February 5, 2013 defense-aerospace.com
(Source: British Forces news; published Feb. 1, 2013)
Confusion Over Defence Spending Plans
David Cameron's plans for Armed Forces spending after 2015 were plunged into confusion today as the Defence Secretary was unable to confirm an apparent commitment to above-inflation budget rises.
Senior sources have indicated that the Prime Minister would deliver real-terms rises in the Ministry of Defence budget after 2015.
Tensions have been growing in the Coalition as negotiations begin over how to save billions of pounds more in the 2015-16 spending review.
Philip Hammond, the Defence Secretary, who has already seen his budget slashed by 8% in real terms since 2010, is believed to be among ministers resisting further cuts.
However, during the Prime Minister's trip to North Africa it was signalled that he "does not resile" from comments he made in October 2010, when he appeared to accept that defence spending had to
start rising again from 2015 onwards.
But Mr Hammond said today that he had been given a commitment that the equipment side of his budget - accounting for roughly half of MOD spending - would rise in real terms, but that there would
be a "robust discussion" about other elements.
"I have a firm commitment that the equipment plan, which is a very large part of the defence budget, will rise in real terms by 1% a year between 2015 and 2020, that's a commitment that has
previously been made and repeated since the Chancellor delivered his Autumn Statement," he told BBC Radio 4's Today programme.
"But there is going to be a spending review for 2015/16 and I will go into that arguing the case for the resources that defence needs to deliver the plan that we have set out, Future Force 2020,
and I am very confident that we will have a robust discussion about that."
Pressed as to whether overall defence spending would rise or not, Mr Hammond said: "What I know is that I have a firm commitment on the equipment plan, which about roughly half the defence budget
is covered by that. That will rise in real terms after 2015."
Asked whether staffing budgets could be cut, he said: "The rest of the budget will be subject to a discussion around the spending review the Chancellor announced in the Autumn Statement. But I'm
going into that spending review discussion on the basis that I expect the outputs that I have defined to be protected."
The confusion comes amid warnings from the Whitehall spending watchdog that any further cost-overruns on the Ministry of Defence equipment programme could jeopardise its future plans for the
armed forces and as Mr Hammond published a detailed equipment plan for the next ten years which, he said, had finally eliminated a £79 billion "black hole" inherited from the former Labour
government.
The £159 billion programme includes £35.8 billion for a new generation of nuclear-powered submarines, £18.5 billion for combat aircraft for the RAF and £17.4 billion for Royal Navy warships,
including the Queen Elizabeth Class aircraft carriers.
Within the plan there is £4.8 billion for contingencies as well as £8 billion of "unallocated" funding which the MoD said would be allocated to meet new equipment priorities as they emerged over
the coming decade.
But the National Audit Office said there was "systemic over-optimism" built in to the MoD's planning which ran the risk of leaving "capability gaps" in the years ahead. While the NAO acknowledged
that the MoD had taken "significant positive steps" to address the affordability of the equipment programme, it expressed concern that the contingency allocation was insufficient.
It warned that if the MoD was forced to fall back on the unallocated funding to make-up the shortfall, it would be unable to deliver in full the plans set out in the 2010 Strategic Defence and
Security Review - known as Future Force 2020.
"The £8 billion of unallocated budget does offer protection to the core programme. However, our review of departmental documents and interviews with departmental personnel suggest that the
unallocated budget is essential to deliver the full intent behind Future Force 2020” the NAO said.
"Using this budget to protect the core programme would therefore result in capability gaps."
Margaret Hodge, the chairman of the Commons Public Accounts Committee, said they would be taking evidence from MOD officials in order to assess the robustness of the plan.
"The Ministry's track record in forecasting accurately the cost of its largest projects hardly inspires confidence," she said.
"Between 2000 and 2012, the cost of its 69 largest projects ballooned by £11 billion. Independent analysis in 2009 found that final project costs were typically 40% higher than the Ministry's
initial forecasts.
"Given this past performance, I am dismayed that the Ministry is still taking an over-optimistic view to putting a price on risk and uncertainty."
Mr Hammond, however, insisted that the plan would ensure that Britain's armed forces remained among the most capable and best equipped anywhere in the world.
Downing Street insisted today that Mr Cameron's previous statement had been referring to the 2016-17 financial year and beyond, and not 2015-16.
The PM's spokesman said: "The Prime Minister does not resile from what he said to the House of Commons at the time of the SDSR.
"He said then his strong view is the defence budget will require year-on-year real-terms growth in the years beyond 2015.
"As his remarks at the time made clear, in the years beyond 2015 means starting in 2016.
"To suggest otherwise would be quite wrong.
"As to the spending review announced by the Chancellor in the 2012 Autumn Statement, we are not going to pre-empt its decisions which will be announced in the first half of this year."
Shadow defence secretary Jim Murphy said the NAO report "confirms what many feared - Philip Hammond has failed his own test of balancing the MoD books. This supposed 'mission accomplished' fact
is more like a 'wishful thinking' claim.
“The Government has not provided a full list of equipment that is accounted for. The financial baseline against which projections are made is unknown. This report covers less than half of defence
expenditure. The Government's claims don't add up.” (ends)
Viewpoints: Future of the British Army (excerpts)
(Source: British Broadcasting Corp.; posted Feb. 1, 2013)
What does the future hold for the British army?
More than 5,000 Army job losses have been announced as part of plans, unveiled last year, to restructure the force and reduce its numbers from 102,000 to 82,000 by 2017 - while at the same time
boosting reservist numbers from about 15,000 to 30,000.
BBC News asked defence experts and employers what the future holds for the Army - and its operations.
Click here for the full story, on the BBC News website.