Source · Select Committees · Public Accounts Committee
Forty-Eighth Report - MoD Equipment Plan 2022–2032
Public Accounts Committee
HC 731
Published 19 April 2023
Recommendations
2
Accepted
The refreshed Integrated Review may revise judgements about operational requirements and identify new priorities which...
Recommendation
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 …
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Government Response 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.
HM Treasury
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3
Accepted
The Department has not demonstrated the necessary urgency to deliver enhanced capabilities to deter hostile...
Recommendation
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 …
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Government Response 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 front line. They will also provide an update on the implications for the Army’s forward equipment programme.
HM Treasury
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4
Acknowledged
The Department’s assessment of the Equipment Plan’s affordability still relies on over-optimistic assumptions about the...
Recommendation
The Department’s assessment of the Equipment Plan’s affordability still relies on over-optimistic assumptions about the cost of programmes and the efficiencies and cost reductions it will achieve. Although the Department assesses that the Equipment Plan is affordable over ten years, …
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Government Response Summary
The government states that the department carries out a rigorous annual process to review and challenge delivery teams’ costings and will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update to the committee.
HM Treasury
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5
Accepted
The Department has ignored the worsening economic environment in its latest Equipment Plan and faces...
Recommendation
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 …
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Government Response 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.
HM Treasury
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6
Acknowledged
We are concerned that the Department has not yet developed a supply chain that can...
Recommendation
We are concerned that the Department has not yet developed a supply chain that can reliably and quickly deliver the capabilities and stockpiles it needs. The Department has started to replenish stocks gifted to Ukraine, the cost of which HM …
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Government Response Summary
The government agrees and says it has published a Defence Supply Chain Strategy last year and is implementing initiatives including a MOD Supply Chain Development Programme, a Supply Chain Contingency Fund, and a tool to manage supply chain issues. It recognises collaboration with the defence industry is vital.
HM Treasury
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1
Rejected
On the basis of a report by the Comptroller and Auditor General, we took evidence...
Recommendation
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Defence (the Department) on the Equipment Plan 2022 to 2032.1
Government Response Summary
The government does not plan to publish a full equipment plan, but is supporting the National Audit Office to produce their annual report. It announced an additional £5 billion for defence at the Spring Budget 2023.
HM Treasury
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7
Accepted
In response to Russia’s invasion, the Government has decided to review its 2021 Integrated Review.
Recommendation
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 …
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Government Response 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 the equipment plan will be explained in the next update to the committee.
HM Treasury
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Conclusions (17)
8
Conclusion
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, …
Government Response 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.
9
Conclusion
The Department has been slow to implement the capabilities set out in the March 2021 Integrated Review, several of which it has not fully funded despite publishing two Equipment Plan reports since then.23 Furthermore, as part of the Integrated Review, the Department set aside £6.6 billion from 2021–22 to 2024–25 …
10
Conclusion
Acknowledged
The Ukraine conflict has demonstrated the renewed importance of land capabilities, but the Department acknowledged that there has been slippage in several major programmes.25 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 …
Government Response Summary
The government recognizes the need to balance risk with speed 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 front line, and provide an update on the implications for the Army’s forward equipment programme.
11
Conclusion
Acknowledged
In the meantime, the Department’s struggles to deliver projects to modernise land capabilities leaves the Army reliant on out-dated vehicles.27 Although the first Boxer armoured fighting vehicle is due to be delivered in 2023, it will not achieve initial operating capability until 2025.28 The Department recently updated us on the …
Government Response Summary
The government agrees with the committee's recommendation and will provide an update on the implications for the Army's forward equipment programme and more detail on the department’s approach to balance risk with the speed of capability delivery.
12
Conclusion
Acknowledged
Even when Ajax is finally introduced, it will not operate to its full potential without the Morpheus communications system. This will integrate Ajax across the land, air and sea domains, allowing real-time information-sharing and connectivity with other capabilities, such as Lightning II jets, on the battlefield.32 However, Morpheus has also …
Government Response Summary
The government recognizes the need to balance risk with speed 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 front line, and provide an update on the implications for the Army’s forward equipment programme.
13
Conclusion
Acknowledged
Furthermore, the Department acknowledged that even if all the Army equipment in the Plan was delivered, that would not guarantee it could provide an operational division. This is because the current Plan does not address some risks, such as the need for “joint enablers” which facilitate operations.35 The Department provided …
Government Response Summary
The government agrees with the committee's recommendation and will provide an update on the implications for the Army's forward equipment programme and more detail on the department’s approach to balance risk with the speed of capability delivery.
