Yahoo News MoD's new jets and warships threatened by rising costs and falling pound warn MPs
The Ministry of Defence may be unable to afford new fighter jets, warships and other military equipment because costs are rising and the falling pound has blown a black hole in its budget, MPs have warned.
The cross-party Commons Public Accounts Committee on Tuesday said it was "very concerned" a £178 billion defence equipment plan to deliver new kit over the next decade was now at risk.
The recent fall in the value of the pound against the US dollar may lead to “significant cost increases” for equipment coming from America.
F-35B stealth fighters and P-8 Poseidon submarine-hunting planes are particularly at risk and the MOD will be left with a £5bn shortfall unless sterling recovers.
Ambitious efficiency savings supposed to free up money for new equipment have also yet to be found and the cost of building the Astute Class nuclear-powered, attack submarines is creeping up.
Overall MPs said they were more concerned about the MOD’s equipment plan than at any time in the past five years.
The MPs’ report is the latest warning the Government’s 2015 defence review is not properly funded.
The committee concluded: "We are very concerned that the Ministry of Defence's equipment plan is at greater risk of becoming unaffordable than at any time since its inception in 2012."
Keeping the plan affordable was "heavily reliant" on a "highly ambitious, but still under-developed" programme of efficiency savings.
The MoD’s spending plan is “vulnerable to cost growth” because of a lack of detail on how much new projects will cost, an inability to rein in spending on some building programmes and a “significant fall” in the pound.
F-35 jump jets and P-8 maritime patrol planes being bought from the US are “particularly vulnerable to exchange rate fluctuations".
Defence chiefs had based their budget on an exchange rate of $1.55 to the pound, but sterling has been trading at around 30 cents lower. Forward purchase contracts designed to cut the risk of currency moves will end in 2018-19,
The report warned “if current exchange rates persist, the cost of the plan will increase by approximately £5bn pounds”.
“The department and the Treasury have not yet decided whether such additional costs would be met by the Treasury, or whether some projects would have to be curtailed to accommodate the increased costs.”
Around £10bn set aside so the MOD can respond to future changes in warfare is instead being ploughed into the existing budget, leaving the department with “little flexibility to deal with changing military priorities."
By giving the Armed Forces more missions without raising funding, the Government is threatening the MOD’s ability to “deliver what our forces need to operate effectively”.
The MoD expects to spend £178 billion between 2016 and 2026, but the MPs warned that "uncertainties and over-optimism in project costs mean that the cost of the plan may be significantly understated".
The report noted "continuing problems" with the nuclear-powered Astute hunter-killer submarine programme and warned that there was a risk of similar difficulties with the new Dreadnought class boats which will carry the Trident nuclear deterrent.
The MPs also criticised the Type 26 warship programme, with failure by the MoD to agree a "workable way forward" with the main contractor "which has compromised maritime capability and placed further upward pressure on costs".
