LONDON – Britain’s Ministry of Defence says its latest equipment spending plans for 2021-2031 are affordable, compared with a $9.9 billion deficit reported last year, a projection that auditors here still view with some skepticism.
Officials said Feb. 21 it was the first time since 2018 that they had been able to file a rolling 10-year equipment plan expected to fit within spending projections.
Britain’s defense budget woes go back a long way before that, but the MoD figures show a significant upswing with £238 billion ($322 billion) spending on defense equipment and support planned over the coming ten years compared with £190 billion ($258 billion) in the 2020-2030 figures.
The MoD may be upbeat about its budget plans, but the National Audit Office, the government’s financial watchdog, was not so sure.
It said in its review of the 2021-2031 equipment plan that while the MoD had taken difficult decisions to reduce spending it still faced questions of affordability.
“Risks remain of over-optimistic assumptions about future budgets, costs and the likely achievement of savings targets. There is a real risk that, despite the additional funding it has received, the department’s ambition outstrips the resources available,” auditors wrote.
The office said the new and significant multiyear spending settlement agreed by the government in 2020 “gives the department a rare opportunity to break old habits and set the plan on course to be affordable. Despite some recent improvements, the department continues to have to take short-term decisions to balance the books, restricting the delivery of equipment and reducing value for money.”
The NAO also raised questions about whether there is sufficient funding for the Tempest Future Combat Air System program to develop the sixth-generation jet.
FCAS is the largest non-nuclear program in the equipment plan and a key driver of military and industrial capability here as it replaces the Typhoon starting around 2035.
Italy and Sweden are partners in early concept assessment work but with a British budget allowance over 10 years of £8.65 billion current assumptions about schedule, capability and international partners suggests Britain will have to spend between £10 and £17 billion, said the NAO.
The financial watchdog said the figures suggest the program could be underfunded by as much as £8.4 billion, or $11.4 billion.
Among the major spending plans in the MoD’s latest equipment budget review is confirmation of its ambition to purchase additional A400M airlifters and money to acquire further F-35 strike jets beyond the 48 aircraft already on order with Lockheed Martin.
Britain has taken delivery of 20 of 22 A400M’s due for delivery to the RAF by 2023.
“Decisions on exact numbers for future A400M aircraft is still under discussion,” said a Royal Air Force spokesman.
The RAF had originally planned to acquire 25 of the Airbus aircraft before technical and cost over-run issues resulted in the order being cut to its current level.
Details in the NAO document showed additional funding becoming available towards the back end of the 10-year plan to fund purchases of airlifters and combat jets – dependent on the affordability of the total equipment plan.
If the budget plans come up to scratch the MoD said that will generate a £4.3 billion ($5.9 billion) surplus, which the department says it intends to set aside for contingency and other spending.
Defense-procurement minister Jeremy Quin told Parliament it was the “first time in many years we expect to live within our budget without ministers having to take decisions on savings measures in year or running central saving exercises.”
That may be so, but the equipment plan shows that while the MoD says the procurement program is affordable over 10 years, contingency funding figures are currently inadequate in years five and six of the plan.
The scale of the problem is not spelled out, but the document said: “We aim to address this through the coming planning cycles by smoothing delivery schedules, rebalancing across other parts of the defense program and, if necessary, looking at further savings measures.”
Quin said the MoD had achieved its forecast budget surplus through additional investment being made available for defense by the government and “tough prioritization.”
In November 2020 the government announced a £16.5 billion ($22.3 billion) hike in defense spending over four years to help meet the costs of transforming the military into a modern, high-tech, force in line with the integrated defense, security and foreign policy review revealed early last year.
Beyond the initial four-year spending increase the MoD said that for the six years after 2024/25, the ministry has a planning assumption, agreed with the Treasury Department, of an 0.5% annual real growth in the core budget.
Efficiency and other cost reduction efforts are also part of the budget balancing effort, and the MoD admits that failure to deliver on those targets [as has happened in the past] would risk delivery of the plan.
Not all of the MoD’s capability increases are included in the equipment spending plans, though.
The military space budget is one of the items sitting outside the equipment plan figures. Earlier this month, the MoD announced it would spend £6.4 billion ($8.7 billion) over ten years on space-related projects.
Another budget line outside the Equipment Plan figures is the £4.1 billion ($5.6 billion) being set aside from 2025 to exploit spending in research and development.
“We have not categorized it as equipment spend … although it is likely that a significant, but as yet unknown proportion, will ultimately become equipment spend,” said the report.
“This funding has been set aside in recognition of the pace of technological change and to ensure that Defence [the MoD] has the flexibility to address emerging capability requirements without having to make cuts to existing programs,” the equipment plan said.
Cancellation of the Warrior infantry fighting vehicle program and the early demise of the Royal Air Force’s C-130 airlift fleet were among victims of the cuts triggered by the need for a balanced budget and the implementation of the new integrated review.
Other program changes, like the three-year deferral of an expected agreement with Oshkosh Defense to purchase hundreds of Joint Light Tactical Vehicles for the British Army, was among those programs now shown to have taken a hit.
Although not mentioned in the equipment plan, the Royal Navy has also recently opted to ditch procurement of an interim buy of over the horizon anti-surface warfare missiles to fill the gap between its Harpoon weapon going out of service in 2023 and the introduction around 2028 of a new generation missile being developed by MBDA in a joint Anglo-French program.
Andrew Chuter is the United Kingdom correspondent for Defense News.