The absence of long-term funding guidance for military acquisition poses further problems for effective defence planning. The current annual or triennial CSR process in the UK is not commensurate with planning and delivery of major capital projects which may be delivered over a ten year timeframe, and have significant financial implications (through force structure, contracted support arrangements, etc.) beyond even this horizon. Other countries have started to implement alternative approaches which recognise the mis-match and realistically set expectations of the defence community in the longer term.
For example, French plans are formulated in the context of known forward budgets. Every six years a law, known as the Loide Programmation Militaire ("LPM"), is passed by the French parliament. The law sets targets (for example on staff numbers and on the volume of equipment to be delivered) and fixes military expenditure for each of the next six years. In this way, the budgets for equipment acquisition, manpower and various other cost centres are specified over the medium-term. The LPM therefore constitutes an agreement between the finance ministry and the French MoD regarding the outputs that must be delivered for a specified level of financial commitment. Some flexibility is retained within this framework, as variations from the plan are still allowed, although any changes must always be introduced with reference to the extant LPM.
Budgets are not set on a rolling basis, so the LPM does not always provide the acquisition community with accurate long-term funding expectations. It does, however, provide a stable funding environment for acquisition planning for many years, and therefore permits acquisition activities to be prosecuted with greater certainty than would otherwise be the case.
An alternative approach, which does provide funding certainty over the long-term, has recently been instituted by the Australian Department of Defence. A White Paper was published in May 2009, setting out the strategy for the Australian Defence Force until 2030. In parallel with these strategic plans the Australian Government, made the following funding commitments17:
• 5.5% nominal growth in defence budget to 2017-18; and
• 4.7% nominal growth in defence budget from 2018-19 to 2030.
These arrangements were explicitly agreed to ensure that the Australian Department of Defence can make long-term plans and to "remove the need for Defence to constantly adjust its expenditure parameters to suit short-term fluctuations in the broader economy"18.
In contrast, the MoD's planning process has become a short-term book-balancing exercise, with the long-term plan far adrift from reasonable views of future funding. Although a framework for medium-term funding stability is highly desirable, it is only likely to be agreed to by Government if the forward spending plans are constrained to fit within this affordability envelope, and currently the process for ensuring affordability is far off course. This is discussed more fully in Chapter 6.
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17 Funding commitments expressed before the costs of major overseas operations.
18 Defence White Paper – Defending Australia in the Asia Pacific Century (May 2009)