Chapter 1 - Finance

Departmental Resources

This section examines changes in the defence expenditure over time (Table 1.1). Table 1.2 examines expenditure on defence within the wider public expenditure framework. Table 1.3 gives a breakdown of defence expenditure outturn by main area. Table 1.4 presents estimates of MOD equipment expenditure broken out by the main categories of expenditure. Table 1.5 presents the MOD resources broken down by budgetary area. Table 1.6 is included to show the resources consumed against departmental objectives. Following the introduction of RAB, Tables 1.1, 1.3 and 1.5 display the Resource, Capital and AME components separately. Table 1.7 details actual net book values for MOD Fixed Assets broken down by budgetary area. Table 1.8 details the MOD's annual expenditure on R&D. This is broken down into intramural (within the department) and extramural (outside of the department) expenditure.

Main Findings

Defence Spending (Table 1.1)

  • In 2007/08, Defence Spending (Resource DEL plus Capital DEL minus Depreciation) totalled over £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.

Comparison with other Government Departments (Table 1.2)

  • 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 Health, Defence and Children, Schools and Families represent around 53% of Departmental Expenditure Limits (55% of Resource DEL and 39% of Capital DEL).

Principal Headings of Defence Expenditure Outturn (Resources) (Table 1.3)

  • 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.

  • Between 2006/07 and 2007/08 expenditure on service personnel has increased by 2.7% while civilian personnel expenditure has increased by 2.0%.

MOD Equipment Expenditure (Table 1.4)

  • MOD Equipment Expenditure has increased by some £0.7 billion for 2007/08, largely due to an increase in equipment support costs.

MOD Resources by Budgetary Area (Table 1.5)

  • The largest outturn against the DEL by TLB in 2007/08 was for the Defence Equipment and Support (£22.9 billion).

  • Of the operational TLBs, Commander-in-Chief Land Command had the highest outturn against the DEL in 2007/08 (£6.6 billion).

Fixed Assets (Table 1.7)

  • The total net value of MOD Fixed Assets was £105.1 billion as at 31 March 2008.

  • The largest category of assets was Single Use Military Equipment (£35.8 billion) as at 31 March 2008.

  • The value of land & buildings owned by the MOD totalled nearly £19.8 billion as at 31 March 2008.

  • Defence Estates hold over 99% of the MOD's land and buildings as at 31 March 2008.

  • The Defence Equipment & Support holds nearly 98% of the Department's remaining fixed assets as at 31 March 2008.

  • The large holdings of Defence Estates and the Defence Equipment & Support of fixed assets reflect the policy since April 2006 to transfer tangible and intangible assets from Top Level Budgets to Single Balance Sheet Owners.