'Unaffordable' Defence Equipment Plan Leaves MOD With £7bn Shortfall

The Ministry of Defence must find "immediate" savings to address a £7 billion black hole in the armed forces equipment budget, the Whitehall spending watchdog has warned.

The National Audit Office (NAO) said the rolling 10-year Equipment Plan, covering the period 2018 to 2028, remains "unaffordable" and is "not sustainable" for achieving longer-term value for money.

However, the NAO said that with 84% of the expected overspend falling in the first four years of the plan, urgent action was needed.

"This means the department needs to make immediate savings decisions rather than relying on longer-term cuts or efficiencies," it said.

The MOD currently estimates the plan will cost £193.3 billion against a budget of £186.4 billion, a shortfall of £7 billion.

However, it acknowledges that under a worst-case scenario that could rise to £14.8 billion - a figure which the NAO said "could still be optimistic".

It warned the MOD was in danger of repeating past mistakes focusing on "short-term affordability rather than longer-term value for money".

The report goes on to say delaying decisions increases the chance of "poor practices", and uses the examples of a two-year delay to the Astute-class submarine programme and the introduction of remotely controlled aircraft, Protector.

The head of the NAO Sir Amyas Morse said: "The equipment plan 2018-28 shows that the MoD has a clearer understanding of the affordability issues that it faces, but it equally shows how urgently it needs to get on and tackle them."

The Commons Public Accounts Committee chairman Meg Hillier said that an extra £1 billion announced last Monday does not address what she calls "the gap in the MOD’s budget": "The ministry still does not have enough money to buy all the equipment it says it needs and is in real danger of wasting taxpayers' money through short-term decision making.

"With the ongoing financial pressures, the MOD needs to be clear about what equipment they will or will not be funding."

An MOD spokesman said: "We are confident that we will deliver the equipment plan within budget this year, as we did last year, as we strive to ensure our military have the very best ships, aircraft and vehicles through our £186 billion plan.

"We recognise the financial challenges that these ambitious, complex programmes pose, and are addressing these after securing a £1.8 billion financial boost for defence and reducing forecast costs by £9.5 billion through efficiency savings."

Shadow Defence Secretary Nia Griffith MP, said: “This report on the government’s Defence Equipment Plan is very damning.

“We need proper investment in our nation’s defences."