Auditors have today praised the ‘significant positive steps’ taken by the Ministry of Defence to improve its procurement.
In an examination of the MoD’s £160bn ten-year Defence Equipment Plan, the National Audit Office said it had put in place measures to ‘deal with the accumulated affordability gap’ in previous schemes, and laid the foundations for stability.
The plan sets out the department’s purchasing plans for the next decade, including £35.8bn earmarked to replace the Trident nuclear deterrent submarines. Around £18.5bn is for new combat aircraft and jets, £17.4bn on ships, including two aircraft carriers, and £12.3bn on armoured fighting vehicles.
The plan also includes a contingency of £4.8bn to manage cost increases in projects between April 1, 2012 and March 31, 2022. A further £8bn is unallocated and will fund any new equipment priorities that emerge over the decade.
Defence Secretary Philip Hammond said the plan would be achieved as it was likely the MoD’s equipment budget would increase by 1% in real terms annually, once the current Spending Review period ends in March 2015.
He added: ‘This £160bn equipment plan will ensure the UK’s armed forces remain among the most capable and best equipped in the world, providing the military with the confidence that the equipment they need is fully funded.
‘For the first time in a generation, the armed forces will have a sustainable equipment plan.Step by step, we are clearing up years of mismanagement under the last government by ending the culture of over-promising and under-delivering that created a multibillion pound black hole in the defence budget.’
Earlier this month, the National Audit Office said that the department still had to improve itsprocurement of major projects. Previously, auditors had found a funding shortfall as high as £74bn in the defence programme.
However, today’s NAO report said ministers had taken ‘difficult decisions’ to address the gap between the department’s forecast funding and project costs, and had cut unaffordable expenditure.
Ministry of Defence: Equipment Plan 2012 to 2022 stated: ‘The department has taken significant positive steps designed to deal with the accumulated affordability gap and lay the foundations for stability going forward.
‘The crucial test will be whether the department is able to deliver the equipment plan within planned expenditure limits, supported by the existence of a substantial contingency provision, over the next few years. If such a track record is established, which can only happen over time, the department will be able to demonstrate it has really turned a corner.’
Auditors will now assess the MoD’s progress against the plan every year to ‘test the realism of the department’s approach’, the report added.
