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MoD faces £7bn ‘black hole’ in forces equipment plan

The spending watchdog said ‘immediate’ savings are needed to address the budget shortfall.

The Ministry of Defence must find “immediate” savings to address a £7 billion black hole in the armed forces equipment budget, the Whitehall spending watchdog has warned.

The National Audit Office (NAO) said the rolling 10-year plan – covering the period 2018 to 2028 – remains “unaffordable”.

The MoD is currently considering whether to delay or defer some projects as part of the Modernising Defence Programme (MDP) launched in January.

However the NAO said that with 84% of the shortfall falling in the first four years of the plan, urgent action was needed.

With the ongoing financial pressures, the MoD need to be clear about what equipment they will or will not be funding Meg Hillier MP

“This means the department needs to make immediate savings decisions rather than relying on longer-term cuts or efficiencies,” it said.

The MoD currently estimates the plan – which includes the development of four new submarines to carry the UK’s Trident nuclear deterrent – will cost £193.3 billion against a budget of £186.4 billion, a shortfall of £7 billion.

However, it acknowledges that under a worst-case scenario that could rise to £14.8 billion – a figure which the NAO said “could still be optimistic”.

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The National Audit Office said the current 10-year spending programme is unaffordable (Andrew Milligan/PA)

It warned the MoD was in danger of repeating past mistakes focusing on “short-term affordability rather than longer-term value for money”.

The Commons Public Accounts Committee chairman Meg Hillier said: “The ministry still does not have enough money to buy all the equipment it says it needs and is in real danger of wasting taxpayers’ money through short-term decision making.

“With the ongoing financial pressures, the MoD need to be clear about what equipment they will or will not be funding.”

The head of the NAO Sir Amyas Morse said: “The equipment plan 2018-28 shows that the MoD has a clearer understanding of the affordability issues that it faces, but it equally shows how urgently it needs to get on and tackle them.”

An MoD spokesman said: “We are confident that we will deliver the equipment plan within budget this year, as we did last year, as we strive to ensure our military have the very best ships, aircraft and vehicles through our £186 billion plan.

“We recognise the financial challenges that these ambitious, complex programmes pose, and are addressing these after securing a £1.8 billion financial boost for defence and reducing forecast costs by £9.5 billion through efficiency savings.”

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