Since the acquisition of the UK's first strategic nuclear deterrent in the 1950s, the cost of procuring and maintaining it, and which Government department should finance it, has always been a matter of much debate.Jump to full report >>
Ascertaining historical costs for the nuclear deterrent is difficult and complex, as this information is not easily available from public sources. Many records no longer exist, while others were classified. In the past the Government has also often not discussed costs on the grounds of operational security.
Information is also presented in many different ways (i.e. current prices, constant prices, as a percentage of the defence budget) therefore making it difficult to provide an annual breakdown that is calculated in a consistent manner. A cost set out in the early 1960s, for example, could not be directly compared to costs set out in the 1980s or the present day unless they were uprated to take into account inflation.
The UK’s strategic nuclear deterrent was initially provided by the RAF’s V-force. In In 1957 the Secretary of State for Air sought to reassure those who felt that too much of the defence expenditure was being devoted to the deterrent, saying the V-bomber force "will absorb only about one-tenth" of the defence budget. In 1958 the Government said that altogether, including the cost of the defence by conventional forces of deterrent bases, about one-fifth of the defence budget was allocated to the deterrent. The nuclear role of the V-force was withdrawn in 1969.
The UK purchased the submarine-based Polaris system from the United States in 1962 under the Polaris Sales Agreement. In 1968 Polaris entered service and became the UK’s main nuclear force.
In March 1981 the MOD put the cost of the Polaris procurement at £330 million, over a period of nine years (1963-1972). This was roughly equivalent to £2 billion in 1980 prices, when the Trident programme began (see below). This figure did not, however, include the Chevaline modification to Polaris, which was estimated at a further £1 billion.
Discussing how Polaris would be paid for, the Civil Lord of the Admiralty, John Hay, stated on 2 March 1964:
It has always been the Government's view that the Polaris submarine programme Polaris being the carrier of the nuclear deterrent, should be taken on the defence budget as a whole; that is to say, it should not fall entirely on the Navy. For that reason, the defence budget includes a Polaris element. The extra money that we receive for Polaris is made up partly from additional cash from the Treasury and partly from a contribution from each of the Services.
The Polaris fleet began to leave service in 1994.
A decision to replace the Polaris nuclear deterrent system with Trident was made in July 1980, under the terms of the Polaris sales agreement 1963, as amended for Trident (Treaty Series 086/1980) and (Treaty Series 008/1983).
The then Defence Secretary Francis Pym made a statement to the House on the replacement of the UK’s Polaris strategic nuclear deterrent system with Trident. In that statement he confirmed that the capital cost of procuring Trident would be taken out of the existing defence budget. He added that the deterrent "is a weapons system, like any other weapons system" and will be accommodated within the defence budget "in the same way as Polaris was accommodated 10 to 20 years ago". In terms of costs, he estimated at its peak Polaris will account for about 5% of the whole defence budget and 8% of the equipment part of the budget.
Further questions about the cost were raised during the debate on procuring Trident in March 1981. Then Defence Secretary, John Nott, reiterated in that debate:
The strategic deterrent has been an integral part of the British defence budget under all Governments up to now. Trident is not an addition to that budget.
In 1982, and following on from a decision to procure the Trident II D5 missile instead of the Trident I C4 variant, the capital costs of procuring and maintaining Trident were estimated to be £7.5 billion (1981 prices).
By the time of the 1998 Strategic Defence Review (SDR) the majority of costs associated with procuring Trident had been spent. The SDR subsequently put total acquisition expenditure on the Trident programme at £12.52 billion, which equates to £18.35 billion in 2015/16 prices.
However, it should be noted that this did not represent a doubling of costs on the Trident programme. Once inflation over the period 1980-1998 is accounted for, according to the Treasury's GDP deflator £5 billion in 1980 was worth approximately £12.02 billion in 1998.
Although commonly referred to as “the renewal or replacement of Trident”, the Dreadnought programme is about the design, development and manufacture of four new Dreadnought class ballistic missile submarines (SSBN) that will maintain the UK’s nuclear posture of Continuous At Sea Deterrence (CASD). Replacement of the Trident II D5 missile itself is not part of the programme.
