The evolving budget situation: reassuring (with risks) - UPDATE

1: Of aircraft carriers and OPVs
2: Land Forces

3: Helicopters

4: Force Structure 

5: Reversing bad decisions 

6: Army programs on the (slow) move 

7: Capabilities in the air  
8: GEOINTELLIGENCE improvements 


The financial aspect

The National Audit Office has today published the annual Major Project Report and, for the second year, the analysis of the 10-year equipment plan. The MOD has released the updated version of the 10-year equipment plan, showing the welcome short term funding re-arrangement which is, among other things, allowing the retention of hundreds of armored vehicles and related equipment purchased as UOR for operations in Afghanistan.

The documents, despite the not unexpected press focus on the cost growth (almost exclusively due to the aircraft carrier contract renegotiation), actually provide a reassuring picture of how defence equipment programs are moving on. The programs have confirmed, for the second year, to be in a stable position after a decade of chaos. The cost of the major programs, if the carriers are excluded from the count due to the particular situation which came into being with the switch to catapults and back, has actually decreased by 46 million in the past year. The cost hike on the aircraft carriers program has a cost of 754 million, leading to a negative figure of 708 million. However, this was not unexpected, and the NAO confirms the MOD position: the cost hike has largely been absorbed by the CVF's program own budget allocation, and has not required using the Contingency fund built into the 10-year budget, which is stable at 4.7 billions.
Over the 10 years from 2013 to 2023, the equipment budget is split in the following way:

Equipment procurement, 63 billion

Equipment support, 87 billion

Central contingency fund, 4.7 billion 

Uncommitted "headroom" fund, 8.4 billion 

The risks remain, obviously. Among them, the most worrisome is the uncertainty on how the budget for the next years will be calculated. The 10-year plan has been crafted on the basis of an agreement with the Treasury that would see the MOD arriving to 2015/16 with the budget levels set by the SDSR; moving to a budget flat in real terms (increasing annually with an inflation rate of 2.7%) out to 2021, with a 1% annual boost for the sole Equipment budget, out to 2023.

Since that agreement and the SDSR, however, the MOD budget has already been cut back twice, with the Autumn Statement 2012 and the Spending Review 2013. The Spending Review for the years 2014/15 and 2015/16 has reduced MOD spending by 2.9 billions overall, mostly in 2015/16 (2.6 billion) with an impact in-year of 890 millions directly on the Equipment spending voice. These reductions have been covered without major shocks to the system, through efficiencies and reprogramming, but the fragile balance achieved in these two years can be shattered in any moment.
The next Spending Review and SDSR will be absolutely decisive: details here are truly the devil. If the Flat-in-real-terms budget is calculated on the base of the reduced spending post-2013 agreement, a 15 billion shortfall in funding will have been generated over the residual life of the 10-year program. Just like that. 15 billions. It would be enough to screw everything up, very badly.

That's why, in NAO style, i'm calling this article "Reassuring (with risks)": because it is enough to look away for one minute, and the whole thing might well collapse.
Even minimum variations on the baseline budget over which the future is planned are enough to very quickly not just head away contingency and headroom money, but bite into the current Core budget as well, with catastrophic implications.

Of course, a reduction in MOD spending is not necessarily immediately aimed at the Equipment budget: the department is free to shift money between its main voices of expenditure (and does so rather regularly) to adjust to the various needs of the moment and protect this or that part: but reductions so large could only be absorbed with further, massive cuts in manpower, and the impact would be global all the same, as there really is the risk of having no men left to use the kit.
As has been observed by the Chief of General Staff himself, the Royal Navy appears to be already in a critical situation in terms of manpower. The situation of the Navy appears seriously dangerous: as it is, considering the impact of the nuclear submarines force (almost 5000 men) and the Marines (7000+) on a force that is shrinking to less than 30.000 men in total (29.900 in April 2020, with a low point at 29.850 in 2018), the surface fleet and Fleet Air Arm are being required to run on a number of sailors and airmen that is much inferior to that of even the italian navy. Of course, the RFA personnel is counted separately, but even that is overstretched, and does not change the reality of a navy which is, to say the least, impressively lean manned in comparison to peer and near peer forces.
The Guardian's commenters might find the First Sea Lord's comments unjustified and too partisan, but the data actually sides with the Navy's point: it is going be the struggle of the generation, in order to keep the Navy alive and valid. 

