The 1998 Strategic Defence Review committed to replace the three existing Invincible Class aircraft carriers with two larger, more versatile, carriers capable of carrying a more powerful aircraft. By the time the 2010 Strategic Defence and Security Review (SDSR) started, the Department had signed manufacturing contracts for two carriers with an estimated cost of £5.24 billion and delivery dates of 2016 and 2018. The construction of the carriers by the Aircraft Carrier Alliance is going well to date. The majority of build targets have been met and the project is on track to be within budget.
The Department entered the 2010 SDSR with an expected deficit in its equipment programme over the next ten years of up to £38 billion. Decisions taken as part of the Review significantly changed the way the United Kingdom will deliver its Carrier Strike capability. The UK will have no carrier aircraft capability from 2011-2020. While two carriers are still being built, only one will be converted to launch the planes that have now been selected, and the other will be mothballed. The UK will only have one operational carrier with a significantly reduced availability at sea when Carrier Strike capability is reintroduced in 2020. That carrier is being built according to the old design and will have to be modified to make it compatible with the requirements of the new aircraft.
The SDSR decision to change the aircraft flown from the carriers from the Short Take-Off and Vertical Landing (STOVL) variant of the Joint Strike Fighter to the carrier variant changed, but did not necessarily reduce, the balance of risks and uncertainties to the programme in ways which are not yet fully understood. The carrier variant will be more capable with greater operational range and the ability to carry a heavier payload. However, they will require the installation of catapults and arrestor gear on the carriers to help them take-off and land. The technology proposed has yet to be tested and the version the UK intends to buy will be unique to Britain. The costs of converting the carrier for use with the carrier variant aircraft will not be known until 2012.
Whilst the strategic policy decision to re-focus investment in both the carriers and the linked combat aircraft was well informed, it will only become apparent whether the Department can secure value for money in implementing the strategic policy decision when it fully develops and costs detailed delivery plans to support robust investment decisions, probably in late 2012.
As we have commented before, the Department's singular failure to manage its equipment programme within affordable limits has had damaging consequences for both military capability and value for money. It meant that options prepared by the Department to support the SDSR were heavily influenced by the need to make cash savings and by short-term affordability. The Department believes that the SDSR decision will save £3.4 billion, but only £600 million of this is cash savings while the remainder is simply deferring expenditure beyond the Department's 10 year planning horizon. The decision will lead to nine years without Carrier Strike and full capability will not be achieved until 2030. It has also acknowledged that there is more work to do to get the best and most flexible operational use from the carrier.
The Accounting Officer confirmed that a policy decision was taken in the SDSR to have aircraft carriers and we do not question this. However, decisions on how to deliver this capability were operational judgements with major cost and value for money implications. We are concerned that the National Audit Office did not have access to all the information it requested to prepare and conclude on value for money in its report of 7 July 2011 on this project. Nevertheless we took evidence from the Department on the basis of that report, on whether the strategic decision to refocus investment was well informed and whether the Department has plans to cost effectively deliver the Carrier Strike capability now required. We welcome the subsequent decision by the Prime Minister and the Cabinet Secretary, in response to our concerns, to allow the National Audit Office access to the relevant material.
In November 2011, the Comptroller and Auditor General produced a memorandum for the Committee on Carrier Strike drawing out the key messages emerging following his access to the relevant papers. Our report draws on the hearing we held on 11 July 2011 and evidence from the Comptroller and Auditor General's report and subsequent memorandum. We are disappointed that the systemic issues that have appeared in our other recent defence reports continue to arise. In making our recommendations we have built on what we have said in past reports and focussed on two key areas: strategic decision-making and delivery of capabilities.