Lima Charlie: What Will Extra Funding Over Next Four Years Mean For The Armed Forces?

The Royal Navy emerge as clear winners from the spending announcement

The Prime Minister has confirmed that the Ministry of Defence budget will see an extra £16 billion allocated to it over the next four years. This funding will be used to purchase equipment and help transform the British Armed Forces into a modern fighting force. On paper, this sounds like extremely good news, but what does it mean in reality?

The announcement of extra funding will be welcomed by the budget planners in the MOD who, for several years now, have been struggling with a very difficult financial problem. A combination of not quite enough money in the budget to do everything the MOD wanted to do, added to the growing cost of equipment meant that at one point recently, according to the National Audit Office, the MOD was facing a roughly £15 billion shortfall in funding for new equipment.

This poses a real challenge for the MOD, trying to find enough cash to keep major projects funded, while also making savings to keep within tight budgetary limits. It is an unenviable position, and one that was untenable without having to make very significant cuts to the Armed Forces.

Throughout much of 2020, the MOD has been involved in a major defence review, done alongside partners from across Government to understand what the UK’s defence and national security challenges are, and how best to respond to them. Known as the ‘Integrated Review’ (IR), it has been carried out to try and work out the threats, and the best combination of both capable and affordable Armed Forces needed to meet it. 

For the MOD, the challenge has been that without a sustainable budget, it was having to look to cut equipment both in the future programme, and also in-service equipment to make the budget work. This meant that the review may have had to focus on what was affordable, not necessarily what was the right force structure to meet all threats. 

The news then that the budget has been given a very significant uplift ahead of the publication of the IR will be strongly welcomed by the MOD. The cash will enable it to do several things to help with planning and move the forces to a new footing.

Firstly, it will allow the securing of funding for various defence procurement projects that are underway over the next few years. Although people hear the headline cost of a project, this is never paid in one lump sum. Instead each year varying amounts of money are allocated to it, which means that one year may see 5% of the total cost spent, but another year may need 30% of the overall budget.

This makes financial planning for projects difficult as the MOD has hundreds of different programmes underway at any one time. All of them have different requirements and need different amounts of cash to be budgeted. If they are costing more than expected, or if they are running later than planned, this can cause real disruption to the overall budget.

A Royal Marine Commando waits beside a Chinook helicopter on operations in Kajaki, Afghanistan. UK MOD © Crown copyright

The cash increase will play an important part in trying to reduce a lot of the pressures on the budget. It will help inject cash in potentially quite small doses to help keep projects moving forward and not be delayed or cancelled. This is really good news as it prevents the MOD from having to consider cancelling or delaying a major project (for example new armoured vehicles) to find the level of savings needed. 

The second way that the money will be used is to help kickstart new projects relying on innovative technology and start to transform the Armed Forces. The last few years have seen a growth in the use of technology like drones, autonomous systems and robotic technology, all of which have the potential to really change how modern militaries can work. 

The next few years are likely to see a real increase in this sort of equipment entering service. Small hand-held drones will probably become as normal a part of an infantry platoons equipment as assault rifles or grenades. This technology changes rapidly though and what might be cutting edge today will be obsolete very quickly. 

To that end, the UK will need to invest funds in working out the best equipment and technology to buy, recognising some of it may work and others may fail spectacularly. In some ways this is a bit like the 1950s, when large numbers of different jet types entered service in short succession. Not all of them worked, some were very successful while others were not. The 2020s are going to be similar, but this time it will be for investing in autonomous systems, robots and drones. 

It is likely that some of the cash will be used to fund this sort of development work and help make the transition to the next stage of military capability. In an ideal world, then the next few years could see very rapid transition from the current force structures into an entirely new and different military.

General Sir Nick Carter, the Chief of the Defence Staff has said that by the 2030s, there could be 30,000 plus robots in the British Army. 

A third way that the money will be used is to safeguard existing major projects and provide long term financial assurance. Many defence projects can take years to deliver, and if budgets drop or circumstances change, may become unaffordable or change in scope. For example, the Type 45 started out as a projected class of 12 destroyers, which later became eight, and then finally six as the costs grew and budgets were not enough.

The budget increase provides some significant reassurance to some of the bigger projects that they have a stable future ahead. For industry, this is important as it can help them budget for buying long-lead items, and in driving prices down as they know exactly how much they will need to order and can do so with certainty, for some years to come. 

HMS St Albans. UK MOD © Crown copyright 2020

For the Royal Navy, this increase will play a key part in securing the construction of both the eight Type 26 and five Type 31 frigates currently being built around the UK. These ships will form the backbone of the future escort force for decades to come. To know there is assured funding in place for their construction is incredibly helpful because it means the industry can order long-lead items for the hulls that need construction now knowing the amounts they will need – it is much more cost and time-efficient to order eight sets of everything in one go than it is to order six sets in dribs and drabs.

The spending announcement is particularly good news for the Royal Navy, who emerge as clear winners from it.

The commitments from the Prime Minister to more ships, to increase its presence around the world and to invest in new designs like the previously unknown Type 32 are all good news. The Type 32 is particularly intriguing as it points towards a new frigate class entering service in the late 2020s that will complement the existing plans for a force of Type 23, 26 and 31 frigates. This seems to suggest that the Royal Navy plans to expand its escort force beyond what has previously been announced, potentially growing in size towards 23-25 escorts depending on how many Type 32s are bought. 

