Defense Ministry accused of overspending as budget ‘black hole’ hits £17bn

Parliament’s spending watchdog has accused the UK Ministry of Defense of over-ambitious spending that exceeds its resources, as it revealed the ‘black hole’ in the armed forces’ capital budget now stands at 17 £.4 billion.

A National Audit Office report released on Tuesday chastised the Department of Defense for presenting an unaffordable equipment plan for the fourth consecutive year and warned that the department’s calculations did not even include the full cost of flagship projects such as the Program of the future Tempest fighter aircraft, the successor to the Astute submarine, and a new military space command.

The criticism comes just two months after Downing Street announced a surprise £16.5bn increase Department of Defense budgets over the next four years to reinvigorate the armed forces and fund new investments in cyber, space and naval capabilities. However, the watchdog warned that even with this new spending, tough decisions about savings would have to be made.

“To date, the MoD’s fundamental problem has been that the cost of delivering its ambition far exceeds its available budget,” said Gareth Davies, head of the NAO. “Faced with an unaffordable equipment program, he has taken a short-term approach to financial management that prevents military commands from developing the equipment they need and drives up longer-term costs.”

According to the report, the MoD estimates a shortfall of £7.3bn in its £190bn capital budget for 2020-30, although in a worst-case scenario the shortfall could reach £17.4 billion. Last year the worst-case estimate was £13billion, but the NAO has warned the figures are not directly comparable due to changes in the way deficits are calculated.

The Ministry of Defense stressed that the plan had been prepared before the increase in funding obtained in November and said that the Secretary of Defense was “committed to matching ambition with resources for future equipment plans” .

However, Meg Hillier, chair of the public accounts committee, said while the £16.5billion spending settlement could give the Ministry of Defense a “much-needed respite”, it might not be enough to develop the capabilities that the armed forces need.

“The Ministry of Defense still needs to make thoughtful decisions about what it can afford,” she said. “The equipment plan needs to be more than just a wish list, relying on nebulous ‘efficiency savings’ to make the sums add up.”

While all the military services have funding shortfalls, the Royal Navy’s is the biggest at £4.3billion, or 12% of its overall costs. The navy is at the heart of Boris Johnson’s plans to strengthen the armed forces after the Prime Minister promised last year that new investment in shipbuilding would “restore Britain’s position as Europe’s leading naval power”.

Malcolm Chalmers, deputy chief executive of the Royal United Services Institute, said the injection of funding offered “an opportunity to rebalance the MoD equipment budget, with all the benefits that this can bring in terms of fast and cost-effective supply”.

“But it also makes it clear that the extra money for defense equipment will largely be spent on funding existing, albeit previously underfunded, commitments, not entirely new programs,” he added.

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