The committee calculated an equipment plan funding deficit of at least £4.9bn and potentially as much as £20.8bn over the 10-year £179.7bn equipment budget.

The Ministry of Defence has put its faith in the Modernising Defence Programme to solve its affordability issues and to prepare for the continued challenges of a ‘fast-changing defence landscape’, including the UK’s capabilities for cyber, chemical, biological, radiological, nuclear and electromagnetic attacks. The report released today however is highly sceptical that the Modernising Defence Programme will be able to return the Department to a balanced position. The report also warned that the equipment plan contains “no headroom” and leaves the UK “increasingly dependent on international allies”.

According to the report, which can be found here:

“The Department faces a significant affordability gap in its Equipment Plan for the next 10 years, but is unable to determine the size of the gap, thereby reducing its ability to make informed decisions about our national defence. 

There is an affordability gap of at least £4.9 billion in the Plan, rising to a potential £20.8 billion if all identified financial risks materialise and no savings assumed in the Plan are achieved. Financial risk has increased since last year, and while the Department acknowledges that the affordability gap is in the billions of pounds, it is unable to quantify the size of the gap with any degree of precision. We are concerned by the Department’s vagueness and reluctance to acknowledge its full exposure, and by the Department seeming to question the accuracy of its own numbers when giving evidence.

The Department says it is confident that at end of the Modernising Defence Programme, with cost information anticipated in autumn 2018, it will have a “strategically affordable” Plan, but is unable to articulate clearly how this will be achieved.”

Meg Hiller, who chairs of the committee, said the government had also failed to report transparently:

“The MoD’s national security responsibilities give it a unique and critical place in the public sector but that is no excuse for a lack of rigour in its financial affairs. The MoD’s inability to better quantify that affordability gap has consequences not just for its confirmed spending plans, but also its ability to prepare for serious challenges in national defence.

The department must be more rigorous and realistic in its approach to costing its equipment plan. It also needs to be more open with parliament and the public about its finances, commitments and their costs to taxpayers.”

An MoD spokesperson said:

“We are committed to delivering large, complex and technologically challenging defence programmes as part of our £180bn plan to give our military the very best equipment. We recognise financial risk comes with that, but the potential affordability gap highlighted by this report reflects an unlikely, worst-case scenario in which all possibilities materialise. 

We are on track to meet our £16bn savings target and will also review these recommendations as part of our Modernising Defence Programme, which aims to strengthen our armed forces in the face of intensifying threats.”

 

32 COMMENTS

  1. The committee calculated an equipment plan funding deficit of at least £4.9bn and potentially as much as £20.8bn over the 10-year £179.7bn equipment budget.

    I wonder how much of that figure could be reduced if the Government took back the funding of the Nuclear deterrent which in 2010 was taken out of Government funding and lumped onto the MPD budget:
    Trident costs must come from MoD budget, Osborne says
    The full £20bn cost of renewing the UK’s Trident nuclear deterrent must be paid for by the Ministry of Defence, George Osborne has said. Traditionally, the Treasury has always found the money for the submarines. The chancellor’s comments come as Defence Secretary Liam Fox warned it would be “very difficult” to maintain other MoD projects if more than half its budget went on funding Trident.
    http://www.bbc.co.uk/news/uk-10812825

  2. In my experience when talking about the equipment programme, most identified risks do materialise during the development and introduction into service phases and some others that were not even on the risk register in the first place do as well! That means that the gap identified by the NAO will be closer to the 20bn figure than the 5bn, bringing us all the way back to when Philip Hammond as Secretary of State for Defence famously declared that the Tories had plugged the 20bn black hole left by Labour. Obviously not! All smoke and mirrors. So more salami slicing everywhere, fewer numbers and moving things to the right. Same story as ever…

    • Possibly naively but I am cautiously optimistic that the forces will start to get a bump in funding this year. Not enough of one that there won’t still be some funding and capability gaps but think the 2% of gdp figure will inch up over the next few years to closer to 2.3% or so. Am I hopelessly deluded??

  3. In my view it would make more sense to separate the equipment costs from the running costs. The equipment costs should be looked at in relation to the lifetime of the asset in question. A three billion pound aircraft carrier does not look quite so bad over fifty years and as an annual expense to each UK national to keep them safe. The UK is spending a lot in an attempt to modernise the RN & RAF. More is needed and the needs of the Army will perhaps be clearer after Brexit. The Government needs to view equipment as an investment and budget accordingly. Equipment is an area I think it is worth borrowing on like infrastructure projects for Government or more personally a mortgage. I’m not a great one for borrowing money but there are times where it is appropriate.

    • Running costs should be included or contractors will design and build to keep the cost as low as possible but the life expectancy and maintenance costs will be horrendous. Look at the age of a lot of military equipment and it’s still in good shape just outdated.
      As a tax payer why would you want the government to be hiding the true cost of things anyway?

