This topic provides details on the composition and scope of Ministry of Defence (MOD) expenditure. It also provides information on the impact of defence spending on the wider economy and international comparisons.
Publications
The annual statistics compendium of the Ministry of Defence
A summary of the annual statistics compendium of the Ministry of Defence
A summary of the annual statistics compendium of the Ministry of Defence
War Pensions statistics.
Overview
Published statistics on finance in the Ministry of Defence (MOD) cover the following areas:
Departmental resources
Statistics include:
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changes in defence expenditure
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a breakdown of defence expenditure outturn
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estimates of MOD equipment procurement expenditure
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MOD resources by Departmental aim and objective
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net book values for MOD Fixed Assets
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MOD’s estimated annual expenditure on Research and Development
Industry and employment
Information on the MOD’s spending on equipment and services in the UK, including:
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the estimated amount of money the MOD spent with UK industry broken down by industrial grouping
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estimates of direct and indirect UK employment dependent on MOD expenditure and defence exports
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estimates of the number of direct full-time jobs in England, Scotland, Wales and Northern Ireland
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recent MOD payments on PFI projects and those planned for the next year
Trade
Information on defence trade, including:
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estimates of total export orders for defence equipment and services
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the estimated value of MOD Balance of Payments for Trade in Services
Contracts
Information on analysis of contracts placed, major equipment projects and payments, including:
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the number and value of contracts placed
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a list of defence suppliers paid £5 million or more
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a list of private sector holding companies paid £50 million or more
International defence
Information on MOD’s commitment to Conflict Prevention, and military spending in foreign countries, including:
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estimated costs incurred by MOD in respect of conflict prevention
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defence expenditure converted to US dollars and expressed as a percentage of a nation's GDP for each of the NATO countries
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top 15 military spenders worldwide
Technical Data
Departmental resources
The majority of the UK Defence Statistics (UKDS) data tables (
1.1
,
1.3
,
1.4
,
1.5
,
1.6
, 1.7) are obtained directly from Ministry of Defence (MOD) Directorate of Defence Resources and are consistent with figures published in the MOD Annual Report and Accounts
(AR&A).
Public Expenditure by Departmental Grouping (UKDS Table
1.2
) is taken from Public Expenditure Statistical Analyses (
PESA 2008
). It examines the expenditure on defence within the wider public expenditure framework.
Research and development
Research and development (R&D) expenditure (UKDS table 1.8 ) is broken down into R&D activity undertaken inside and outside the MOD. Data are derived from an annual survey of MOD R&D expenditure and from MOD accounting systems.
R&D activity is classified within the Organisation for Economic Co-operation & Development’s Frascati Guidelines that align to National Accounts definitions. Revisions and changes to these statistics are described in Defence Statistics bulletin 6 and Defence statistics bulletins 1 and 2 .
Employment
We provide estimates of the number of full-time jobs supported in the UK by MOD expenditure and defence exports (UKDS table
1.10
). The methodology is described in
Defence Statistics Bulletin No.5
.
‘Direct’ employment is that generated in those companies providing the product or service directly to MOD, or that within the exporter
‘Indirect’ employment is that provided through ’the supply chain’ by sub-contractors or suppliers to the ‘direct’ contractor.
Changes to the methodology resulting from the introduction of Resource Accounting and Budgeting are described in Addendum No 5a to Defence Statistics Bulletin.
We also provide estimates of the number of direct full-time jobs in the Government Office Regions of England, Scotland, Wales, Northern Ireland and the UK as a whole, supported in industry and commerce by MOD direct expenditure (UKDS tables 1.11 , 1.11a and 1.11b ). The full methodology, and an assessment of data quality, is described in Defence Statistics Bulletin No. 7
Industry
Estimated Defence Expenditure Outturn in the UK, by Industry Group (UKDS table 1.9 ) is prepared from MOD administrative systems. Figures exclude ‘internal’ expenditure such as pay and allowances. Industrial groups are derived from the Standard Industrial Classification (SIC) guidelines maintained by the Office for National Statistics (ONS). From 1996/97 onwards figures are based on SIC 1992, prior to this they are based on SIC (80).
Trade
Balance of Payments ( UKDS table 1.14) is a measure of the UK’s trading account with the rest of the world. Trade in Services are provisions of services between UK residents and non-residents, and transactions in goods which are not freighted out of the country in which they take place; these transactions are not recorded in the official ‘Trade in Goods’ statistics. More details can be found in Defence Statistics Bulletin No.4 .
Contracts
Information on Equipment Projects comes from the Major Projects Report and shows details of projects at both the pre- and post Main-Gate stage of their development.
A list of organisations paid £5 million or more by MOD ( UKDS table 1.17 ) is compiled from data obtained from the Financial Management Shared Service Centre ( FMSSC ).
International defence
Information used in Table 1.19 comes from the MOD AR&A. Information contained in Tables 1.19, 1.20 and 1.21 comes from data gathered by NATO and the Stockholm International Peace Research Institute ( SIPRI ).
