Moving into 2010/11 the 'bow wave' still exists, although appears to be mitigated by c.£900m due to actions taken in PR09, allowing for no further cost increases or slip on projects already in the plan.
Table 6-3 shows the EPP spend in the context of the forecast defence spend.
Spend | 2007/08a | 2008/09e | 2009/10p | 2010/11p | 2011/12f | CAGR (2007/08 - 11/12) |
Defence spend |
|
|
|
|
|
|
Total | 40.6 | 41.6 | 43.8 | 45.6 | 46.8* | 3.6% |
Near cash | 29.4 | 31.1 | 31.9 | 33.3 | 34.2* | 3.8% |
EPP spend** (near cash) | 5.5 | 6.0 | 6.0 | 6.7 | 7.1 | 6.6% |
EPP spend as proportion of Defence spend (near cash) | 18.6% | 19.2% | 18.7% | 20.0% | 20.7% | n/a |
Note: All data for RfR1 (Provision of Defence Capability) only.
* Assuming 2.7% nominal increase in Defence spending;
** Actual spend not tracked accurately since formation of DE&S, so final control totals are shown for 2007/08 and
2008/09. For later years, planned spend from PR09 after options and manual adjustments up to 23rd April is shown for later years.
Source: Resource Planning; CapEP; DE&S
Table 6-3: EPP spend (near cash) as a proportion of total Defence spend
The data presented in Table 6-3 suggest that spending on the EPP is planned to increase at 6.6% p.a. between 2007/08 and 11/12. The current planning assumption, which appears to be somewhat optimistic, is that the MoD budget will increase by 2.7% beyond the comprehensive spending review period (which extends to 2010/11). Even on the basis of this assumption, the EPP is projected to consume a greater proportion of the MoD's overall budget than has been the case in the past, increasing by +2 percentage points between 2007/08 and 2011/12. It remains to be seen whether such an expansion in the spend on equipment procurement will, in reality, be possible given the current funding climate and operational imperatives.
It is more likely that the planned EPP spend through to 2011/12 will be re-evaluated and reduced in-line with the overall defence budget. This would lead to the EPP for PR09 as it stands becoming unaffordable, resulting in possible delays to projects to allow reductions to the in-year spend in order to meet the revised plans. A reduction to current proportions could lead to an affordability gap in 2011/12 of almost £750m (before considering the effects of slip / cost overrun which are not forecast).