The Defence Equipment Plan: a decade of prudence and clarity

The Secretary of State for Defence, Rt Hon Phillip Hammond MPThe Ministry of Defence has shared with industry its ten-year procurement vision with publication of its long-term defence equipment spending plans, which will total almost £160 billion. Details of the MOD’s plans for equipping the Army, Royal Navy and RAF over the coming decade, and how this will be funded, were announced to offer clarity and open up business opportunities to make British troops among the best equipped in the world.

The MOD’s recently announced Defence Equipment Plan covers the decade to 2022 and is the first time the Department has outlined defence equipment spending over such a long period, reflecting the growth and lifespan of major military projects.

The publication of the Equipment Plan is part of an ongoing commitment to transparency across Government and provides more information on defence spending plans than has ever been previously published. Defence Secretary Philip Hammond said he believed the plan will help deliver greater efficiency within the Department and enable the defence industry to plan its future investment with greater confidence.

Supplying to the MOD is a competitive business and, as suggested by the CBI following the announcement of the plan, greater visibility of how the MOD will allocate £160 billion of spending over the next decade will give companies more security when making investment planning decisions in the UK.

The Equipment Plan includes some major investments in state of the art military capabilities and their support over the next ten years. The MOD currently spends around 40 per cent of its budget on equipment and equipment support, but the Department forecasts that this will increase to 45 per cent by the end of the decade. This is good news for both Service personnel and business.

In headline terms, over the next ten years the MOD will spend £60 billion on the procurement of new equipment and £18 billion on support arrangements for new equipment, including spending on routine spares and maintenance, ship refits, support arrangements for communications and information infrastructure, and the running costs of the nuclear propulsion and nuclear weapons production facilities.

Mr Hammond has also introduced for the first time a contingency of £4.8 billion to manage cost variation and protect existing projects. Structuring the Defence Equipment Plan and the budget that supports it in this way is intended to enable the MOD to deliver Future Force 2020 and help bring the defence programme back into balance while maintaining the Armed Forces and making its equipment fit for the 21st century.

Drilling into the plans further reveals that £35.8 billion is to be spent on submarines and the strategic nuclear deterrent, including a total of seven Astute Class attack submarines and developing a replacement for the Vanguard Class ballistic missile submarines. A further £18.5 billion will be invested in combat air, including Lightning II and Typhoon fast jets and Unmanned Aerial Vehicles (UAVs); while £17.4 billion worth of spend will be channelled into ships, including the Queen Elizabeth Class aircraft carriers, six new Type 45 destroyers and the development of the Type 26 Global Combat Ship.

The next decade will also see £13.9 billion spent on aircraft for air-to-air refuelling, passenger and heavy lift, such as Voyager and A400M; £12.3 billion spent on armoured fighting vehicles, including Warrior, Scout and other land equipment; £12.1 billion spent on helicopters, including Chinook, Apache, Puma and Wildcat; and £11.4 billion spent on weapons, for example missiles, torpedoes and precision guided bombs.

Around 80 per cent of this equipment spend is contractually or otherwise committed in the early years of the programme, with 20 per cent due to be spent at the end of the decade.

The plan also includes an additional £8 billion, which is currently unallocated. This will be committed as new equipment priorities emerge, and only once the MOD is confident that such priorities are affordable and hence deliverable.

Defence Secretary Philip Hammond said: “It is essential that our Forces are fully equipped to respond to the range of threats we face in this uncertain world. This £160 billion Equipment Plan will ensure the UK’s Armed Forces remain among the most capable and best equipped in the world, providing the military with the confidence that the equipment they need is fully funded. For the first time in a generation the Armed Forces will have a sustainable Equipment Plan.”

The affordability of the plan has been scrutinised by the National Audit Office (NAO), and their independent analysis has also been published. The NAO said that the MOD has substantially revised the way it compiles and manages its Equipment Plan and is now approaching the task on a more prudent basis.

The NAO is also satisfied that the MOD has taken difficult decisions to address what was estimated to be a £74 billion gap between its forecast funding and costs, and that it has taken significant positive steps designed to deal with the accumulated affordability gap and lay the foundations for future budgetary stability.

Mr Hammond said he was delighted that the NAO had recognised that significant progress has been made with the Equipment Plan and that positive steps have been taken to deal with the affordability gap.

The Defence Secretary added: “The [NAO] report also shows that, in addition to the Core Equipment Plan, we have around £8 billion of additional headroom in the later years of the decade. This will allow us to fund, incrementally and flexibly, a number of additional programmes that are a high priority for defence, as soon as we can be sure that they are affordable. We will do so only at the point when commitment is required to meet the operational requirement and only in accordance with the military assessment of priority at the time, an order defined by operational need, rather than short-term financial pressure.”

The importance of the Defence Equipment Plan cannot be doubted, and the transparency of its commitments is sure to receive a warm welcome from industry. The best way to support the Armed Forces, according to Mr Hammond, is to present well-managed programmes with assurances that the Equipment Plan is deliverable; the financial headroom announced in the plan and the flexibility it will allow is a positive signal for all.