Auditors flag fiscal vagaries in UK military-buying plans

LONDON — The British government’s budget watchdog says a newly published Ministry of Defence ten-year equipment plan is affordable but fails to account for the country’s difficult economic situation.

“While the plan continues to serve a useful purpose in reporting to Parliament on planned expenditure, the volatile external environment means this year’s plan is already out of date,” the National Audit Office said in its report on the 2022-2032 defense spending plans released by the MoD on Tuesday.

The government expects defense equipment spending would total £242 billion ($290 billion) over the next ten years, compared to an estimated £238 billion ($285 billion) in last year’s program.

“The department faces significant and growing cost pressures which will have an immediate impact on its spending plans,” auditors wrote. “The department believes it can manage these pressures but has left itself limited flexibility to absorb any cost increases on equipment projects, or across other budgets.”

The equipment plan is based on data submitted by the end of March this year and does not take account of the impact of exchange rate changes, rampant inflation, fuel costs and the Russian invasion of the Ukraine.

The MoD, though, says its plans remain relevant.

In a foreword to the equipment plan Defence Secretary Ben Wallace acknowledged there were difficulties ahead on equipment spending.

“The plan is not immune to risk, we have set ambitious savings targets and made hard decisions in spending priorities across the commands,” he wrote. “We are confident, however, that the capabilities we are investing in, and spending decisions made in the last year, remain in line with the developing defense landscape and ensure we have a stable financial footing for this and future plans,” said Wallace.

Just how relevant the plans will be going forward remains to be seen.

In September, then-Prime Minister Liz Truss commissioned the MoD to reconsider the details of an integrated review published 2021in light of changing security circumstances.

That work continues under the new government of Prime Minister Rishi Sunak and Chancellor Jeremy Hunt and is expected to be complete during the first quarter of next year.

The outcome of the review will dictate if, and when, the government finds additional money for the MoD to reflect the global security situation following Russia’s invasion of Ukraine.

Truss had promised the MoD an increase in defense spending from the current level of 2.1% to 3% GDP by 2030, but Britain’s dire financial position has thrown a shadow over the spending pledge.

“Before we make that commitment it is necessary to revise and update the integrated review, written as it was before the Ukraine invasion,” Hunt told Parliament Nov. 17 while delivering what is known here as the Autumn Statement.

But the equipment plan warned that without the extra cash the MoD would need to take an axe to capabilities and programs.

“Without additional funding it is clear that difficult decisions will be required to reduce the scope of the plan and funding profiles may need to be reshaped to align the delivery of key military equipment with objectives,” said the MoD document.

As it is, defense leaders are optimistically hoping to realize savings of over £13.5 billion ($16.2 billion) to balance the books on the equipment plan.

Most of those savings are based on the MoD renegotiating existing commercial contracts.

Auditors believe it is clear the MoD is facing significant and growing cost pressures and has left itself limited flexibility to absorb cost increases across equipment and other budgets.

The MoD will need to make difficult prioritization decisions to live within its means and retain enough flexibility in its plan to respond promptly to changing threats, said the NAO.

Moves have already been put in place to mitigate some of the cost pressures, including introducing changes to commercial policy to manage the impact of inflation.

“We are making greater use of index-linked, fixed-price contracts to prevent firms from either applying high premia on firm price bids or not bidding entirely. We are also ensuring early engagement with key suppliers to discuss how inflation will be treated in future contracts, including our view of what is reasonable for payroll costs,” said the MoD plan.

“Similarly, our unreserved contingency funding will also aid in offsetting some of this pressure,” it said.

Constraints across industry may also influence the ability of the MoD to keep programs and budgets on track.

The NAO said budgets shareholders in the MoD are beginning to report supply chain risks and industry capacity constraints, including skills gaps and, more recently, an increased demand for defense equipment in other countries.

This trend, they said, will likely make delivering projects within existing schedules and budgets more difficult.

Andrew Chuter is the United Kingdom correspondent for Defense News.

