32nd Report - The Future of the Equipment Plan

Lessons learned from supporting Ukraine have made the Department examine its own decision-making and procurement processes, finding some of them in need of improvement. The Department has learned several lessons from its support for Ukraine. These include: the need for a mixture of high-end capabilities, such as Storm Shadow long-range cruise missiles, and affordable high-mass equipment, such as drones; the importance of augmenting crewed capabilities, such as helicopters, with uncrewed autonomous collaborative platforms; the advantages of having fewer systems for easier logistics management; and having the industrial ability and capacity to sustain equipment if supply chains are disrupted. The Department has responded to these lessons by splitting its procurement of military equipment into three segments: big strategic programmes to provide long-term platforms, such as submarines, ships and aeroplanes; 4 programmes for developing capabilities used on the platforms; and the rapid development and deployment of inexpensive, innovative capabilities. The Department also recognises it must reassess what financial and operational risk it is willing to tolerate, because a higher risk appetite allows it to deliver equipment quicker. In addition, the Department has learned that the pace of innovation means equipment can become outdated quickly, so it must adapt to ending programmes sooner and disposing of equipment which no longer meets requirements. recommendation The Department should update the Committee by the end of June 2026 on what further improvements to how it operates it has identified from its support for Ukraine, and how it will implement them.

The Department’s defence reform programme sets out ambitious plans for improving defence procurement, but it is unclear how long it will take for these benefits to become fully embedded. In April 2025 the Department reorganised itself into four areas–the Department of State, a Military Strategic Headquarters, a National Armaments Director (NAD) Group and Defence Nuclear. The Department anticipates that the NAD will have significantly more control over the end-to-end acquisition process than the old structure provided. The Department is building on reforms begun under the previous government to speed up procurement: it aspires to reduce by two-thirds the time to award a contract to a two-year maximum, and to complete most programmes in under five years. The Department anticipates it can achieve this by involving industry in the process much earlier and reducing the overspecification of requirements. Instead of the Department developing a firm requirement then going to industry, it will state what the military capability problem is, and the NAD Group will seek solutions from industry. The Department expects this approach will increase defence exports, as industry will be able to design products that also work for the expanding international market. However, 2025–26 is a transitional year, and the new approach will take several years to reduce average times, primarily owing to legacy programmes which had started before April 2025. recommendation The Department should provide the Committee with an evidence-based update by the end of June 2026 which demonstrates how defence procurement has improved in the first year that the National Armaments Director Group has operated, including key performance indicators.

The Strategic Defence Review (the SDR) has set out the government’s high-level policy and capability ambitions, but the Department will need to complete further work to prioritise what it must do to achieve them. The government launched the SDR in July 2024 and 5 published it on 2 June 2025, five weeks after our evidence session with the Department. The Department said that the SDR would try to balance ambition and resource, chart the direction needed to respond to the current geopolitical situation and ensure that the UK has the armed forces it needs, both now and for the future. The Department stressed that its existing equipment programme was already ambitious–including renewing the nuclear warhead, spending £40 billion on new equipment for the Army, and investing in a sixth-generation fighter–and that the SDR would build upon and develop this. As confirmed in the Spending Review on 11 June, the government has announced that it will increase defence spending to 2.5% of gross domestic product from April 2027, but the Department is only midway through the process of deciding how to invest the additional funding. Now that the SDR has been published the Department will have to work through the detailed capability choices, and it does not expect to have completed this process until the latter part of 2025–two years since this Committee was last able to scrutinise the Department’s spending plans. recommendation The Department should provide the Committee with: • a written update during Parliament’s September 2025 sitting on its progress in converting the SDR’s ambitions into a deliverable plan; and • an update on its final implementation plan before the Christmas 2025 recess.

