Report by the Comptroller and Auditor General
HC 1115 2007-2008
5 November 2008
The programme is currently in a two year initial concept phase for the new class of submarines. This requires a series of important and difficult decisions to be taken by September 2009 to keep the programme on track. The MoD has appointed a Senior Responsible Owner to co-ordinate these decisions and other work to inform future decisions and to allocate funding to the various elements of the programme.
The current predicted cost of procuring the new nuclear deterrent is between £15 billion and £20 billion (2006-7 prices), as outlined in the 2006 White Paper, The future of the UK’s nuclear deterrent. The operating costs for the deterrent once the new class of submarines comes into service are estimated to be similar to those of the current deterrent. These are initial estimates, however, and the MoD recognises the need by September 2009 to produce robust estimates of whole-life costs. There are major areas of uncertainty in the budget, including the provision for contingency and VAT, which need to be resolved.
The submarine industry is a highly specialised industrial sector with a number of monopoly suppliers and there are real difficulties in providing the right incentives for these suppliers to deliver to time and budget.
The tight timetable set for ensuring the seamless transition from the present Vanguard class of submarines to the future class is challenging. The Vanguard class is likely to start leaving service from the early 2020s and the programme requires the future nuclear deterrent to be in service by 2024. The MoD needs to establish now how far the service life of the Vanguard class can be safely extended.
A further risk to the programme timescale – of which the MoD is well aware - is a shortage of nuclear-related skills in industry and within MoD - potentially aggravated by competition from civil nuclear projects.
Tim Burr, head of the National Audit Office, said today:
“Much groundwork has been done in the two years since the Government decided to embark on a programme to maintain the country’s submarine-based nuclear deterrent capability beyond the life of the current system. Critical decisions about the design of the future submarine class and the commercial strategy required to incentivise monopoly suppliers now need to be taken so that the Ministry of Defence can stick to its demanding schedule and assure value for money over the life of the programme.”
Notes for Editors
Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office.
The Comptroller and Auditor General, Tim Burr, is the head of the National Audit Office which employs some 850 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.