Today the National Audit Office (NAO) reports that the Ministry of Defence’s Equipment Plan (the Plan) is still unaffordable, with the MoD estimating that costs will be £2.9 billion higher than its budget over 2019-2029.
The Plan sets out the MoD’s equipment and support budget over the next 10 years. It includes spending on equipment already in use and equipment in development. It accounts for 42% of the MoD’s total spending, meaning stability of the wider defence budget depends on effective management of the Plan.
The Plan forecasts spending £183.6 billion on equipment and support costs over the next ten years, against a £180.7 billion budget. These costs could vary, and in a worst case scenario, should all the risks identified by the MoD materialise, this gap could grow to £13 billion.
This is the third successive year that we have concluded the Plan is unaffordable. Although the MoD’s reported funding shortfall is less than last year, it is not possible to directly compare the affordability gap over time as the Department has presented it on a different basis to before. In particular, it has made more optimistic judgments than last year, which removed £7.8 billion costs from the Plan. In spite of this, it is clear that the MoD faces more significant shortfalls over the next five years – it estimates the shortfall is £6 billion up to 2023-24 – and it now has less flexibility to respond to short-term financial pressures.
The MoD is managing these financial pressures by establishing tighter control of in-year expenditure and has undertaken a detailed analysis of investment options. However, it has again delayed the difficult decisions to make the Equipment Plan affordable and determine its priorities on future major capabilities. Its continued short-term focus on living within its annual budget is increasingly leading to reduced capabilities. For example, unless action is taken, MoD will lose existing capabilities, such as the medical facilities provided by the ship RFA Argus, during the period covered by the Plan. Decisions to defer project expenditure are also reducing value for money. For example, affordability-driven decisions to delay the introduction of Protector (remotely piloted aircraft) will increase costs by £187 million, plus a further £50 million to retain existing equipment for longer.
“The MoD has not made the necessary strategic decisions to address the 10-year affordability gap and there is evidence that its continued short-term focus on living within annual budgets is increasingly affecting the Armed Forces’ ability to maintain and enhance the UK’s military capability. The MoD needs to determine its strategic priorities so that it can develop an affordable long-term programme of investment.”Gareth Davies, head of the NAO
Read the full report
Notes for editors
- The Equipment Plan covers large and complex procurement projects including nuclear-deterrent submarines (Dreadnought-class), global combat ships, new armoured vehicles (Ajax) and Lightning II aircraft. It also includes a budget to support new and in-service equipment, such as maintaining Typhoon aircraft, and introducing modern information and communications technology.
- The Equipment Plan was introduced in 2012. At the request of the then Secretary of State, the NAO provides Parliament with a commentary on the Plan when it is published each year, and assesses the robustness of its underlying assumptions. A link to the 2019-2029 Equipment Plan published by the MoD can be found here.
- Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
- The National Audit Office (NAO) helps Parliament hold government to account for the way it spends public money. It is independent of government and the civil service. The Comptroller and Auditor General (C&AG), Gareth Davies, is an Officer of the House of Commons and leads the NAO. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether government is delivering value for money on behalf of the public, concluding on whether resources have been used efficiently, effectively and with economy. The NAO identifies ways that government can make better use of public money to improve people's lives. It measures this impact annually. In 2018 the NAO's work led to a positive financial impact through reduced costs, improved service delivery, or other benefits to citizens, of £539 million.