We are extremely disappointed that the Permanent Secretary did not have concrete suggestions for how the Department will provide Parliament with annual reporting on its plans. The Department last published a full Equipment Plan in November 2022. Since July 2023, it has written to both this and the previous Public Accounts Committee several times with excuses for why it has not produced any subsequent Equipment Plan reports, and it has questioned whether that format was best suited to explaining its future investment and support plans. The recent SDR says that the Department will develop a new ‘Defence Investment Plan’ to supersede the Equipment Plan, but provides no details. We held this inquiry in the sincere hope that by its end we would have heard clear proposals from the Department as to how this Committee, and by extension Parliament, will be able to scrutinise annually the crucial issue of its forward spending plans. The Department acknowledged that it works better with scrutiny from this Committee and the Defence Committee and told us that Ministers were clear that they wanted the Department to be more transparent than previously. However, the Department did not propose how it might present its plans to Parliament and could not give us a date for when it might be able to do so. These answers were entirely unsatisfactory. 6 recommendation During Parliament’s September 2025 sitting the Department must provide the Committee with a fully worked out proposal for how it will update Parliament each year about its equipment procurement and support plans. The Department should include in its proposal how it will: • ensure that the updates are timely; and • provide analysis of any variances from the Spending Review baseline.

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

Russia’s illegal invasion of Ukraine in February 2022, which followed its annexation of Crimea in 2014, has contributed to making the world more unstable. In response, the UK government has confirmed in its Spending Review on 11 June that it will increase defence spending to 2.5% of gross domestic product from April 2027, with an ambition to increase it to 3% in the next Parliament.1 Likewise, total NATO defence spending has increased enormously, predominantly through European countries, and NATO has refreshed its operational plans so that member nations know how they best fit in and what capabilities are required.2

Through Taskforce Hirst, UK and Ukrainian industry are working together to design, build and support innovative and adaptable equipment. The Department said that both the UK and Ukraine are benefitting from this collaboration, including aligning how the defence industries in the two countries operate.9 The Department for Business and Trade (DBT) works with the Department on Taskforce Hirst, and DBT has led trade missions to Ukraine in support of this initiative.10 5 Q 1 6 C&AG’s Report, Investigation into military support for Ukraine, Session 2024–25, HC 230, 11 September 2024 7 C&AG’s Report, Ukraine, paras 1, 2, 1.1 8 Q 44; C&AG’s Report, Ukraine, paras 2.4 and 2.7 9 Q 39 10 C&AG’s Report, Ukraine, para 1.9 9

The Department said that there are two important but unheralded international groups working to assist Ukraine: the Ukraine defence contact group, and the conference of national armaments directors.11 The UK, Germany and Ukraine now lead the Ukraine defence contact group, which works with more than 40 allies to coordinate responses to Ukrainian requests for equipment, oversee delivery, and marshal European resources in the most effective way.12 This is supported by around a dozen capability coalitions, led by different nations, which work to supply Ukraine’s immediate needs, and develop future capabilities for it. The UK and Norway lead on maritime capability, and other capability coalitions lead on drones, artillery, cyber and IT.13 The Department said that there is significant overlap between the Ukraine defence contact group, and the conference of national armaments directors, with the latter working to make sure that member countries are able to support NATO’s plans and sustain them in a warfighting situation.14 The UK is also working with allies to identify who is best placed to supply particular capabilities to satisfy the anticipated operational requirements of any future peacekeeping operations in Ukraine.15 Lessons learned from military support provided

The importance of allies, discussed in the previous section, is one of the lessons that the Department has learned from its support for Ukraine.16 The Department also highlighted several other lessons. First, for future conflicts armed forces will need a mixture of capabilities to be effective. For example, Storm Shadow long-range cruise missiles have been of fundamental importance in the war in Ukraine, but they are a long-term, expensive capability at the cutting-edge of technology. However, a transformation during the war has been the importance of affordable high-mass equipment, such as drones. The Department now considers that it needs both high end equipment and affordable mass going forward.17

