I wish to inform Parliament that the Permanent Secretary for the Ministry of Defence has written to the Chair of the Public Accounts Committee with our 2023 update on the affordability of the 2023 defence equipment plan as at the end of financial year 2022-23, which details the Department’s spending plans in equipment procurement and support projects over a period of 10 years.
I am placing a copy of his letter and the supplementary tables in the Library of the House and they have been published online. This more concise update takes the place of the usual equipment plan financial summary report and maintains continuity of financial reporting ahead of implementing the outcomes of the Integrated Review Refresh and the Defence Command Paper 2023 (DCP23). I welcome the continued engagement of the National Audit Office (NAO) which has today published its independent assessment of our plans.
The world is increasingly dangerous and the transition into a multipolar, fragmented and contested world had happened more quickly and definitively than anticipated in the original Integrated Review. The risk of escalation is greater than at any time in decades.
This year’s equipment plan comes at a time of significant financial pressures due to pivotal world events, including the ongoing war in Ukraine, and the plan recognises the significant impact inflation has had on defence’s budget.
We have increased the budget for the equipment plan to £288.6 billion. Against this assumption we estimated there was a 6% pressure, but there are other reasonable scenarios in which the Department has a surplus over 10 years. The position reported in the plan and by the NAO does not reflect the Government’s aspiration to increase defence spending to 2.5% of GDP as soon as economic and fiscal conditions allow.
While we are currently forecasting a pressure, the Department is confident it can live within its equipment budget, with only 25% of the equipment plan committed over the next decade, providing the headroom to adjust the programme as needed and ensuring we can remain responsive to emerging events. We have also made significant changes to how we manage the nuclear enterprise which will support us in delivering the nuclear deterrent on schedule.
We published DCP23 this summer and work is already underway to develop proposals to deliver its intent within our current budget. The additional funding from the 2022 autumn statement and 2023 spring budget is already allowing us to make new investments in stockpiles and munitions.
While we recognise the affordability challenge of the 2023-2033 equipment plan, it is only right that the choices we make to address this reflect the Government’s priorities as set out in DCP23, as the Department focuses more on artificial intelligence, digital capabilities and assuring supply chains to modernise our armed forces. We continue to work on reform to our acquisition processes including more iterative development of capabilities.
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