Chapter 1 - Finance
                       
Table 1.6 MOD Resources by Departmental Aims & Objectives
The MOD's aim is to "deliver security for the people of the United Kingdom and the Overseas Territories by defending them, including against terrorism, and act as a force for good by strengthening international peace and security". This aim and three supporting objectives are set out in the MOD's Public Service Agreement for the years 2008 to 2011. The costs of meeting these objectives, and their enabling outputs set out below, are reported in the MOD Annual Report & Accounts. The outputs are defined more fully in Note 24 to the Accounts. Figures are net of receipts and are not comparable with those presented in Tables 1.1, 1.3 and 1.5, for example, due to the treatment of MOD Trading Funds. The Total Defence Output Cost is consistent with the net operating cost figure (excluding the payments of War Pensions and Benefits) in the statement of Operating Costs by Departmental Aim and Objectives of the MOD Annual Report & Accounts.

The sum of Resource DEL and "Other AME", which may be derived from Table 1.5, closely aligns with the total of these net operating costs. The figures do not exactly match because certain categories of MOD's interest payments and grants and other non budgetary costs are specified by HM Treasury to be outside the scope of the MOD's Departmental Expenditure Limits (DEL) and Annually Managed Expenditure (AME).

Operating costs include resource charges for capital assets through depreciation and cost of capital charges.

The figures for 2007/08 have been restated due to the introduction of new Financial Reporting Standards (Nos. 23, 25, 26 and 29) related to the implementation of foreign currency and financial instrument accounting requirements for the first time. See the Special Note to Table 1.6 under the Departmental Resources Introduction for more details including an explanation of the variances between 2007/08 and 2008/09.

Differences between the totals and sums of the components are caused by rounding.
Inclusive of non-recoverable VAT at Current Prices (£ million)
  Outturn   Outturn   Outturn  
Outturn
  
Outturn
  
Outturn
  2003/04   2004/05   2005/06 1 2006/07 2 2007/08 3 2008/09
Total Defence Output Cost
 33 415   31 222   33 325   32 911   35 190 r 35 717
                       
                       
OBJECTIVE 1: Achieving success in the tasks we undertake
 3 481   3 390   3 564   3 711   4 048 r 4 521
                       
    Operations 1 233   938   1 040   1 443   2 196   2 855
    Other Military Tasks 1 659   1 764   1 698   1 525   1 157 r 883
    Contributing to the Community 360   395   494   397   439 r 449
    Helping to Build a Safer World 229   293   332   346   255 r 334
                       
OBJECTIVE 2: Being ready to respond to the tasks that might arise4
 26 777   24 934   26 601   26 292   26 802 r 26 342
                       
Royal Navy 9 990   7 310   7 942   7 037   7 314 r 7 318
    Aircraft Carriers 293   347   354   339   362 r 438
    Frigates & Destroyers 1 709   1 548   1 355   1 619   1 439 r 1 744
    Smaller Warships 284   486   413   390   338 r 316
    Amphibious Ships 339   340   290   339   399 r 491
    Strategic Sealift 3   38   41   46   34   64
    Fleet Support Ships 348   408   344   366   294 r 299
    Survey & Other Vessels 157   102   72   94   145 r 179
    Naval Aircraft 1 393   1 193   1 139   1 083   1 076 r 1 152
    Submarines 4 862   2 307   3 393   2 204   2 715 r 2 037
    Royal Marines 604   540   540   557   511 r 600
                       
Army 8 723   9 252   10 479   10 706   10 359 r 9 796
    Field Units 6 372   7 517   8 492   8 822   9 275 r 8 197
    Other Units 2 350   1 736   1 987   1 884   1 084 r 1 599
                       
Royal Air Force 7 002   6 825   6 848   6 987   7 194 r 7 319
    Combat Aircraft5 4 519   4 577   4 125   3 692   3 728 r 3 546
    Intelligence, Surveillance, Target Acquisition and Reconnaissance
    Aircraft (ISTAR)6		 350   489   606   613   829 r 899
    Tankers, Transport and Communications Aircraft 1 040   1 028   1 247   1 211   1 005 r 866
    Future Capability 339   15   20   44   143 r 200
    Other Aircraft and RAF Units 753   716   850   1 427   1 489 r 1 808
                       
Centre Grouping 1 063   1 547   1 332   1 562   1 935 r 1 908
    Joint and Multinational Operations 148   523   474   425   771 r 405
    Centrally Managed Military Support 236   289   400   367   636 r 656
    Maintenance of War Reserve Stocks 679   734   458   770   529 r 848
                       
OBJECTIVE 3: Building for the future
 3 156   2 899   3 160   2 907   4 340 r 4 854
                       
Research & Expensed Development 1 007   996   1 041   1 026   973 r 1 112
Equipment Programme 2 149   1 903   2 119   1 881   1 819 r 1 883
Non-Equipment Investment Programme *   *   *   *   1 548   1 858
Source: MOD Annual Report & Accounts
1. The increased Total Defence Output Cost figure for 2005/06 reflects: an increased cost incurred following the change in discount rate, from 3.5% to 2.2%,     applied to the Department's provisions for nuclear decommissioning of £1.1 billion; and movements in other operating costs, including staff, impairments, and     depreciation as a result of the Quinquennial review of fixed assets of £1.4 billion offset by receipts from the sale of QinetiQ shares.
2. With effect from April 2006, intangible and tangible fixed assets were transferred from Top Level Budgets (TLBs) to Single Balance Sheet Owners (SBSOs).     The related operating costs (e.g. depreciation and cost of capital charge) have been apportioned to outputs by the SBSOs using the percentage of costs     attributed to the Management Grouping in 2005/06 as a basis for the apportionment. Where Front Line TLBs had previously allocated some asset costs directly     to final outputs, the methodology used in 2006/07 has resulted in some variances in costs attributed to final outputs from those reported in 2005/06.     Restructuring within RAF Strike Command resulted in a more accurate alignment of costs to outputs.
3. A working group, consisting of all TLBs and the SBSOs, was set up in 2007/08 to review the apportionment methods used. The aim was to improve     consistency in the costing of final outputs; some of the variances between 2006/07 and 2007/08 are as a result of changes agreed by the group. The     increase in Total Defence Output is as a result of Operational costs due to continuing commitments in Iraq and Afghanistan (£0.75 Billion) and costs in respect     of Typhoon £0.5 Billion, Apache helicopters £0.3 Billion and increases to provisions in respect of nuclear decommissioning £0.5 Billion.
4. The costs of delivering the military capability to meet Objective 2 are analysed among force elements of the front line commands, including joint force units     where these have been established, and a small number of centrally managed military support activities. In addition to the direct operating costs of the front     line units, they include the attributed costs of logistical and personnel support. In common with all Objectives, these also contain a share of the costs of     advising ministers and accountability to Parliament, and apportioned overheads for head office functions and centrally provided services.
5. Combines former titles of Strike/Attack and Offensive Support Aircraft and Defensive and Surveillance Aircraft.
6. Formerly Reconnaissance and Maritime Patrol Aircraft.