Sunday, August 7, 2016

The ministry of stealth budgeting and stealthier cuts

Thanks to the MOD’s sales service, we have just discovered that the Royal Navy has been robbed of yet another precious capability, with the untimely demise of RFA Diligence, the Forward Repair Ship. She is now on sale, ready for further use in the hands of a new owner.

She is in good conditions despite the many years of age, having received constant updates and adjustments over the years, which have included an improved ballast water treatment plant purchased in 2014. She completed her last refit in March 2015… and left service, according to the sales brochure, in May 2015.
Congratulations, MOD! It is not the first time that money is wasted to refit a ship which is then immediately after removed from service. In recent times, it has been the fate of RFA Orangeleaf as well. But this does not mean that the practice is any less demented and offensive.

The cut of RFA Diligence is probably the stealthiest in many years. Sthealtier still than the cut of 2 of the Point class RoRo transports, which took place merely months after the SDSR 2010 had specifically said that all 6 would stay in service. There have been no messages, no ceremonies, no news, no explanations. Only silence.
Nobody knew that RFA Diligence had gone out of service. It was known that she was in port since may 2015, but the assumption was that the RFA had put her “in pause” due to the well known shortage of manpower.
Even the MOD itself seems to have missed the cutting of RFA Diligence, since they replied to a FOI in December 2015 saying that her Out of Service Date was 2020.

The following is a very interesting article about RFA Diligence, her capabilities and her role, from Marine Maintenance Technology International, September 2015 issue.

Yet, she is gone. And a replacement is nowhere to be seen. Considering the capability she offered, it is a big loss.

In the meanwhile, another interesting FOI offers actual numbers to back up the coloured but un-detailed graphics of the 10 year Equipment Programme. This, together with the annual publication on the MOD Major Projects status, makes it possible to play a little bit of math. Open all three documents, and follow me in this puzzle-solving game. 

The FOI’s table offers a more readable breakdown of the Equipment Budget, showing:

-          Money reserved for the launch of new procurement (it does not break down the share destined to support of said new equipment); separating between committed and uncommitted funds. Uncommitted funds are not yet tied down by a contract.
-          Money for In Service Equipment (so, basically, the cost of supporting what is already in service), again in Committed and Uncommitted form.
-          Money for procurement, which is the expenditure on ongoing programmes

Taken alone, these numbers are interesting and impressive, but do not tell the story. What is this money paying for? What margin exists for procuring new kit? Is the situation so desperate that it requires losing a ship as cost-effective and capable as Diligence?
The MOD does not provide the information required. Compare the “10 Year Programme” and all other sparse documents published by the MOD or about the MOD (NAO reports, namely) to the defence budget documentation produced by France, USA and even Italy, and you’ll see that the MOD is as transparent as a thick plate of steel painted solid black.

We only have indications about costs and performance of a handful of selected programmes, and always one year after the budget is determined. The MOD publishes an Excel spreadsheet, annually, detailing the status of the major programmes in the previous Annual Budget Cycle.
The document published this July, in fact, is composed of data from September 2015.
The NAO report works in similar fashion.
Other programmes never get detailed: we are not told what is their in-year cost, nor we are told how much kit is ordered in a set year, and how much kit is taken in charge in the year.
France and US are particularly good at reporting these information. Italy is a bit less detailed, but each year it is possible to read a good document saying how much money is going to go on programme X during the year. The MOD gives no comparable information.

Joining the FOI data with the Excel spreadsheet, though, it is possible to compose a decent picture of the Royal Navy’s equipment budget situation for the year 2015 / 16.
In 2015/16, the Royal Navy has been given, for Surface Ships:

54 million for (eventually) starting new procurement processes for new kit (money uncommitted)

529 million, committed, for supporting equipment in service
302 million, uncommitted, for support to equipment in service

1009 million, committed, for ongoing procurement
310 million, uncommitted, for ongoing procurement

The Excel spreadsheet offers information on in-year expenditure for several programmes. Specifically:

Queen Elizabeth class procurement, 712,93 million
Carrier Enabled Power Projection studies, 1,44 million
Tide class tankers, 194,98 million
Type 26, 222,3 million

The budget allocated in year can be underspent or overspent, depending on how things go. The Excel document contains also the forecasted actual expenditure, most of the time slightly smaller than the allocation.

