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.”