The 10-year equipment program came out, and the document frankly reveals very little we didn't already know. It validates what i had reported already in December last year in my article on the Budget, and essentially only adds a breakdown of the amounts, showing in graphics what money goes to cover exhisting equipment support costs and what goes to procurement of new kit, breaking it down further into the main "areas", from Submarines and Nuclear Deterrent to Complex Weapons.
Again, this is not completely new information, as the MOD Top Level messages have been showing the rough amounts for months, so much so that i was publishing the figures on this blog in June.
The plan is incredibly disappointing in that it provides no further indication of what the budget is paying for. I appreciate the kind answers of Peter Luff, who took the time to speak with me over Twitter about the plan, but i sincerely struggle to believe that security and commercial sensitivity reasons demand the plan to say, basically, nothing.
I just can't understand why most nations, from US to France passing from even muddleheaded Italy can publish detailed procurement plans and lists of requirements to inform their parliaments about what is being made available to the armed forces, while the UK MOD says mostly nothing all the time, with planning rounds passing by without ever being reported about.
Surely there is at least an happy medium between "nothing" and "all", with "all" being the US reports on defence programs, which really are astonishingly open and detailed.
I'm especially "amused" (not) by how this plan was announced time ago as a way to help industry know what programs were ahead, and what they could confidently plan upon. The document provides no clarity at all. Not a single program is detailed, and the few voices that are mentioned mostly date back all the way to the SDR 1998 and are already contracted for and on the way.
One has to hope that industry is being privately briefed or something, because, seriously, what does it mean:
continuing investment in Typhoon to bring Tranche 2 & 3 aircraft fully into service. Further investment to develop and enhance the aircraft’s multi-role and ISTAR capabilities are priorities for use of unallocated headroom in the plan budget;
What has been decided regarding Typhoon Tranche 1's future? Will they go by 2019, or is their reprieve confirmed?
What multi-role capabilities are you planning to add, and when, at least in rough terms? Conformal Fuel Tanks remain envisaged? What about the AESA radar? Will you please say something.
Or another pearl,
a growing investment in unmanned aerial vehicles, including through co-operation with
Yes. So, what?
Then you go on reading, and you find the definition of Core Equipment Program, and learn that it is composed by the following elements:
- The nuclear deterrent
- Programs already contracted for
- Support costs for existing and future equipment
- Publicly announced purchases
- Policy committments
And one is very tempted to think that the reason why government never says a thing about what the Armed Forces are trying to acquire is just that, if they do not name anything, they can cancel, defer and ignore requirements without risking to lose their face in front of the public and in front of parliament.
I guess they've had enough with writing an SDSR that promised an Army with a strenght of 95.000 regulars in 2015 and 94.000 in 2020 [page 32, bottom left of the SDSR document] only to betray that policy committment a few months later cutting a further 12.000.
Other pearls include naming a fleet of 67 Apaches in the SDSR, while it has recently emerged that the Army Air Corps is already being told to plan a possible reduction from 6 to 4 frontline squadrons because they can expect a part of the fleet to go in exchance for the Mid Life Upgrade needed by the helicopter.
Or writing in 2010 that the RN would have 6 strategic sealift RoRo ships, only to cut two of them out of the PFI contract months later (in 2011), revealing it only in a Written Answer in early 2013.
Anyway, the few observations that can be made regarding the 10-year plan (period 2012/13 to 2021/22) are the following.