Adding up the budgets above, however, the total goes well above the Committed 1009 million. The Uncommitted money is not money available for procuring additional kit, but merely money that isn’t yet tied to a specific contract.
If we consider Committed and Uncommitted money together, we reach a 1319 million total. There is in theory a 187,35 million margin, but of course there are programmes we aren’t given details about. For example, the procurement of the River Batch 2. Its cost is 348 million spread over N years, where N is pretty certainly not less than 4. However, the spread of expenditure is not equal, so 348/4 is only a wild estimate.
Again, the Royal Navy also committed 12,6 million (over how many years?) to the ATLAS combined sweep demonstration programme; and a further 17 million (over how many years, again?) for the MMCM system being developed jointly with France.

All things considered, the margin, at the end of the day, is nonexistent. It would be very interesting, instead, to learn what happened to the 54 million for wholly new procurement. It is a small sum, but a non insignificant one. And this year the amount is 80 million, yet, the Royal Navy is reportedly going to lose Scan Eagle, because there is no money to buy the currently contractor-operated systems; nor to renew the current deal; nor to launch the new Flexible Deployable UAS the Royal Navy had hoped to start. This is puzzling, but we simply do not have the information needed to paint a better picture.

The Submarines budget is another interesting area. The FOI gives:

77 uncommitted millions for new procurement, and 15 committed

194 uncommitted and 1663 committed for support to existing equipment

684 uncommitted and 1628 committed for ongoing procurement.

Detectable expenditure in-year in the Submarines budget is given as:

638,65 million for Astute

170,5 for the Nuclear Core Production Capability

770,41 for Successor SSBN

37 million for the Spearfish torpedo upgrade (might actually fall in the Complex Weapons budget line, though)

1085,43 million in costs for AWE Aldermaston, its new infrastructure developments and the Nuclear Warhead Capability Sustainment Programme which is replacing the non-nuclear components of the MK4 warheads to turn them into MK4A.

Again, the total go well above the committed procurement funding, and above the total obtained adding the uncommitted money, too. The most likely explanation is that a big share of the AWE costs actually fall into the Support to in service equipment voice, considering that it is expenditure connected to kit and infrastructure already in use.

It gets more complex with the other services, as the data is even more fragmented and incomplete. The Excel sheet does not provide info on in-year Typhoon expenditure, so Combat Air calculations could only be incomplete.
The simple fact that it takes this kind of research, guessing, reasoning and puzzle-solving to compose a picture of the situation is a sign of just how badly the MOD works, and how much is done to make cuts such as RFA Diligence’s unfortunate departure invisible, or almost so.
The detail about requirements and future purchases is inexistent, and even when the SDSR documents say something, you can expect something else entirely to happen (see the Point class event, or the fact that the “up to six OPVs” in the SDSR 2015 is already turning into “5”, with only of the River Batch 2s replacing HMS Clyde even though the ship is still very much young).

My first plea to the new government is to clear up this mess, and make MOD plans less stealthy. This constant scamming and book-cooking is unhelpful when it is not offensive. This absolute lack of transparency is a shame that needs to be ended. 


  1. While I completely agree that the lack of transparency compared to most other major nations, the US and France in particular, until someone actually challenges the MOD with the fact that their information is woeful compared to others consistently and over a long period of time, nothing will happen - excuses will be given, security will be claimed and only by saying "what and you think the Americans are less security focused!" will anything happen. One other point, while I remain convinced that this is a deliberate attempt to obscure, I would also think it was almost certain that this reflected the chaotic nature of the internal MOD organisation and finances....

    1. In the limits of my possibilities, i've thrown the stone. Now it is up to politicians to bring the issue up in the list of priorities.

