PAC Defence Equipment Plan reveals £7bn funding shortfall for UK MOD

Nancy Victor 1 February 2019 (Last Updated February 1st, 2019 13:36)

The UK Ministry of Defence (MOD) has responded to the Public Accounts Committee's (PAC) Defence Equipment Plan that revealed the MOD is facing an estimated minimum affordability gap of £7bn.

PAC Defence Equipment Plan reveals £7bn funding shortfall for UK MOD
The UK MOD has responded to a new report issued by the PAC that revealed the MOD is facing an estimated minimum affordability gap of £7bn. Credit: US Air Force/Erin R Babis.

The UK Ministry of Defence (MOD) has responded to the Public Accounts Committee’s (PAC) Defence Equipment Plan that revealed the MOD is facing an estimated minimum affordability gap of £7bn.

Updated annually, the MOD’s Defence Equipment Plan 2018-2028 was launched in 2012 and forecasts spending for ten years.

The report estimates that if the affordability gap is not addressed, it could rise to £14.8bn over the next ten years. PAC stated that the calculation: “Looks to be unlikely and overly optimistic.”

In response to the report, an MOD spokesperson told Army Technology: “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.

“At the same time, we are addressing the financial challenges posed by ambitious, complex programmes, after securing a £1.8bn financial boost for defence and reducing forecast costs by £9.5bn through efficiency savings.

“We are grateful for the PAC’s report on the Equipment Plan, and we will carefully review all of its recommendations.”

An equipment budget of £179.7bn was set by the MOD for the ten-year period from 1 April 2018 to 31 March 2028.

The House of Commons public spending watchdog said that the equipment funding shortfall issues were raised in May 2018 and the MOD had pledged to tackle the problem.

However, the defence ministry has been unable to fix the gap and made little progress, the report adds.

“We are addressing the financial challenges posed by ambitious, complex programmes, after securing a £1.8bn financial boost for defence and reducing forecast costs by £9.5bn through efficiency savings.”

The committee noted that the ministry took to short-term decision-making due to continuing affordability issues, creating uncertainty.

“In terms of poor financial planning, the MOD is a repeat offender. The department’s progress with addressing the concerns set out in our last report on the Defence Equipment Plan has been woeful,” said PAC chair Meg Hillier.

“The MoD simply cannot afford everything it says it needs and it is not acceptable for officials to continue deferring decisions that have a bearing on its current affordability gap and longer-term risks.

“A department that is unwilling or unable to take the action required to help it live within its means is failing taxpayers, who rightly expect the government to deliver the best possible value for their money.

“We urge the MoD to act on our recommendations now, work with the Treasury to ensure its funding and planning models are fit for purpose, and bring some much-needed clarity to its priorities and costs.”

In February last year, the UK National Audit Office reported that the 2018 Defence Equipment plan was ‘not affordable’.

–Additional reporting by Talal Husseini.