Gavin Williamson has come under pressure to deal with a potential £14.8bn black hole in the Ministry of Defence’s budget identified in a report by official auditors.
The National Audit Office report says the MoD is in “real danger” of wasting taxpayers’ money on equipment over the next 10 years.
The findings will raise further questions about the MoD’s financial management after a series of critical reports on the department’s spending plans.
Meg Hillier, the chair of the public accounts committee, which scrutinises NAO reports for parliament, said the MoD did not have enough money to buy the equipment it needed and was in danger of wasting money through short-term decision-making.
“The announcement in the budget of an extra £1bn for defence doesn’t deal with the gap in the MoD’s budget,” she said. “With the ongoing financial pressures, the MoD need to be clear about what equipment they will or will not be funding.”
According to the report, the MoD’s forecast costs exceed its budget of £186.4bn by £7bn in the next 10 years. In a worst-case scenario, should all the identified risks occur, this gap could grow to £14.8bn, it concludes.
The NAO recommends that the MoD should decide which programmes to defer or drop as soon as possible and then “outline its decisions, including the financial and broader implications, to parliament.”
It says the MoD should stop deferring projects where it leads to higher costs in later years. “These [deferred projects] included delaying by two years its programme to introduce new remotely piloted aircraft (Protector), resulting in an estimated £160m cost increase, and delaying some Typhoon training by one year, which increased costs by £6 million,” the report says.
Amyas Morse, head of the National Audit Office, said the MoD’s equipment plan for 2018-28 showed that the ministry had a clearer understanding of the affordability issues it faced, but also “shows how urgently it needs to get on and tackle them”.
The defence minister Stuart Andrew said spending was 3.7% over budget in the next decade and he was “grateful” for the NAO’s report. He said ministers would be “rigorously pursuing productivity and efficiency gains” and “prioritising capabilities to meet the changing threat environment”.
He told MPs: “This forecast will vary as risks and opportunities materialise and project plans mature or are changed through management action.”