In May 2018 we reported that the Ministry of Defence (the Department) did not have enough money to buy and support the equipment it needs.
Despite committing to tackle this problem, the Department has made little progress, continuing to delay the difficult decisions needed to make the Equipment Plan (the Plan) affordable, particularly around which programmes to stop, delay or scale back.
Affordability issues have led to short-term decision making
It now estimates a most likely affordability gap between its budget and its forecast costs of £7 billion across its Plan over the next ten years. It also estimates that the gap could widen to £14.8 billion, but even this looks to be unlikely and overly optimistic.
The escalating and continuing affordability issues have led to short-term decision making which has only worsened the longer-term affordability risks. As a direct result, there is uncertainty for both the Department and for industry which needs to be addressed.
Coupled with our ongoing concerns over the Department’s ability to forecast costs and efficiencies accurately, we remain sceptical that the Department is close to reconciling what it says it needs with the funding it has available.
Comment from PAC Chair Meg Hillier MP:
“In terms of poor financial planning, the Ministry of Defence 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.
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 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.”