Recommendations & Conclusions
5 items
6
Conclusion
32nd Report - The Future of the Equipme…
Rejected
The ever-increasing cost of the Defence Nuclear Enterprise (the DNE) is likely to add pressure on the Department’s overall budgets. In 2024–25 the nuclear budget was £10.9 billion, around 18% of the whole defence budget (unchanged as a percentage from 2023–24 figures). The Department has sought to ensure that it …
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The ever-increasing cost of the Defence Nuclear Enterprise (the DNE) is likely to add pressure on the Department’s overall budgets. In 2024–25 the nuclear budget was £10.9 billion, around 18% of the whole defence budget (unchanged as a percentage from 2023–24 figures). The Department has sought to ensure that it manages the DNE budget effectively and efficiently, and is exploring opportunities to include more British small and medium-sized enterprises in its supply chain. However, costs are rising through a combination of the Department trying to speed up the work schedule and adding new programmes to it, and inflation. In consequence, forecast costs for the DNE for the ten years beginning 2023–24 have increased by around £10 billion from £117.8 billion (to approximately £128billion). Yet in 2023, the DNE’s ten-year costs were already £7.9 billion more than budget. The government has created a ringfence which prevents the Department from using elsewhere money allocated to the DNE, but which allows money to flow the other way. The Department has not yet worked through the implications of the SDR on the balance of investment between the DNE and conventional capabilities. However, increasing nuclear costs may restrict the money available for conventional equipment and other important requirements, such as improving poor accommodation which is crucial in addressing the military’s recruitment and retention problems. recommendation The Department’s annual update to Parliament on the DNE should provide details of its planned costs, including: • the proportion of the defence budget this comprises; • an explanation of any variances from the previous year’s plan; and • budgets moving between years or from the wider defence budget into the DNE ringfence. 7 1 Responding to lessons learned from the UK’s military support for Ukraine Introduction
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Government response AI summary
The government rejected the recommendation, stating that the annual update to Parliament is not the appropriate vehicle for detailed DNE financial reporting, as this information is already provided through wider MOD financial reports and the Parliamentary Estimates process.
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HM Treasury
30
Conclusion
32nd Report - The Future of the Equipme…
Rejected
The Department said the UK’s status as a nuclear nation is crucial for keeping the country safe.64 In 2024–25 the nuclear budget was £10.9 billion, around 18% of the whole defence budget (up from £9.433 billion in 2023–2465). The Department said it was focused on delivering its nuclear programmes effectively …
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The Department said the UK’s status as a nuclear nation is crucial for keeping the country safe.64 In 2024–25 the nuclear budget was £10.9 billion, around 18% of the whole defence budget (up from £9.433 billion in 2023–2465). The Department said it was focused on delivering its nuclear programmes effectively and efficiently.66 To achieve this, it has sought to improve its management of the nuclear budget. For example, it can now, with HM Treasury consent, move money between years, which helps to manage the budget effectively, and move some money between programmes to support prioritisation.67 In addition, the Department is exploring opportunities to include more British small and medium-sized enterprises in the DNE’s supply chain.68
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Government response AI summary
The government rejects the committee's implicit recommendation for specific DNE financial reporting, stating that DNE financial information is already provided through existing parliamentary processes and will be included in the Defence Investment Plan.
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HM Treasury
31
Conclusion
32nd Report - The Future of the Equipme…
Rejected
However, costs of the DNE are rising, driven by various factors.69 The Department is seeking to quicken the pace of delivering its nuclear programmes. The Department noted, however, that there is a very strong correlation between speeding up the schedule and costs, because many of the costs are workforce related. …
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However, costs of the DNE are rising, driven by various factors.69 The Department is seeking to quicken the pace of delivering its nuclear programmes. The Department noted, however, that there is a very strong correlation between speeding up the schedule and costs, because many of the costs are workforce related. Inflation continues to flow through into costs. The Department has also added new programmes to the DNE, such as to re-establish the capability to produce nuclear reactor fuel for defence 62 Q 60 63 Letter from the Permanent Secretary of the Ministry of Defence relating to the future of the Defence Equipment Plan, 13 May 2025 64 Q 41 65 The overall defence budget also increased between 2023–24 and 2024–25 meaning that the nuclear budget as a percentage was around 18% of the total budget. 66 Q 12 67 Q 15 68 Qq 19 and 20 69 Q 13 17 purposes.70 In consequence, forecast costs for the DNE for the ten years from 2023 and 2033 have increased by around £10 billion to approximately £128 billion from the £117.8 billion reported in the NAO’s 2023 Equipment Plan report.71 However, that 2023 Plan itself had reported that the DNE’s costs were already £7.9 billion more than its budget of £109.8 billion.72
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Government response AI summary
The government rejects the implicit recommendation for separate reporting, stating that DNE financial information is already provided through broader MOD financial reporting, Annual Report and Accounts, and the Defence Investment Plan.
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HM Treasury
32
Conclusion
32nd Report - The Future of the Equipme…
Rejected
The prioritisation of the DNE has led to government creating a ringfence which prevents the Department from using elsewhere money allocated to delivering the DNE, but which allows money to flow the other way.73 The Department recognises that one of the big capability questions it must answer through the SDR …
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The prioritisation of the DNE has led to government creating a ringfence which prevents the Department from using elsewhere money allocated to delivering the DNE, but which allows money to flow the other way.73 The Department recognises that one of the big capability questions it must answer through the SDR and its follow-on work is the balance of investment between nuclear and conventional capabilities.74 However, it has not yet worked this through.75
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Government response AI summary
The government rejects the committee's implicit recommendation for specific DNE financial reporting, stating that DNE financial information is already provided through existing parliamentary processes and will be included in the Defence Investment Plan.
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HM Treasury
33
Conclusion
32nd Report - The Future of the Equipme…
Rejected
The increase in nuclear costs may restrict the money available for other important needs.76 For example, improving poor accommodation is crucial in addressing the military’s recruitment and retention problems.77 The Department recognises that this is an area where there has been sustained under-investment for many years, and it will take …
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The increase in nuclear costs may restrict the money available for other important needs.76 For example, improving poor accommodation is crucial in addressing the military’s recruitment and retention problems.77 The Department recognises that this is an area where there has been sustained under-investment for many years, and it will take several years for the Department to get all accommodation up to the standard it would like. The Department said it was now addressing this, but noted that future funding for this would be one of the balance of investment decisions later this year.78 70 Q 12 71 Qq 13 and 14 72 C&AG’s Report, Equipment Plan 2023, para 2.17 73 Q 15 74 Q 21 75 Q 16 76 C&AG’s Report, Equipment Plan 2023, para 2.19 77 Q 1 78 Q 2 18
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Government response AI summary
The government rejects the implicit recommendation, stating that detailed DNE financial reporting is already provided through wider MOD financial reporting and other existing documents, to avoid inconsistency.
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HM Treasury