Yesterday, MOD published its annual Defence Equipment Plan for 2017, the rolling 10-year summary of its ‘balanced and affordable’ equipment and support budget. The intent in making this public is to demonstrate continued affordability and deliverability, and to provide the defence industry more information on which to plan. And the numbers are big. Spending on equipment and associated support out to 2027 is projected to be £179.7Bn, which includes a £6 billion contingency to cover unforeseen requirements corresponding to emerging threat assessments.
But the Plan is not without its critics. Since its inception the National Audit Office (NAO) has conducted an independent assessment of the Equipment Plan, providing a view on its robustness. Rarely has the NAO shared the confidence of the MOD in its sums, and this year is no different. The NAO calculates that a minimum affordability gap of £4.9Bn will arise over the period, and that assumes all the projects run to plan - we know from experience that that is not always the case. The additional gap if all risks of cost growth materialise runs to £15.9Bn, growing to £20.8Bn if none of the ambitious savings assumed in the plan can be realised in parallel.
This is reason for concern indeed, particularly when we consider the cost of the as-yet unbudgeted-for fleet of five Type 31e frigates, the continuing increase in cost of nuclear-related projects, and MOD’s insufficient insulation from currently volatility.
One conclusion would be that MOD, having taken on more in commitments than can be met within its budget, will be forced to review, scale back and/or delay core programmes in future years. Industry throughout the supply chain will not welcome such a return to old habits of delay and cancellation. This provides a poor climate in which to invest for the future and is contradictory to the Department’s much vaunted prosperity agenda.
Of course, it could be argued that this all fits a narrative of an underfunded MOD that is not budgeted to deliver an Armed Forces equipped to ensure our national security. The Defence Secretary launched his Defence Modernisation Programme last week with strong overtures towards the Treasury that a budget uplift will be necessary. The Programme is expected to report in the summer and provides us with some hope of change. Few however would argue that this is a high stakes game for a new Defence Secretary to be playing.
Click here to read the Defence Equipment Plan 2017.
Click here to read the NAO’s response.