Select committee: Public Accounts Committee
Conclusion 11
Fiftieth Report - Defence Equipment Plan 2020–2030
Published 16 Mar 2021
Addressed to HM Treasury
Public Accounts Committee Defence Equipment Plan 2020-2030 All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Conclusion (the committee's words)
The Department acknowledged that its equipment projects are subject to uncertainties that affect their delivery and cost. It is responsible for managing the risk of cost increases within its annual budget. For example, as approximately 15% of the Plan’s forecast expenditure is in euros or dollars, the Department models the impact of foreign exchange movements on future equipment expenditure and reflects a possible 10% reduction in the value of sterling in its worst case scenario of the Plan’s funding shortfall.23 The Department told us that it is paying very close attention to the impact of the global economic position on foreign exchange rates and is discussing with HM Treasury the effect of the fluctuations on sterling over the last year.24Furthermore, it monitors the impact on individual programmes as exchange rate fluctuations can create budgetary pressure; for example, it estimated that the costs of the Lightning II programme could increase by £0.8 billion if 2020 exchange rates persisted.25
From: Public Accounts Committee, Fiftieth Report - Defence Equipment Plan 2020–2030 (HC 693), 16 March 2021
Government response
The government responded to the whole report on 31 August 2021 (deadline 16 May 2021).
Summary written by Accountability Index from the government's response. It is not the government's own words.The government states that it agrees with the Committee's recommendations that are set out in the response, each with a stated target implementation date, and sets out related work already under way.
- On affordability, it agrees that the next Equipment Plan report must demonstrate affordability, and says that report (Autumn 2021) will set out the implications of the 2020 Spending Review settlement and the Integrated Review.
- On transparency over the additional funding, it agrees and says it "will write to the Committee before summer recess" with a summary of investment and savings decisions, with a target date of June 2021.
- On defence cost inflation, it agrees and says it will write to the Committee alongside the Autumn 2021 Equipment Plan report, and states it "is committed to changing attitudes and behaviours within the Defence acquisition system".
- On finance capability, it agrees with a target date of March 2023, noting that "It takes time to both train and recruit professionally qualified staff, but numbers will increase over time."