It is too early to speculate about what the design may be, or what the ship will be equipped with, but on paper, the plan seems to be to move the Royal Navy to being a force equipped with a high-end combination of Type 26/45s to provide anti-submarine and anti-air warfare capability to protect the carrier force and nuclear deterrent, while the Type 31 and 32 force will be used to carry out wider general patrols and ‘flag flying’ missions around the world. 

The Royal Navy is not the only winner from the announcement. The Royal Air Force will also do well, with funds secured to help continue the development of the Tempest programme, which will form the basis of the next generation of fighter aircraft for the RAF. This is in the early stages of development but will need funding to invest in the various technology demonstrators, trials and tests needed to work out the right airframe design.

For example, it will take time to work out whether the design should have a pilot or be autonomous in design, and what sort of missions it will carry out, and how many need to be purchased. The technology that will be incorporated into the design may not even exist yet, so funds are required to investigate what could work and invest in this to help move the design forward.

The Tempest is likely to form the backbone of the RAF from the early 2040s onwards, so at this early stage of development, it is vital to understand as much as possible about it to make decisions that can have an impact for decades to come. 

Brought together then this announcement means that the Armed Forces will be operating on a significantly more stable footing for buying equipment over the next three to four years, with more money available and with more certainty about funding. This is without a doubt good news, but equally, there are also challenges ahead that need to be addressed. 

Firstly, the money that has been found is primarily intended for investing in equipment and not operations. There is a longer-term challenge in trying to find the money to ensure that the military can meet all the tasks expected of them, without having to meet local savings to keep within budget. 

There will need to be some savings made too within the existing equipment budget. Part of the challenge of transforming the Armed Forces is that they need time and money to bring new equipment into service, to test it and to ensure that it works. But, that money needs to be found from somewhere, which may mean decisions being taken to withdraw older equipment from service.

The argument likely to be put forward is that with older equipment not having a relevant future on operations, and with replacements in the pipeline, there is little reason for retaining it now. By paying it off now, this frees up money that would have been spent on operating and maintaining it to instead be used for supporting the introduction into service of new equipment. 

The MOD has referred publicly to this as the so-called ‘sunset’ and ‘sunrise’ of capabilities – taking some things out of service now but planning to replace them in due course. The problem though is that it is not clear what is likely to be taken out of service. 

Hints during the defence review process suggest that the British Army is considering taking some or all of its tanks out of service. The Challenger 2 is now long in the tooth, and in desperate need of an expensive mid-life upgrade. The difficult decision facing planners is whether Challenger 2 is the right project to invest in, or if it would be better to remove the tank from service and replace it with different capabilities – for instance, armed drones, more ISTAR and improved anti-tank weapons. The question that planners need to answer is not ‘what is the tank for’ but rather ‘what military effect do we want to have, and if it is currently done by a tank, is there an equally good or better way of doing it more cost-effectively’? 

The British Army does seem to have emerged as a clear loser from the budget announcement. Beyond vague references to new types of weaponry, there were no firm commitments to major equipment changes or new investment. Given the difficult combination of having both a heavily delayed and over budget series of projects to deliver vehicles and the increasingly politically difficult argument for deploying large armoured forces on operations, the Army is likely to find this a difficult defence review.

The most likely outcome regardless of the increase in spending is that there will be reductions in the Armed Forces ahead. The need to refocus spending on future projects, to invest in new technology and to help shape the future will mean in the short-term difficult decisions lie ahead.

It seems all but inevitable that the Royal Navy will scrap some of its older frigates (most likely from the ‘General Purpose’ variant of the Type 23 force, which are very old and increasingly challenging to maintain and support). The RAF may make savings by paying off some aircraft types or reducing airframe numbers (for example there are suggestions that they may buy less Wedgetail aircraft than previously expected). The British Army may find itself shrinking in size as savings are made through reducing vehicle numbers and headcount. 

Challenger 2 Main Battle Tank © Crown copyright

It is unclear what the actual force structures and sizes will be at the moment. This will not be confirmed until the publication of the Integrated Review at some point in early 2021, which will set out more comprehensively the planned size and structure of the armed forces. This will provide more clarity around the likely short-term changes that will happen, and the longer-term plans and opportunities too.

On balance, this funding announcement does seem to be good news for the Armed Forces. It provides certainty of resources for major projects, while at the same time ensures that exciting new technology will be brought into service over the next few years.

This is important as it helps keep the UK placed at the top of the table as one of the most capable Armed Forces in the world. While it may be tempting to want to stop and keep the equipment that already exists in service, there is a risk that in doing so, this reduces the ability to fund proper modernisation. 

The risk, in this case, is that if time and money is not spent on modernising now, then in a few years’ time UK troops will find themselves comprehensively outgunned and outclassed by other countries that do. In order then to keep ahead of the game in the long-term, there is a need in the short-term to take some risks that will be painful but will do long-term good. 

Overall then this increase should be welcomed, but it is important to understand that this is something that will take many years for its effects to be felt. There will not be a rapid increase in new, previously unplanned, equipment, and older equipment will still need to be taken out of service. But if you take a medium-term view out to the 2030s and beyond, this sets the stage nicely for the British Armed Forces to retain their place as some of the most capable armed forces in the world for many years to come. 


This article is the latest contribution in our Lima Charlie columnist section.

This is part of a series featuring unattributed contributions from experts and insiders providing opinion, insight and analysis on today’s Armed Forces, the wider politics of the military and observations on military life.

Under the pseudonym Lima Charlie, our contributors aim to explore the issues facing today’s military and their comment remains unattributed to allow our writers to present their analysis candidly and under one editorial voice.