MoD faces £6bn savings challenge, say auditors

30 Jan 17

The Ministry of Defence needs to find almost £6bn of savings over the next ten years in order for its equipment plan to be affordable, the National Audit Office has said.

In a report published on Friday, the spending watchdog raised concerns about the MoD’s assessment of how much it will cost to supply Britain’s armed forces with equipment for the next decade.

The current plan puts projected spend between 2016 and 2026 at £178bn. This is drawn from the MoD’s overall budget, and makes up 40% of the department’s total planned spend. 

As such, the cost of support and equipment in the plan has risen by 7% compared with the previous year. Between the 2013 and 2015 plans, costs rose by only 1.2%.

In 2015, the Strategic Defence and Security Review added £24.4bn of new commitments to the MoD budget. These included procurement projects such as the Mechanised Infantry Vehicle, Poseidon Maritime Patrol Aircraft and the F-35 Joint Strike Fighter.

In order to afford these projects, and others proposed in the review, the MoD must find savings worth £6bn from existing projects over the next decade, auditors said. Also, the department must use all of its £10.7bn contingency fund, normally set aside to tackle emerging priority requirements.

Extra costs would subsequently have to be met “through a reprioritisation of existing commitments, or a reallocation of funding from the wider defence budget”, the NAO stated.  

Amyas Morse, head of the NAO, said: “The affordability of the equipment plan is at greater risk than at any time since its inception. It is worrying to see that the costs of the new commitments arising from the [defence and security] review considerably exceed the net increase in funding for the plan.

“There is little room for unplanned cost growth and the MoD must actively guard against the risk of a return to previous practices where affordability could only be maintained by delaying or reducing the scope of projects.”

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