2 The Ministry of Defence Main Estimate
2014-15
RESOURCE AND CAPITAL EXPENDITURE
REQUESTS
4. The MoD is requesting total resources
of some £39.9 billion plus capital of some £7.5 billion
for 2014-15. The MoD told us that its spending plans for 2014-15
were based on the final year of the Spending Review agreement
in 2010.[5] The main components
of the MoD's budget are given in Table 1.
Table 1: Components of the MoD's
budget for 2014-15
| Resource Spending within Departmental Expenditure Limit*
| £ million
| Percentage
|
| Provision of Defence Capability: Programme
Administration
| 33,732
1,866
| 93%
5%
|
| Operations
| 839 | 2%
|
| Total Resource Departmental Expenditure Limit
| 36,437
| 100%
|
| Annually Managed Expenditure*
| 3,425 |
|
| Total Net Request for Resources
| 39,862 |
|
| Capital Expenditure
| | |
| Provision of Defence Capability
| 7,484 |
100% |
| Operations
| 23 | -
|
| Total Net Request for Capital Departmental Expenditure Limit
| 7,507
| 100%
|
Notes: * Departmental Expenditure Limits
(DEL) are firm plans for three years for a specific part of a
department's expenditure. DEL covers all administration costs
and programme expenditure except where some programme expenditure
cannot reasonably be subject to close control over a three year
period or spending relates to non-cash costs other depreciation
and impairments.[6]
Annually Managed Expenditure (AME) is
spending that does not fall within DELs. Expenditure in AME is
generally less predictable and more difficult to control than
expenditure in DEL.[7]
Source: MoD Main Estimate[8]
and MoD Memorandum[9]
5. The overall Resource Departmental
Expenditure Limit (DEL) for 2014-15 is some one per cent more
than that for 201314 and the Capital Departmental Expenditure
Limit is some 23 per cent less. A comparison of estimated expenditure
for 2014-15 and 2013-14 is given in Table 2.
Table 2: Comparison of the Request
for Resource and Capital Expenditure
| Resource spending
| 2014-15
£ million
| 2013-14
£ million
| Percentage change
|
| Defence capability
| 33,732 |
31,508 | 7%
|
| Administration
| 1,866 |
2,096 | -11%
|
| Operations
| 839 | 2,651
| -68% |
| Total Resource DEL
| 36,437
| 36,255
| 1% |
| Annually Managed Expenditure
| 3,425 |
2,471 | 39%
|
| Total Resource spending
| 39,862
| 38,726
| 3% |
| |
|
| |
| Capital spending
| |
|
|
| Defence capability
| 7,484 |
9,429 | -21%
|
| Operations
| 23 | 325
| -93% |
| Total capital DEL
| 7,507
| 9,754
| -23%
|
Source: MoD Main Estimate[10]
and memorandum[11]
6. In its memorandum on the Main Estimate,
the MoD provided information about the cost of its Resource DEL
split by type of expenditure such as personnel costs, which total
some £8.8 billion for the Armed Forces and a further £2.3
billion for civilian personnel. The split of MoD planned expenditure
by function for 2014-15 is given in Table 3 below. We note that
the 2014-15 Estimate for Defence Equipment Support costs increased
by some eight per cent from 2013-14. The MoD told us that this
increase was due to the following:
The Equipment Support Programme
costs have increased with provision, for example, to reflect the
entry into service of the A400M, an increase in the number of
Voyager Aircraft and flying hours, T3 Typhoon additions and a
major infrastructure build programme at Atomic Weapons Establishment.[12]
Table 3: Planned expenditure
by function in the Main Estimate for 2014-15
| Cost Type
| Total
£million
|
| Direct Resource DEL
| |
| Service Personnel Costs
| 8,816.1 |
| Civilian Personnel Costs
| 2,298.4 |
| Infrastructure Costs
| 4,482.6 |
| Inventory Consumption
| 1,835.9 |
| Equipment Support Costs
| 6,441.3 |
| Other Costs and Services
| 1,929.3 |
| Research and Development
| 1,041.6 |
| Receipts and other income
| (1,114.1)
|
| Cash release of provisions
| 241.9 |
| Arms Length Bodies
| 171.9 |
| Total non-ring fenced Direct Resource DEL
| 26,144.9
|
