The department “lacks cost control” and its equipment plan covering the 10-year-period up to 2027 was “not realistic”, a public accounts watchdog reported.
A significant affordability gap of at least £4.9bn and potentially as much as £20.8bn more than the budget of £179.7bn is forecast, the PAC noted.
Meg Hillier, chair of the committee, said: “It is concerning that the department [MoD] could find itself more than £20 billion short of the funding required to buy the equipment it says it needs.
“The MoD’s inability to better quantify that affordability gap has consequences not just for its confirmed spending plans, but also its ability to prepare for serious challenges in national defence.”
The PAC raised concerns about the department’s equipment plan last year, saying it was “at greater risk of becoming unaffordable” than any time since it was started in 2012.
The risks have since increased and the ministry is now running out of money, the committee warned.
Hillier said: “The department must be more rigorous and realistic in its approach to costing its equipment plan.”
She also said the MoD needed to be more open with Parliament and the public about its finances, commitments and their costs to taxpayers.”
The committee was sceptical of the ministry’s attempt to fix the unaffordability issues and prepare for a “fast-changing defence landscape” by looking to the Modernising Defence Programme.
The PAC report said: “We are highly sceptical that the Modernising Defence Programme will be able to return the department to a balanced position.”
“I am concerned this [the modernising programme] may end up adding more costs to what is already an overstretched budget,” Hillier said.
The Modernising Defence Programme is identifying further efficiencies and productivity in the MoD as well as ways to improve its performance in commercial and industrial management.