The Department said that autonomy is starting to really matter in warfare. The importance of having a mix of crewed and uncrewed platforms is now more apparent, such as by augmenting crewed helicopters with 11 Q 26 12 Qq 26, 44 and 45 13 Q 45 14 Q 26 15 Q 54 16 Qq 26 and 39 17 Q 39 10 autonomous collaborative platforms. Similarly, the use of artificial intelligence is important to support operations in battlefields when there are very high levels of electronic warfare.18

The advantage of having fewer systems has also been reinforced. The Department explained that with more systems, it is more complicated to manage the logistics and more difficult to sustain warfighting operations, which reduces the deterrent effect. As a result, the Department’s view was that you might get less value for the money spent. The Department contrasted this with the benefits of working with as many allies as possible to co-design, co-develop, co-produce and co-support equipment, and cited the Boxer armoured fighting vehicle as an example of this. It said that this approach was much more cost-effective compared with allies having different systems.19 The Department expressed this view prior to the SDR and the Committee will monitor any changes in its assessment following its publication.

The final lesson is the importance of having the industrial ability and capacity to sustain equipment if supply chains are disrupted. The Department said that this means making sure that the armed forces could continue to operate equipment, even if the UK’s allies have been disrupted for political or technical reasons.20 The Department regards factories as in effect being part of weapon systems because they are fundamental to the UK’s ability to fight and sustain its armed forces.21 The Department explained that the UK defence industry needs to be reorganised to increase its capacity when needed to meet greater demand.22

The Department has responded to these lessons by splitting its procurement into three segments. The top segment consists of large strategic programmes that provide long-term platforms, such as submarines, ships and aeroplanes. The second segment is for developing capabilities and systems that the Department will deploy on those platforms. The third segment, based on the UK’s support for Ukraine, is the rapid development and deployment of inexpensive, innovative capabilities.23

The Department explained that for the third segment, it has developed a process through its support for Ukraine whereby it provides industry with a problem statement and within a month gets proposals back from industry. It requires at least three proposals but often gets more than that, many 18 Q 39 19 Q 26 20 Q 26 21 Qq 26 and 41 22 Q 41 23 Q 22 11 from British small and medium-sized enterprises. The Department then uses experts to select the two best proposals, which are tested in the field. It then selects the best solution to scale up.24

The Department’s support for Ukraine has also led it to reconsider what level of financial and operational risk it is willing to tolerate. A higher risk appetite allows equipment to be delivered quicker as there is less checking for mistakes. Circumstances can affect the risk appetite – in a war situation, for example, the risk appetite is extraordinarily high. The Department is trying to streamline its procurement processes by pushing decision-making down the hierarchy as much as it can. To do this, the Department said it must gauge which of its regulations and procedures are sensible, and which are arcane.25 This includes ensuring that the approvals process strikes a better balance between assurance and pace.26

The speed of innovation seen in Ukraine has highlighted that quicker procurement is important to ensure that new equipment is not already out of date by the time the armed forces deploy it.27 The Department explained that this requires a change in mindset. It will become more common for programmes to end sooner, or even be abandoned, because the pace of innovation and the new, higher-threat environment, means they are no longer relevant. It also means that equipment will have a shorter shelf life than the Armed Forces have been used to, because the Department will need to update capabilities continually to meet evolving requirements.28 Improving defence procurement

On 1 April 2025 the Department’s defence reform programme reorganised it into four areas – the Department of State, a Military Strategic Headquarters, a National Armaments Director (NAD) Group and Defence Nuclear.29 The Department anticipates that defence reform will give the NAD significantly more control over the end-to-end acquisition process than the old structure provided.30

The Department intends to build on procurement reforms begun under the previous government to procure faster. It has identified that the biggest problem is that it takes too long to get programmes on contract.31 24 Qq 22 and 40 25 Qq 42 and 43 26 Q 27 27 Qq 40 and 43 28 Qq 44 and 46 29 Q 29; Secretary of State for Defence, Defence Reform, Statement made on 1 April 2025, Statement UIN HCWS573 30 Q 28 31 Q 47 12 Consequently, the Department aspires to reduce the time taken to award a contract for the most complex programmes from six years to two years, and for programmes in the second segment from three years to one year.32 The Department is also trying to reduce the average time for completing programmes by ensuring that the vast majority of them are completed in less than five years.33