| Depreciation and Impairments-MoD
| 9,450.0 |
| Depreciation and Impairments-Arms Length Bodies
| 3.0 |
| Total
| 9,453.0
|
| TOTAL ESTIMATED DEL COSTS
| 35,597.9
|
Source: Ministry of Defence[13]
ADDITIONAL COSTS OF MILITARY OPERATIONS
7. The additional costs of military
operations are met from the Treasury Reserve and not from the
MoD core budget. The Treasury has asked the MoD to request only
80 per cent of the cost of operations in Afghanistan in the Main
Estimate and to request any remaining funds at the time of the
Supplementary Estimates. The MoD told us that the Treasury agreed
that it would fund any additional costs at the time of the Supplementary
Estimate:
The costs of operations are significantly
driven by the tempo of operations, affecting equipment support
cost, attrition, fuel and ammunition consumption. In addition,
exchange rates, fuel prices and actual costs incurred with contractors
can all also vary during the financial year. MoD has involved
HMT [Treasury] in formulating the estimate to reassure them of
the rigour applied and to inform forecasts of wider Government
spending. The ME [Main Estimate] provides funding now for 80%
of the forecast net additional costs of operations in Afghanistan
this year, recognising that the costs are subject to change due
to the reasons outlined above. There is explicit agreement with
the HMT, however, that they will fund in full any additional costs
at SE [Supplementary Estimate].[14]
8. The MoD identified the costs of operations
in Afghanistan separately in its memorandum. The amount requested
for these operations in 201415 is some £775 million,
a reduction of some £1,495 million from the sum requested
for 201314.[15]
The reduction in planned expenditure reflects the withdrawal of
UK Forces in Afghanistan by January 2015. There is no planned
expenditure in the Operations section of the Main Estimate other
than that for Afghanistan.[16]
9. The concept of the Deployed Military
Activity Pool (DMAP) was introduced for the first time in the
2013-14 Main Estimate. The MoD described the DMAP as follows:
The DMAP is a new joint Treasury
and MoD initiative to make available resources to fund the initial
and short term costs of any unforeseen military activities, as
authorised by the National Security Council. As with the policy
for Afghanistan and the Wider Gulf, only the net additional costs
of certain activities are charged. The Special Reserve element
is £25 million and is matched by £25 million available
within the MoD's allocation for Defence Capability.[17]
10. A summary of the cost of operations
in Afghanistan and planned expenditure on the conflict pool and
the deployed military activity pool is given in Table 4 below.Table
4: Main Estimate 2014-15 forecast costs for operations in Afghanistan,
the Wider Gulf, the Conflict Pool and the Deployed Military Activity
Pool
| Operation
| Total Estimate 201314
£million
| Direct Resource DEL
£million
| Non cash Resource DEL
£million
| Capital DEL
£million
| Total Main Estimate AME request
£million
| Total Main Estimate 2014-15
£million
|
| Afghanistan
| 2,269.8 |
596.4 | 152.8
| 23.2 | 2.6
| 775.0 |
| Wider Gulf
| 45.0 | 0
| 0 | 0
| 0 | 0
|
| Conflict Pool
| 55.8 |
64.4 | 0
| 0 | 0
| 64.4 |
| Deployed Military Activity Pool
| 25.0 | 25.0
| 0 | 0
| 0 | 25
|
| Total
| 3,195.3
| 1,849.8
| 621.3
| 325.4
| 3.5
| 2,800
|
Source: Ministry of Defence[18]
11. The estimated cost of operations
in Afghanistan as at the time of the Main Estimate for 201415
broken down between the main cost headings, such as personnel
costs, is shown in Table 5 below.Table
5: The Estimated Cost of Operations in Afghanistan in the Main
Estimate for 2014-15
| Cost Type
| Total for Afghanistan in 2014-15
£million
|
| Direct Resource DEL
| |
| Civilian Personnel
| 6.8 |
| Military Personnel
| 55.0 |
| Stock/Other Consumption
| 170.6 |
| Infrastructure Costs
| 199.4 |
| Equipment Support Costs
