On 1 February 2019 the House of Commons Public Accounts Committee (PAC) released its annual report on the MOD's 10-year Equipment Plan, covering 2018-2028. The report is critical of the assumptions made in the Equipment Plan, and in particular it disputes the department's predicted affordability gap of between £7-14.8bn over the next 10 years, with even the higher figure being 'overly optimistic'. The PAC believes that the MOD has not made sufficient progress towards reducing this affordability gap, and that this has been exacerbated by the MOD delaying decisions to scale back or stop various capability programmes.
The PAC report is also critical of the Modernising Defence Programme (MDP) review, which published its findings in December 2018. The report noted that the MDP was slow to conclude and has deferred important capability decisions until the anticipated Comprehensive Spending Review (CSR) this year. However, if the CSR is delayed until 2020, the risks to current and planned capabilities will substantially increase, and will negatively impact the department's transformation agenda.
The PAC report has produced a number of recommendations, which are as follows:
1) As soon as possible, government must produce an affordable Equipment Plan by:
- Providing clarity on its priorities and the subsequent decisions made to stop, delay, and scale back areas of the defence programme to make the Equipment Plan affordable
- Clarifying what it considers to be a prudent level of over-programming across the 10-years and why
2) The Department should report back to us by July 2019 on how it has engaged with industry, and whether the Department and industry are signed up to a coherent plan to maintain the UK-based capability to develop and deliver the equipment required in the future.
3) The Department should report back on how it is working with industry to purchase off the shelf equipment rather than pursue unnecessarily complex kit, to maximise value and drive the transformation agenda.
4) By July 2019, and each year after, the Department should provide the Committee with a progress report on the development of financial skills and performance against the metrics that the Department will be using to measure success.
5) In compiling its Equipment Plan 2019 position, the Department must ensure that it only includes efficiencies that it can realistically expect to deliver, and that it discloses in future Plans a detailed and robust statement of how it will deliver them.
6) The Department’s future Equipment Plans should include more information on the cost, maturity and risks of the largest projects (including, in particular, the F-35 and Type 31e frigate), as well as being more transparent about its costing approach.
7) The Department should use the Spending Review 2019 as an opportunity to explore longer-term budgeting arrangements in certain areas such as nuclear programmes and shipbuilding maintenance and improvements planning.
8) The Department should report back to the Committee on how the extra funding settlement for nuclear and anti-submarine warfare in October 2018 was allocated and spent.
9) We expect the Department to report to the Committee on substantial progress within 12 months.
The full version of the PAC report on the MOD's Equipment Plan can be viewed here.