UK Edition
MoD's £193bn equipment plan is 'unaffordable', warns spending watchdog
The Ministry of Defence’s £193.3bn equipment plan covering the coming decade has been labelled “unaffordable and unsustainable” by the Government spending watchdog.
The National Audit Office (NAO) warned the MoD’s forecast costs for new equipment and support were £7bn over budget, and if prices vary from the assumptions, under a “worst case” scenario the funding gap could rise to as much as £14.8bn.
However, this shortfall is lower than the potential £20.8bn the audit office identified in its assessment of the previous spending plan, issued in January this year.
Major projects covered by the plan include the new Dreadnought submarines that will replace the Navy’s ageing Trident nuclear missile vessels; Type 26 frigates; building up the fleet of F-35B joint strike fighters; P-8 maritime spyplanes; and new armoured vehicles for the Army.
The NAO’s analysis of the plan said the MoD had become “more realistic” in assessing costs, diving deeper into detailed costings of nuclear projects, such as the £41bn missile submarines programme.
With much of the equipment in service with the British military purchased from US arms giants, the watchdog also welcomed the MoD’s “more accurate use of US dollar exchange rates”. This reflects the weakening pound, which has pushed up the cost of buying kit from American suppliers.
Costs have also been included for the Type 31e “budget frigates”, with which the Navy wants to bolster the fleet. These ships were omitted from previous plans, raising questions about whether the vessels would ever go beyond the drawing board.
The NAO added that for the first time the MoD had outlined the “affordability risks” it faces, though it cautioned that some forecasts are “optimistic” and costs could spiral.
The MoD hopes to use the long-delayed Modernising Defence Programme (MDP) review to help close the funding gap. This review will look at the changing risks the UK faces and could see projects deferred, reduced or even abandoned to reflect changing defence demands and the money available to pay for them.
Further savings could come from efficiency measures. The NAO has previously warned that defence chiefs may not have delivered claimed savings because of a lack of transparency.
The watchdog also warned that more than 80pc of the expected overspend is in the first four years of the period covered by the plan. This means that defence chiefs must act now to make savings with the MDP before costs spiral.
“Delaying decisions while the MDP is ongoing increases the risk of the MoD not achieving long-term affordability and value for money. This increases the likelihood of the MoD returning to past poor practices,” the NAO said, adding the equipment plan was intended to put a stop to this.
The watchdog cited previous examples of defence chiefs delaying replacement Astute-class submarines and Protector drones to save money, which could have pushed up the overall costs of these projects.
Amyas Morse, head of the NAO, added: “The equipment plan shows the MoD has a clearer understanding of the affordability issues that it faces, but it equally shows how urgently it needs to get on and tackle them.”
Launching the equipment plan, Minister for Defence Procurement Stuart Andrew acknowledged it exceeded the budget by 3.7pc and the MoD was “acting to address this increased risk to affordability”.
He added: “We are confident that with appropriate spending control and oversight we will deliver the equipment plan within budget.”