MoD: Crucial defence equipment plan "unaffordable" says spending watchdog amid near £17bn "blackhole"

The National Audit Office (NAO) have produced a report showing the Ministry of Defence’s (MoD) equipment plan is running a deficit of nearly £17bn – which has been branded as “unaffordable”. Labour said the report was “totally damning” and accused ministers of losing control of military budgets.

In its report published today, The Equipment Plan 2023 to 2033, the watchdog said the department’s plans to build and purchase new weapons and defence capabilities over the next decade are unaffordable. The NAO said the £16.9bn deficit is the largest since 2012.

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At the end of March this year, the estimated costs were £305.5 billion compared to a budget of £288.6 billion. Last year’s 10-year estimate was £2.6 billion less than the available budget.

The NAO said costs have risen by 27 per cent in 12 months, outstripping a budget increase of more than £46bn. Higher inflation costs of roughly £11bn have driven up the bill for some equipment projects.

The MoD has not received further funding to help with inflationary pressures. Naval and nuclear programmes have seen increases of £54.6bn, the watchdog said.

None of the six expenditure areas of what are known as the “top level budgets” – covering the Royal Navy, RAF and other forces – have an affordable equipment plan, the NAO found. It said some costs for new projects are included in the plan but are not fully funded.

The report said new entries into the ship-building pipeline – including Type 32 frigates, Type 83 destroyers and multi-role ocean surveillance vessels – are unaffordable by £5.9 billion against currently allocated budgets. Head of the NAO, Gareth Davies, said there had been a “marked deterioration” compared with the previous plan.

The watchdog said the MoD was not planning to cancel programme in the short-term because doing so would “would limit the choices available to decision-makers at the next spending review”.

Mr Davies said: “The MoD should consider how future plans can achieve their core purpose: providing a reliable assessment of the affordability of its equipment programme and demonstrating to Parliament how it will manage its funding to deliver equipment projects.”

Dame Meg Hillier, Labour chairwoman of the Commons Public Accounts Committee, said there was a “huge gap between the military equipment Government thinks it needs and the budget available to provide it”. She added that the deficit of almost £17bn was despite the plan “not even including all likely cost pressures”.

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Labour’s shadow defence secretary John Healey said: “This is a totally damning report. The NAO does not pull its punches on Conservative mismanagement of defence, which has seen 13 years of failure blow a £17 billion blackhole in Britain’s defence plans."

The MoD said the report was based on a “dated snapshot” from seven months ago. A spokesman said while the report recognises the impact which rising costs and inflation are having on defence, it does not accurately reflect the current or future state of the armed forces equipment plan.

He added: “Our armed forces are operating in a world of increasing conflict, and this Government is working to deliver what our service men and women need to keep Britain safe.”

The spokesman said defence equipment spending of £288.6bn over the next decade addresses long underinvestment in critical areas, and the government will backs its promise to increase defence spending to 2.5 per cent of GDP.