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The Ministry of Defence (MoD) appears to have balanced the £74 billion* ten-year 'funding gap', but key equipment programmes, such as Trident renewal and Joint Strike Fighter, are still a major source of potential instability to defence budget, highlights a recent paper from the Royal United Services Institute (RUSI).

Looking into the Black Hole: Is the UK Defence Budget Crisis Really Over?  by Professor Malcolm Chalmers, outlines that while the MoD's books may be balanced on paper, the work needed to turn assumptions on how to close the funding gap into detailed plans has only started.

'The decision to reduce the size of the regular army, made more palatable by increased investment in reserve forces, has restored some credibility to the commitment to a balanced posture. While the MoD's books may be balanced on paper, the work needed to turn assumptions into detailed plans has only just begun.'

'In areas as diverse as equipment programmes, pay levels, service accommodation, boarding school allowances and regimental identities, hard battles remain to be fought in order to achieve projected levels of saving,' writes Chalmers.

'While the government is now planning for a 1 per cent annual real growth in the equipment budget after 2014/15, it cannot guarantee what its successor will decide in the 2015 Spending Review. The drawdown from Afghanistan could weaken the MoD's bargaining position, especially if current efforts to reduce the nation's fiscal deficit have not yet fully succeeded.'

The paper also warns that there continues to be a risk that the MoD's plans could be 'blown off course' if the cost of major programmes increases more sharply than planned.

'Three key projects, any one of which could pose substantial financial risks to the MoD, will be particularly important in this regard. These are the successor nuclear deterrent, the Joint Strike Fighter, and the Type-26 frigate. Of those projects still in the pre-Main Gate stage (i.e. without production contracts having been signed), these are the three with the largest projected budgets over the next decade.'

'The costs of major projects remain a major source of potential instability, with particular concerns over the looming costs of Trident renewal. Pressures to bear down on unit costs will continue to be difficult to reconcile with a diminishing number of front-line capabilities, each of which involves significant overhead expenditure.'

To read Malcolm Chalmers' briefing paper in full please visit http://www.rusi.org/downloads/assets/RUSIBriefingPaperSept2011.pdf

*Out of a projected £74 billion MoD 'funding gap' - the difference between actual budget and expenditure including maintenance of personnel and force levels - almost two-thirds (£47 billion) is a result of cuts in the MoD budget, including a real terms cut of 8.6 per cent between 2010/11 and 2014/15. The remainder (£27 billion) is a result of inherited commitments that were unaffordable even if the core budget had continued the rate of growth that it had enjoyed since 1999.

NOTES FOR EDITORS

1. Any enquiries, please contact : Daniel Sherman/ daniels@rusi.org

2. Looking into the Black Hole: Is the UK Defence Budget Crisis Really Over? ' can be viewed at:  http://www.rusi.org/downloads/assets/RUSIBriefingPaperSept2011.pdf

3. RUSI is an independent think-tank for defence and security. RUSI is a unique institution; founded in 1831 by the Duke of Wellington, it embodies nearly two centuries of forward thinking, free discussion and careful reflection on defence and security matters.

4. Professor Malcolm Chalmers is Research Director and Director (UK Defence Policy) at RUSI. He is a Special Advisor to the UK Parliament's Joint Committee on the National Security Strategy, and was a member of the UK Cabinet Office consultative group for the 2010 Strategic Defence and Security Review, and of the UK Defence Secretary's Advisory Forum for the 2010 Defence Green Paper. He is Visiting Professor of Defence and Foreign Policy in the Department of War Studies, King's College, London, and was a Special Adviser to Foreign Secretaries Jack Straw MP and Margaret Beckett MP.