Ministry of Defence facing £14.8bn budget black hole, warns spending watchdog

Posted On: 
5th November 2018

The Ministry of Defence could face a near-£15bn black hole in its budget over the next ten years, a damning report by the Government's own spending watchdog has found.

The Ministry of Defence said its equipment plan would ensure the armed forces had the 'best ships, aircraft and vehicles'.

The National Audit Office said that the MoD's equipment plan - used to fund military hardware including combat aircraft and submarines - "remains unaffordable", with the department itself forecasting a £7bn gap between now and 2028.

Labour said the findings, which come just a week after Chancellor Philip Hammond handed the MoD an extra £1bn following intense lobbying by Conservative MPs, were "very damning".

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According to the NAO, the defence chiefs expects to spend £193.3bn in equipment and support costs over the next decade, against a budget of £186.4bn.

But while the department has set aside a £6.2bn contingency fund in case costs spiral further, the NAO warns the MoD's projections could still be too optimistic.

"These costs could vary, and in a worst case scenario, should all the identified risks occur, this gap could grow to £14.8billion," the report says.

The MoD is currently considering whether to pause a raft of big projects under the Modernising Defence Programme launched by ministers earlier this year.

But the NAO said that with the vast majority of costs set to fall in the next four years, the department will need to "make immediate savings decisions rather than relying on longer-term cuts or efficiencies".

Seizing on the findings, Shadow Defence Secretary Nia Griffith said: "This report on the Government’s Defence Equipment Plan is very damning.

"We need proper investment in our nation’s defences, not just political posturing from the Defence Secretary. You cannot do security on the cheap."

She added: "It is high time that Conservative Ministers stopped relying on unrealistic efficiency savings and got to grips with the huge affordability gap in the Defence Equipment plan."       

Public Accounts Committee chair Meg Hillier said the MoD was "in real danger of wasting taxpayers’ money through short-term decision making".

The senior MP added: “With the ongoing financial pressures, the MoD need to be clear about what equipment they will or will not be funding.”

An MoD spokesperson said: “We are confident that we will deliver the equipment plan within budget this year, as we did last year, as we strive to ensure our military have the very best ships, aircraft and vehicles through our £186 billion plan.

“We recognise the financial challenges that these ambitious, complex programmes pose, and are addressing these after securing a £1.8 billion financial boost for defence and reducing forecast costs by £9.5 billion through efficiency savings.”