The Ministry of Defence Equipment Plan 2018 to 2028 sets out its equipment and support budget for the period 2018 to 2028.

The plan includes equipment already in use, such as the Typhoon combat aircraft, as well as equipment in development, such as four new nuclear-armed submarines.

The report, found here, concludes:

“The Department’s Equipment Plan remains unaffordable, with forecast costs exceeding budgets by £7.0 billion over the next 10 years. This variance could increase or decrease depending on different circumstances, with the Department estimating a worst-case scenario of costs increasing by £14.8 billion should all the identified risks materialise. However, some of its analysis remains optimistic and costs could increase further. The Department is improving its understanding of affordability risks, but we are not yet fully confident in the robustness of some of its underlying assumptions, particularly around efficiencies.

The Department recognises that continued unaffordability of the Plan is not sustainable and has presented the nature and scale of the challenges it faces more clearly in its latest Plan. However, as we have previously recommended, it still needs to undertake the necessary analysis and make the decisions needed for the Plan to be affordable. In January 2018, it established MDP to take the action needed to close the affordability gap, but this work has not yet concluded. Given that 84% of the identified affordability challenge falls in the next four years, the Department must make decisions now. During the current period of uncertainty, the Department has resorted to short-term decision-making, increasing the longer-term risks to value for money and the likelihood of returning to past poor practices.”

To bring the plan into balance, the NAO recommend that the Department must:

  • make the decisions required to defer, de-scope or delete programmes as soon as possible so as to address the affordability challenge;
  • ensure decisions are supported by a full and transparent evidence base to demonstrate longer-term value for money; and
  • outline its decisions, including the financial and broader implications, to Parliament. In setting its Plan for 2019 to 2029, the Department must:
  • continue its current plans to improve cost forecasting and consider, as part of this, what can be learnt from the work of the Cost Assurance and Analysis Service;
  • ensure greater consistency across TLBs and delivery organisations in how risk and uncertainty are reflected in project costs, for example, through further challenge of TLBs, in line with our recommendation last year;
  • continue, for example through delivering its current plans to improve financial leadership, to improve its understanding of affordability risks, and their impact, across the Equipment Plan portfolio. This includes using this insight to inform the size of its contingency budget; and
  • improve central oversight of efficiency savings by ensuring that there is a single point of accountability, a central view of efficiencies included in the Plan, and a clear and accessible audit trail for all the efficiencies included in the Plan.

43 COMMENTS

  1. Is it just me or does £7 billion over ten years not sound like a lot. NAO always issues catastrophic forecasts along with the jokingly called office for budgetary responsibility as this is the easiest way to not be wrong. However when you are procuring equipment like Dreadnought SSBN’s and F35 Lightning’s that are some of the most complicated machines on the planet it’s difficult to be exactly right on price.

    7 billion over ten years is less than 2% of MOD Budget.

    • Again this is all about choices made by HMG and not a question of what we can afford. £7 billion not even one year’s DfID budget. It is under our EU contribution (the headline figure) by a couple of billion.

      Yet we can’t afford, apparently.

          • £20 Billion worst case.

            The end result will be the same.

            Cuts NOW in MDP to “balance” a budget that does not yet exist, as the money is not allocated yet as its so far in the future.

            These figures are virtual reality, they do not exist yet.

            A few years pass and MoD will be in another similar situation or another government will be in power and the whole lot is recalculated again with yet more cuts.

            Defence money should be ring fenced with a long term plan agreed by Parliament so MoD has certainty.

        • Then there is the allusion to ‘losing capabilites’ which is always a mysterious something beyond the platform and things they can’t hide. I never quite understood the mysterious in cost ‘defence out’. An infantry soldier needs a scale of equipment, then a platoon needs more, and so on up the tree. You will need so much training per year. And so on. We live in age where scientists can model mini universes in virtual reality and we have systems that can design can design chips with billions of components and route all the connections. But plan defence? No. It isn’t as if the armed forces are faced with the day to day uncertainties of say the NHS. The military have plans for everything. I do wonder what QinetiQ spend all their money on developing how much reaches the front line. I appreciate their are subtleties in all spheres which the lay person doesn’t see or appreciate. But I also know that sometimes those in sphere can get very insular.

