But 'muddle through' is the mission statement, right?
UK Defence Spending Decisions Can’t Wait for the Strategic Defence Review
A combination of factors has left the UK defence budget seriously out of balance. Key decisions on priorities will therefore need to be taken well before the Strategic Defence Review process concludes, with the crunch moment likely to come in the buildup to the new government’s first Budget this October.
On 16 July, Prime Minister Keir Starmer launched the government’s Strategic Defence Review (SDR), led by Lord Robertson, previously NATO Secretary-General. The Review has begun by commissioning written submissions from within the Ministry of Defence (MoD), as well as from industry, think tanks and others. This will be followed in October and November by a period of ‘Review and Challenge’, after which the Reviewers are due to
submit their final report to the prime minister in the first half of 2025.
The sequence of events after the submission of the Review has not been made public, but it seems likely that the government will use the SDR to inform the decisions of its multi-year Spending Review, the outcome of which is due to be published in spring 2025. Once its budgets for the rest of this parliament have been agreed, it will then be up to the MoD to translate the Review’s broader judgements into detailed resource allocation decisions for the years ahead. On this timetable, some of the most difficult capability choices – that is, where to spend more or less – may therefore not be made until the summer of 2025.
The Funding Gap
But not all decisions can wait until then. The MoD faces a large funding gap in the current (2024/25) financial year, and in 2025/26. In December 2023, the National Audit Office identified a
deficit in the equipment plan of £3.0 billion for 2024/25 and a further deficit of £3.9 billion in 2025/26. The MoD will also need to find an extra £1 billion each year to fund the above-budget costs of the 2023 and
2024 pay settlements for the armed forces. It is an indication of the seriousness of the situation that the MoD has already asked defence contractors for any
immediate ideas that they might have for reducing the pressure on this year’s budget. All new contracts valued at more than £50,000 now reportedly require
ministerial sign-off, with all the additional paperwork which this involves.
The main effect of these and similar measures will be that more spending is deferred than would normally be the case. This will risk increasing lifetime project costs (through spreading work over a longer period), delaying the introduction of new capability and forcing the armed forces to extend the lifetime of older, less effective kit. These effects can be minimised if ministers use their enhanced scrutiny role to identify projects that can be cancelled (rather than delayed). But doing so will require decisions – explicit or implicit - to be made on relative priorities well in advance of the conclusion of the SDR.
A combination of factors has left the UK defence budget seriously out of balance. Key decisions on priorities will therefore need to be taken well before the Strategic Defence Review process concludes, with the crunch moment likely to come in the buildup to the new government’s first Budget this...
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