1.6 Through the 2010 Strategic Defence and Security Review the Department tried to address some immediate causes of the overheated budget.6 It cancelled some equipment projects and took some equipment out of service earlier than originally planned. In 2012 it used a new approach of setting a budget for a 'core programme' of key equipment projects, with extra sums for contingency and emerging requirements.
1.7 At £162.9 billion, the cost of the 2014-2024 Equipment Plan is £1.4 billion less than the previous Plan. It comprises:
• a procurement budget (£68.854 billion);
• a support budget (£80.576 billion);
• a central contingency reserve (£4.600 billion);7
• headroom (£8.003 billion);8
• central provision (£1.152 billion);9 and
• central over-programming (-£300 million).10
1.8 The Department's management of the Equipment Plan has improved over time. There are several positive features in the 2014-2024 Equipment Plan, not least the relative stability of the forecast project costs of core equipment. However, risks remain, and affordability relies on DE&S having the skills and capacity to make more than £6 billion of savings, a significant proportion of which it has yet to identify. Our annual report on the assumptions underpinning the Equipment Plan gives greater detail.11
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6 HM Government, Securing Britain in an Age of Uncertainty: The Strategic Defence and Security Review, Cm 7948, October 2010.
7 The Department has set a contingency to mitigate potential cost increases within the core equipment programme.
8 The Department intends to use this money to fund extra projects beyond the current core programme according to their military priority (and assuming they are affordable), so that it can reach the full equipment capability needed to meet its longer-term objectives.
9 An amount of budget, held as part of the Equipment Plan, which is not allocated to any project but is available to fund potential cost growth in the existing core programme.
10 The Department is planning work above the budgeted level to compensate for predicted underspending in-year.
11 Comptroller and Auditor General, Ministry of Defence, Major Projects Report 2014 and the Equipment Plan 2014 to 2024, Session 2014-15, HC 941-I, National Audit Office, January 2015.