Introduction

This Chapter provides details on the composition and scope of the Department's expenditure. It also provides information on the impact of defence spending on the wider economy and international comparisons.

Other related sources on the strategy and performance of the Department include:

• The Government's Expenditure Plans 2008/2009 (Cm 7385, June 2008)
• The Ministry of Defence's Annual Report & Accounts 2007-08 (HC850-I and II, July 2008)
• HMT Public Expenditure Statistical Analyses 2008 (HC489, April 2008)

Some of these documents and other background information can be found at the MOD website: http://www.mod.uk

Where possible, every attempt has been made to maintain the consistency of this publication with those above. Where differences do occur, this reflects differences in coverage and/or the availability of more up to date information.

This year has seen the inclusion of a new table detailing future planned financial commitments relating to MOD PFI Projects (Table 1.12a) as well as further improvements to existing tables including:

• the expansion of some of the industrial categories contained within Table 1.9a
• an update on the latest developments relating to defence related imports and exports statistics (Tables 1.13 & 1.14)
• a redesigned Table 1.19 to include more information on the net direct and indirect costs incurred by MOD operations overseas.

There are five main sections within this Chapter covering:

• Departmental Resources - Defence Expenditure Outturn, Public Expenditure by Departmental Grouping, Principal Headings of Defence Expenditure Outturn, MOD Equipment Expenditure, MOD Resources by Budgetary Areas, MOD Resources by Departmental Aims & Objectives, MOD Fixed Assets and MOD Research & Development Expenditure Outturn.
  
  
• Industry & Employment - MOD spending with UK industry, Estimated UK Employment Dependent on Defence Expenditure and Exports, Estimated UK Regional Direct Employment Dependent on MOD Expenditure and MOD payments on Private Finance Initiatives (PFI) Projects.
  
  
• Trade - Imports, Exports and Balance of Payments for Trade in Services.
  
  
• Contracts - by type, major equipment projects and main suppliers (including by holding company).
  
  
• International Defence - MOD Operation and Peacekeeping Costs, NATO Countries Defence Expenditure and their expenditure as a percentage of GDP and the Top World-wide Military Spenders in 2007.

Main Findings

The main findings from Chapter 1 are:

Departmental Resources

• In 2007/08, Defence Spending (Resource DEL plus Capital DEL minus Depreciation) totalled £37.4 billion.
  
  
• In 2007/08, the outturn against the Departmental Expenditure Limits was £43.7 billion. The Resource DEL accounted for £35.7 billion of the 2007/08 expenditure, whilst the Capital DEL accounted for £7.9 billion.
  
  
• In 2007/08 Defence is estimated to be the fourth highest area of Government expenditure (Resource DEL plus Capital DEL plus AME) behind Work and Pensions, Health, and Children, Schools and Families.
  
  
• In 2007/08, the main areas of Resource expenditure were personnel (£11.5 billion) and depreciation/impairments (£6.2 billion).
  
  
• In 2007/08, the main area of Capital expenditure was Assets under Construction (£5.4 billion), which largely consist of major weapons platforms under construction.
  
  
• Estimated MOD Equipment Expenditure has increased by some £0.7 billion for 2007/08, largely due to an increase in equipment support costs.
  
  
• The total net value of MOD Fixed Assets was £105.1billion as at 31 March 2008.
  
  
• The largest category of assets was Single Use Military Equipment (£35.8 billion) as at 31 March 2008.
  
  

Industry & Employment

• In 2006/07, the MOD spent some £16.5 billion with UK Industry. The 'manufacturing' industries (section D) attracted nearly 50% of MOD expenditure with UK Industry. The single industry group attracting most MOD expenditure was Aircraft and Spacecraft (around 12% of the total).
  
  
• Estimated employment in UK industry and commerce dependent on MOD expenditure and defence exports has fallen slightly on last year to around 305,000.
  
  

Trade

• Total estimated UK deliveries of exports increased from £4.7 billion reported in 2006 to £5.5 billion in 2007.



• The UK identified export orders increased by £4.1 billion between 2005 and 2006 to £9.7 billion. This significant increase in export orders can be attributed to a large order from Saudi Arabia for Typhoon aircraft and orders from Oman and Trinidad and Tobago for offshore patrol vessels.

Contracts

• In 2007/08 MOD HQ placed just over 22,900 contracts with a collective value of around £14.4 billion. The number of contracts placed in 2007/08 remains roughly the same as was reported for 2006/07, whereas the value has decreased by nearly 50% (£13.8 billion) over the same period. The increase in contract value in 2006/07 was due to the placing of a multi billion pound contract with Aspire Defence Holdings and the removal of this contract from the 2007/08 calculations sees a return to historical levels of contract value. Please note that most contract payments are not made during the year in which the contract is placed.
  


• The largest post Main-Gate equipment project by value is the Type 45 Destroyer (£6.5 billion). This is followed by the Astute Class Submarine (£3.8 billion) and the Nimrod Maritime Reconnaissance and Attack Mk4 (£3.5 billion).

International Defence

• In 2007/08, the MOD spent around £3.0 billion on conflict prevention worldwide
  
  
• The net additional cost incurred by the MOD as a result of operations in Iraq and Afghanistan was around £1.5 billion each.