The Department has set the five-year target for programme length to stop the armed forces over-specifying their requirements.34 It said that the troubled Ajax programme, for example, had been tremendously over-specified.35 The Department anticipates it can achieve this target by involving industry in the procurement process much earlier.36 Instead of the armed forces developing a firm requirement then going to industry with it, the Department will state what the military capability problem is, and the NAD Group will seek solutions from industry.37 The Department expects this approach will also help to increase defence exports, as industry will be able to design products that work for an international market that is expanding as spending across NATO nations, especially in Europe, increases dramatically.38

However, 2025–26 is a transitional year as the changes bed in. The Department has started to roll out new processes so that programmes beginning this year adhere to the faster timeframes. The Department’s senior leadership team will monitor progress using a refreshed dashboard.39 However, the Department said it will take several years for the new approach to reduce average times because of legacy programmes that had started before April 2025.40 32 Qq 22, 32 and 46 33 Q 47 34 Q 47 35 Q 29 36 Q 22 37 Qq 28 and 33 38 Qq 11, 22, 23 and 24 39 Q 37 40 Q 36 13 2 Future Parliamentary scrutiny of defence spending plans The 2025 Strategic Defence Review

The government launched the Strategic Defence Review (the SDR) in July 2024 and said it would publish it in the first half of 2025.41 The Department told us that the SDR would try to balance ambition and resource, but also chart the direction needed to respond to the current geopolitical situation and ensure that the UK has the armed forces it needs, both now and for the future.42 Five weeks after the Department’s oral evidence to us, it published the SDR on 2 June 2025.

At our evidence session the Department had reiterated the importance of NATO to its strategic outlook and noted that one theme of the SDR’s terms of reference is thinking ‘NATO-first’, when considering policy, capability requirements and procurement .43 The Department said that NATO is now stronger following recent geopolitical developments: its membership has increased to 32 with the addition of Finland and Sweden; it is refreshing its operational plans so that they are in a better state, with member nations knowing how they best fit in and what capabilities are required; and total NATO defence spending has increased enormously, predominantly through European countries.44 One area of renewed emphasis is on NATO’s planning, meaning that the 32 nations can operate collectively, with each knowing its place in NATO’s war plans. NATO is also reemphasising the importance of standardisation and the interoperability of equipment between members, which the conference of national armaments directors is working to address.45 41 Q 4; Ministry of Defence, Strategic Defence Review 2024–2025: Terms of Reference, 17 July 2024 42 Q 6 43 Qq 26 and 41 44 Qq 23 - 26 45 Q 26 14

The Department said that the SDR would build upon and develop the current equipment programme. The Department described the existing programme as “ambitious” and an “extraordinary list” of “massive programmes” which includes renewing the nuclear warhead, spending £40 billion to reequip the Army, and the long-term investment in a sixth-generation fighter. It also said it was trying to strengthen some areas of weakness.46 For example, the previous Public Accounts Committee heard during its inquiry on the 2023 Equipment Plan that integrated air missile defence needed to be deeper and broader both within the UK’s armed forces and within NATO collectively.47

In March 2025, the government announced that it will increase defence spending to 2.5% of gross domestic product from April 2027.48 However, the Department told us it is only midway through the process of deciding how to invest the additional funding in priorities that ensure the armed forces deliver what the government has asked of them.49 The Department said that once the SDR was published it would have to work through the detailed capability choices using an internal balanced investment process, and then set out the results of that for parliamentary scrutiny. It does not expect to have completed this process until the latter part of 2025.50 The absence of full Equipment Plan since 2022

The Department published an Equipment Plan (the Plan) each year from 2012 to 2022, setting out its 10-year spending plans for equipment procurement and support projects. The Department’s aim was to produce a reliable assessment of the affordability of its equipment programme, and to demonstrate to Parliament how it intended to manage its equipment funding. Each year, the National Audit Office published a report examining the Department’s assessment of the Plan’s affordability and its response to the financial challenges it faced.51

