13. The Ministry of Defence (MoD) remains a primary department of concern with a looming hole in its budget and an affordability gap in its Equipment Plan of at least £7 billion. This funding gap, by the MoD's own estimates, could be as much as £14.6 billion.17
14. Concerns about the impact of spending constraints on the MoD are well known and widely reported. The Department secured an additional £1.8 billion in funding last year. However, with so many high-stakes projects, all with justifiable competing demands for money, it is unclear where and how resources will be allocated. The Permanent Secretary told us that the MoD "has calls on resources that are very large and more unpredictable than we would like".18 Whilst MoD projects are by their nature often long term and expensive I am unconvinced demands on the MoD's resources are uniquely unpredictable.
15. Our inquiry into Submarine Defueling and Dismantling demonstrated what can happen when less pressing, and less time-sensitive projects are deprioritised in pursuit of cost savings.19 The MoD's savings decisions contributed to the huge delays of this project resulting in dismantling work drastically behind schedule: seven of the stored submarines have now spent longer out of service than they did in service; and the MoD has now spent half a billion in maintenance and storage costs at the dockyards in Rosyth and Devonport.20 The projects needed to allow disposal to happen have been beset by delays, with an 11-year delay to defueling and a 15-year delay to dismantling. The Department will not be able to meet its commitment to fully dismantle its first submarine-HMS Swiftsure-in 2023 and is now aiming for 2026.21 The MoD expects to restart its defueling work in 2024.22 However, we are not convinced that this is achievable. The MoD does not have a fully funded plan for this project and given the persistent delays in the project so far, it is difficult to see this date being met. We encourage the department to take ownership of and put momentum behind a project that has been deprioritised and overlooked for too long.
16. Over the past two years, the Committee monitored the progress of the ambitious and costly Carrier Strike programme. We are conscious that costs could spiral out of control and that the MoD's focus on Carrier Strike might result in under-staffing and under- funding on other less high-profile projects. The UK secured sole Tier One partner status in Carrier Strike's F-35 programme by providing additional funding and expertise to the project. We expect the MoD to monitor and minimise any negative impact now that that Tier One status has ended. We have wider concerns over skills and the development and retention of people within the MoD. The Committee intends to examine this further over the coming year.
17. Our inquiry into Military Homes returned to the MoD's contract with Annington Homes, originally agreed in 1996. The current Permanent Secretary admitted that the original deal was "a poor one": an observation which can only be described as an understatement.23 The MoD is now in rent review negotiations with Annington. We have received reassurance from both the Department and UK Government Investments that negotiations are progressing but the deal was stacked in favour of Annington Homes 20 years ago and even a well negotiated deal today is only good within imperfect parameters.24 We will be watching the progress of negotiations keenly and expect the MoD to strike a deal that is as favourable to the taxpayer as possible. Whilst nothing can now be done to rectify the damage and losses incurred since 1996, we hope that the department can at least go some way in moving on from, and rebalance the terms of, the original deal.
18. Beyond this, we remain concerned about the state of the housing stock for service personnel in general. We will consider the outcome of the much-delayed pilots of the MoD's Future Accommodation Model and reviewing how the MoD applies the lessons learned from these in order to improve the standard of accommodation provided to service personnel and their families. Defence housing is an embarrassment and, I believe, impacts on retention.
19. The new Secretary of State for Defence-Penny Mordaunt-will have to get to grips quickly with these issues and prioritise accordingly.
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17 Committee of Public Accounts, Defence Equipment Plan, Seventy-Seventh Report of Session 2017-19, HC 1519, 1 February 2019
18 Committee of Public Accounts, Oral evidence: Military Homes, HC 2136, 8 May 2019, Q 118
19 Ibid, Qq 3,13, 76, 89, 101
20 Report by the Comptroller and Auditor General, Investigation into submarine defueling and dismantling, Session 2017-19, HC 2102, 3 April 2019
21 Committee of Public Accounts Report, Ministry of Defence nuclear programme, Sixty-First Report of Session 2017-19, HC 1028, 10 September 2018, para 16, and Committee of Public Accounts Report, Submarine defueling and dismantling, One Hundred and First Report of Session 2017-19, HC 2041, 19 June 2019, para 10
22 Committee of Public Accounts Report, Submarine defueling and dismantling, One Hundred and First Report of Session 2017-19, HC 2041, 19 June 2019, para 9
23 Committee of Public Accounts, Oral evidence: Military Homes, HC 2136, 8 May 2019, Q 15
24 Ibid, Q 21