The 2015 SDSR confirmed that the costs of design and manufacture of a class of four submarines will be £31 billion, an increase of £6 billion on estimates set down in the programme’s Initial Gate report in 2011 (at outturn prices). This cost estimate includes all costs associated with acquisition including feasibility studies, design, assessment, demonstration and manufacture (including the US-UK Common Missile Compartment project). It also accounts for expected defence inflation over the life of the programme and investment in new facilities at BAE Systems in Barrow, which in 2013 the MOD suggested would be “limited to the modification of existing infrastructure to accommodate the differences between the Vanguard and Successor designs”. Investment in HM Naval Base Clyde is not part of the Dreadnought programme spend.
As such the £31 billion price tag incorporates the £4.8 billion already spent on the initial phases of the programme.
A contingency of £10 billion will also be set aside. This contingency represents approximately 35% of the submarine cost to completion and according to the MOD “is a prudent estimate based on past experience of large, complex projects, such as the 2012 Olympics”. However, there is no guarantee whether all, or any, of this money will be spent. If it were, then it would provide an upper-end estimate of acquisition of £41 billion. Spread over the 35 year life of the programme, this represents 0.2% of Government spending.
The MOD has stated that “the revised cost and schedule reflect the greater understanding we now have about the detailed design of the submarines and their manufacture”.
The years of peak expenditure are expected to be principally 2018 through to the mid/late 2030s, as the programme moves into full production.
In line with convention, the Dreadnought programme will be funded from the MOD's core equipment procurement budget.
This was reiterated by the MOD in answer to a Parliamentary Question on 25 January 2017:
The Chancellor of the Exchequer and Defence Secretary agree that funding and control of the Dreadnought programme remain rightly part of the Defence budget.
In 2007 a disagreement erupted between the MOD and the Treasury over the funding of the capital costs of the Successor programme. The MOD suggested that the capital costs of procuring the nuclear deterrent had, in the past, been borne by the Treasury, a position which the Treasury refuted. The argument centred round an increase to the defence budget which was announced as part of the 2007 Comprehensive Spending Review (CSR). The CSR settlement suggested that the increase would allow the MOD “to make provision for the maintenance of the nuclear deterrent”, which some commentators considered to be a commitment to fund the capital costs of the project. However, the MOD confirmed in November 2007 that while additional funding had been provided to the MOD budget, spending on the Successor programme would come from within the core equipment budget.
In recent weeks the question of budgetary responsibility has resurfaced after a number of MPs made the suggestion that the Dreadnought programme should be removed from the defence budget. On 27 November 2017 Sir Hugo Swire MP raised this point during oral Defence Questions:
In his ongoing and delicate discussions with the Treasury, will he remain aware, first, that there are those of us on this side of the House who believe that the defence budget has been pared back about as far as it can be, and secondly, that when it comes to Trident renewal many of us on this side of the House do not believe it should be part of the defence budget? Indeed, it distorts the defence budget, and if that is part of his argument, he will have considerably more support than perhaps he knows.
In response the Defence Secretary, Gavin Williamson, replied:
Everything that my right hon. Friend has raised will be part of the review. He has raised the important question of nuclear capability being part of the defence budget. It has traditionally not sat as part of the defence budget; that changed only post-2010. It is vital to look at all options as part of the national security and capability review, and I look forward to speaking to him and seeking his advice and thoughts on the issues that he has raised.
The Ministry of Defence issued a correction on 7 December 2017 in a written statement:
I wish to inform the House that an error has been identified in the answer I gave to the hon. Member for East Devon (Sir Hugo Swire) in Defence Oral Questions on 27 November 2017, Official Report, column 21, on the subject of funding defence nuclear capabilities.
To clarify, the UK's nuclear deterrent has always been funded from the Defence budget.
Commons Briefing papers CBP-8166
Authors: Louisa Brooke-Holland; Claire Mills