National Audit Office publishes report on The MoD Equipment Plan 2023 to 2033

Background to the report

The Ministry of Defence (MoD) publishes its Equipment Plan (the Plan) each year, setting out its intended investment in equipment and support projects over the next 10 years. The Plan assesses whether the intended investment is affordable within the available budget. It covers a 10-year period because of the long-term nature of large, complex defence projects.

The latest Plan, for which the supporting analysis is published alongside this report, covers the period 2023–2033. It shows that the MoD has allocated a budget of £288.6 billion, 49% of its entire forecast defence budget, to fund the Plan. This is a larger proportion than last year’s 46%. This year’s Plan includes more than 1,800 projects, including the future nuclear deterrent, F35-B Lightning II aircraft and new information and communication technologies. It also includes budgets to support and maintain military capabilities.

Scope of the report

This report examines:

the MoD’s assessment of the affordability of its 2023–2033 Equipment Plan

cost pressures affecting MoD, and the implications of these for the Plan

This report 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 MoD makes to develop a Plan which meets its future needs. This report also does not consider the UK’s support to Ukraine, the additional costs of which have to date been funded by HM Treasury through the Reserve.

Our review examines the MoD’s approach to producing the Plan. We focus on its approach to cost forecasting and the reasonableness, consistency and reliability of the assumptions underpinning its assessment of affordability.

Conclusions

The MoD acknowledges that its Equipment Plan for 2023–2033 is unaffordable, with forecast costs exceeding its current budget by £16.9 billion. This is a marked deterioration in the financial position since the previous Plan in 2022, which the MoD judged to be affordable.

In part, this is because inflation, which we highlighted last year as not being fully reflected, is now showing its effect. But more importantly, the costs of delivering major priorities have increased significantly as the MoD has sought to show more clearly the gap between the available budget and the ambitions expressed in the 2023 update of the Integrated Review and the associated Defence Command Paper, the consequences of which MoD is still working through.

Deficits between forecast costs and budgets have increased in the DNE because MoD has brought forward costs to deliver the nuclear deterrent to schedule, and also in non-nuclear areas including the RAF, the UK Strategic Command, the Strategic Programmes Directorate, and the Navy’s conventional capabilities. Only the Army has not shown an increased deficit, although this is because the Army has only included forecast costs that it can afford, which means it is accepting greater risks that its capabilities will not meet government’s objectives.

The MoD is using the 2023 Equipment Plan to set the baseline for its capability requirements ahead of the next government-wide Spending Review, which it expects is likely in 2024, and has chosen to defer any choices on spending priorities until then. This approach, while understandable given the ambitions expressed in the updated Integrated Review, risks poor value for money if spending continues in the meantime on programmes which are then cancelled, descoped or deferred because they are unaffordable. It also means that the Plan does not provide a reliable assessment of the affordability of MoD’s equipment programme or demonstrate to Parliament how it will manage its funding to deliver equipment projects.