The 8.4 billions left currently uncommitted are needed to start off several important programs, needed to reach the capabilities envisaged by Future Force 2020 and, in the best of cases, close some of the gaps that have opened in these years. More realistically, the money will barely prevent other gaps from occurring, even if things go as planned.
The "White Board" of unfunded programs has been restructured, and despite the NAO's nice wording about the opportunity of looking at capability needs holistically instead of compiling a list of programs locked in a fight for funding, the feeling is that what happened is just a further work of scissors to shorten the list. The MOD has named only a few of the programs in the Equipment plan, and provided only graphics showing the distribution of the spending for macro areas, so that they can effectively cut and change a lot of other activities without it showing.

The release of the uncommitted headroom money seems to have also been pushed to the right somewhat, as there is only mention of committing it starting from 2017/18, and not immediately after the SDSR 2015. This is a passage considerably less reassuring.
The 8.4 billions have been provvisionally assigned to the service commanders, who are taking up the responsibility of deciding the way forwards for their arms. Again, despite the Guardian's annoying and badly informed cry of a Navy "soaring" at the expense of the Army, the picture is far different: as of now, Land HQ has been provvisionally assigned over 50% of the headroom (4.7 billion), while the Royal Navy and the Royal Air Force have been assigned 1.1 billion each. The remaining 1.5 billion has been assigned to the Joint Forces Command.

This split is hardly promising when it comes to the hope that Maritime Patrol Aircraft capability would be restored. A new MPA would be controlled by Joint Forces Command because ISTAR assets are now (rightly so) seen as force multipliers that interest all services. Even CROWSNEST falls under Joint Forces, not under Navy command. The allocation of a mere 1.5 billion looks too small to accommodate a new MPA program, especially considering that there are most certainly several other requirements to consider. The headroom money would be spent between 2017 and 2023, so it might still be that it covers the beginning of a longer MPA program stretching into later years... but this is wild guessing on my part. The current split of the scarce resources is not particularly encouraging.

The Royal Navy's 1.1 billion can be expected to be largely used for MARS Solid Support, the next phase of the renewal of the logistic fleet, which should replace the three Fort-class ships left in service by the middle of the next decade. The NAO Major Project report itself reminds several times that the existing maritime logistic capability is not sufficient to meet future requirements, and Fort Rosalie and Fort Austin will bow out in 2023 and 2024. There is not an official date for Fort Victoria OSD, but 2025 might be it. And these dates, already now, are the result of life extensions. It looks likely that the First Sea Lord's priority will be largely on their replacement.
From 2018, the Navy also hopes to roll into service new MCM capability under MHPC (not new vessels, but new unmanned vehicles and equipment), and this is another candidate area for additional funding.  




The programs



98% of requirements on the major items of equipment as studied by the NAO are forecast to be met, leaving only 3 technical requirements unsatisfied. Those are:

Typhoon landing distance; the fighter's landing distance isn't as short as was once hoped, but this has been known for years and isn't particularly concerning

Astute SSN top-speed; at least the first three of seven Astute-class submarines will not reach the hoped-for top speed value.

Aircraft Carrier availability: the NAO is still assuming that one of the aircraft carriers will be in mothball, so that availability of one carrier for every day of the year isn't possible. This problem will go away if the MOD will bring both ships into service.


A far higher number of requirements is being met with risks remaining, but this is to be expected.


One program of notice is that for the Astute SSNs. As said, in this program there is probably the only meaningful technical shortcoming in the reported projects. Of course, no one will ever told us what the speed requirement was, and by how much it has been missed. But the confirmation that at least the first 3 boats will be slower than expected is of course disappointing.

