House of Commons Library briefing note on "The cost of the UK's strategic nuclear deterrent"

Since the acquisition of the UK's first strategic nuclear deterrent in the 1950s, the cost of procuring and maintaining it, and which Government department should finance it, has always been a matter of much debate.

Ascertaining historical costs for the nuclear deterrent is difficult and complex, as this information is not easily available from public sources. Many records no longer exist, while others were classified. In the past the Government has also often not discussed costs on the grounds of operational security.

Information is also presented in many different ways (i.e. current prices, constant prices, as a percentage of the defence budget) therefore making it difficult to provide an annual breakdown that is calculated in a consistent manner.  A cost set out in the early 1960s, for example, could not be directly compared to costs set out in the 1980s or the present day unless they were uprated to take into account inflation.

Historical costs

V-bomber force

The UK’s strategic nuclear deterrent was initially provided by the RAF’s V-force. In In 1957 the Secretary of State for Air sought to reassure those who felt that too much of the defence expenditure was being devoted to the deterrent, saying the V-bomber force "will absorb only about one-tenth" of the defence budget. In 1958 the Government said that altogether, including the cost of the defence by conventional forces of deterrent bases, about one-fifth of the defence budget was allocated to the deterrent. The nuclear role of the V-force was withdrawn in 1969.

Polaris

The UK purchased the submarine-based Polaris system from the United States in 1962 under the Polaris Sales Agreement. In 1968 Polaris entered service and became the UK’s main nuclear force.

In March 1981 the MOD put the cost of the Polaris procurement at £330 million, over a period of nine years (1963-1972). This was roughly equivalent to £2 billion in 1980 prices, when the Trident programme began (see below). This figure did not, however, include the Chevaline modification to Polaris, which was estimated at a further £1 billion.

Discussing how Polaris would be paid for, the Civil Lord of the Admiralty, John Hay, stated on 2 March 1964:

It has always been the Government's view that the Polaris submarine programme Polaris being the carrier of the nuclear deterrent, should be taken on the defence budget as a whole; that is to say, it should not fall entirely on the Navy. For that reason, the defence budget includes a Polaris element. The extra money that we receive for Polaris is made up partly from additional cash from the Treasury and partly from a contribution from each of the Services.

The Polaris fleet began to leave service in 1994.

Cost of procuring Trident

A decision to replace the Polaris nuclear deterrent system with Trident was made in July 1980, under the terms of the Polaris sales agreement 1963, as amended for Trident (Treaty Series 086/1980) and (Treaty Series 008/1983).

The then Defence Secretary Francis Pym made a statement to the House on the replacement of the UK’s Polaris strategic nuclear deterrent system with Trident. In that statement he confirmed that the capital cost of procuring Trident would be taken out of the existing defence budget. He added that the deterrent "is a weapons system, like any other weapons system" and will be accommodated within the defence budget "in the same way as Polaris was accommodated 10 to 20 years ago". In terms of costs, he estimated at its peak Polaris will account for about 5% of the whole defence budget and 8% of the equipment part of the budget.

By the time of the 1998 Strategic Defence Review (SDR) the majority of costs associated with procuring Trident had been spent. The SDR subsequently put total acquisition expenditure on the Trident programme at £12.52 billion, which equates to approximately £18 billion in 2017 prices.

However, it should be noted that this did not represent a doubling of costs on the Trident programme. Once inflation over the period 1980-1998 is accounted for, according to the Treasury's GDP deflator £5 billion in 1980 was worth approximately £12 billion in 1998.

Cost of the Dreadnought programme

The 2015 SDSR confirmed that the costs of design and manufacture of a class of four submarines will be £31 billion. This cost estimate includes all costs associated with acquisition including feasibility studies, design, assessment, demonstration and manufacture (including the US-UK Common Missile Compartment project). It also accounts for expected defence inflation over the life of the programme and investment in new facilities at BAE Systems in Barrow. Investment in HM Naval Base Clyde is not part of the Dreadnought programme spend.

A contingency of £10 billion will also be set aside. This contingency represents approximately 35% of the submarine cost to completion and according to the MOD “is a prudent estimate based on past experience of large, complex projects, such as the 2012 Olympics”. However, there is no guarantee whether all of this money will be spent. If it were, then it would provide an upper-end estimate of acquisition of £41 billion. Spread over the 35 year life of the programme, this represents 0.2% of Government spending.

Thus far the MOD has spent £5.5 billion on the programme and has accessed £600 million of the contingency fund.

In line with convention, the Dreadnought programme will be funded from the MOD's core equipment procurement budget.

The longstanding debate over budgetary responsibility

In 2007 a disagreement erupted between the MOD and the Treasury over the funding of the capital costs of the Successor programme. The MOD suggested that the capital costs of procuring the nuclear deterrent had, in the past, been borne by the Treasury, a position which the Treasury refuted. The argument centred round an increase to the defence budget which was announced as part of the 2007 Comprehensive Spending Review (CSR). The CSR settlement suggested that the increase would allow the MOD “to make provision for the maintenance of the nuclear deterrent”, which some commentators considered to be a commitment to fund the capital costs of the project. However, the MOD confirmed in November 2007 that while additional funding had been provided to the MOD budget, spending on the Successor programme would come from within the core equipment budget.

Over the last year the question of budgetary responsibility has resurfaced as part of the Modernising Defence Programme review, with a number of MPs  suggesting that the Dreadnought programme should be removed from the defence budget.

The issue arose once again after the allocation of additional MOD funding in the Chancellor's Autumn 2018 budget statement. Part of that funding was earmarked for the Dreadnought programme.