          • Whole heartedly agree steve. The only blocker i can think of is internal and external politics. It’s always bloody politics (as anyone who has worked on a large project can appreciate, how bloody hard it is to get the simplest idea implemented)

    • Martins spot on, when you want to smear a fact its about how you present it. A head line ‘MoD 2% over budget’ does sound bad at all so no one would pay much attention. The press has been running 20bn over figures as that sounds enormous. Even 20bn is 6% which many Program managers will tell you is not that bad either.

      The problem is the government should set asides money annually (make a provision) and not wait until year 5 to plug the hole as taking the hit in one go is just a bad idea.

  2. They always do this to get the public ready for some defence capabilty erosion! They will decrease numbers of something, like already the Ajax numbers cut by a few hundred, less p8 Poseidons than we actually need, 8 type 26s instead of 13, they have cut almost everything they planed to buy, I think they have cut a new apache squadron aswell! The only thing they have increased in years is the OPVS by 2! They will be very handy and we should have one permanently based at Gibraltar for there squadron.

    • That’s interesting! What do you see an OPV at Gib doing? Anti II and anti smuggling? Keeping an eye on North Africa coast?

      • I don’t think the Gibraltar Squadron need a River size vessel myself, but you could always base it there for use in the Med. Likewise one in the Middle East.

        I would have a RFA type vessel acting as a “Mothership” too for more fast boats and helicopters for smugglers, pirates, and the like.

        Why use a high end warship?

        • Can’t use a River to patrol Gib. The current fast patrol boats, GDP, RGP, and Customs vessels are all better suited for that.

          However, you could indeed base a River *from* there from Med patrol. Currently, Echo is forward based from Malta I believe for this purpose (and at one stage, both Echo and Enterprise were). Whilst our survey ships are fantastically adaptable, they’re perhaps not best suited for the role undertaken by them at the moment.

          Forward basing a River in the Med would allow these ships to return to their primary roles – supporting the minehunters, and surveying.

          And of course, a regular bit of funnel in and out of Gib will annoy our Spanish friends to no end.

  3. Whilst I agree this is not a lot, if you dig into it some of the figures being bandied about are almost impossible to map to the actual capability.

    I do wonder how the MOD spend x3 to x10 times as much as a commercial outfit would and yet end up with so little.

    Warrior and Challenger life extensions now need cancelled. I also just don’t believe Successor are £10bn each when astute are £1.5bn each. Realistically, how can that be?

    Some of these costs are also as a result of slowing down of work (by as much as 2 years!!) – who in their right mind would save £60m today if it was going to cost £160m tomorrow, answer HMG. They did it disastrously with the carriers (plus £1bn) and now to some of the current programmes (protector).

    This now needs to be far more granular, Equipment Support, Maintenance and infrastructure all need to be costed very carefully.

    This is just clearly unfocused, poorly governed and wasteful. The MOD should be ashamed of themselves.

    • I have highlighted that before myself.

      Ten billion for a submarine? Really? Even with the other costs of AWE, Raynesway, reactors, and other stuff thrown in?

      Posters here suggested it’s to do with the missile compartment. Really?

      Someone somewhere is making a killing and laughing their socks off.

      • https://fas.org/sgp/crs/weapons/R41129.pdf
        has the equivalent costs for the USA next generation SSBN. $8.2B for first of class, $6.5B for follow on boats and $12.9B in R&D. They are building 12 so will have some economies of scale; for a class of four amortising the R&D gives $10.2B a boat. This does not include any of the warhead or missile refurbishment costs, so it looks comparable to the UK costs. But I don’t understand where all the money goes in either program.

        • We could consider that both us and the Yanks might be looking for say an increase in operating depth which would mean a lot of structural work and more exotic metals.