  2. Surely Successor and Aldermaston would come under the separate strategic budget? Actual submarine design is one thing, though it seems a bit early in the cycle to be spending 770 million on this when parliament only voted on it months after the FOI.

    1. The latest parliamentary vote is recent, but Parliament had already voted once a few years ago, and since then the Assessment Phase has been ongoing, with over 3 billions committed to design, long lead procurement, infrastructure build-up. So, nothing surprising.

      And there is no such thing as a separate strategic budget there. The Equipment Programme specifies that

      This sector covers spending on all Submarine procurement and support. This
      includes investment in:

      "the nuclear weapons capability sustainment programme, which covers the
      operation, maintenance and updating of the Atomic Weapons Establishment; the
      Trident missile system with the US; the UK/French collaborative Teutates project,
      and the provision of other services and activities across the Strategic Weapons

    2. The FOI lists it by command, and then by operating centre. Under the command there is Strat Progs and Navy Command.

      I assume this is the same money cut up in different ways though the totals for Strat progs plus Navy comes to about £7bn per year, that for the subs + ships £5 or £6 billion per year..

    3. Strat Progs seem to be the same thing as Submarines Budget. If you look at the graphics on page 15 and 16 of the 10 Year Equipment Programme, 2015 edition, you see that the budget is first given "by Command", and then by Operating Centre. The Strat budget is, effectively, the budget operated by the Submarines Centre.

    4. There's a good billion difference in the FOI request...

    5. But I only see a difference of 300 millions between the 4002 listed for Strat Prog and 3703 for Submarines in 2015/16. The other years seem to follow a roughly similar profile, too. Most of the Strat budget is handled by and is connected to Submarines expenditure. Hard to say which parts are kept separate, and whether it makes any real difference to have that separation.

    6. Ok, but in that case there is a big difference between the funds allocated to Navy command ( 3096m) and ships (2241m)....

      Still ends up as over a billion difference.

      Maybe worth going back further and seeing how much has been allocated to subs since the start of the Astute program, we know how much they cost so what has the procurement budget been for the only submarines we have been building over that period?

    7. The most likely explanation for that difference is that "Navy command" allocation includes money that belonga within other budget lines (Weapons, Helicopters, ISTAR). There is Wildcat, there is Merlin (HM2 and HC3), there are FASGW and Sea Ceptor and CROWSNEST in there. All those things are bound to make up a fair share of the missing money, but it is pretty much impossible to say what was the in-year expenditure on those various lines.

      The NAO says that Astute expenditure was 6257 million for procurement up to 31 march 2015, plus 373 million in support expenditure. I don't know the exact breakdown by year. Trying to determine it might not be easy.

    8. Yes but we don't know how much is still to be paid on the Astutes. As far as subs go however they were the only game in town from 2001 onwards. Some of the current submarine budget could be towards them or Successor, 6257 doesn't sound as though Anson is included.

      Strategic systems which isn't directly subs would have to be Aldermaston surely?

    9. There is still more than 3.5 billions to be paid for the Astutes out to the programme end date of 2024. Total expenditure is expected to be 9935,48 million.

      And Aldermaston infrastructure might make up that difference, yes. But basically, we do not know how the borders are drawn.

  3. Off topic question:

    How capable is the Tomahawk Block IV at degrading/destroying an advanced integrated air defence system?

    French posters on some of the defence sites I read, are always keen to point out the stealth capabilities of the
    mdCN, so is SCALP more capable against a high-end opponent?
    even though it has a much shorter range.


    1. The TLAM has done excellently in all these years. mdCN is not yet proven at all. That is the only real thing that can be said. Supposedly, mdCN is stealthier, but the TLAM has more range available to do diversions and approach the target from routes and directions offering terrain masking.

    2. Thanks.


  4. Gaby

    I don't know how relevant this is and you may have answered this question before (but I can't find it anywhere).

