By Richard Johnstone | 14 May 2013
The Ministry of Defence's £159bn procurement plan relies on 'uncertain' efficiencies and an unconfirmed budget increase in next month’s Spending Review, the Public Accounts Committee has warned.
Although the MPs welcomed publication of the department's ten-year purchasing programme, they found there were still ‘deep-seated’ procurement problems. They were concerned that the department’s cost estimates were not robust enough, meaning they could 'not have confidence that the equipment plan is affordable’. Among the spending proposed in the plan, £35.8bn is earmarked to replace the Trident nuclear deterrent submarines, £18.5bn is to be spent on combat aircraft and jets and £17.4bn on ships, including two aircraft carriers.
Funding for the range of projects is dependent on the settlement from the Treasury for 2015/16, to be announced in the Spending Review on June 26.
Currently, the MoD expects to receive a 1% annual increase from 2015/16 to 2020/21, following a provisional deal with the Treasury. Based on this assumption, the department’s equipment budget is expected to rise from about 39% of core defence expenditure in 2012/13 to 45% by 2021/22.
However, as this increase has not yet been confirmed, the plan could be at risk if the allocation were to change, the committee said. A £4.8bn contingency set aside might not be sufficient to cover any shortfall, or to deal with increased costs in individual projects.
In addition, the department does not yet have a robust understanding of how much it will cost to recover equipment from Afghanistan following the withdrawal of British troops, which is expected next year.
Committee chair Margaret Hodge said the MoD had made ‘a good start in trying to get to grips with its budget’, but the affordability of its plans remained in doubt ahead of the Spending Review.
‘It also depends on savings in the wider defence budget, including cutting staff numbers, and on future capability requirements that remain uncertain,’ she added. ‘The department claims to have contingency plans in place but there is a lack of transparency that prevents the committee’s full understanding on this issue.
‘The department needs to make sure it proactively addresses risks to affordability, through scenario planning and having other options to cut costs if its budget assumptions turn out, as they so often do, to be over-optimistic.'
Responding to the report, defence equipment minister Philip Dunne insisted the plan was ‘fully funded and affordable’.
He added: ‘The PAC is right to acknowledge that it will take time to undo the consequences of years of over-promising and financial mismanagement by the last administration. We’ve already balanced the budget and are pressing ahead with plans to radically reform the way the MoD procures equipment for our armed forces.
'The government is fully committed to increasing the equipment budget by 1% a year in the next Spending Review and we are confident our armed forces will have what they need to deliver Future Force 2020 [the government’s vision for the UK military from 2020] and defend the UK’s interests both at home and abroad.’