The "160 billion" figure breaks down in this way:
- 147 billion for the Core Equipment
- 4.8 billions of centrally-held reserve money to cover cost growth
- 8 billions of uncommitted money, to be used mainly after 2015 to finance a series of High Priority programs that sit on the so called "White Board"
The Core Equipment budget figure is composed of:
60 billions for procurement of new equipment (includes 8.4 billions of "risk money" allocated within the various programs to cover unexpected cost growth and changes)
18 billions for support of new equipment
68 billions for the support of existing kit
The 147 billion Core Equipment Budget is broken down further, into the main areas of expenditure:
(NOTE: the money figures provided are for Procurement and Support of new equipment, and support of existing kit)
17.4 billion for Surface Ships
35.8 for submarines and the nuclear deterrent (7 Astutes, activities on the new SSBN with assumption that four vessels will be built, some money for the Future Maritime Underwater Capability studies which will one day shape the replacement for Astute)
12.3 billion for land equipment (including 5.5 billion for armored vehicles)
18.5 billion for combat air (Typhoon and F35)
13.9 billion for air support (including expenditure for Voyager, A400 and AIRSEEKER)
12.1 billion for helicopters (including Puma HC2, JULIUS upgrade for existing Chinooks, delivery of 14 HC6 Chinooks, Wildcat, Merlin HM2, Merlin HC3 life extension and navalisation, Apache CSP)
11.4 billion for Complex Weapons (SPEAR program, Future Local Area Air Defence System, Indirect Fire Precision Attack capability)
15.7 billion for Information Systems (Bowman Tactical Communications and Information Systems, Defence Information Infrastructure)
4.4 billion for ISTAR (Fixed and deployable communication networks, suggesting FALCON is part of this voice, Crowsnest, drones including SCAVENGER, but also CBRN detection and countermeasures and special forces gear. A very crowded voice of expenditure...)
5.6 billion for other voices of expenditure (Naval Bases, Joint Supply Chain, Logistics & Commodities, Safety & Engineering)
NOTE: the figures are approximated and will not precisely add up to form the various 147, 160 or other totals.
80% of the Core Budget is already firmly committed out to 2015, due to the many ongoing big-ticket contracts, most of which have been signed literally years ago: Type 45, Typhoon, Astute submarines, CVF, FALCON, Bowman and so along.
The amount of contractually committed money in the Core Budget falls dramatically from 2015 to 2022, to just around 20%. The rest is money allocated to firmly planned items which haven't yet seen contracts signed (F35B purchases, Type 26 frigates and Successor SSBN submarines program being good examples).
In addition, from 2015 there will be 8 billions of headroom available to committ to further high priority programs.
The Equipment budget contains 4.7 billion pounds of money obtained from cuts and efficiencies delivered elsewhere within the MOD (manpower, estate etcetera). In part because of this, the Equipment budget will grow in relevance: in 2012/13 the Equipment budget represents 39% of the MOD's expenditure, and it will rise to 45% by 2022.
What the National Audit Office underlines, it that the 10-year budget remains extremely sensitive. It is enough to have a 1% reduction in the assumed budget to lose 4.4 billion pounds in cash terms, almost the whole of the Contingency Reserve.
A 0.5% inflation growth, similarly, would add 3.7 billion in extra costs.
So it is absolutely vital that the Treasury is not allowed to tamper with the budget that has been promised to the MOD and has been used to put together the plan.
The MOD has been told to plan on the basis of a budget that will stay flat in real terms over the decade [which actually means a real term growth due to an assumed 2.7% inflation per year, a measure used for all government departments] with a localized uplift of 1% to the sole equipment budget after 2015 and out to 2021/22.
The risk is, of course, that the Treasury will try to modify the arrangement to give the MOD less money, not necessarily by betraying the promise of the localized 1% uplift to equipment. It would be enough to calculate the flat overall budget for the second half of the decade on the basis of the 2015's MOD budget instead of on the 2010's one.
The Budget 2015 will be the one most affected by the Autumn Statement cut, so it represents a lower baseline from which to start. Using it as base for the later years could well mean having 700 millions to a billion less in each financial year.
Obviously, the MOD would be put in huge difficulties by such an arrangement, and further cuts would be needed.
Challenges, as it is obvious, remain. The Treasury is going to be a worse enemy than the Talibans in this crucial year in which the new Spending Review is written.
And in the meanwhile, we continue to know very little of what exactly the Armed Forces will or will not get.