Deborah Haynes' piece in full
"A military plan to buy warships, jets and submarines is unaffordable and unrealistic, with a funding hole of up to £21 billion over ten years, the UK’s spending watchdog said yesterday.
The Ministry of Defence omitted even to include the £1.3 billion price for a fleet of five new frigates in its equipment plan, the National Audit Office revealed. The NAO also identified a £576 million rise in the cost to build four replacement nuclear-armed Trident submarines.
The watchdog took a veiled swipe at Philip Hammond, the chancellor, and Sir Michael Fallon, who succeeded him as defence secretary, suggesting that the MoD was reverting back to before 2012 when its budget was consistently overheated. “The department risks returning to the situation it was in before the equipment plan was first introduced [in 2012],” the watchdog said in a report on the ten-year, £180 billion programme.
After cuts to personnel and kit, Mr Hammond declared six years ago that he had balanced the MoD books, eliminating what he claimed had been a £38 billion funding hole under Labour. This boast was repeated by Sir Michael during his time as defence secretary.
That is no longer the case, according to the spending watchdog.
“The department’s equipment plan is not affordable,” said Amyas Morse, head of the NAO. “At present the affordability gap ranges from a minimum of £4.9 billion to £20.8 billion if financial risks materialise and ambitious savings are not achieved.”
Financial risks include over-optimism in the cost to buy and maintain kit, the impact of a weak pound and a failure to meet efficiency saving targets.
Highlights from the report include:
•A failure to include £9.6 billion in forecast costs for equipment on top of the £1.3 billion omission related to the Type 31e frigates. This appears to have been caused by a failure by the MoD last year to make politically difficult decisions on which ship, aircraft and vehicle programmes to cut or delay to balance the books.
•Uncertainty over how to achieve at least £8.1 billion in efficiency savings out of a £16 billion target.
•A question over whether there is money to fund the last in a fleet of seven Astute-class attack submarines after the cost of the programme grew by £365 million.
•A lack of “reliable data” to forecast the cost to support next generation F-35 jets and a query over assumed savings in the support plan for two new aircraft carriers “at a time when the department was still to finalise the relevant contracts”.
•No budget to fund increasing costs to keep an older fleet of Type 23 frigates running because of delays in ordering replacement ships.
The watchdog called on the MoD to take “urgent action” to fix the funding gap or be forced to reduce or delay acquisition programmes.
Guto Bebb, the defence procurement minister, conceded in a foreword to the MoD’s equipment plan, which was also released yesterday, that there was “a high level of financial risk and an imbalance between cost and budget”. But he said that ensuring a sustainable and affordable armed forces would be part of a “modernising defence programme”.
The NAO also flagged up past work in which it identified a £8.5 billion shortfall in funding for barracks and other aspects of the defence estate over the next three decades. The MoD is also well short of a target to reduce civil servants by 30 per cent to 41,000 within two years to save £150 million a year."