          Who knows?

        • Ah thanks for this Mark. Interesting….

          Maybe the yanks are also being taken for a ride by the Military Industrial Complex!

          • So that equates to say £5bn per sub and if you look at Astute costs against the USN version it is cheaper.

            I just don’t buy into the massive difference in cost for what is basically a bigger version of Astute class. If it really is nearly 8 times more expensive per boat, then we really do need to reconsider this.

            The cost of the overall system is one thing – the cost of a boat should be very clear. This lack of focus and granularity is why the costs are massive.

            Also if it includes the full cost of maintenance and support over 10 years then that is also a bit disingenuous, as that really isn’t equipment, but operational support costs.

            Surely we can create a Ram Jet ballistic missile that can fit into a larger astute with Mk57 Silo and save ourselves a shed load of money.

            Really is depressing.

    • We should have just continued to build SSN’s even if we couldn’t crew them because it is just cheaper. Which sounds odd…………….I know what I mean……… 🙂

      Barrow do a lot with small workforce when compared to Electric Boat.

      I think Dreadnought are about £1 billion over, easy.

      • Well the reality is you would in all likelihood never “need” to crew all of them fully as some of them will be in the yard for repairs or upgrades at any given time.

      • I would suggest that a lot more new technology is being developed and introduced on successor than we realise. Our CASD has to be absolutely cutting edge to survive in the modern environment. I just hope that these advances will form the basis for our next SSN saving development costs for that programme. I would also like to see the Vanguards kept and retasked as cruise missile barges thus removing the need for this capability from the next SSN. This is what America are looking at doing, going for pure hunter killers in their next design. This would hopefully save more money allowing us to grow numbers.
        The unknown factor in all of this is the affect of Uuavs and if they make current designs redundant. Will lots of small cheap stealthy unmanned subs be Astutes replacement?

      • Kinda of agree once you’ve taken the hit of design, tooling, upskilling etc the build becomes easier. Stop and start again you add huge one off costs. I wonder if an diesel/electric based on the Astute would be possible. Diesel/electrics are quieter but slower. Weve seen big advances in battery tech with massive commercial investment in electric cars that’s still continuing. By then end of the Astute run battery tech good offer considerable range and submersed times. Faster charging is also likely so time at surface is also reduced. Role would more UK / Northsea waters based more anti-access and denial role and intelligence. Would give the UK a high / low mix similar to the T26/T31

        https://www.usni.org/magazines/proceedings/2018-06/theres-case-diesels

  4. While it doesn’t seem as bad as previously thought I think we could do a lot more with the defence budget if people in procurement had any sense.

    £31billion or more for Dreadnought? Why not just build another 4 Astute subs, modified and enlarged to carry 12 Trident missiles? If a regular Astute is £1.4billion then I don’t see a modified SSBN version being more than £2billion each including missiles. 2.5 tops. Even then that’d be saving £21billion which could be spent on more frigates and destroyers to give us a fleet of 25+, rather than 19, a few more Typhoon or F35 squadrons etc.

    I fully agree with the need for a credible nuclear deterrent but I don’t see why it has to be so expensive when we have Astute which is arguably the best sub in the world and making 4 more would save so much extra cash.

  5. Most of the “overspend” is in the next four years. If Carney put up UK interest rates, the pound would strengthen & most of the currency gap would vanish.
    The alternative is to delay some purchases by a year or two, so it is not all in the next four years.

    • HS2 is purely a vanity project & hardly a priority when we’ve been told we need austerity for so long. We’d be better improving the existing rail system & spending the money in more essential areas. It’s wierd what HMG finds it can afford in such difficult times while cutting to the bone & beyond essential services.

    • Hear, hear! An insane amount of money to shave about 20 minutes off a London-Manchester trip, 20 minutes that any competent business person can fully utilise on a train anyway to process emails, read and write reports, prepare presentations and, if not confidential or in a quiet carriage, make calls too (not that the quiet carriage always stops them).

