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Defence money potentially lost in ‘funding black hole’

The Ministry of Defence has published a ten-year military equipment and capabilities Plan that the Public Accounts Committee says has a funding ‘black hole’ at its centre, potentially as big as £17.4 billion.

With the MoD also facing additional cost pressures estimated at more than £20 billion to develop future defence capabilities not yet included in the Plan, MPs say that ‘this is highly destabilising for defence and must not continue’.

The Public Accounts Committee says that the MoD remains ‘stuck in a cycle’ of focusing on short-term financial pressures. It has sought to balance its annual budget by again deferring or descoping the development of capabilities, resulting in poor long-term value for money and the use of all its contingency funds in 2020-21 to help offset funding shortfalls.

The government announced an additional £16.5 billion of defence funding over the next four years in November 2020, intended for modernising UK defence and investment in new technologies like cyber and space capabilities. But with the existing equipment budget not balanced, the PAC says that the  MoD ‘must make tough choices to end the vicious circle of short-term financial management and delays in developing military capabilities’.

Meg Hillier, chair of the Public Accounts Committee, said: "The outgoing Permanent Secretary of MoD was clear in evidence to our inquiry that the new £16.5 billion defence funding settlement is not being added to a balanced budget and is simply, in his words ‘not all going to go on new and revolutionary kit’. On the face of it, it’s potentially swallowed whole by the up to £17.4 billion funding black hole at the centre of our defence capabilities, and Sir Stephen was equally clear about the capability reductions that will have to happen for the UK to look forward to any enhancements.

“What is crucial is that this new money is not instead just eaten up, once again, by the constant, debilitating time and budget overruns that have been eroding our national defence and security for years."

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