The UK’s defence department is facing a GBP16.9 billion ($21.4 billion) shortfall in its equipment budget due to inflation and demands from the government’s updated strategy, the public spending watchdog said Monday.
“The Ministry of Defence (MoD) acknowledges that its Equipment Plan for 2023-2033 is unaffordable, with forecast costs exceeding its current budget by GBP16.9 billion,” the National Audit Office (NAO) said in its annual report.
In March this year, the estimated costs were GBP305.5 billion compared to a budget of GBP288.6 billion, the largest deficit since the NAO began publishing the annual report in 2012.
The outlook represented “a marked deterioration” in the financial position since last year’s plan, said the report.
It said that inflation was responsible, in part, as rising costs were not fully reflected in last year’s calculations.
“But more importantly, the costs of delivering major priorities” set out by the government “have increased significantly”, it added.
The government outlined its ambitions in the 2023 update of its Integrated Review of defence and foreign policy priorities, “the consequences of which MoD is still working through”, the NAO said.
Meg Hillier, Labour chairwoman of the Commons Public Accounts Committee, said she was “concerned about the risk to the UK” presented by the deficit.
There was a “huge gap between the military equipment government thinks it needs and the budget available to provide it,” she added.
The MoD accepted that the report “recognises the significant impact global headwinds and high inflation has had on UK defence”.
But it added that “it does not and could not accurately reflect the current or future state of the armed forces equipment plan.”
“The report is not based on a full equipment plan and is a dated snapshot from April 2023,” said a spokesman.