14
Conclusion
Acknowledged
The Department told us that its 2022–2032 Equipment Plan is affordable, as the equipment budget exceeds forecast costs by £2.6 billion (1% of budget). However, we noted that the aggregate surplus obscures financial pressures in the short-term and in some Top Level Budgets – those organisations, including front line commands, …
Government Response Summary
The department will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update to the committee; forecasting across ten-years is inherently uncertain, plans need to be flexible to adapt to change, and the equipment plan report includes an upper and lower cost estimate for the ten-year plan.
15
Conclusion
Acknowledged
We also noted that the Plan is only affordable if the Department achieves intended £13.8 billion of savings, £5 billion of which it has not yet developed plans to achieve.39 The Department may be over-optimistic in expecting to achieve all intended cost reductions and efficiency savings.40 In addition, of the …
Government Response Summary
The government agrees with the committee's recommendation and will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update to the committee.
16
Conclusion
Acknowledged
The Department may be over-optimistic in its assessment of project costs. The Department’s Cost Assurance and Analysis Service estimates that project costs could be between £5.2 billion and £14 billion higher than those in the Plan. The Department told us that the latter figure was a worst-case scenario and that …
Government Response Summary
The government agrees with the committee's recommendation and will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update to the committee.
17
Conclusion
Acknowledged
We are concerned that the Department seems reliant on delaying delivery of capabilities to keep the Plan affordable.44 The Department told us that the £13.2 billion management adjustment for realism represented a small amount of over-programming, and was based on historical performance and its assessment of deliverability, with supply chain …
Government Response Summary
The department will provide an assessment of the key sources of uncertainty and risk in the forward plan in the next update to the committee; forecasting across ten-years is inherently uncertain, plans need to be flexible to adapt to change, and the equipment plan report includes an upper and lower cost estimate for the ten-year plan.
18
Conclusion
Acknowledged
The affordability of the Plan is also under pressure from external economic factors, including rising inflation and unfavourable exchange rate movements. In March 2022 the Office of Budget Responsibility forecast that inflation would reach 8.7% by the end of 2022.47 The Department reported that this would increase cost pressure on …
Government Response Summary
The department continuously updates its forecast of the cost of the equipment plan and reviews its affordability through the annual financial planning process. The government announced an additional £5 billion for defence in the remaining two years of the 2020 Spending Review settlement at the 2023 Spring Budget, but the department still faces financial pressures.
19
Conclusion
Acknowledged
Economic factors such as inflation and exchange rates will cause significant risks to the plan’s affordability. The Department told us that it has £25 billion of risks that are not included in its forecast costs because it deems these unlikely to occur, compared to £13 billion of more-likely risks that …
Government Response Summary
The department continuously updates its forecast of the cost of the equipment plan and reviews its affordability through the annual financial planning process. The government announced an additional £5 billion for defence in the remaining two years of the 2020 Spending Review settlement at the 2023 Spring Budget, but the department still faces financial pressures.
20
Conclusion
Acknowledged
We are also concerned about the impact of inflation on the Plan’s delivery, particularly the Department’s ability to obtain the skills required. The Department told us that it and its suppliers do not have enough data scientists, software engineers or project managers. This puts at risk the delivery of a …
Government Response Summary
The department continuously updates its forecast of the cost of the equipment plan and reviews its affordability through the annual financial planning process. The government announced an additional £5 billion for defence in the remaining two years of the 2020 Spending Review settlement at the 2023 Spring Budget, but the department still faces financial pressures.
21
Conclusion
Acknowledged
The Department acknowledged that inflation also makes it difficult for suppliers to deliver due to rising staff and material costs.55 As a result, the Department is changing its contractual approach to take account of the inflation risk and avoid suppliers charging a higher premium for continuing to take this risk …
Government Response Summary
The government agrees with the committee's recommendation and states that the department continuously updates its forecast of the cost of the equipment plan and reviews its affordability through the annual financial planning process.
22
Conclusion
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 …
Government Response 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 beginning the implementation of a tool to proactively manage supply chain issues at lower tiers.
23
Conclusion
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 …
Government Response 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 beginning the implementation of a tool to proactively manage supply chain issues at lower tiers.
24
Conclusion
Acknowledged
HM Treasury has provided the Department with £560 million to restart production lines in UK companies.62 The Department told us that it is working closely with key suppliers in the UK, including BAE Systems, MBDA and Thales, to invest in long-term strategic capabilities. The Department subsequently wrote to us outlining …
Government Response Summary
The government agrees with the committee's recommendation and outlines actions being taken in relation to defence supply chain strategy, including the creation of a MOD Supply Chain Development Programme, a Supply Chain Contingency Fund, and implementation of a tool to proactively manage supply chain issues.