      This project should be killed stone dead immediately. Even half that money could be used so much better for loads of other infrastructure projects leaving £25 bn left over for other stuff.

      Oh, and it’s not even likely to be £50bn is it? The Wikipedia article on HS2 says that the institute of economic affairs estimates that the final budget will end up at over £80 bn!

      #KILLHS2

      • Interesting Julian.

        Being in the rail industry myself I used to be for HS2.

        I have now changed my mind.

        The infrastructure in my area of control is falling apart. Constant delays as a result.

        Railway needs more capacity everywhere but not at that price for 1 line.

        I echo Pacmans comment on another thread about Successor vs Astute costs.

        HOW can such a thing cost 50 Billion HOW!? Who is making a killing from this?

    • I used to be a supporter of HS2, but having researched what’s go on with Hyperloop technology and how first systems will be running by 2022 in a few countries I feel HS2 by the time its built is so far behind the curve, High speed railways are last century. Britain used to be the first to implement a new technology, we lead the world with transport once now we follow.

  6. I haven’t read the whole report yet but I did look to see that this £7bn overspend prediction is against a total budget of £186.4 bn. With F-35B, P-8A, the Mk41/Phalanx/etc for T26, CMC for Dreadnought and I’m sure lots of other stuff I would guess that about half of that total is US Dollar spending. For easy maths let’s say £100bn is in USD so the £7bn represents a 7% overspend on the USD-denominated stuff. We’ve had something like 30% GBP-USD fluctuations since the Brexit referendum result and who knows what will happen between now and March next year. Given the uncertainty, and the possibility of huge effects from currency swings, my cunning plan for dealing with this is to wait and see what happens to the GBP-USD exchange rate over the next 6 months. The report’s headline recommendation to cut, defer and/or descope projects ASAP seems particularly naive, idiotic and inappropriate at this particular point in time.

    Out of interest, has anyone dug into it deeply enough to see if it factored in spreadsheet Phil’s extra £1bn announced in the budget last week? I assume they did factor it in but you never know.

  7. Lots of facts and figures to digest in that report and then you have to play spot the omissions.

    The big picture is that (1) the entire budget has been swamped by two big naval vanity projects that we simply cannot afford, the Dreadnought SSBNs and CVNs. Now that this Government has squeezes AWRE Aldermaston and all its nefarious works into the defence budget, these two goodies remove £40 bn from the budget, with another £10 bn contingency to cover the real cost of Dreadnought. That is getting to 30% of the entire equipment and support budget, no wonder we are critically short of escorts and fast jets and just about everything on the ground.

    (2) The army has once again been robbed blind to pay for the silly vanity projects, T26, Lightning and a whole array of RAF missiles. Of the 28 major projects covered, only 3 are army – the Apache MLU (only 38 of the promised 50, total silence on the other 12), a taradiddle about the costs of Warrior CSP increasing by £230 m (which is a peanit next to the xBn cost increases on Dreadnought, T26, etc) and a big £5.5 bn for Ajax, of all things.

    The army picture demonstrates rte big risks of the service being their own Top Level Budget Holder. The other TLBHs seem to have got things broadly right, excluding the navy’s ruinous vanity projects, the army is coming up with increasingly wild new ventures and early disposals that make little sense.

    As a member of NATO, we need to be able to deploy a hard-hitting tracked armoured division on the North German Plain or wherever. Refurbishing our Challenger 2s and the 30+ year old Warriors, and replacing the 50-tear-old Bulldogs, would logically be the first priority and a relatively cheap one too, compared to other pticey equipments. But no, Carter rushed off down the road for a wheeled APC (Boxer), which would have little value in the mus and snows of Europe in winter with its little 40mm gun. And Ajax, which is coming in three times heavier and several times more costly than the DV100s it is meant to replace. And Foxhound, too small and light and with too few dismounts to be of any value in the front line. And now the Oshkosh LTV, which will only do rear area command and,tiny though it is, logistics!

