The UK government's ambitious defence and foreign strategy for the next decade risks being derailed by a funding black hole, MPs suggested.
The Ministry of Defence needs to get its existing programme under control, as well as make further cuts, before it can embark on new projects, the Public Accounts Committee report said.
The findings will be an embarrassment to UK Prime Minister Boris Johnson who later on Tuesday will announce the much-anticipated Integrated Review, intended to be the most comprehensive review of the UK's defence, security, development and foreign policy since the Cold War.
A huge budget increase for Britain’s armed forces announced in November as the first outcome of the review will be “eaten up” by major cost overruns in the MoD, the parliamentary report said.
It was hoped the extra £16.5 billion ($22.9bn) of funding announced by Mr Johnson would be used for advanced technology programmes, but the report suggested it will be swallowed by MoD debt.
The funding issue also comes just a day after a highly critical report predicted the British Army would find itself “outgunned” in a major conflict with Russia.
The ‘Obsolescent and Outgunned’ paper by the Commons Defence Committee said the Army’s decreasing number of armoured vehicles would put its forces at “serious risk” of being overwhelmed by adversaries. The number of British battle tanks has fallen from 1,200 in 1990 to 227, and is likely to drop to 150 after the review.
But it is the funding shortfall that will most worry defence chiefs who are seeking to rapidly reorganise and modernise the military in the face of new threats.
The ambitions for a new Space Command, advanced jets, warships, cyber warfare and drones are estimated to cost £20 million, yet this price is not included in the financial plan. “This is highly destabilising for defence and must not continue,” the report said.
The PAC’s evidence was based on the former MoD permanent secretary stating that the new money had not been “added to a balanced budget” and was “not all going to go on new and revolutionary kit”.
The MoD’s funding shortfall estimate for 2020-2030 is £7.3bn but the true figure could be as high as £17.4bn if certain risks materialise, absorbing almost all of the new money, the report said.
“On the face of it, it’s potentially swallowed whole by the up-to-£17.4bn funding black hole at the centre of our defence capabilities,” said Meg Hillier, the PAC chairwoman. “What is crucial is that this new money is not instead just eaten up, once again, by the constant, debilitating time and budget overruns that have been eroding our national defence and security for years.”
The report recommended that within three months of the Integrated Review being published, the MoD should provide “full transparency on its allocation of the additional funding”.
There are also concerns that the review will not address the specific threat of a coronavirus-inspired terrorist attack.
Britain’s strategic focus is expected to “tilt East” to the Indo-Pacific region and towards Chinese dominance after a rapid cooling in recent relations.
The 100-page document addresses national security, foreign policy and the UK’s approach to the global economy for the next decade.
Setting out the conclusions of the Integrated Review, Mr Johnson will say: “The UK will live up to the responsibilities that come with our position as a permanent member of the UN Security Council. We will play a more active part in sustaining an international order in which open societies and economies continue to flourish and the benefits of prosperity are shared through free trade and global growth.
“We must show that the freedom to speak, think and choose – and therefore to innovate – offers an inherent advantage, and that liberal democracy and free markets remain the best model for the social and economic advancement of humankind.”
The review is expected to say that the UK must address the challenges of new powers are using all the tools at their disposal to redefine the international order and in some cases undermine the open and liberal international system that emerged in the wake of the Cold War.
"As we champion an international order in which democracies flourish, we will harness the fundamentals of the British approach to foreign policy and national security: a defence of democracy and human rights; the importance of our relationship with the US; our constant work to keep the people of the UK safe from terrorism and serious organised crime; and our leadership on international development as we continue to be one of the largest aid contributors in the Organisation for Economic Co-operation and Development," the review will say.
It will also establish tackling climate change and preserving biodiversity as the UK’s top international priority in the decade ahead.
Biological warfare expert Col Hamish de Bretton-Gordon urged the government to prioritise biosecurity, warning that greater precautions were needed against either an enemy state or terrorist use.
“I hope the politicians are not over-prioritising bombs and bullets when pathogens actually pose a more realistic threat to British lives,” he said. “Covid-19 has provided a template for terrorists, as well as Russia and China, for how effective a biological weapon could be.”
But Phillip Hammond, a former chancellor of the exchequer, said Britain had to accept China’s power as it was too important for trade.
“China is a very large economy and an emerging strategic power and we have to live with the world as it is. What this Integrated Review has to do is work out how best for Britain to engage with the facts. There are huge economic stakes and, frankly, a lot of British jobs.”