1. Despite the broad range of savings identified in the October 2010 Strategic Defence and Security Review and progress in making the defence programme more affordable, there remained a mismatch between the planned Defence budget and the cost of the Equipment Plan over the next decade.
2. As part of its focus on improving financial management, the Department conducted a further review of its forward equipment expenditure plans in spring/summer 2011, known as the Three-Month Exercise. The Exercise incorporated a review of the costs of key programmes, including an examination of the need for greater financial contingency in forward plans, and development of a series of options for a balanced and affordable Equipment Plan.
3. In order for the Department to be able to plan on a long term basis, the Exercise included discussions with HMT on the financial planning assumptions that could be made about the level of resources likely to be available to Defence beyond the end of the current Spending Review period, in 2014-15. As part of these negotiations the Department secured a one per cent a year increase in real terms on the defence equipment and equipment support budget between 2015-16 and 2020-21.
4. In his statement to the House on 18 July on Defence transformation, the former Secretary of State confirmed the procurement of 14 additional Chinook helicopters, the upgrade of the Army's Warrior vehicles, spending on the Joint Strike Fighter, the procurement of the Rivet Joint intelligence and surveillance aircraft, the 'cats and traps' for the Queen Elizabeth class carriers, and the development of the Global Combat Ship. He also noted that: "we will rationalise vehicle acquisition to make the best use of those we have already procured to support operations in Afghanistan". The Secretary of State further noted that: "... in future: we will order only what we can afford to buy."1
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1 http://www.publication.parliament.uk/pa/cm201011/cmhansrd/cm110718/debtext/110718-0002.htm