Glossary
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Aerospace, Defence and Security industries (ADS)
The ADS was formed following the merger of the Association of Police and Public Security Suppliers (APPSS), the Defence Manufacturers Association (DMA) and the Society of British Aerospace Companies (SBAC).
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Annual business inquiry (ABI)
The ABI is a business survey that gathers data from businesses to produce estimates of employee jobs by industry and geography. It also offers a breakdown of businesses by type.
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Assets
Assets can be financial or non-financial. Financial assets include monetary gold, bank deposits, IMF Special Drawing Rights, Loans granted bonds, shares, accounts receivable, and the value of the government’s stake in public corporations. Non-financial assets consist of fixed capital (such as buildings and vehicles); stock, land and valuables.
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AUC
Assets Under Construction.
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Balance sheet
The balance sheet is a financial statement showing the assets, liabilities, and net worth of a business on a specified date.
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Capital consumption
Capital consumption is also called depreciation and represents the amount of fixed capital used up each year.
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Constant prices
At ‘constant prices’ indicates a quantity from which the effects of inflation have been removed. The constant prices will refer to a year as the basis for the calculation, for example ’constant 2001/02 prices’.
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Current expenditure
Current expenditure on goods and services is the sum of expenditure on pay, and related staff costs, plus spending on good and services. It is net of receipts from sales. It excludes capital expenditure, but includes expenditure on equipment that can only be used for military purposes since that is counted as current expenditure. It differs from final consumption in that capital consumption is not included.
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Current prices
See Outturn prices.
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Defence analytical services and advice
DASA was created in July 1992 and provides National Statistics on Defence and other corporate information, forecasting and planning and consultancy, advice and research services to the Ministry of Defence. It ceased to be an agency on 1 April 2008 and was renamed Defence Analytical Services and Advice.
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Defence bills agency
The DBA is primarily responsible for paying bills submitted to the Ministry of Defence by defence contractors. The DBA formally ceased to be a Defence Agency as at 1 April 2007 and forms part of the Financial Management Shared Service Centre.
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Defence budget
Under Cash Accounting, the amount of money planned to be spent during a financial year is the defence budget. Under RAB, the sum of resources planned to be consumed during a financial year is the defence budget. This excludes the additional expenditure on current operations that are funded from year to year by HM Treasury. See Resource budgeting.
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Defence Support Group
As of 1 April 2008, the Army Base Repair Organisation (ABRO) and the Defence Aviation Repair Agency (DARA) merged to form the Defence Support Group. DSG is a Trading Fund established to support the Armed Forces and deliver wider defence objectives in support of the key Defence Industrial Strategy requirements.
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Departmental Annually Managed Expenditure
Departmental Annually Managed Expenditure is spending that is outside the DEL, but included in departmental budgets. This includes the provision for Armed Forces Pensions and non-cash items such as depreciation, cost of capital charges, and provision. Previously these non-cash items were not subject to the same controls and were included in AME, but from 2003/04 they were included as part of the DEL.
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Departmental Expenditure Limit (DEL)
The DEL is a firm plan for three years for a specific part of a department’s expenditure. In general the DEL will cover all running costs and all programme expenditure except, in certain cases, where spending is included in departmental AME because it cannot reasonably be subject to close control over a three-year period. DELs are divided into current resource and capital budgets.
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Departmental Resource Accounts (DRAc)
The Ministry of Defence is required to prepare resource accounts for each financial year detailing the resources acquired, held, or disposed of during the year, and the way it has used them during the year.
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Depreciation
Depreciation is also termed capital consumption. Total Managed Expenditure (TME) includes public sector expenditure gross of the depreciation of capital assets used to produce non-market services. Public sector net investment deducts an aggregate charge for all depreciation (market and non-market) from gross capital spending.
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Estimated prices
They are forecasts of the prices expected to pertain when the expenditure occurs. These are presented to Parliament.
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Financial Management Shared Service Centre
The FMSSC was established in April 2007, bringing together several existing Ministry of Defence (MOD) back-office finance processes including the former Defence Bills Agency (DBA). Based at sites in Liverpool and Bath, the FMSSC is customer focused and has responsibility for overseeing end-to-end accounting processes. Its mission is to deliver high quality financial management services to support the MOD’s decision making, internal and statutory reporting activities.
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Frascati manual
The Frascati Manual is an internationally recognised methodology for collecting and using R&D statistics. It includes definitions of basic concepts, guidelines for collecting data and the classifications to be used in compiling statistics, which in turn allow for international comparisons to be made. See also SSAP 13.
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Gross domestic product (GDP)
GDP (at market prices) is the value of goods and services produced within a country’s borders in a year. Economic data are often quoted as a percentage of GDP to give an indication of trends through time and to make international comparisons easier.
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Gross national product (GNP)
GNP is the total value of goods and services produced in a year by a country’s nationals, including profits from capital held abroad.
