagination and a curious public did to that mindset. There’s money in them there MOD lands and assets, it just needs a bit of can-do spirit to make it happen. Shotting ranges is a brilliant idea, open them under strict supervision, and it will draw thousands of firearm users. I can hear the cash machines rolling already.

          • BB85 – I recall rallying on Myndd Epynt many decades ago and that was (might still be) MOD land. Totally brilliant place as well ….

        • Aircraft only have a finite life span measured in flight hours and we can’t waste them on flying commercial freight. The A400M is about £140 million a pop and we are only getting 22. We only have 8 C-17s and the 14 C130J look ripe for the chop. Plus the transport fleet is the busiest part of the RAF. The navy could maybe open ships up for tour groups while in port but how much money can you make doing that? Not a lot would be my guess as it could only be for a short window between refit and deployment. If you open a Type 45 up for 1 month of tours and attract 5000 people paying £10 each you will barley cover the cost of supplying toilet roll to the fleet. I might be more realistic if we had plenty of kit but even the army are struggling to cobble enough vehicles together to form a single deployable division. With the numbers talked about for WCSP, CLEP, ABSV & Ajax there will barley be anything left for BATUS.

  6. the issue here is waste – millions of pounds worth

    the MOD procurement process drives the price up due to the hassle of dealing with them and the even bigger hassle of getting paid

    my company declines mod based enquiries on a regular basis as it is not worth the trouble of dealing with them – we can do business with an overseas navy, get paid and deliver on time for a fraction of the cost, paperwork and problems – this is why as a country we are reliant on BAE and Babcock – they have an army of teams to generate needless paperwork and pass the cost on to the MOD.

    de-regulate the procurement process and trust your suppliers – the MOD could save 20-30% on costs overnight if they just employed common sense and good engineering practice

    rant over

  7. Dear Maurice. I like new ideas but you miss the point on leasing out fine tuned equipment such as military planes and ships. Every hour spent joyriding or flying widgets for beer cans uses up an hour of life expectancy and short life components. The cost of running a military plane and the increased frequency of maintenance thus required means any money made would be spent. They are not built to commercial standard but much, much higher. It would be akin to using a formula1 car for doing the shopping.

  8. Maybe the REAL question isn`t the size of the budget,it`s it`s utilisation. I know it`s mentioned a lot on this forum, but how can the USMC do what it does capability wise with a smaller budget than our MoD ? More manpower and plenty of bang for their buck with top knotch kit.

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