LONDON — Britain’s Ministry of Defence has been given a £1 billion (U.S. $1.28 billion) spending boost in the Treasury budget announcement Oct. 29, with Chancellor Philip Hammond suggesting the money would be mainly spent on three strategic military programs.
Hammond said the additional money would be available in the coming months. Cyber, anti-submarine warfare and the Dreadnought nuclear submarine build program all got named as destinations for the extra cash.
“As a former defense secretary myself I understand the immediate pressure our armed forces are facing, so today I will provide £1 billion to cover the remainder of this year and next to boost our cyber, and anti-submarine warfare capacity and to maintain the pace of the Dreadnought program,” Hammond told Parliament.
The increase caught many by surprise. Defence Secretary Gavin Williamson has been battling with Hammond for months for extra cash, but a massive funding commitment to the National Health Service made new funds toward security seem unlikely.
Jon Louth, the director for defence, industry and society at the Royal United Services Institute think-tank in London said the additional funding was good news, but fell well short of what is required.
“It’s welcome, but comes nowhere near addressing the potential funding gap if you add up all the programs in the equipment plan. It does appear to be a significant increase in percentage terms, although the devil will be in the detail,” he said.
The RUSI analyst said the outcome was “better than we expected a few months ago. Politically people will be chalking that up as a win for Williamson in the context of the wider government budget. One billion pounds is a win,” he said.
Louth cautioned against getting too hung up on the chancellor’s announcement about where the extra cash will be spent.
“I suspect when we come to see how the money is used next year it will potentially be a little different from the chancellor’s headlines today,” he said.
Defense consultant Alex Ashbourne Walmsley of Ashbourne Strategic Consulting said the new money was a “sticking plaster, but it will buy the MoD a bit more time to work out how to do more with less.”
Earlier this year the MoD received a total of £800 million in funds to keep the program to build four Trident missile equipped Dreadnought nuclear submarines on track.
Some £600 million of that cash came from a £10 billion contingency fund set aside by the government for the Dreadnought program.
Ashbourne-Walmsley described the Dreadnought program as a “money pit.”
The MoD is trying to bridge a funding gap in its £179 billion 10-year equipment plan.
The black hole is put at anywhere between £4 billion and £20 billion by the National Audit Office, the government’s financial watchdog. The final figure is dependent, in part, on how effective an ongoing efficiency drive is at the MoD.
The MoD budget for this year is £36.6 billion with 15.6 percent of that spent on equipment procurement and 18.7 percent on support.
The Conservative government is committed to increasing equipment spending in real terms by 0.5 percent a year until 2020.
A long running review, known as the Defence Modernisation Program, has been looking at how British armed forces can adapt and transform to meet the changing and growing military threat, while at the same time balancing the books — an effort that could require capability cuts in several areas.
Publication of that report has already been kicked down the road a couple of times. Although Williamson may announce something before the end of the year, analysts and industry executives expect little of substance ahead of a comprehensive spending review due to take place across all government departments next year.
Hammond appeared to say as much today when he told Parliamentarians the modernisation review will “form the basis for a comprehensive consideration of defense spending next year.”
“The Modernizing Defence Program is increasingly tied into the comprehensive spending review and the 10-year equipment plan in 2019. We might get a whitepaper in late winter or early spring to set up some of the themes but the details won’t be out until beyond April,” said Louth.
Some industry executives though are starting to wonder if the modernization program could be published even by April. One executive who asked not to be named, said he wondered whether the comprehensive spending plan might be the trigger for a full blown strategic defense review, particularly if Brexit goes badly and the economy takes a big hit.