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PAC questions whether UK can afford its military equipment plan

19 April 2023

  • Report today says “optimism bias” affecting MoD budget planning and huge financial risks have been “ignored”
  • Ministry has failed to adapt Equipment plan and lacks the urgency required to develop and deliver the enhanced capabilities the Armed Forces need
  • Military equipment beset by problems and delays leaving UK land forces needing to “catch up” to fulfil NATO commitments

In a report today, the Public Accounts Committee expresses serious doubts about whether the MoD’s 10-year rolling Equipment Plan process is affordable or agile and responsive enough to react to the new more volatile world we face now.

The MoD acknowledges that the current Equipment Plan does not resolve the significant risk that the UK could not provide NATO with an operational Army division. Programmes to help fulfil our commitments such as Ajax and Morpheus are beset by problems and delays and have been for many years. The invasion of Ukraine has challenged strategic assumptions and has necessitated a refresh of the 2021 Integrated Review of security, defence, development, and foreign policy.

The Committee suggests the Ministry’s assessment that its Equipment Plan is affordable over the next ten years suffers from optimism bias. The Ministry has not included external cost pressures, including inflation and foreign exchange movements, in its central assessment of the Plan’s affordability. It’s unsure if the £2.1 billion increase in costs it has predicted accurately reflects inflation over the period in the Plan. The MoD has a forecast deficit of £2.6 billion in the first seven years of the Plan. To rectify this, it relies on having a budget surplus of £5.2 billion in the Plan’s final three years.

The Plan’s affordability also assumes a reduction in project costs by £30.4 billion during the next ten years. This depends on the MoD achieving all planned efficiencies and savings, though there are not yet plans for £1.6 billion cost reductions and £3.4 billion efficiency savings, of which it needs over £2 billion in the next three years.

Comments by the Deputy Chair of the Committee

Sir Geoffrey Clifton-Brown, Deputy Chair of the Public Accounts Committee:

“If the MoD does not act swiftly to address the fragility of its supply chain, replenish its stocks, and modernise its capabilities, the UK may struggle to maintain its essential contribution to NATO. The 2022-2032 Equipment Plan is already somewhat out of date. It doesn’t reflect the lessons emerging from Ukraine, more than a year in. And every year it’s the same problems – multi-billion-pound procurement problems. Equipment arrives in service many years late and significantly over-budget, and some of it just isn’t arriving at all. The MoD still does not have or seem to be able to attract the skills it needs to deliver the Plan.

Neither taxpayers nor our Armed Forces are being served well. There needs to be meaningful change of this broken system. The Department needs to break from this cycle of costly delay and failure and deliver a fundamental, root and branch reform of defence procurement.”

Further information

Image: MoD