In July 2023, the Department’s Permanent Secretary wrote to the Chair of the previous Public Accounts Committee to say that it would not provide a full Plan that year as it needed “to work through the direction from the 46 Q 5 47 Public Accounts Committee, Oral Evidence: Defence equipment plan 2023–33, Q 61, HC 451, 22 January 2024 48 HM Treasury, Spring Statement 2025, para 2.4, CP 1298, March 2025; The 2.6% figure referred to in the announcement on 11 June includes the 0.1% intelligence and security services contribution. 49 Q 3 50 Q 59 51 C&AG’s Report, The Equipment Plan 2023–2033, Session 2023–24, HC 315, 4 December 2023, paras 1.2 and 1.3 15 Defence Command Paper 2023 (DCP23) and further understand the impact of extraordinary inflation and how to mitigate it.”52 In December 2023, however, it published affordability analysis of its equipment and support projects for 2023 to 2033, in which the forecast costs of £305.5 billion were £16.9 billion more than its available budget.53 The total forecast 10-year defence costs to 2032–33 were £42.5 billion more than the overall budget.54 The previous Public Accounts Committee reported on this in March 2024.55

In November 2024, the Minister for Defence Procurement & Industry wrote to the Chair to say that the Department would not publish a Plan for 2024 because “it would not provide an accurate reflection of this Government’s spending plans and I do not believe it would provide a useful means for Parliament to hold the Department to account on how we will deliver the plan affordably”.56 In March 2025, the Permanent Secretary wrote to the Chair: “In light of the Defence funding announcement made by the Prime Minister on 25th February we are working through the consequences for our future spending and our approach to procurement and as a result what that means for how we might best support the committee and Parliament in its scrutiny of the department’s equipment planning.”57

We held this inquiry in the sincere hope that by its end we would have heard clear proposals from the Department as to how this Committee, and by extension Parliament, would be able to scrutinise annually the crucial issue of its forward spending plans.58 The Department acknowledged that it works better with scrutiny from this Committee and the Defence Committee and told us that Ministers were clear that they wanted the Department to be more transparent than previously.59 However, the Department made no proposals for how it might present its plans to Parliament and could not give us a date for when it would be able to do so.60 These answers were entirely unsatisfactory.61 52 Correspondence from David Williams CB, Permanent Secretary, Ministry of Defence, re Update - MOD Equipment Plan 2022 - 2032 in Session 2022–23, dated 21 July 2023 53 Revised correspondence from David Williams CB, Permanent Secretary, Ministry of Defence, re Equipment Plan 2023–2033: Update on affordability, dated 4 December 2023 54 C&AG’s Report, Equipment Plan 2023, para 2.8 55 Committee of Public Accounts, MoD Equipment Plan 2023–2033, Nineteenth Report of Session 2023–24, HC 451, 8 March 2024 56 Letter from the Minister for Defence Procurement and Industry relating to the Ministry of Defence Equipment Plan 2024, 13 November 2024 57 Letter from the Permanent Secretary of the Ministry of Defence relating to the response on the Defence Equipment Plan, 12 March 2025 58 Q 1 59 Q 57 60 Qq 58 and 59 61 Q 60 16

At the end of our evidence session, we asked the Department to write to us setting out a satisfactory and precise methodology for providing Parliament with an update on its spending plans at least once a year.62 The Permanent Secretary has since written to us, but yet again he has failed to address our concerns. Instead, the letter contained platitudes regarding the Department’s commitment to report to Parliament annually to provide opportunities for regular scrutiny, but was vague about how the Department would do this.63 The recently published SDR says that the Department will develop a new ten-year Defence Investment Plan, which will be completed in autumn 2025. While the SDR says this will supersede the Equipment Plan, the ongoing lack of details means we cannot judge how adequate a replacement this might be. The rising cost of the Defence Nuclear Enterprise (the DNE)

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

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

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

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