    On the subject of money held in reserve for equipment, wasn't it the case that not very long after the 2010 SDSR, Phil Hammond,who was then Secretary of State for Defence, introduced a system whereby a certain amount of money was to be held as a reserve in case equipment projects ran over budget. or other contingency expenditure was needed. I think the amount was something like £13 billion, divided into two funds (the names of which escape me at the moment), of £8 billion and £5 billion respectively.

    This was an arrangement entered into by the MOD on the understanding that, in return for some cutbacks in procurement programmes, there would be that reserve present, so that programmes would not have to be cancelled in the future, as they had in the past.

    How can this be reconciled with the news that the Royal Navy does not even have enough money to keep Scan Eagle in service and that RFA Diligence is to be retired 4 years early? There seems be a serious inconsistency present somewhere, with two distinctly conflicting policies at work.

    What will happen to all that reserve? Will it be clawed back by the Treasury, something which would be a heinous act, breaking faith with the MOD, who presumably entered the arrangement in good faith, as there was a distinct advantage to the policy.

    This cheeseparing which is taking place may not seem to matter if you look at one or two individual decisions but over six or seven years it is resulting in seriously degraded capabilities across all three services. And I thought that more money was to be spent on defence!

    1. The 8 billion headroom is no more, having been committed to the new programmes of SDSR 2015, from Poseidon to retention of the Typhoon Tranche 1 and C-130. The actual headroom of 4 billion is kind of still present, but it is supposed to act as a long-term parachute to absorb unexpected cost growth in ongoing programs, so that short-term delays (such as the 2008 one to Queen Elizabeth to save 400 million in year even if it cost 1000 in the long term) can be avoided. Unfortunately, this sound approach seem to have been forced into becoming a severe underspending habit, which leaves a lot of money non spent at the end of the year. Supposedly, that money is carried on into the following year, but probably the Treasury actually bites back at least part of it.

  5. Gaby

    Many thanks for that knowledgeable and very revealing reply. I did not know about the £8 billion being no more. Thanks.

  6. Gabriele,

    I couldn't agree more with you and have recently sent a letter to Michael Fallon about this that received a luke warm reception, where they acknowledged some of my points but did not state if or how they would remediate the issues at hand.

    The general accounting principles used by most industries is to split your budget into 3, a) Capital expenditure b) operating costs c) people costs. Having investigated a number of sources for information it is my opinion that the equipment budget actually consists of circa 60% operational support costs with only 40% being the cost of the product. It is therefore no surprise that a T26 costs £1bn when you factor in 30 years of support costs into a 10 year budget. This is highly misleading and is the core reason why the £17bn on equipment is just pie in the sky - its closer to 7 I would suggest.

    I would also like to see the service leaders given an annual budget and be made accountable for it. On a £40bn budget i see the following breakdown

    RN - £9bn
    Army - £13bn
    RAF - £9bn
    Cyber - £2bn
    Core Logistics - £4bn (shared across all of the above services)
    Central Services - £1bn
    R&D - 2bn

    Once a clear capital budget is defined it then becomes easier to schedule the equipment buy, in the RN's case over 25 years and £3bn p.a. would provide a budget of £75bn if we remove £40bn for our submarine fleet this leaves £1bn to be spent p.a on the surface fleet and £400m on munitions, every single year.

    For £1bn we can buy a mistral, an absolon / Iver Huitfeldt and a number of small vessels (Safeboats mk 6 and CB90s) and still have change.

    The USMC has a published budget and larger force and equipment set than the whole UK armed forces - for a lesser budget. Include naval assets and serious questions as to why they can have such a well equipped force on a similar overall budget to the UK's and we cannot must be answered.

  7. Gaby

    "The 8 billion headroom is no more, having been committed to the new programmes of SDSR 2015, from Poseidon to retention of the Typhoon Tranche 1 and C-130."

    Mmmm! All RAF equipmemt, I see. Far be it from me to set off internecine strife between our admirable services but when are we going to get some real money spent on the Army? There's no point in having 50+ transport aircraft if there's no Army to transport. How often do we hear "It's boots on the ground that we need for this campaign" or "It's boots on the ground we need for that deployment". We need at least another 5,000 regulars (the basis for another brigade) and we need to get key programmes going: MIV, ABSV, MRV(P), etc.etc. as soon as possible.

