Feeding the ‘Monster’: Escalating Capital Costs for the Trident Successor Programme

In October 2015 Jon Thomson, Permanent Under Secretary at the Ministry of Defence, described the Trident Successor programme as a “monster” that kept him up at night, “the biggest project the Ministry of Defence will ever take on” and “an incredibly complicated area in which to try to estimate future costs.”

Trident and its replacement are a high salience, politically symbolic issue. When it comes to a vote in Parliament later in 2016, the debate will involve familiar positions and arguments around national security, status, cost and jobs as well as tactical electoral assessments. Meanwhile, the project to construct the Successor class submarines goes on, although its progress is far from smooth. Delayed partly for political reasons in 2010, it is now becoming clear that further slippage in the programme has been down to poor management, significant cost escalation, delays in the construction of the Astute attack submarines at Barrow, and other uncertainties. More recently, questions have arisen over the choice of submarines as an effective platform for the UK’s nuclear weapons, as they could be far more vulnerable to detection than first thought.

The Successor submarine project has been plagued by delay and confusing, out-dated or over-optimistic cost assessments, made worse by conflicting bases of reporting. This briefing from Nick Ritchie pulls into one place the evolution of the main official statements in relation to costs associated with the UK Trident renewal project from 2006 to the present. The graph below is an illustrative cost function over time for the Successor project, showing the cost shifts based upon declared past estimates and a possible cost hike in the near future.

Illustrative Cost Functions for Successor Programme 
What of the future? We were assured in November 2015 that the updated cost assessments presented in the SDSR were based upon rigorous assessments. But they are already under pressure internally, and could soon be increased by up to another 50% over the coming months, more than wiping out the £10bn contingency even before the vote in Parliament expected in late 2016 and the contracts for production are laid with BAE Systems and other major suppliers. The change in procurement structure away from a single Main Gate and towards greater flexibility is highly understandable in the circumstances, but must present a major worry that costs will not be contained. This danger is recognised by officials, but there is as yet no indication that MoD will be able to produce the incentive packages to prevent further budget-busting price hikes.

This has already been a story of serial under-estimation of costs, shifting bases for cost announcements and a deep lack of confidence in the management of the project. A recent Ministerial correction to a Parliamentary Written Answer from last year is revealing in this regard that even officials were confused by their own figures.  The 2006 White Paper estimated the Successor submarines would cost £11-14bn in 2006 prices. The 2011 Initial Gate claimed costs were maintained within this envelope, but estimated this to equal £25bn in outturn prices. Subsequent Ministerial statements, including the 2014 update to Parliament, reverted to the £11-14bn figure as an assurance that costs had not risen. This all suggests that the 2006 figure was arrived at by adding general inflation to the cost of the original Vanguard programme from the 1980s and 90s, and no serious attempt was made to relate the figures to actual future estimates, until the November 2015 review estimated £31bn outturn figures.
This all begs the question – can we be confident of Parliamentary accountability for the biggest capital project ever undertaken by MoD when the costs are reported in such opaque ways?

It would be heroic indeed to expect the project to stay roughly within the current public estimates released in November 2015, even with the addition of the £10bn contingency. This leaves parliament and the public with the question of ‘how much is enough?’ At what point does the cost of the ‘monster’ project become too much, particularly when there’s little guarantee that emerging technologies will not render it a liability before the first submarine even comes into service? Will parliament only find out when it is too late and billions more have been committed?

Download the full briefing as a PDF with references below.


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