      • Ah sorry my fault i am not making myself clear. I am suggesting separating the major equipment costs from the annual MOD budget. You would then specifiy an equipement budget of x billion over a specified number of years to meet a strategic plan. Decisions about including or excluding predicatable maintenance costs would need to be dealt with at the bid stage for the very reasons you outline although this is nothing new in procurement. If anything this should make it clearer to tax payers & parliament what they will be getting at the end the period, for what cost and what the peaks and troughs are in the spending.

        • IT’s already happening Mark. Equipment comes under the longer term Capital Programme and running costs under Revenue Expenditure. The problem is the same as it always has been and I mean right back to the 19th century. The Foreign Office and often the Prime Minister wants to do A,B,C and D and the MOD is left asking where the money is coming from to pay for it!

          • Interesting. Thanks. As austerity seems to be old news now perhaps the chancellor will discover a pot of money to relieve the pressure. Certainly the public will not want lives risked by too much penny pinching now we are beginning to get something worth dhouting about.

  4. pretty sure trident and several other budgetary movements that never used to be part of things have kind of ruined the massive savings the department have actually made over the last few years (+huge cuts that helped that)

  5. 500m a year gap isn’t looking so bad. I wonder what assumptions this includes around gdp growth over the 10 years, assuming the current 2% is maintained.

  6. Almost £15 billion being spent this year alone on foreign aid. Utter madness.
    Charity begins at home and when you’ve got it to give….

    • And they keep repeating it year after year=Utter madness, like so much of todays delusional thinking.

  7. Well what a shocker the British government is making promises or trying to do something without actualy being willing to pay what it costs.

    Its not suprising really it’s a tactic that’s worked with the NHS for 50 years and to the tune of a couple of hundred billion pounds.

  8. I believe the U.S. Congress is going to classify major funds for the reconstitution of our nuclear TRIAD as separate National Defense Funds as opposed to being in the budget of a specific service. The USN shipbuilding program would have taken would have imploded otherwise due to the costs of building the Columbia Class. The same for USAF aircraft acquisition and our upcoming new ICBMs.

    Aloha!

  9. We hear.calls to bring back national service, we couldn’t afford it in my opinion, its also too bad that we couldn’t add a military curriculum into colleagues that are designed for folk that have an interest in getting into the armed forces that provided insight and knowledge of what’s required. Lets think k outside of the box, reinvent UK plc and have a serious debate of where our armed forces are heading.

    There’s an argument to be had over quality or quantity and i feel we are paying a helluva lot on a forces reliant on the US and other allies.

    I’ve said countless times on this site about recieving military aid from the US, and have questioned amounts given to Israel despite not been involved in the types of war we have been involved in with the US.

    Would i give up trident, most likely in a heartbeat and watch our size tenfold, Are Israel likely to be in Korea? China and parts of mid east in future conflicts i think not yet imo they Israel are possibly stronger than us.

    imo a lot has to be discussed😁

    • there’s no way the military would give up trident and watch their size increase tenfold, as soon as trident gets scrapped so would the money required for it, it would be taken away from the MOD in a heartbeat to fund something else.

      • That’s the huge catch with the no-CASD scenario isn’t it. To throw in a counter-argument though…

        Might there be a limit to how much money could actually be scrapped from the defence budget? Another peg in the ground is the NATO target of 2% of GDP that the UK is just about meeting (with some creative accounting). In a scenario where CASD was scrapped if HMG then also cut the equivalent amount from the defence budget at some point afterwards it would end up being seen to join the ranks of the NATO countries really not pulling their weight which I assume would be viewed as undesirable.

        Admittedly some funding could probably be cut by more creative accounting adding in stuff currently funded elsewhere into the defence budget (although I’ve no idea what) but if (and perhaps it’s a big if) HMG does want to stick with meeting the NATO 2% target that would seem to be something of a protection against huge chunks of money being ripped out of the defence budget.

  10. There’s one piece of good news on the BBC web site today. Ignoring the slightly misleading headline (I doubt it’s actually new money, just a cut avoided) but it does look as if the 7th Astute is finally out of danger. Gavin Williams is due to confirm funding on a visit to the factory today. Apparently we even have a name now. It’s going to be called “At last”.

    Just kidding. The name is actually reported to be Agincourt. News item here: http://www.bbc.co.uk/news/uk-44102308

    • Sorry. Just for accuracy, I don’t know why I said that Gavin Williamson (get his name right too) is visiting the factory today, the article just says “while at the factory” but presumably his visit is in the next few days and quite possibly today.

        • Charming. How is news that a critical element of current plans hasn’t fallen victim to the requirements to close the affordability gap unrelated to an article talking about the requirements to close the affordability gap? Ironically, I actually took some care to choose this article to post on since this news is related to this article.

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