| 620.2 |
| Other Costs and Services
| 108.9 |
| Receipts and other income
| (9.3) |
| Cash release of provisions
| 2.9 |
| Total Direct Resource DEL
| 596.4
|
| Non cash Resource DEL
| 152.8 |
| Total Resource DEL
| 749.2
|
| Capital DEL
| |
| Capital Additions-single use military equipment (SUME)
| 13.3 |
| Capital Additions-fiscal
| 9.9 |
| Total Capital DEL
| 23.2
|
| TOTAL ESTIMATED DEL COSTS
| 775.0
|
Source: Ministry of Defence[19]
12. The MoD told us that operational
costs in Afghanistan reflect the planned UK force levels in theatre
in support of the NATO-led international mission in Afghanistan
for 2014-15. The costs are significantly driven by the tempo of
operations which affects equipment support costs and fuel and
ammunition consumption.[20]
The MoD also told us that the net additional costs of the UK's
contribution to the Afghan National Army Officer Academy and the
institutional development of the Afghan National Security Forces
were funded from the HM Treasury Special Reserve and were part
of the planned operational costs. The estimated costs of this
support in 2014-15 are £14.5 million.[21]
Armed Forces Pension and Compensations
Schemes Main Estimate 2014-15
13. The Armed Forces Pension and Compensation
Schemes came into force in April 2005. The Compensation Scheme
provides compensation for injury, illness or death which is caused
by service on or after 6 April 2005. For injury or illness, the
Scheme provides a tax-free lump sum for pain and suffering, the
size of which reflects the severity of the injury or illness.
Payments range from £1,200 to £570,000. For those personnel
with more serious injuries and illnesses, the Scheme also provides
an income stream known as the Guaranteed Income Payment. This
is a tax-free, index-linked monthly payment which is paid for
life from the point of discharge.[22]
14. The Schemes' spending plans for
2013-14 are based on the expected take-up of pensions of retired
Service personnel and the expected claims under the Compensation
Scheme, taking account of anticipated mortality within the existing
pensioner population. This Estimate covers the payment of pensions
and compensation; the costs of administering the Schemes fall
to the MoD Main Estimate.[23]
This Estimate requests provision of Net Resources of £6,749
million leading to a Net Cash Requirement of £2,418 million.
The number of pensioners in the scheme has increased from 398,840
in 2010 to 412,402 in 2013,[24]
5 Ministry of Defence Main Estimate 2014-15 Memorandum
(MAI 0001) Back
6
Public Expenditure Statistical Analyses 2011 (Cm 8104) page 205 Back
7
Ibid , page 202 Back
8
HM Treasury, Central Government Supply Estimates 2014-15 Main
Supply Estimates, HC 1233,, 29 April 2014 Back
9
Ministry of Defence Main Estimate 2014-15 Memorandum (MAI 0001) Back
10
HM Treasury, Central Government Supply Estimates 2014-15 Main
Supply Estimates, , HC 1233, 29 April 2014 Back
11
Ministry of Defence Main Estimate 2014-15 Memorandum (MAI 0001) Back
12
Ministry of Defence Supplementary Memorandum (MAI003) Back
13
Ministry of Defence Main Estimate 2014-15 Memorandum (MAI 0001) Back
14
Ministry of Defence Main Estimate 2014-15 Memorandum (MAI 0001) Back
15
Ministry of Defence Main Estimate 2014-15 Memorandum (MAI 0001) Back
16
Ministry of Defence Supplementary Memorandum (MAI003) Back
17
MoD Main Estimate 2013-14, Second Report of 2013-14 (HC 571)Ev
1 Back
18
Ministry of Defence Main Estimate 2014-15 Memorandum (MAI 0001) Back
19
Ministry of Defence Main Estimate 2014-15 Memorandum (MAI 0001) Back
20
Ministry of Defence Main Estimate 2014-15 Memorandum (MAI 0001) Back
21
Ministry of Defence Supplementary Memorandum (MAI003) Back
22
http://www.veterans-uk.info/pensions/afcs_overview.html Back
23
Armed Forces Pension and Compensation Schemes Main Estimate 2014-15
Memorandum (MAI002) Back
24
Ibid Back
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