I am pleased to place in the Library of the House this year’s financial summary of the Defence Equipment Plan. This is the seventh consecutive annual publication of the equipment plan summary, and presents our plans to deliver the equipment needed by our Armed Forces to defend the country and keep our people safe. The Government is committed to meeting the NATO target to spend 2% of GDP on defence and at least 20% of that spending on equipment. This report sets out our plans to spend £186 billion on equipment in the 10-years from 2018/19.
We have substantially revised the content of this report to make it more transparent and accessible. For the first time, we have set out the strategic context for the Equipment Plan and presented in detail the Department’s assessment of the affordability of the Plan. The NAO has assessed our plans and we are grateful to them for their report which is also published today.
In 2017/18 the Department achieved several notable milestones in procurement and support of equipment and successfully delivered the plan within budget. Looking ahead, there are significant financial pressures we must manage in the Equipment Plan. Our central estimate for the cost of the Equipment Plan at April 2018 exceeded the allocated budget by an average of 3.7% over the 10-years from 2018/19. The shortfall is greatest in the four years from 2018/19. This forecast will vary as risks and opportunities materialise and project plans mature or are changed through management action.
The Department secured £1 billion additional funding in the Autumn budget, which will help reduce the risk to affordability until 2020 and allow the Department to continue delivering existing plans for Joint Force 2025 and to modernise some key capability areas.
We are also taking steps to improve management of the Plan and enable longer term affordability. The Modernising Defence Programme was launched to further strengthen and modernise UK defence and the Armed Forces and put UK defence onto an enduringly affordable footing for the future. This work involves rigorously pursuing productivity and efficiency gains as well as prioritising capabilities to meet the changing threat environment. It will reshape the content of the Equipment Plan and improve the way in which it is managed. We will report on the implications for the Equipment Plan in subsequent financial summary reports.