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Holding company
Refers to companies that are full or part owners of other companies (subsidiaries and joint ventures).
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Intangible assets
Most if not all of the Ministry of Defence’s intangible assets are development costs. Under Statement of Standard Accounting Practice 13 (SSAP 13), pure research costs, and applied research costs that are not immediately linkable to a product cannot be put in the Balance Sheet as assets. Only development costs which lead to the introduction into service of new products or systems can be put on the Balance Sheet.
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Market exchange rate
The Market Exchange Rate is a currency exchange rate determined largely by market forces.
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National Audit Office
The NAO scrutinises public spending on behalf of Parliament. It is totally independent of government. It audits the accounts of all government departments and agencies as well as a wide range of other public bodies, and report to Parliament on the economy, efficiency and effectiveness with which government bodies have used public money.
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NATO
North Atlantic Treaty Organisation.
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Net-cash requirement
The NCR is the amount of actual money that Ministry of Defence requires from the Government in order to fund its activities. The NCR takes account of the movements in working capital levels (debtors, creditors and stocks) but not non-cash costs.
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Non-cash items
Non-cash items in Annually Managed Expenditure (AME) include various notional transactions such as depreciation and cost of capital that appear in the operating cost statement under RAB and which are recorded in AME for the period of Spending Review 2000, rather than in DEL.
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Operating cost statement
The Operating Cost Statement is the statement in departmental resource accounts that shows the current income and expenditure on an accrual basis. It is similar to the profit and loss statement on commercial accounts.
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Outturn and estimated outturn
Outturn describes expenditure actually incurred, whereas estimated outturn describes estimated expenditure on the basis of actual expenditure to date.
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Outturn prices
Outturn prices are the prices of the period when the expenditure actually occurred; also described as current prices.
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Pink book
Detailed annual estimates of the UK balance of payments including estimates for the current account (trade in goods and services, income and current transfers), the capital account, the financial account and the International Investment position.
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Private Finance Initiatives
The PFI is a system for providing capital assets for the provision of public services. Typically, the private sector designs, builds and maintains infrastructure and other capital assets and then operates those assets to sell services to the public sector. In most cases, the capital assets are accounted for on the balance sheet of the private sector operator.
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Public Expenditure Statistical Analyses
PESA is a compendium that gathers recent outturn data, estimated outturns for the latest year, and spending plans over the entire range of UK public expenditure.
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Purchasing Power Parity (PPP)
PPP is a method of measuring the relative purchasing power of different countries’ currencies over the same types of goods and services. Because goods and services may cost more in one country than in another, PPP allows us to make more accurate comparisons of standards of living across countries. PPP estimates use price comparisons of comparable items but since not all items can be matched exactly across countries and time, the estimates are not always ‘robust.’
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R&D
Research and Development
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Real terms
Real terms figures are amounts adjusted for the effect of general price inflation relative to a base year, as measured by the gross domestic product (GDP) market price deflator.
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Resource accounting
Resource accounting is the accounting system that will henceforth be used to record expenditure in the departmental accounts instead of cash accounting. It applies generally accepted accounting practice (GAAP) used in private industry and other government departments to departmental transactions. Spending is measured on an accruals basis.
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Resource budget
The resource budget is the sum of a department’s resource Departmental Expenditure Limit and resource Annually Managed Expenditure. It is the budget for current expenditure on an accruals basis.
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Resource budgeting
Resource budgeting is the budgeting regime adopted for the spending plans set in the 2000 Spending Review. It is derived from resource accounting rules, but there are several differences in treatment between resource accounts and resource budgets.
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RfR
Request for Resources: RfR1 = Provision of Defence Capability, RfR2 = Net additional cost of operations, RfR3 = War Pensions and Allowances.
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Single Use Military Equipment
Single use military equipment are Ministry of Defence held assets that are only suitable for military purposes (such as warships), as apposed to dual-use equipment which can also be used for non-military purposes.
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SSAP 13
Statement of Standard Accounting Practices No.13 gives guidance on the accounting policies to be followed in respect of research and development expenditure. The guidance aligns to the OECD Frascati definitions for measuring Research & Experimental Development. See also Frascati Manual.
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Standard Industrial Classification (SIC)
SIC classifies business establishments and other statistical units by the type of economic activity in which they are engaged. The classification is maintained by the Office for National Statistics (ONS).
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Total managed expenditure
TME is a definition of aggregate public spending derived from national accounts. It is the consolidated sum of current and capital expenditure of central and local government, and public corporations. TME is the sum of the Departmental Expenditure Limit and Annually Managed Expenditure.
Contact Details
For statistical enquiries about this topic, please contact:
Defence Analytical Services and Advice
Email: dasa-enquiries-mailbox@mod.uk
Telephone: Tel: +44 (0) 20 7807 8792
Defence Analytical Services and Advice 3-K-15 MOD Main Building Whitehall London SW1A 2HB
