MoD criticised over £17bn equipment 'funding black hole' ahead of Integrated Review

16 March 2021, 00:05 | Updated: 16 March 2021, 00:17

The Ministry of Defence has been accused of drawing up plans with huge funding gaps
The Ministry of Defence has been accused of drawing up plans with huge funding gaps. Picture: PA Images
Ewan Quayle

By Ewan Quayle

The Ministry of Defence (MoD) has faced intense criticism from MPs for failing to address a "funding black hole" of up to £17 billion ahead of the biggest UK review of global affairs since the Cold War.

The Prime Minister will outline the findings of the Integrated Review - billed as the most significant overhaul of the UK's strategic posture since the end of the conflict.

But MPs on the Commons Public Accounts Committee (PAC) have accused defence officials of drawing up a 10-year plan for military equipment with a major funding gap at its centre.

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They said the MoD also faces additional cost pressures, estimated at more than £20 billion, to develop future defence capabilities not yet included in the plan to meet growing threats across the globe.

In its Defence Equipment Plan 2020-2030 report published on Tuesday, the PAC said the situation was "highly destabilising for defence and must not continue".

The Ministry of Defence's 10-year plan could have a funding gap of £17 billion
The Ministry of Defence's 10-year plan could have a funding gap of £17 billion. Picture: PA Images

In November, Boris Johnson set out a £16.5 billion increase in defence spending over four years to pay for military modernisation, including advances in cyber and space technology.

But Committee chair Meg Hillier said the additional money was in danger of being "swallowed whole" by the gaps in the budget.

The Labour MP said: "The outgoing permanent secretary of MoD (Sir Stephen Lovegrove, set to take up the role of national security adviser) was clear in evidence to our inquiry that the new £16.5 billion defence funding settlement is not being added to a balanced budget and is simply, in his words, 'not all going to go on new and revolutionary kit'.

"On the face of it, it's potentially swallowed whole by the up to £17.4 billion funding black hole at the centre of our defence capabilities, and Sir Stephen was equally clear about the capability reductions that will have to happen for the UK to look forward to any enhancements.

READ MORE: Boris Johnson to boost UK's cyber military capability

"What is crucial is that this new money is not instead just eaten up, once again, by the constant, debilitating time and budget overruns that have been eroding our national defence and security for years."

The committee's report warned of "tough choices" when it came to implementing the equipment plan.

"As the 2020-2030 plan is not affordable, the department needs to make tough choices to reduce the existing funding shortfalls, including disinvestment in capabilities that it decides it no longer needs," the MPs said.

The MoD plans to boost its military capabilities amid growing threats
The MoD plans to boost its military capabilities amid growing threats. Picture: PA Images

They recommended that within three months of the Integrated Review being published, the MoD "should provide full transparency on its allocation of the additional funding", including "disinvestment decisions" and how the fresh funding will be used to "address existing shortfalls".

They noted that the equipment plan was "unaffordable for the fourth year in a row" and that safeguards were still needed to protect long-term spending on defence investment from inflation.

"The department's central estimate of the funding shortfall on equipment projects over 2020-2030 was £7.3 billion but this figure could be as high as £17.4 billion if certain risks materialise," the committee's report said.

"The department also faces significant additional cost pressures - estimated to be around £20 billion - to develop future military capabilities which are not yet included in the plan, alongside wider financial pressures in maintaining the defence estate.

"We are extremely frustrated by the department's inability to develop an affordable programme and break the cycle of short-term financial management.

"It is very concerning that the department seems to have resigned itself to there being a degree of inevitability about the financial problems facing the department.

The SNP's defence spokesman Stewart McDonald MP said: "Once again it's clear that the MoD has failed to learn the lessons from the past and act properly to develop a strategy fit for the 21st century.

"The delayed Integrated Review has undoubtedly damaged our ability to develop a proper defence strategy.

"However, unless the MoD takes these findings seriously and acts now, the reality is that the UK's role and influence will continue to diminish close to home and further afield."

An MoD spokeswoman said: "Defence has secured a substantial settlement over four years in order to restore financial sustainability and the Defence Secretary has committed to matching ambition with resource for future equipment plans.

"The equipment plan 2020 provided a financial summary of our plans before the recent funding announcement and decisions that will be announced in the upcoming Integrated Review."