Recommendations & Conclusions
7 items
2
Recommendation
Forty-Eighth Report - MoD Equipment Pla…
Accepted
The refreshed Integrated Review may revise judgements about operational requirements and identify new priorities which are not currently funded in the Equipment Plan. The Ukraine conflict has necessitated a refresh of the 2021 Integrated Review. The Department expected that the refresh would be completed in the first quarter of 2023 …
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The refreshed Integrated Review may revise judgements about operational requirements and identify new priorities which are not currently funded in the Equipment Plan. The Ukraine conflict has necessitated a refresh of the 2021 Integrated Review. The Department expected that the refresh would be completed in the first quarter of 2023 and that the core of the Equipment Plan would still hold good. The Government published the refresh in March 2023, but the Department will now have to reflect the changing priorities from the refresh in a further Command Paper, as well as reflecting lessons from Ukraine and recent announcements, such as the combat air partnership with Japan and Italy and the AUKUS partnership with the United States of America and Australia. The Department says it will argue for new capabilities and add these to the Equipment Plan if it secures additional funding from HM Treasury. However, it will need to prioritise investment decisions if new demands exceed available funding. The Department assumes that the refresh decisions will inform the Chancellor’s next Budget, planned for March 2023 at the time we took evidence, but it had not agreed the timetable. If the 2023 Budget does not fund the revised requirements, enacting the changed priorities might be delayed by a year. Furthermore, the Department has been slow to implement the capabilities set out in the original Integrated Review, several of which it has not fully funded in the two Equipment Plans since 2021. Recommendation 2: The Department should clearly set out to HM Treasury as soon as it can what capability requirements and priorities arise from the refreshed Integrated Review, the funding requirements to provide these, and the risks arising 6 MoD Equipment Plan 2022–2032 from any shortfall. We expect to see the Department reflect these decisions in the next Defence Command Paper and its 2023 Equipment Plan and will challenge the Department on the changes next year.
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Government response AI summary
The department has worked with HM Treasury to set out the implications of the Defence Command Paper Refresh and will continue to do so as it develops its plans. Details will be in the next update to the committee.
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HM Treasury
3
Recommendation
Forty-Eighth Report - MoD Equipment Pla…
Accepted
The Department has not demonstrated the necessary urgency to deliver enhanced capabilities to deter hostile parties. The Ukraine conflict has demonstrated the renewed importance of land capabilities. However, the Department acknowledges there is significant risk that the UK could not provide NATO with an operational Army division and that the …
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The Department has not demonstrated the necessary urgency to deliver enhanced capabilities to deter hostile parties. The Ukraine conflict has demonstrated the renewed importance of land capabilities. However, the Department acknowledges there is significant risk that the UK could not provide NATO with an operational Army division and that the current Equipment Plan does not resolve this. Lessons from Ukraine show that the Army needs to increase its long-range precision artillery, air defences and medical supply chain beyond the capabilities included in the current Plan. Furthermore, the Department is struggling to deliver existing projects to modernise current land capabilities. Notably, timetables for introducing Boxer and Ajax armoured vehicles have slipped significantly, leaving the Army reliant on out- dated vehicles and unable to provide the necessary deterrence of adversaries. Even when Ajax is finally introduced it will not operate to its full potential without the Morpheus communications system, which is also delayed. We are unconvinced by the Department’s assertion that it is doing all it can to speed up these programmes or its claim that it could only be quicker by taking more risks. Recommendation 3: The Department should reconsider whether it strikes the right balance between risk and delivery speed in procurement and write to us alongside its Treasury Minute response setting out its scope to deliver programmes faster. It should also set out in next year’s Equipment Plan how it will ensure that the Army fully benefits from the investment in new equipment by the timely delivery of military hardware and the technology needed to enable interoperability.
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Government response AI summary
The government states that the experience of procuring equipment for Ukraine has shown what can be achieved with increased risk appetite, and will write to the Committee with more detail on the department’s approach, including the scope to increase the pace of delivery to the …
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HM Treasury
5
Recommendation
Forty-Eighth Report - MoD Equipment Pla…
Accepted
The Department has ignored the worsening economic environment in its latest Equipment Plan and faces significant financial pressures on its equipment programme. The Department has not included external cost pressures, including inflation and foreign exchange movements, in its central assessment of the Plan’s affordability. This is despite identifying when it …
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The Department has ignored the worsening economic environment in its latest Equipment Plan and faces significant financial pressures on its equipment programme. The Department has not included external cost pressures, including inflation and foreign exchange movements, in its central assessment of the Plan’s affordability. This is despite identifying when it produced the Plan that inflation could increase project costs by up to £2.1 billion over ten years. It did not include this inflationary pressure in its affordability analysis despite it being more than 80% of the Plan’s forecast surplus of £2.6 billion. Inflation has since risen higher than the March 2022 forecast, and the Department accepts it will struggle to manage affordability as a result. Further, the pound to dollar exchange rate has remained below the Plan’s worst-case scenario for several months, increasing the cost of several major Plan programmes. In the worsening economic environment, there is an increased possibility that some of the £25 billion of risks that the Department deemed unlikely—and has not included in cost forecasts—may occur, further increasing pressure on the Plan. Cost of living increases caused by rising inflation also mean that the Department might struggle to attract and retain staff with the skills it requires to deliver equipment programmes. We do not think that the Department has sufficiently taken these factors into account when considering the affordability of the plans. Recommendation 5: After the Integrated Review refresh, the Department must: • urgently reassess the affordability of its equipment procurement and support programmes; • move quickly to achieve the assumed savings; and • assess the level of headroom it needs to respond promptly to changing external events. We will seek an update from the Department at an evidence session in 2023.
