Source · Select Committees · Public Accounts Committee
Recommendation 7
7
Rejected
MoD Equipment Plan affordability contingent on uncertain 2.5% GDP defence spending pledge.
Conclusion
The MoD told us that if the government fulfils its commitment to spending 2.5% of Gross Domestic Product (GDP) each year on defence, the Plan could well be affordable.18 The current defence budget is 2.1% of GDP, which increases to 2.25% when the UK’s support for Ukraine is included. The MoD said that the difference between 2.25% and 2.5% of GDP is about £6 billion or £7 billion.19 However, the government will only increase non- Ukraine defence spending to 2.5% of GDP if fiscal and economic circumstances allow, and there is no certainty when or whether this will occur.20
Government Response Summary
The government disagrees with the implied recommendation, stating the Prime Minister's commitment to 2.5% GDP by 2030 and explaining that it will not set out a list of potential capability cuts due to operational security risks.
Government Response
Rejected
HM Government
Rejected
1.1 The government disagrees with the Committee’s recommendation. 1.2 The Prime Minister has committed to defence spending reaching 2.5% of GDP in 2030. 1.3 The Ministry of Defence (the department) has already implemented changes to commercial policy to manage inflation and continues to make greater use of index-linked fixed price contracts to prevent firms from either applying high premia on firm price bids or not bidding entirely. Engagement with the department’s main suppliers to discuss how inflation will be treated in future contracts, including a view of what is reasonable for payroll costs, is ongoing. 1.4 The government sets out the capability required by the Armed Forces via Strategic Reviews such as the Integrated Review and Defence Command Papers. The department does not intend to set out a list of capabilities that would be cut if certain budget assumptions are not met as this would create a risk to operational security and undermine industry confidence. 1.5 The department is continuing to work through the Defence Command Paper 2023 which signals a shift to focus more on Artificial Intelligence, autonomous and digital capabilities to modernise the Armed Forces, and reinforces the importance of assuring the department’s supply chains.