Summary: The Public Accounts Committee, in its recent report on the MOD’s Defence Equipment Plan 2012-2022, said it “did not have confidence” that the planned £159bn equipment budget between now and 2022 could be paid for.
The report warns that the MOD faces “a particular challenge in delivering projects to agreed timescales”, and warned that current spending plans depended upon the Treasury honouring a commitment to an annual 1% real terms increase in the equipment budget over the five years from 2015-16, stating that “if this is now not achieved in the current fiscal circumstances then the current plan may well be unaffordable”.
In addition, the report revealed concerns that £8 billion of unallocated funding, which had been set aside to meet new capability needs, could be absorbed into cost increases elsewhere and in funding the return of equipment from Afghanistan.
Committee chairwoman Margaret Hodge said: “The Ministry of Defence has made a good start in trying to get to grips with its budget but its deep-seated problems cannot be solved overnight, and we do not yet have confidence that its equipment plan is affordable.
“This will depend on the Treasury delivering on its commitment to a 1% annual increase in the equipment budget in the next spending review. It also depends on savings in the wider defence budget, including cutting staff numbers, and on future capability requirements that remain uncertain.”
Many, however, said that the PAC report had some good news overall. Paul Everitt, Chief Executive of defence trade organisation ADS, said:
“The challenge faced by the Ministry of Defence is in balancing the delivery of the right capability for UK armed services within a restricted budget. Today’s Public Accounts Committee report shows that while there is still more work to be done, some significant progress has been made thanks to the determined efforts of the Department to upskill. Each project now has a contingency to cover increases in cost and the Department acknowledges that it needs to become a more intelligent customer for the future. We are wholly supportive of efforts to improve the management and delivery of defence projects which will ensure the best possible value for money.”
The Public Accounts Committee statement comes despite ministers’ claims to have finally brought spending in the Ministry of Defence under control.
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