Asked by
To ask His Majesty’s Government what assessment they have made of
the National Audit Office’s value for money analysis of the
Ministry of Defence’s Equipment Plan 2023 to 2033, published on 4
December.
The Minister of State, Ministry of Defence (The ) (Con)
My Lords, the National Audit Office’s report on the equipment
plan states that it does not consider the value for money of the
MoD’s equipment expenditure or of the specific projects
mentioned; nor does it comment on the policy choices that the
department makes to develop a plan that meets its future needs.
While the National Audit Office report recognises the significant
impact that global headwinds and high inflation have had on UK
defence, it does not and could not accurately reflect the current
or future state of the Armed Forces equipment plan, given that it
pre-dates the publication of the defence Command Paper
refresh.
(Lab)
My Lords, the NAO report is deeply disturbing at a time when we
have war in Europe, conflict in the Middle East and growing
threats globally. As we have just heard from the Minister, the
MoD just dismisses it as a dated snapshot that does not reflect
reality. The NAO says that the plan is unaffordable and that
forecast costs exceed the available budget by £16.9 billion. It
says that the MoD estimates that the funding gap could range
between £7.6 billion and £29.8 billion. How is that just a dated
snapshot?
The (Con)
My Lords, the Ministry of Defence certainly does not consider the
report in such a way. Where the Ministry of Defence is coming
from is that our Armed Forces are operating in an increasingly
contested and dangerous world, and we are working hard to deliver
what our servicepeople need to keep the United Kingdom safe. We
are in a period of great change, which is why the equipment plan
budget has increased to £288.6 billion over the next decade. It
is about the next decade—10 years forward.
(CB)
My Lords, one of the most interesting forecasts in the NAO report
is not a figure but a word: “Unknown”. It is the forecast of the
equipment plan cost if it were to reflect all the capabilities
outlined in the 2023 integrated review and defence Command Paper
refresh. The gap between resource and ambition is serious and
leaves us exposed in an increasingly dangerous world. When are
the Government going to get a grip on it?
The (Con)
My Lords, I do not buy that the plan is unfundable and
unworkable. There is significant flexibility within the figures
and large contingencies to allow the flexibility of the correct
platforms to be developed over the period of time to meet the
defence needs for the state.
(Con)
My Lords, does my noble friend the Minister agree that it is
wrong to look at the defence equipment plan as some kind of
rigid, unchangeable proposition, for the very reason he has just
indicated? We have to have headroom, which is necessary to allow
for flexibility, pursuant to the defence Command Paper refresh,
but also because of emerging technologies and our constant
journey with artificial intelligence. It is important for
everyone to remember that inherent flexibility is actually a
strength.
The (Con)
My Lords, it is a great honour to answer a question from my
predecessor. She is absolutely right: we are looking at a 10-year
timeframe and only 25% of expenditure is committed. We have a
contingency budget in there of more than £4 billion.
(LD)
My Lords, the equipment plan bandies around some interesting
figures: the noble Lord, , mentioned £16.9 billion, while
I picked up £7.6 billion and £29.8 billion—obviously, precision
is our watchword. The noble and gallant Lord, , picked up the very alarming
word “Unknown” for the costs and, where they are known, they are
deemed to be “unaffordable”. This is not a good projection. Can
the Minister project a rather more accurate estimate of the
financial cost? In particular, how does the MoD intend to meet
the acute skills shortage gap? Without the skills, our brave
military personnel are going to be lost.
The (Con)
The noble Baroness makes a good point. In fact, there is
considerable investment in skills—particularly in the areas of
nuclear and shipbuilding—within these figures, all of which are
costed. She is absolutely right that the skills gap that the
industry is facing is entirely being funded and down to
government.
(Lab)
My Lords, following on from the most important question arising
from this report, raised by the noble and gallant Lord, , I wish to make a couple of
points to the Minister and ask him a question. First, this
report, like all NAO reports, was agreed by the department.
Secondly, the report specifically says that the equipment
plan
“does not reflect all the cost pressures to develop new and
support existing capabilities set out in the 2021 Integrated
Review”,
which was updated in March this year. I recollect that the then
Secretary of State for Defence, , said that the extra £5 billion was welcome but that
£11 billion was needed.
Thirdly, the report highlights the fact that the individual
services have differing approaches to preparing the forecast in
the plan. The Navy and the Royal Air Force include predicted
costs for the capabilities that the Government expect from them
while the Army includes only what it can afford. These issues
need immediate attention, do they not? They should be attended to
immediately.
The (Con)
My Lords, I agree with much of what the noble Lord has said. One
of the key points about the NAO report is that it does not
reflect the aspiration to increase defence spending to 2.5% of
GDP when economic and fiscal conditions allow. If one puts that
back in, it obviously completely changes the finances.
On the question of consistency, I am in entire agreement. I am
very new in this role. I have looked at budgets for the last 40
years and I have never seen a budget that resembles anything like
this one, and that is not just the absolute figures. The way in
which it is constructed means that it is very difficult to get to
exactly the way in which the money moves around. That is
something that I commit to the House that I will learn and then
lose not much more sleep over.
(CB)
My Lords, can the Minister confirm that none of the cost of the
equipment provided to the Government of Ukraine has been or will
be met from the defence budget, and that that will include any
restocking of war stocks that have been gifted to Ukraine?
The (Con)
My Lords, I thank the noble and gallant Lord for that question. I
can confirm that all equipment gifted to Ukraine is well without
these figures. Your Lordships will know that, as well as the £5
billion that was granted by the Chancellor, an additional nearly
£0.5 billion was given to restock the stockpiles that are
required.
(Con)
My Lords, I wish the Minister all the best in his new
appointment. Further to the question from the noble Baroness,
Lady Garden, the NAO report refers to supply line risks and
constraints caused by skills gaps, plus the shortage of key
components. Much of that is the consequence of the war in
Ukraine. We must continue the support for that war but, further
to the noble Baroness’s question, what more can the Minister and
the department do to address the skills gap by working with key
contractors and suppliers, such as BAE?
The (Con)
My noble friend makes two very good points. One is about the
extremely complicated supply chain that the defence industry has
to follow and the extreme pressures that inflationary costs bring
to bear on that. It is not just headline inflation; the
inflationary costs go from raw materials right through to the
completed product. It is extraordinary and very varied. The
question of the skills gap is at the heart of one of my right
honourable friend’s tasks in the other place in ensuring that
British industry, particularly organisations such as BAE Systems,
is sufficiently available to get the skills.
(Lab)
My Lords, the report is extremely worrying. The Government seem
to have the ability to talk as if these things are not crucial.
There is no doubt that we need more money spent on defence. I
understand that we are looking at 2.5% when the situation allows.
Yes, we are very short of money, but sometimes, if things are so
dangerous and worrying, you have to adjust your priorities.
We seem to be lulling ourselves into a false sense of security.
If the Government really think that our military is being
sufficiently funded and all things are rosy, I am very worried.
If that is just what they are saying to put a good face on it
here, fine, but I have a horrible feeling that they believe
things really are rosy. I ask the Minister to look at the real
impact of this NAO report, because there is no doubt that things
we have been promised will not come.
The (Con)
My Lords, I assure the noble Lord that the Government take the
report extremely seriously, as I said to the noble Lord, . An enormous amount of work is
going on in the department to look at the changing defence
requirement for the next 10 years and the impact that it is
likely to have on the cost implications. Everybody is fully aware
that the Government wish to get to 2.5% as a minimum and I am
sure that, when fiscal conditions allow, that will be delivered.