    On the subject of the £8 billion being spent on the new programmes of the SDSR 2015, it turns out that it wasn't the commitment to spend at least 2% of our GDP on Defence that did it, rather monies prudently held back from earlier spending arrangements? Rather a dishonest spin on that one too?

    1. Dishonest, i don't necessarily think so. They had been very clear about the headroom being money held at readiness for new investments after 2015, and that is what it'll be used for. Unfortunately, the MOD is also being asked to find several other billions from internal reorganizations and "efficiencies". That is were the real problems could pop up.

  8. Gabriele,
    I think there is a level of dishonesty within the defence budget as I see foreign aid has been inserted into it. I also think that mixing the capital equipment budget with maintenance/operational costs is also misleading.

    Mike W, I think the army have wasted so much money they really don't deserve more, but as always that affects the guys on the ground so we need to do something. If an Ajax costs circa £5m why can't we build 50 per year indefinitely and operate effective fleet management. Too much old equipment running on its last legs. As I have said the USMC can fund stuff with a very similar budget - why can't we

    1. If we only spend £12bn per annum of capital expenditure (actual assets rather than support and maintenance packages) it could be split as follows:

      RN - £3bn p.a. (£1.5bn Subs, £1bn Surface, £0.5bn munitions)
      Army £2bn - £0.5bn Armour, £0.5bn Mech, £0.3bn transport, £0.4bn personal equip, 0.3bn munitions
      RAF - 6bn - £2.4bn Fighters, £1bn Helicopters, £1bn Transport, £0.6bn other aircraft, £1bn munitions and systems

      Core logistics would require the other £1bn for the myriad of systems and vehicles required.

      2 things - logistics to be provided centrally for all 3 services. think of having bases with all services on site and lastly, divert all end of life vehicles towards foreign aid instead of sending brand new toyota's. Army surplus should be bought and distributed through the foreign aid budget where appropriate (rations, vehicles, tents and other items).

      Its as much common sense as anything else - thousands of land rovers are sitting awaiting disposal and we send brand new toyota's to Sierra leone... barking mad

  9. @Anonymous

    Thanks for the reply.

    " If an Ajax costs circa £5m why can't we build 50 per year indefinitely and operate effective fleet management. Too much old equipment running on its last legs."

    Well, the last sentence is certainly true. We are well and truly into block obsolescence as far as large parts of he fleet are concerned.

    The idea about building 50 Ajax per year is not such a bad one. You might even be able to get some of the variants which were quietly dropped from the original range (e.g. Direct Fire, Overwatch and Brigelayer). However, I think it might fall down as the Army has just introduced the idea of Strike Brigades, in which the predominant vehicle should be wheeled (i.e. the MIV). Ajax should not really constitute a large part of those Brigades. Therefore you might find more than a bit of competition for funding.

  10. I think the MoD was being more than a little Disengenuous in their Dec 2015 reply to the Foi request.
    Seems that the Refit Completed March 2015 didn't go so well.

    'Summary of Condition: Sound for Towing, Not in running condition. '

    Sounds like a major snafu with the refit.

    PS as to secretive, the UK MoD is still much better than the Canadian Department of National Defence (DND) aka Department of No Information.
    It went from being able to talk to Military ppl about programs they were working on, to - once Harper (the 180 Degree PM - the opposite of what I say) the PM supposedly in favour of Openess and Transparency (ie. No open / very Censored and Not at all Transparent) came into power - request that throug ATI (access to information) and maybe 6 months to 1.5 yrs after you were supposed to receive a request you would finally get Heavily Censored and wayyy out of date info.


Everybody can comment on this blog without needing a Blogger account. It is meant to keep the discussion free and open to everyone. Unfortunately, anonymous accounts keep the door open for spammers and trolls, so i'm forced to moderate comments and approve them before they appear. Apologies for the inconvenience.