A report released by the NAO warns that the MoD’s ten year Equipment Plan is ‘not affordable and does not provide a realistic forecast of the costs the Department will have to meet over the next 10 years buying and supporting the equipment it has determined the Armed Forces need’.
“The Department’s Equipment Plan is not affordable. At present the affordability gap ranges from a minimum of £4.9bn to £20.8bn if financial risks materialise and ambitious savings are not achieved.” – Amyas Morse, head of the National Audit Office, 31 January 2018
According to the report, spending on equipment and associated support in the 2017 Plan is projected to be £179.7 billion, including a £6 billion contingency. But even after assuming the contingency will be used, the NAO has calculated a minimum affordability gap of £4.9 billion.
“There is an additional potential affordability gap of £15.9 billion if all risks of cost growth materialise and the Department does not achieve any of the savings assumed in the Plan. Overall, the potential affordability gap could be £20.8 billion.”
There are also significant risks to the cost of the Equipment Plan: over-optimism in forecast costs of £3.2 billion as calculated by the Department’s independent Cost Assurance and Analysis Service; and the risk of increased costs of £4.6 billion due to the Department not using foreign currency exchange rates that reflect market rates say the NAO.
The MoD, say the report, is also relying on ambitious savings to help fund the Plan. The Department reports that it has achieved savings of approximately £7.9 billion against an increased savings target of £16 billion, with approximately £8.1 billion still to be achieved by 2027. However, there is a lack of transparency on the full amount of savings included in the Plan and the Department does not have evidence to support all the savings it has claimed to date.
The report also claims that the MoD has limited flexibility to use other budgets to address the funding shortfall for equipment and support.
“It was unable to agree a balanced defence budget for 2017-18 and is now managing a significant projected overspend in 2017-18. Our past work has identified an £8.5 billion funding gap for managing the Department’s estate. Also, the Department faces challenges in managing its staff budget.”
Reverse Osbourne’s stupid placement of Trident into the defence budget. Re-evaluate. It won’t be a magic fix but at least it gives a proper basis for assessment. We cannot keep cutting budgets forever.
Totally agree, the only way the defence budget worked (in part) in the past, was due to the nuclear component coming from another pot. Recently, many learned voices have warned of an impending threat from many sources, and how we need to be on our metal. I believe the time has come for a serious cross-party conference on UK defence, where the threats and budgets can be analyzed in a mature and logical process. Only then, can we seriously go forward with a realistic long-term plan, and put a stop to this continual flux of opinion.
sack the M.O.D as not fit for purpose. set up a whole new organisation and staff it with people who actually know what they’re doing
Totally agree. Simply remove any political aspect, and just have a board of military officials and other professionals with a fixed budget. And let them make there own decisions.
Well it’s this report is only stating what the vast majority on UKDJ already knew – the 178Bn equipment plan that Fallon and Baldwin kept harping on about time after time after time, was never properly funded – surprise, surprise. I agree with John above – the nuclear deterrent should never have been allowed to be transferred into the MOD’s budget. How Osbourne ever got away with that boggles my mind. There again, the PM at the time was Cameron – utterly useless. British defence is a shambles and everyone knows it. There is no political will at all to… Read more »
Remove Trident from core budget.
Reduce F35 order.
Job done.
Exactly.
The TRUTH is that the British Armed Forces have been badly funded for decades and that it is past time to play ‘catch up.’ All three elements, land, sea and air are woefully understaffed and equipped and significantly have allowed people who have no business interfering with the vital business of protecting our nation to have an unwarranted amount of say in strategic priorities. Part of the problem of funding has been brought about by successive British governments being confused by being too closely aligned with initiatives emanating from the EU. THAT influence must cease and Civil Service Mandarins must… Read more »
Reverse George Osbourne creative accountancy that has buggered up the defence budget. So Trident and nuclear deterrent costs go back to core governmental budget and ditto armed forces pensions. Then a few efficiencies like not having an Admiral for every ship in the fleet, a general for every army battalion and an RAF wing commander for every squadron. Cut foreign aid budget by 50% and put that money into NHS and defence in equal measure. Job done! We can now afford 13 type 26 frigates, a replacement MBT for challenger 2, at least 10 type 31s, a replacement lph for… Read more »
Have to agree with that we need to look after our selves here in Britain first by cutting foreign aid overseas & spending more money on our Armed forces, we are not in a position to provide protection to our own country never mind anywhere else because of the continual shortfall in funds over the years, I’m not saying don’t give foreign aid just sort out our financial shortfalls here first in particular the MOD & the health service.