Recommendations & Conclusions
10 items
3
Recommendation
Fifty-Second Report - Ministry of Defen…
Accepted
The Plan’s affordability relies on the Department achieving a number of different types of savings, including £7 billion of ‘cost reductions’ by 2031. The Top Level Budgets (TLBs) do not yet have plans to achieve £4 billion of the ‘cost reductions’, which is almost as much as the savings expected …
Read more
The Plan’s affordability relies on the Department achieving a number of different types of savings, including £7 billion of ‘cost reductions’ by 2031. The Top Level Budgets (TLBs) do not yet have plans to achieve £4 billion of the ‘cost reductions’, which is almost as much as the savings expected from capabilities cut as a result of the Integrated Review. Two-thirds of this £4 billion needs to be achieved by March 2025 even though contractual commitments limit the flexibility to make savings in the short term. The Department is relying on a “sense of cost control throughout the Department” to achieve these cuts. Higher inflation means that any decisions to deliberately delay projects would be costly, and the Department told us that in any case it wants the capabilities to be delivered. Without a realistic plan to achieve savings, the Department risks remaining caught in a trap of short-term, affordability-driven decisions. Recommendation: The Department should urgently set TLBs targets to develop and implement concrete plans to achieve the cost reductions allocated to them in the Plan.
Show less
Government response AI summary
TLBs have targets and plans to achieve these savings, closely monitors and scrutinises Top Level Budget (TLB) planned cost reductions in the annual budget cycle, and considers that the savings are achievable.
Read full response →
HM Treasury
10
Conclusion
Fifty-Second Report - Ministry of Defen…
Accepted
An example of new funding for more established programmes is the new radar for the Typhoon. Although it had been in development for several years before the decision to buy it was announced in 2015, the Department did not include the cost in recent Plans as it was not affordable.19 …
Read more
An example of new funding for more established programmes is the new radar for the Typhoon. Although it had been in development for several years before the decision to buy it was announced in 2015, the Department did not include the cost in recent Plans as it was not affordable.19 The Department told us that the Spending Review settlement allowed it to fund the programme, and since we took evidence has written to us to report that by the end of February 2022 it had spent £701 million on its development.20 But it does not expect the radar to enter service until 2030.21
Show less
Government response AI summary
The government agrees with the committee's conclusion, stating that future Equipment Plans will include an additional section explaining changes made and planned to address emerging developments, recognizing the need to balance competing priorities.
Read full response →
HM Treasury
11
Recommendation
Fifty-Second Report - Ministry of Defen…
Accepted
More widely, the Committee asked whether the Plan was now based on a large number of past assumptions, observing that it does not include funding for capabilities 7 Q2 8 Q8 9 Q86 10 Qq 7–8 11 Q88 12 Q64 13 Q68 14 Q71 15 Q75 16 Q54 17 Committee …
Read more
More widely, the Committee asked whether the Plan was now based on a large number of past assumptions, observing that it does not include funding for capabilities 7 Q2 8 Q8 9 Q86 10 Qq 7–8 11 Q88 12 Q64 13 Q68 14 Q71 15 Q75 16 Q54 17 Committee of Public Accounts, Delivering carrier strike, HC 684, November 2020, paragraph 4 18 Q54 19 C&AG’s report, paragraph 1.8, Qq 62 – 63, Q76 20 Letter to the Committee from the Permanent Secretary, 21 March 2022. 21 Q79 10 Ministry of Defence Equipment Plan 2021–31 other nations are developing such as hypersonic rockets.22 The Department responded that the strategy in developing the Plan was to close current capability gaps and to invest in the technologies “to have the capability required to deter our potential aggressors in the future”. The Department told us it believes it is now placing much more attention on developing new technologies than it did in the 2010 and 2015 Strategic Defence and Security Reviews. It told us it had £4.1 billion set aside in the years after 2025 for further development of new technology.23
Show less
Government response AI summary
The government agrees with the recommendation and commits to including an additional section in future Equipment Plans by Autumn 2022, explaining changes and plans made to address emerging developments and the impact of the conflict in Ukraine.
