MoD criticised over potential £21bn procurement budget deficit

The Ministry of Defence could be left with a funding gap of up to £21bn…...

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The Ministry of Defence could be left with a funding gap of up to £21bn over the next ten years, according to a review by the National Audit Office (NAO).

The MoD’s ten-year budget could be significantly destabilised by the renewal of Britain’s nuclear deterrent, the NAO warned. Costs for the new Astute and Dreadnought class submarines have also risen by £941m over the last year.

The Ministry claimed to have been sourcing savings of £7.9bn in order to stay within its £719bn equipment budget for the next decade. However, the NAO claimed that there was insufficient evidence of these savings. The organisation identified a funding shortfall of between £4.9bn and £20.8bn. If this was not urgently addressed, major defence projects would need to be reduced, delayed or cancelled altogether, the review claimed.

It was also suggested that £9.6bn worth of costs had not been included in the MoD’s ten-year budget due to internal disagreements over how they should be allocated. £1.3bn related to a programme intended to introduce greater competition into the procurement of naval vessels was also omitted.

An extra £4.6bn in costs could also potentially be added to expenditure after the MoD was found to have not used current exchange rates in calculating the value of foreign currency.

The Ministry admitted it had been over-optimistic in its expenses predictions on projects where detailed costing had not been available, resulting in an understatement of some £3.2bn. But it added that the £20.8bn shortfall the review predicted as a worst-case scenario was unlikely to come to pass.

“The report’s potential affordability gap of £20.8bn reflects the wholly unlikely and unrealistic situation where all equipment plan financial risks materialise and the MoD achieves none of its efficiency and savings measures,” a spokesman said. “We have already saved almost £5bn in efficiencies while making sure our military have the best equipment available and taxpayers get value for money.”

Nick Ford

Nick has over 30 years procurement experience in consulting, outsourcing and line roles within industry with international experience across many sectors and industries and led many procurement programs with blue chip organisations.

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