UK defence equipment plan faces '£17 billion black hole'

UK military personnel prepare to leave for Afghanistan in 2021. The costs of the UK's latest 10-year defence plan far exceed the allocated budget. AP

The UK Ministry of Defence’s equipment plan for the next decade has a black hole of about £17 billion ($21.5 million), a study by the National Audit Office has found.

The shortfall is the largest since the budget was first published in 2012, according to The Equipment Plan 2023 to 2033 report.

The plan sets out the department’s proposals to build and purchase new weapons and defence capabilities. None of the six expenditure areas of what are known as the "top-level budgets" – covering bodies including the Royal Navy and Royal Air Force – have an affordable equipment plan, the office found.

It said some costs for new projects are included in the plan, but are not fully funded.

At the end of March this year, the estimated costs were £305.5 billion, compared with an equipment budget of £288.6 billion. Last year's 10-year estimate was £2.6 billion less than the available budget.

But in 12 months, costs have increased by 27 per cent, causing the plan to exceed a budget increase by more than £46 billion, the office reported.

Higher inflation costs of about £11 billion have driven up the bill for some equipment projects, with the ministry lacking funding to help deal with inflationary pressures.

There have also been large cost increases in the nuclear and naval programmes, totalling £54.6 billion, the watchdog said.

The report said shipbuilding projects, including Type 32 frigates, Type 83 destroyers and ocean surveillance vessels, face a shortfall of £5.9 billion against current budgets.

Gareth Davies, who leads the watchdog, said there had been a "marked deterioration" compared with the previous plan.

The watchdog said the ministry was not planning to cancel programmes in the short-term because doing so would "would limit the choices available to decision-makers at the next spending review".

Mr Davies said such a move "risks poor value for money if programmes continue which are later cancelled, scaled down or deferred because they are unaffordable".

"The MoD should consider how future plans can achieve their core purpose: providing a reliable assessment of the affordability of its equipment programme and demonstrating to Parliament how it will manage its funding to deliver equipment projects," he said.

Labour said the office's report was "totally damning" and accused ministers of losing control of military budgets.

Meg Hillier, Labour chairwoman of the Commons Public Accounts Committee, said she was "concerned about the risk to the UK" that the equipment plan deficit represents.

She said there was a "huge gap between the military equipment government thinks it needs and the budget available to provide it".

The deficit of about £17 billion was despite the plan "not even including all likely cost pressures", she said.

Labour's shadow defence secretary John Healey said the office did not pull its punches on "Conservative mismanagement of defence, which has seen 13 years of failure blow a £17 billion black hole in Britain's defence plans".

"The Conservatives are failing British troops and British taxpayers," he said. "Major defence decisions are now delayed until after the next election, and ministers have no plan to control defence budgets.

"With war in Europe and a Middle East conflict, this risks leaving our armed forces without the equipment and troops they need to fight and fulfil our Nato obligations."

The ministry said the report was based on a "dated snapshot" from seven months ago.

"While this report recognises the significant impact global headwinds and high inflation has had on UK defence, it does not and could not accurately reflect the current or future state of the armed forces equipment plan," a ministry spokesman said.

"The report is not based on a full equipment plan and is a dated snapshot from April 2023. Our armed forces are operating in a world of increasing conflict, and this government is working to deliver what our servicemen and women need to keep Britain safe.

"As a result, we have significantly increased our spending on defence equipment to £288.6 billion over the next decade, including landmark new funding settlements to address decades long underinvestment in critical areas.

"The Defence Secretary [Grant Shapps] is currently leading work to ensure the armed forces have the next generation equipment they need to defend Britain and maintain a strategic advantage. As part of that work, we remain absolutely committed to increasing defence spending to 2.5 per cent of GDP as soon as economic and fiscal conditions allow."