Read full response →
HM Treasury
12
Recommendation
Fifty-Second Report - Ministry of Defen…
Accepted
However, the NAO report found that in the Plan the Department has only set aside £1.05 billion from 2026–27 to 2030–31 to exploit research to develop usable military capabilities.24 This expenditure is only 0.4% of the Plan’s total budget, although the Department believes the boundary between R&D and exploitation is …
Read more
However, the NAO report found that in the Plan the Department has only set aside £1.05 billion from 2026–27 to 2030–31 to exploit research to develop usable military capabilities.24 This expenditure is only 0.4% of the Plan’s total budget, although the Department believes the boundary between R&D and exploitation is blurred. The Department also agreed that the cyber threat is changing very rapidly and accepts that this makes it hard to be certain that the money in the Plan to protect against this threat will be enough.25 The Department also acknowledged that its procurement approach does not adequately reflect the notion that “if you want to do something cheaply, you need to do it quickly”.26 22 Q144 23 Q144 24 C&AG’s report, para 2.27 25 Qq 92–93 26 Q31 Ministry of Defence Equipment Plan 2021–31 11 2 The Plan’s affordability
Show less
Government response AI summary
The government agrees with the recommendation and commits to including an additional section in future Equipment Plans by Autumn 2022, explaining changes and plans made to address emerging developments and the impact of the conflict in Ukraine.
Read full response →
HM Treasury
13
Conclusion
Fifty-Second Report - Ministry of Defen…
Accepted
The Department told us that, thanks to the funding increase in the Spending Review and the Integrated Review process, it thinks the Plan is now affordable, although there are financial and capability risks in its delivery.27 The Department also told us that it had a clearer strategy than before, with …
Read more
The Department told us that, thanks to the funding increase in the Spending Review and the Integrated Review process, it thinks the Plan is now affordable, although there are financial and capability risks in its delivery.27 The Department also told us that it had a clearer strategy than before, with a Plan whose cost is less over 10 years than its budget.28 It acknowledged that agreeing the Plan had involved difficult decisions, for example to retire some in-service equipment and decisions on profile and timing of replacement projects. The Department’s Permanent Secretary noted that if the Department is to maintain the affordability of the Plan in the future “that kind of discipline needs to be not just a one-off in the integrated review but how we conduct ourselves year in, year out”.29
Show less
Government response AI summary
The government agrees with the committee's conclusion, recognizing the need for ongoing discipline to maintain the affordability of the Equipment Plan. It commits to including an additional section in future Equipment Plans that explains changes and planned developments to address emerging issues.
Read full response →
HM Treasury
14
Conclusion
Fifty-Second Report - Ministry of Defen…
Accepted
This is the first time the Department has claimed the Plan is affordable for four years. And given the NAO has repeatedly reported on the Department’s focus on short term affordability at the expense of long-term value for money, we asked how the Department was guarding against accruing capability risk …
Read more
This is the first time the Department has claimed the Plan is affordable for four years. And given the NAO has repeatedly reported on the Department’s focus on short term affordability at the expense of long-term value for money, we asked how the Department was guarding against accruing capability risk and higher cost in the Plan’s later years, by trying to save money in the early years. The Department acknowledged that, in seeking balance, it has made some decisions to defer a few future capability enhancements that will cost more overall. It noted the NAO’s example of the three-year delay in purchasing a new model of Chinook helicopter which will result in a net cost of £295 million.30 According to the Department, “In a world of low inflation, that is an acceptable management technique”, but a world of high inflation will require changes to the “processes, approvals and mindset” in the way the Plan is put together.31
Show less
Government response AI summary
The government agrees and recognizes the impact of the conflict in Ukraine on equipment spending, stating this is being examined. It commits that future Equipment Plans will include an additional section explaining changes made and planned to address emerging developments.
Read full response →
HM Treasury
15
Recommendation
Fifty-Second Report - Ministry of Defen…
Accepted
We asked why the Department is forecasting to spend more than its capital budget in seven of the next 10 years. The Department responded that the differences in those years were quite small and it judged them to be manageable.32 It had taken a conscious decision not to fully “address …
Read more
We asked why the Department is forecasting to spend more than its capital budget in seven of the next 10 years. The Department responded that the differences in those years were quite small and it judged them to be manageable.32 It had taken a conscious decision not to fully “address that pressure”, in order to balance financial and capability risk, given available contingency and the remaining uncertainties in costings and delivery schedules.33 Cost control of the Plan’s largest programmes
Show less
Government response AI summary
The government agrees with the recommendation and commits to including an additional section in future Equipment Plans by Autumn 2022, explaining changes and plans made to address emerging developments and the impact of the conflict in Ukraine.
