Report published 4 December 2016. Government response published 3 March 2016.
The Ministry of Defence has the third-largest budget in government. In 2014–15 it spent the majority of its £38.5 billion funding in four broad areas:
- equipment procurement and support;
- military personnel and civilian staff;
In 2010 the Committee reported that the Department's poor financial management had led to a severe funding shortfall of up to £36 billion in defence spending over ten years. It also noted that weaknesses in financial planning and management had resulted in poor value for money from delays to projects, changes to project specifications and costly contract renegotiations, and that the Department had failed to develop a financial strategy identifying core spending priorities.
Since 2010 the Department has sought to address the funding gap in its equipment programme, which was having a significant destabilising effect on the defence budget, and to reduce costs and deliver efficiencies to the Spending Review 2010 settlement. In addition to improving its management structure by delegating greater responsibilities to the Armed Forces and by implementing reforms to its Head Office, and to Defence Equipment and Support and Defence Infrastructure Organisation.
2% spending target
In the budget in July, the Government committed to meeting the NATO target of committing 2% of GDP to defence spending. Further details about the Government's defence objectives and spending decisions will be contained in the Strategic Defence and Security Review, which is expected to be published before the end of the year.
Ahead of this, this inquiry intends to examine the Department's progress in improving its financial management; challenge the Department in relation to its plans for improving its management structure, including how it is getting assurance that its approach is working; and explore the potential impact on the Department's finances of recent funding announcements and the forthcoming Strategic Defence and Security Review.