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Government response AI summary
The department has worked with HM Treasury to ensure external pressures are reflected in the planning process and the next update to the Committee will provide commentary on the key risks to the affordability of the plan and the approach to managing the department’s contingency.
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HM Treasury
7
Recommendation
Forty-Eighth Report - MoD Equipment Pla…
Accepted
In response to Russia’s invasion, the Government has decided to review its 2021 Integrated Review. This work has been led by the Cabinet Office. The Government published its Integrated Review Refresh 2023 in March 2023.15 The Department now expects to publish its own refreshed plans in a new Defence Command …
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In response to Russia’s invasion, the Government has decided to review its 2021 Integrated Review. This work has been led by the Cabinet Office. The Government published its Integrated Review Refresh 2023 in March 2023.15 The Department now expects to publish its own refreshed plans in a new Defence Command Paper, which in turn will have implications for its Equipment Plan.16 The Department anticipated that the core of the Equipment Plan would still hold good but that there would be some noticeable changes to reflect lessons from Ukraine and other recent announcements, such as the combat air partnership with Japan and Italy. It also thought that further decisions, such as on the AUKUS partnership with the United States of America and Australia announced in March 2023, and on the programme to replace the nuclear warhead, would be reflected in the 2023 or 2024 planning rounds.17 The Department cautioned it would take time to firm up Integrated Review plans and address the challenges of deliverability.18
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Government response AI summary
The department has worked with HM Treasury to set out the implications of the Defence Command Paper Refresh including any specific commitments ahead of its publication and will continue to work with HM Treasury as it develops its plans. The details of the implications for …
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HM Treasury
8
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Accepted
The Department said that it would argue for new capabilities through this process, and if it received more resources, it would add these to the Equipment Plan. However, it accepted that it would need to prioritise investment decisions if new demands exceeded the funding from HM Treasury.19 In March 2023, …
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The Department said that it would argue for new capabilities through this process, and if it received more resources, it would add these to the Equipment Plan. However, it accepted that it would need to prioritise investment decisions if new demands exceeded the funding from HM Treasury.19 In March 2023, as part of the Integrated Review refresh, the Prime Minister announced that the Department would receive £5 billion of additional funding over 2023–24 and 2024–25.20 Of this new money, it will spend £3 billion across 10 Qq 13, 14 11 Q 13 12 Q 33 13 Committee of Public Accounts, Defence capability and Equipment Plan, Tenth Report of Session 2019–21, HC 247, July 2020 14 Committee of Public Accounts, Improving the performance of major defence equipment contracts, Twenty- Second Report of Session 2021–22, HC 185, November 2021 15 Q 26, Integrated Review Refresh 2023 16 Q 26 17 Q 28, British-led design chosen for AUKUS submarine project - GOV.UK (www.gov.uk) 18 Q 52 19 Q 49 20 Integrated Review Refresh 2023, P34 10 MoD Equipment Plan 2022–2032 the defence nuclear enterprise and the remaining £2 billion on replenishing stockpiles and increasing them in line with a reassessment of appropriate levels.21 In November 2022 the Secretary of State for Defence had told Parliament that the inflationary pressure on his budget over the next two years was £8 billion.22
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Government response AI summary
The government agrees with the recommendation to clearly set out to HM Treasury the capability requirements, priorities, funding needs, and risks arising from the refreshed Integrated Review, with details to be explained in the next update to the committee.
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HM Treasury
22
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Accepted
The Department faces significant challenges replenishing its stocks and delivering new capabilities to meet the threats of a more volatile world. The Department has begun replacing stocks gifted to Ukraine, either on a like-for-like basis or with an equivalent where gifted capabilities are no longer in production or the Department …
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The Department faces significant challenges replenishing its stocks and delivering new capabilities to meet the threats of a more volatile world. The Department has begun replacing stocks gifted to Ukraine, either on a like-for-like basis or with an equivalent where gifted capabilities are no longer in production or the Department now has different requirements.57 However, we are concerned that replacement is not occurring quickly enough, with, for example, the Department confirming that it will take at least two years to replace NLAW anti-tank weapons gifted to Ukraine.58
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Government response AI summary
The department has adapted its supply chains and how they are managed on many critical programmes, published the Defence Supply Chain Strategy, and is implementing a range of initiatives including the creation of a MOD Supply Chain Development Programme, a Supply Chain Contingency Fund, and …
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HM Treasury
23
Conclusion
Forty-Eighth Report - MoD Equipment Pla…
Accepted
The Department acknowledged that UK stocks were not sufficient even before gifts to Ukraine.59 A recent Royal United Services Institute report stated that at the height of fighting in the Donbas, Russia was using more ammunition in two days than the UK held in total.60 The Department told us that …
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The Department acknowledged that UK stocks were not sufficient even before gifts to Ukraine.59 A recent Royal United Services Institute report stated that at the height of fighting in the Donbas, Russia was using more ammunition in two days than the UK held in total.60 The Department told us that the Ukraine war has shown that its principle of buying munitions and capability in batches is no longer the right approach. It intends to shift to having supply chains with continuous production which can be quickly increased when required, for example in times of war.61
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Government response AI summary
The department has adapted its supply chains and how they are managed on many critical programmes, published the Defence Supply Chain Strategy, and is implementing a range of initiatives including the creation of a MOD Supply Chain Development Programme, a Supply Chain Contingency Fund, and …
Read full response →
HM Treasury