"The MoD acknowledges that its Equipment Plan for 2023–2033 is unaffordable, with forecast costs exceeding its current budget by £16.9 billion [$21.41 billion]. This is a marked deterioration in the financial position since the previous Plan in 2022, which the MoD judged to be affordable," the NAO said in a report focused on the ministry's "approach to cost forecasting and the reasonableness, consistency and reliability" of its budget policies.
The equipment plan allocates a total of 288.6 billion pounds for equipment for 2023-2033, which is 49% of total forecast defense spending and 3 percentage points higher than in 2022. The current plan covers 1,800 projects "including the future nuclear deterrent, F35-B Lightning II aircraft and new information and communication technologies," the National Audit Office said.
The watchdog attributes the deterioration to several factors, including inflation and increasing costs of delivering the key priorities covered in the 2023 update to the Integrated Review and the associated Defense Command Paper, the consequences of implementation of which the ministry was "still working through."
"Deficits between forecast costs and budgets have increased in the DNE [Defense Nuclear Enterprise] because MoD has brought forward costs to deliver the nuclear deterrent to schedule, and also in non-nuclear areas including the RAF [Royal Air Force], the UK Strategic Command, the Strategic Programmes Directorate, and the Navy’s conventional capabilities," the report read, adding that the army was the only branch of the UK military that did not exceed its budget, though that is due to the fact that it has only included forecast costs that it can afford, thus risking not to meet certain government-posed objectives.
The NOA also said that while the ministry's budget approach was understandable in light of "ambitions expressed in the updated Integrated Review," it risks "poor value of money" spent on projects which may be canceled or "descoped" by the next government-wide Spending Review, expected in 2024.