I limit myself to the first three boats because the report breaks down the Astute class into boats 1 - 3, boat 4, 5, 6 and 7, and measures their (classified) requirements under different headings. For boats 1 - 3, there's "Top Speed" requirement, not to be met, while the following boats have "Theatre Mobility" as requirement, and are forecast to meet it.
Hopefully this means that corrections have been applied to the later boats to reach the desired speed (something that would also justify hopes of seeing the improvement added afterwards to the first boats during their future refits) but there is simply no way to tell for sure.

From Boat 4 onwards, the submarines of the class will benefit of significant capability insertions and improvements thanks to the full approval, in 2013, of the Naval Extremely / Super High Frequency Satcom terminal and of the Astute Capability Sustainment Programme.
Full Communication and Radar Electronic Support Measures (CESM and RESM) capability has also been funded as baseline fit from Boat 4 onwards. The Spearfish heavyweight torpedo upgrade programme is also underway. Overall, good news.
The Rafael TORBUSTER advanced countermeasures system, which uses decoy which combine seduction and hard-kill capability, has been proposed as part of the Astute CSP by a team made up by BAE, Babcock and Rafael, but we might never get told whether it is being installed or not.

Also on the naval front, the NAO report shows that one of the requirements for the new Tide class tankers (MARS FT) includes being able to support Chinook operations on the flight deck. The ship should include an hangar sized for a Merlin, and aviation stores magazines.

This year the NAO has focused on the Complex Weapons programme, and thanks to this we have a refresh of the list of what it includes:

Future Local Area Air Defence System (Land and Marittime) - FLAADS / Sea Ceptor

Future Anti-Surface Guided Weapon (Heavy and Light) - FASGW(H) / FASGW(L)

Selective Precision Effects At Range 2 (Brimstone 2 and spiral development)

Selective Precision Effects At Range 3 (new stand-off 100 kg-class weapon)

Loitering Munition (Fire Shadow)

Meteor integration in F-35

Indirect Fire Precision Attack Simple

Indirect Fire Precision Attack Complex

Storm Shadow mid-life upgrade (also known as SPEAR 4?)

ASRAAM Capability Sustainment Programme

Very Short-Range Air-Defence Effectors (research into dismounted and vehicle-mounted solutions for replacing Starstreak)

Future Long Range Deep Fires Capability

Future Offensive Surface Warfare (new anti-ship missile)

Deep Fires Rocket System (for Royal Artillery)

Dismounted Effects (future man-portable weapon capability) 

Most of these programs haven't yet been approved and launched, however.

NOTE: missing from the NAO list, for whatever reason, is SPEAR 1 (spiral development of Paveway IV bomb). Also note that Future Long Range Deep Fires Capability and Future Offensive Surface Warfare might become one as UK and France continue cooperation on the Future Cruise and Anti-Ship Missile concept, which is intended to replace Storm Shadow, Scalp EG, Harpoon and Exocet.

From the joint declaration on Security and Defence after the bilateral meeting at Brize Norton:

Progress has also been made on the SCALP-EG and Storm Shadow refurbishment and upgrade programme where both governments have agreed to share data associated with national concept and assessment phase programmes. We aim to agree a Memorandum of Understanding for staffing by early summer 2014. Looking further ahead, we continue to work to progress the joint concept study assessing possible solutions to meet our long term requirements to replace Harpoon, Exocet, and Storm Shadow/SCALP. The concept study is due to complete later this summer.

From the UK - France collaboration agreements could emerge another project, if the UK decides to join Italy and France in the effort to expand the capability of the Aster 30 missile, with the "Block 1 New Technology" programme, which in particular greatly expands capability against ballistic threats.

We have agreed to launch a bilateral dialogue on Ballistic Missile Defence (BMD). This would include analysis of the potential to develop a longer range BMD role for the Aster missile; this work has synergies with the One Complex Weapons initiative.