Read full response →
HM Treasury
19
Conclusion
Fifty-Second Report - Ministry of Defen…
Accepted
The Plan’s affordability depends on the Department achieving a number of different types of savings by March 2031. As the NAO reported, these amount to nearly £22 billion, which comprises around £12 billion of ‘management adjustments for realism’, £7 billion of ‘planned cost reductions’ and £2.8 billion of ‘potential efficiencies …
Read more
The Plan’s affordability depends on the Department achieving a number of different types of savings by March 2031. As the NAO reported, these amount to nearly £22 billion, which comprises around £12 billion of ‘management adjustments for realism’, £7 billion of ‘planned cost reductions’ and £2.8 billion of ‘potential efficiencies which project teams have lower confidence in achieving’.42 We asked about the so-called ‘planned cost reductions’, where £4 billion of the £7 billion assumed savings do not have a plan supporting them. The Department told us that it was confident that all the savings would be achieved, and that in setting the overall target the Department attempts to judge the right balance between risk and maximising capability delivery over 10 years.43
Show less
Government response AI summary
The government agrees with the Committee’s recommendation and says that TLBs have targets and plans to achieve these savings, and the department closely monitors and scrutinises Top Level Budget (TLB) planned cost reductions in the annual budget cycle.
Read full response →
HM Treasury
20
Recommendation
Fifty-Second Report - Ministry of Defen…
Accepted
Pressed on the £4 billion for which there are no plans yet, the Department explained that the target is based on an assumption of what the TLBs can deliver. The Department told us that Head Office scrutinises about 80 of the 400 projects in setting its savings targets for TLBs, …
Read more
Pressed on the £4 billion for which there are no plans yet, the Department explained that the target is based on an assumption of what the TLBs can deliver. The Department told us that Head Office scrutinises about 80 of the 400 projects in setting its savings targets for TLBs, as it is not possible to look at all the Department’s projects across all TLBs in any one year. The £4 billion is based on what it believes TLBs can find in the remaining 320 projects through re-scoping and re-prioritising work. Head Office’s aim is to set ‘taut but realistic’ budgets for each year of the Plan.44 36 Q127; NAO Figure 9 37 NAO report paragraphs 2.10, 2.15 and Figure 9 38 Q122 39 Q126 40 Q129 41 Qq 129–130 42 NAO report Figure 8 43 Q96 44 Q96 Ministry of Defence Equipment Plan 2021–31 13
Show less
Government response AI summary
The government agrees with the Committee’s recommendation, stating that it has been implemented, and TLBs have targets and plans to achieve these savings. The department closely monitors and scrutinises Top Level Budget (TLB) planned cost reductions in the annual budget cycle and will include further …
Read full response →
HM Treasury
21
Conclusion
Fifty-Second Report - Ministry of Defen…
Accepted
We noted that £2.6 billion of the £4 billion savings—two thirds of the total—needs to be achieved by March 2025. This is despite the fact that contractual commitments limit TLBs’ flexibility to make savings, for example 62% of Air Command’s spend is already committed over the next ten years. Air …
Read more
We noted that £2.6 billion of the £4 billion savings—two thirds of the total—needs to be achieved by March 2025. This is despite the fact that contractual commitments limit TLBs’ flexibility to make savings, for example 62% of Air Command’s spend is already committed over the next ten years. Air Command believes that, as a result, it will need to reduce flying activity considerably, which will have consequences for aviators’ skills.45 The Department said in response it still believes the savings targets are realistic, but it will return to the targets each year to refine them. The latest position will be given in the next Plan, which the Permanent Secretary hopes will be published this Autumn.46 On the question about fewer flying hours, the Department told us that it is up to Air Command on how it manages its priorities, and that the target may reflect the move to more ‘synthetic’ training.47 Other pressures
Show less
Government response AI summary
TLBs have targets and plans to achieve these savings, closely monitors and scrutinises Top Level Budget (TLB) planned cost reductions in the annual budget cycle, and considers that the savings are achievable.
Read full response →
HM Treasury