    It seems that the army TLBH wants only to have shiny new toys with their name on, rather than address the central issue. If we had to field an armoured force today, with our ageing and near obsolete kit, it would be downright embarrassing for the nation.

    Somebody needs to tell Cartoer and the CGS that the US Army is no longer pursuing a ‘transfomational’ sytayehu as im the heady days of Tracer and FRES, they are now pivoting to a more traditional heavy tracked force with a big helicopter provision. We are at the cow’s tail once again, dreaming of sailing the 7 seas – well 2 or 3, because we don’t want to get too close to trouble and retreating into an isolationist UK. I find every aspect of this hugely depressing.

    • I see it different.

      Yes give the army it’s armoured division.

      But no more.

      Priorities should be the RN RAF and Intelligence community. Power projection assets which along with Trident and our UKSF give the UK punch.

      Others here would go further and remove armour entirely.

  8. I love this ‘punch’ claim! If Russian troops start appearing in the Baltic republics or pushing into Ukraine or similar, I wonder what useful rile the Navy or intelligence community would play? The Navy wouldn’t risk venturing into the Baltic or Black Sea, where ships would be a sitting duck. The intelligence community has been caught with its pants down three times over Russia’s asymmetric warfare techniques – the first they knew of the ussians coming to Kosovo was when the planes landed and the troops took over the airport! They were completely caught out by the move into Crimea, having missed all the preparations on the ground, and by the speedy and clandestine Russian involvement in the Donbass.

    Air yes, though we currently have under 100 front-line fast jets, so unlikely to be a battle-winning contribution.

    The bottom line is that, when command shifts to NATO in a time of tension or hostility, we along with all the other members will be ordered to move our heavy forces forward to deter or engage. Our heavy forces, reduced now to just one division with ageing and obsolete kit, will be right in the front line, hoping to heck that NATO can win the air war overhead.

    It won’t necessarily be Europe either, it could be another part of the globe where the USA calls on us for support.

    The idea of putting forward wheeled vehicles with a 40mm gun into the front line against tanks and waiting a few weeks till our two elderly armoured infantry brigades creek their way across 1,200 miles of Europe or wherever it is we’re going, is not a valid way of waging war, never was.

    I think the military reality, which serving and past officers and men are acutely aware of, is being sidelined by a small coterie of isolationist, we-hate-Europe, we can rule the waves again (with our 13 frigates and 5 OPVs!) bods, which is more to do with English (I would not say British) political nationalism than military reality.

    Those who decry armour (and usually the army as well), need to take a look at how the US army is changing back to a war-fighting rather than network-enabled expeditionary light force. Where they lead, we inevitably follow and it will not be long before they start asking hard questions about how little the UK can actually put in the field and how incapable it looks to be.

  9. Are any of our possible opponents abandoning MBTs? NO. It’s another insane idea for the UK toscrap its MBTs. We have militaries to both deter attack & fight wars. We can’t keep trying to do without essential kit, usually just to save a bit of money. It’s insane to expect enem,ies to not notice & take advantage. Such measures led to the Falklands war. Withdrawing the ice patrol ship, selling the carriers, considering cutting the Falklanders loose?(All in the historic record) The Argies thought they had every chance of a coup de main, so tried it.

    The UK pioneered the tank. It is not obsolete. We will need it again, so don’t scrap it.

      • For me the question is one of speed and lethality.

        I think UKDF should be predominantly UK based, and have an expeditionary force that would re-I force mainland Europe in times of need.

        As such we can get apaches into the war zone far easier than MBT’s. Also we could build tanks far more quickly than apache aircraft if the need arose.

        An apache can get in cause havoc and get out multiple times, the MBT is just too exposed these days.

        We have a small military these days and for me the apache is such a force multiplier that if I had to choose between having 300 MBTs or 200 Apaches – its a no brainier for me – the latter every time.

        Of course we would all like options and force balance -but I am afraid those days have gone, our military is just too small.

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