Other projects that could become part of the planned, joined-up "One Complex Weapons" initiative are the Very Short-Range Air-Defence Effectors and Dismounted Effects. France will have to replace its Mistral SHORAD missile roughly in the same period planned for the demise of the Starstreak, and voices about a collaboration in this area aren't new.
France has besides just launched the development of the MMP anti-tank / multirole missile, which might gain british interest going forwards, especially considering that the current Javelin has a (provvisional) OSD set in 2025.

FASGW(H) is finally on the move after significant delays due to France's reluctance in providing funding. A MOU has been signed in Brize Norton, finally, but the MOD had already given its approval in January 2012, hoping that France would follow within March 2012. It took much longer, and now there is no real hope to have the missile ready for use on the Wildcat helicopter in 2015. It might take until 2019, and leave the Navy with another gap in capability for several years, as the current Sea Skua is supposed to go out of service together with the Lynx.

FASGW(L), the Thales Light Multirole Missile, is technically more mature but at the time of the writing of the NAO report, it still wasn't approved.
This information is somewhat contradictory since the MOD secured a contract modification with Thales already in 2011, swapping Starstreak missiles for a batch of 1000 LMM.
It was hoped that deliveries would start in 2013, but the MOD wanted to approve FASGW(H) and (L) together. It is quite likely that the FASGW(L) will now be cleared to proceed, to ensure the Wildcat is not completely without claws when it enters in service.

My interest was also pointed onto Fire Shadow, which slipped behind curtains in silence after the planned deployment to Afghanistan was cancelled.
The report helps, but only so much. A Royal Artillery troop has been formed to use and test Fire Shadow, which has met all the requirements, including internal transport of the launcher and ammunition inside Chinook helicopters. Even this requirement, which was seen as "at risk" last year, was successfully cleared, although June 2012 firing trials weren't as successful as hoped.
Nonetheless, the Army preferred not to deploy the system in theatre, and the future of Fire Shadow remains uncertain. Unfortunately, the whole Indirect Fire Precision Attack capability for the Royal Artillery (of which Fire Shadow is a part) has been revised, and a new assessment phase has been started. Decisions will be made on how to proceed, including in regard to Fire Shadow.

Fire Shadow on its Chinook-portable launcher

IFPA has been plagued by lack of funding and by delays for many years in a row, and it looks like it is back to square one once again. It includes:

Deep Fires Rocket System

Indirect Fire Precision Attack Simple

Indirect Fire Precision Attack Complex

Within these activities (all of which planned but not yet approved), there will be requirements that the RA had formulated clearly already once, but which couldn't be funded and so are sent back to the thinking box: the Deep Fires Rocket was once expected to be the well known ATACMS missile. The M270B1 launchers of the Royal Artillery are ready to take the missile anytime, and were once supposed to do so by 2020. Now, who knows.
A precision guided 155mm shell was planned for adoption in 2018, with the Excalibur round as preferred option, already tested on AS90 in 2010. The procurement of new fuzes able to dramatically improve the accuracy of normal "dumb" artillery shells was also envisaged.
A 155mm shell cointaining precision guided anti-tank submunitions (SMART) was ordered, only to have the contract cancelled soon afterwards.
Fire Shadow has an uncertain future.
And the adoption of measures (again already demonstrated by an international team) to expand the reach of the GMLRS rockets to well beyond 100 km is also currently going nowhere.
The US Army is working to develop a new warhead for the MLRS rockets, which can replace the wide-area effects of the submunition-carrying rocket which proved so deadly in Operation Granby. The british army has abandoned all submunition-dispensers years ago, because they leave dangerous Unexploded Ordnance over the areas they hit, but this has left the M270B1 with only the unitary warhead rocket, and no wide-area suppression capability.
The new warhead in development in the US aims to solve this issue: the RA could and should look into joining in, but there's no telling if this will be possible.

