​£5bn black hole in UK defense budget poses ‘real risks,’ say MPs

Reuters / Luke MacGregor
Britain’s defense budget could end up £5 billion short after the Ministry of Defence (MoD) underestimated the bill for its 10-year equipment plan, MPs have warned.

The Public Accounts Committee (PAC) said the MoD has admitted its £163 billion bill for buying weapons could rise by an additional £5.2 billion.

MPs also said they were “not confident” the department can achieve promised savings of £4.1 billion.

The influential committee expressed concern the MoD had assumed its funding would rise 1 percent in real terms after the election, when future spending cuts could be implemented.

We welcome the progress the Ministry of Defence has made in getting to grips with its budget and military equipment costs, but real risks remain to the affordability of its 10-year equipment plan,” chair of the committee Margaret Hodge said.

The department admits that the costs of its £163 billion plan could be understated by at least £5.2 billion, a figure that could grow as it develops a better understanding of the support costs involved.”

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Hodge warned the MoD’s contingency fund of £4.6 billion would not be enough to meet its spending commitments.

We are not confident that the department can deliver all the efficiency savings required from its equipment budgets. £800 million of the £4.1 billion savings required has yet to be identified.”

The committee also expressed concern about plans to increase the Army Reserve numbers to 30,000 by 2020 to offset reductions of regular troops.

MPs said the MoD had yet to demonstrate it had adequately assessed whether the policy could be achieved, or made contingency plans in the event it failed.

Risks to manning the Army remain and the department acknowledges that meeting the target beyond 2016 requires a significant improvement in performance,” the PAC said.

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Prime Minister David Cameron has come under fire from military figures and think tanks for insisting the MoD be subject to budget cuts.

America’s top general, Raymond Odierno, told the Daily Telegraph earlier this month he was “very concerned” at proposed cuts to the UK’s defense budget in the current climate.

This is the most uncertain global environment I have seen in 40 years of service,” said Odierno.

British General Sir Peter Wall also expressed concern over the government’s cost cutting.

Writing in the Daily Telegraph, he said reduced military spending has led to the West being “caught napping” while new threats arise from Russia and the Islamic State (IS, formerly ISIS/ISIL).

Cameron indicated he was looking to merge the budgets for security services MI5, MI6 and GCHQ with military spending last week to ensure Britain meets its NATO defense spending target.

READ MORE: ‘Very concerned’: Top US general attacks UK military spending cuts

NATO member states are supposed to commit 2 percent of their GDP to national defense, however only four countries actually achieve this: the USA, Estonia, Greece and Britain.

Defence Secretary Michael Fallon defended the MoD’s budget, accusing MPs of overstating the costs.

The £163 billion we plan to spend over the next 10 years on cutting-edge equipment is a landmark investment and I welcome the committee's acknowledgement that this Government has got to grips with both MoD budget and military equipment costs,” he said.

The committee's concerns on costs are overstated - our major project costs were reduced by £400 million last year and we are confident of delivering the further savings.

For the third consecutive year, we have a realistic and affordable equipment plan with substantial contingency funding,” he added.