LONDON — A powerful U.K. parliamentary committee has reported what it says is the “largest affordability gap” since 2012 between the Defence Ministry’s budget and equipment requirements.
The Public Accounts Committee’s review, released March 8, comes two days after the government opted not to allocate extra funding for the military in its 2024 budget.
The deficit for the 10-year equipment plan, which the ministry published late last year and begins in 2023, will amount to £16.9 billion (U.S. $21.5 billion), the committee found. However, that could grow by a further £12 billion if the individual armed services each took the same approach to stating their equipment requirement costs, the committee noted.
The committee reviews the 10-year defense equipment plan annually as part of its role in overseeing how the government spends taxpayers’ money. The committee has consistently cast doubt on the affordability of the ministry’s equipment plans, but the latest report is especially critical.
The 10-year plan, based on financial data from March 31, 2023, saw the ministry allocate an equipment budget of £288.6 billion over the following decade to 2033 — a £46.3 billion rise on the figures presented from 2022.
“However, forecast costs have increased by £65.7 to £305.5 billion, resulting in a £16.9 billion deficit between the MoD’s capability requirements and the available budget,” the committee reported.
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That deficit could grow to £29 billion were the separate armed services to be consistent in the method they use to price their equipment requirements, the committee noted. For example, the inquiry found the Royal Navy includes the costs of all capabilities the government expects the service to deliver, whereas the Army only includes those capabilities it can afford.
Committee figures show this can have a significant impact on forecast costs. For instance, the Royal Navy’s decision to change its previous policy of only including costs it can afford, to predicted costs for capabilities the ministry expects it to deliver, resulted in a deficit of £15.3 billion in the latest plan, compared with a surplus of £700 million in the 2023 equipment plan.
The primary problem
The main cause of the cost increases reported by the committee is the ministry’s decision to fully fund Britain’s defense nuclear enterprise, according to the report.
The ministry has agreed to a minimum 10-year budget with the Treasury at a price tag of £109.8 billion for nuclear activities over the period.
The principal cost for the nuclear program is the construction of four Dreadnought-class nuclear missile submarines made by BAE Systems. They are to enter service in the coming decade. However, a new warhead program and other nuclear-related initiatives together dwarf spending on individual conventional weapons procurement.
Maintaining the nuclear deterrent is one of the ministry’s top defense priorities. If addition funds are needed for the nuclear program, accounts for conventional equipment will be further squeezed, the report noted.
Costs at the Defence Nuclear Organisation, which is responsible for the U.K.’s nuclear deterrent — have increased by £38.2 billion since the government released last year’s plan, the committee said.
‘Unpleasant, short-term decisions’
Inflation and the foreign exchange rate have also taken their toll on Britain’s budget. The ministry estimates inflation will add almost £11 billion to its costs over the 10-year period.
Despite the ailing condition of the Defence Ministry’s finances, the report said, the department has put off making major decisions about canceling programs it cannot afford.
“Instead, it has optimistically assumed that the plan would be affordable if the government fulfilled its long-term aspiration to spend 2.5% of GDP [gross domestic product] on defense each year, despite there being no guarantee on whether this will happen,” the report noted.
Everything that does not fall under the nuclear budget will experience severe pressure, said Malcolm Chalmers, the deputy director general at the Royal United Services Institute think tank in London.
“The government is going to have to make some unpleasant, short-term decisions between different conventional equipment capabilities at a time when the Ukraine war is shining the spotlight on neglected capabilities in which our armed forces clearly need to invest more,” he said.
“After the full-scale invasion of Ukraine, many European countries are increasing their defense budgets rapidly, including Germany, the Scandinavian countries, the exposed eastern countries and quite a number of others as well. The U.K. government seems to have decided, given the wider fiscal squeeze and the priority being given to tax cuts, that there will be no more money for defense in this budget.” he added.
Indeed, the Defence Ministry is becoming “increasingly reliant” on allies to protect British interests, the committee said, “which carries the risk that such support might not always be available.”
Last year, the ministry told the National Audit Office, the government’s financial watchdog, that it was not planning to cancel programs in the short term, as that would limit the choices available to decision-makers at the next governmentwide spending review‚ which is likely this year.
Chancellor of the Exchequer Jeremy Hunt has been under pressure to increase funds to rebuild Britain’s depleted military amid Russia’s ongoing invasion of Ukraine. He has reiterated the Conservative government’s ambition to increase overall defense spending from the current level of 2.1% of GDP to 2.5% during his March 6 budget speech‚ but has not provided a concrete timeline, only saying it would happen when economic conditions allow it so.
The Labour Party has pledged to reform defense, but not unveiled specific spending commitments.
A general election is expected by the end of the year, with the Labour Party currently ahead in the polls.
Andrew Chuter is the United Kingdom correspondent for Defense News.
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