Bringing into core the EXACTOR missile and the Firestorm kit for Fire Support Teams will help keep the RA relevant, but the inability of IFPA to progress to fielding any kind of new capability is worrisome. 

M270B1, traditional and Afghan TES

The Brimstone 2 missile is making excellent progress and showing immense capability, but it has suffered significant delays due to issues with the new, Insensitive Munition-compliant Vulcan rocket and with the new warhead. The biggest problem is that integration on Typhoon is currently not seen possible before 2021 (!) and that would leave a gap between the 2019 withdrawal of Tornado GR4 and the entry in service on Typhoon. The MOD is trying to find a way around the problem.

Other program of interest is the Warrior CSP. Unfortunately, there is not much new information about it, other than the mention in passing that, of 445 vehicles expected to be updated, 65 are intended to become Armoured Battlefield Support Vehicles. There's no information, unfortunately, about the role variants that the ABSV would cover, nor do we know in detail how many IFVs (with turret and working gun) and how many support vehicles (Joint Fires Command, Recovery, Repair) make up the remaining 380. With six battalions of armoured infantry, the requirement for the IFVs should be at least around 300, and actually more if the battalions were to be all fully equipped with their share of vehicles.

FRES SV brings welcome news. The Demonstration Phase has included activities to prove that additional variants, specifically Ambulance, Command Post and Engineer Recce can be obtained by installing the appropriate role fit on the Common Base Platform.
This gives new hopes for a relatively speedy expansion of the number of variants validated and fielded under FRES SV. Initially, it was expected that the separation between Blocks would be wider.
Only Block currently funded for full demonstration is the first, including Scout, Protected Mobility, Recovery and Repair variants.
Test activities have been added to the demonstration phase in the 2012 planning round to prove the feasibility of the variants of Block 2: ambulance, command post, engineer recce.
Assessment studies only, instead, have been started for Block 3, including Formation Recce (Overwatch), Joint Fires Command and Ground Based Surveillance.
These three variants, extremely interesting, should deliver a fire-support platform which would effectively replace the Striker with Swingfire missiles, used until 2005; a vehicle for the Fire Support Team that directs artillery, mortar fire and air support, and a platform carrying (mast-mounted?) long range surveillance system, to complement the Scout.

Early activities are starting on the Apache CSP. The British Army hopes to soon reach the decision point, and sign a contract to replace the current Apache AH1 helicopters with new ones, at Block III (AH-64E Guardian) standard.
The preferred plan is to take the current Apaches, tear them down into pieces, salvage everything still valid (gun, HIDAS, sights, radar, perhaps the engines even though the new US ones are more powerful) and move the components into newly built Block III airframes.
Hopefully, the resulting machine will come with even better navalisation. It has just been disclosed in Parliament that, following a contract with AgustaWestland in October 2013, all Army Air Corps Apaches are being modified to take an emergency flotation gear, deemed indispensable for operations from ships.

Early activities also for the expected re-launch of the (FRES) Utility Vehicle program. Here the most noticeable news is that France will loan 20 VBCI to the British Army, that will be trialed and used to experiment the concepts for the future medium weight armored vehicle.

UPDATE: Defense News reports that the loan of 20 vehicles cannot go ahead due to issues with british law, so that the testing is only being made on one vehicle.

Unfortunately, Wildcat was no longer included in the Major Projects Report. I hoped the NAO document would provide some information about what is happening with the Light Assault Helicopter variant which was added with a modification to the program in 2011. 4 of the Army helicopters had to be modified into LAH, and four new build helicopters had to be added to the total. There has been no further mention of the modification ever since, though. Rumor is that the Lynx AH9A will stay a bit longer and act as LAH (expected to mean they will be used by 657 AAC, in support of special forces) in the interim. It would have been interesting to see this point cleared up somewhat.

A final mention for the A400M cargo aircraft, not so much for its presence in the NAO report (nothing new to report there) but because France and UK have agreed to trade delivery slots, and the RAF will now get its first aircraft slightly earlier than planned, getting MSN 15 instead of MSN 16.