Taking money away from a healthy program to pay for cost overruns on a broken one, only to leave both crippled, is a standard defense budgeting practice worldwide. The U.K. is hoping that a new financial reserve fund will break that habit.
As part of the £160 billion ($253 billion) the U.K. plans to spend on defense equipment and services in the next decade, it is earmarking several billion pounds to deal with unforeseen circumstances. Of the total, slightly less than £152 billion has been allocated to specific budget lines, including more than £4 billion for the reserve. Another £8 billion is not allocated against specific accounts. The reserve is designed to give some flexibility to manage cost increases without affecting other projects.
The funding level is spelled out in Program Review 12 (PR12) in which Defense Secretary Philip Hammond vows to have brought into equilibrium equipment plans and actual available funding after years of a mismatch between the two. Balancing the books has been a priority for Hammond, who says the National Audit Office will be able to review the balanced-budget claim, including by looking at commercially sensitive information. That assessment is expected to be made public.
In Hammond's view, the sustainable equipment program “gives industry the confidence to invest.”
The funding being set aside includes an extra £4 billion for intelligence, surveillance and reconnaissance projects (such as the Solomon intelligence data storage and fusion system and the carrier-based Crowsnest airborne early warning efforts) and £7 billion for complex weapons, mostly for previously committed efforts.upgrades also are being funded, says Hammond, without giving details of which enhancements are planned. However, the money is likely to help support the fielding of additional ground-attack capabilities and an active, electronically scanned array radar, although approval from other partner countries will still be needed.
The budget will cover the already announced purchase of 14Chinooks and an eighth , as well as three RC-135 Rivet Joint signals intelligence aircraft (called AirSeeker). The purchase of 23 military airlifters and 14 Voyager air-to-air refuelers also is being backed.
On the helicopter front, Hammond says Wildcat buys are being funded, as are Merlin helicopter upgrades, studies to marinize the Merlin fleet, an Apache attack-helicopter life extension to keep them in service past 2025, and upgrades of 24 Pumas, slightly below the almost 30 once planned. More than half the Pumas have already been modified.
Underpinning the road map is a plan to increase by 1% in real terms equipment spending from 2015 on. Research and technology outlays will not fall any further, according to Hammond.
“Cultural” acquisition changes are another priority, and Hammond says he hopes to adopt some of the benefits of the urgent operational requirements process. The effort is being backed by a planned initiative to reform the Defense Equipment & Support organization, with an announcement due before the summer recess.