伦敦——英国政府预算监督机构表示，国防部新公布的十年装备计划虽然负担得起，但未能考虑到该国严峻的经济形势。

“虽然该计划在向议会报告计划支出方面仍然发挥着有益的作用，但动荡的外部环境意味着今年的计划已经过时了，”国家审计署在其周二由国防部发布的 2022-2032 年国防开支计划报告中表示。

英国政府预计未来十年国防装备支出总额将达到 2420 亿英镑（2900 亿美元），而去年计划的支出估计为 2380 亿英镑（2850 亿美元）。

审计人员写道：“该部门面临着日益增长的巨大成本压力，这将对其支出计划产生直接影响。该部门认为自身能够应对这些压力，但在设备项目或其他预算方面，其应对成本增长的灵活性有限。”

该装备计划基于今年3月底提交的数据，并未考虑汇率变化、恶性通货膨胀、燃料成本以及俄罗斯入侵乌克兰的影响。

不过，英国国防部表示，其计划仍然有效。

国防大臣本·华莱士在装备计划的前言中承认，装备支出方面存在困难。

“这项计划并非没有风险，我们设定了雄心勃勃的节约目标，并在各司令部做出了艰难的支出优先事项决定，”他写道。“然而，我们相信，我们正在投资的能力以及过去一年做出的支出决定，仍然符合不断发展的国防格局，并确保我们拥有稳定的财政基础来支持当前和未来的计划，”华莱士说。

这些计划在未来究竟有多大意义，还有待观察。

9 月，时任首相利兹·特拉斯委托国防部根据不断变化的安全形势，重新考虑 2021 年发布的综合审查报告的细节。

这项工作在新任首相里希·苏纳克和财政大臣杰里米·亨特的领导下继续进行，预计将于明年第一季度完成。

审查结果将决定政府是否以及何时为国防部追加拨款，以应对俄罗斯入侵乌克兰后全球安全形势的变化。

特拉斯曾向国防部承诺，到 2030 年将国防开支从目前的 2.1% GDP 提高到 3%，但英国严峻的财政状况给这一支出承诺蒙上了阴影。

“在我们做出这项承诺之前，有必要对综合评估报告进行修订和更新，该报告是在乌克兰入侵之前编写的，”亨特在11月17日向议会发表的秋季声明中说道。

但装备计划警告说，如果没有额外的资金，国防部将不得不大幅削减能力和项目。

英国国防部文件称：“如果没有额外的资金，显然需要做出艰难的决定来缩小计划的范围，并且可能需要重新调整资金结构，以使关键军事装备的交付与目标保持一致。”

目前，国防领导人乐观地希望节省超过 135 亿英镑（162 亿美元），以平衡装备计划的收支。

这些节省的大部分资金都来自于国防部对现有商业合同的重新谈判。

审计人员认为，国防部显然面临着巨大且不断增长的成本压力，并且在应对设备和其他预算成本增长方面缺乏足够的灵活性。

国家审计署表示，国防部需要做出艰难的优先事项决定，才能量入为出，并在其计划中保持足够的灵活性，以便迅速应对不断变化的威胁。

已经采取了一些措施来缓解部分成本压力，包括对商业政策进行调整以应对通货膨胀的影响。

国防部计划指出：“我们正在更多地使用与指数挂钩的固定价格合同，以防止企业要么在固定价格投标中收取过高溢价，要么干脆不投标。我们还确保尽早与主要供应商接洽，讨论未来合同中如何处理通货膨胀，包括我们对合理工资成本的看法。”

“同样，我们未预留的应急资金也将有助于缓解部分压力，”声明中写道。

整个行业的制约因素也可能影响国防部保持项目和预算按计划进行的能力。

国家审计署表示，国防部的预算股东开始报告供应链风险和行业产能限制，包括技能缺口，以及最近其他国家对国防装备需求的增加。

他们表示，这种趋势可能会使在现有进度和预算内完成项目变得更加困难。

Andrew Chuter 是《防务新闻》的英国记者。