National statistics

Background quality report: departmental resources 2022

Published 1 December 2022

1. Contact Details

The Analysis Directorate welcomes feedback on our statistical products. If you have any comments or questions about this publication, or about our statistics in general, you can contact us as follows:

Analysis Directorate (Analysis-Expenditure)

Telephone: 030 015 86554

Email: Analysis-Expenditure-PQ-FOI@mod.gov.uk

If you require information which is not available within this or other available publications, you may wish to submit a Request for Information to the Ministry of Defence under the Freedom of Information Act 2000.

If you wish to correspond by mail, our postal address is:

Analysis Directorate (Analysis-Expenditure)
Ministry of Defence
Oak 0 West, #6028
MOD Abbey Wood North
Bristol
BS34 8QW

For general MOD enquiries, please call: 020 7218 9000

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2. Introduction and Statistical Presentation

This bulletin provides a range of information about the total level of MOD spending and on spending on specific activities. It includes time series of defence spending, broken down by activity, and compared with other government departments. Time series of MOD spending on equipment, research and development (R&D), consultancy, and operations and peacekeeping costs are also provided. The value of non-current assets (for example, MOD-owned land, buildings and equipment) is also given, as well as income earned by MOD (such as rental income and from sales of fuel).

This bulletin compliments the MOD Annual Resources and Accounts (ARAc), which is audited by the National Audit Office (NAO). The ARAc mainly contains information for the current and previous financial year, whereas this bulletin provides time series for the figures reported in the ARAc.

The bulletin comprises an HTML report which focuses on commentary and data visualisations, and Open Data Source (ODS) tables which contain the data behind the text and visualisations.

2.1 Publication Frequency

The Departmental Resources bulletin is produced annually (as listed on the statistical release calendar) and contains figures from the most recent financial year for which data are available.

2.2 Publication History

The MOD have published statistics on departmental resources and R&D for at least 35 years. Historically, these were published in the Statement of Defence Estimates and subsequently in UK Defence Statistics. Since 2013, these statistics have been published as the Departmental Resources bulletin.

3. Statistical Processing

3.1 Source Data

Many of the statistics in this bulletin use data from the MOD Annual Report and Accounts. In addition:

• HM Treasury Public Expenditure Statistical Analyses (PESA) are produced annually to show information on government spending.

• UK Defence Statistics Compendiums were produced annually up until 2014 showing statistics on a wide number of topics across MOD. Selected content from the ‘Finance’ section is now included within the Departmental Resources bulletin.

• A survey of MOD is run by the Analysis Directorate on behalf of the Office for National Statistics (ONS) to record expenditure on R&D.

• HM Treasury GDP deflators at market prices, and money GDP are produced regularly and used as a measure of general inflation.

3.2 Data Compilation

Below, the methodology and production for each section of the bulletin and its corresponding table number is described. Sections indicate where data is taken from different sources.

Tables 1, 3, 4, and 6 to 10

These tables are produced using data from the MOD’s Financial Management Information Systems. This data is also used to produce the MOD Annual Report and Accounts, is subject to international standards, and is audited by the NAO.

Where not presented in the ARAc, some historical data has been sourced from the UK Defence Statistics compendiums.

GDP deflators produced by HM Treasury are used to show expenditure in constant prices for comparability across years.

Table 2 (Public Expenditure for Top Six Departmental Groups)

HM Treasury provide the underlying PESA data used in Table 2 (Public Expenditure by Departmental grouping); this is derived from the cross government Combined Online Information Systems.

Departments update five years of outturn data on a comparable basis each year where possible. This can sometimes lead to significant changes in reported figures compared to in previous publications at the departmental level. This is normally due to Machinery of Government adjustments, classification decisions, and accountancy changes.

Table 5 (MOD Research and Development Expenditure Outturn)

This data is derived from a MOD wide survey of Frascati-compliant R&D expenditure and uses the MOD Chart of Accounts as a basis of the survey. The survey aims to confirm the levels of Frascati R&D reported in the accounts, as well as obtain lower-level data on the types of expenditure required to meet Office for National Statistics (ONS) reporting requirements.

Defence Science and Technology Laboratory (Dstl) undertake the majority of MOD intramural Frascati R&D (R&D conducted in-house) and are therefore included within the survey to enable the split again extramural R&D expenditure (R&D commissioned by MOD within industry, institutes of higher education and Research Councils).

4. Quality Management and Assessment

The MOD’s quality management process for Official Statistics consists of three elements:

1. Regularly monitoring and assessing quality risk via an annual assessment.
2. Providing a mechanism for reporting and reviewing revisions/corrections to Official Statistics.
3. Ensuring Background Quality Reports are published alongside bulletins and are updated regularly.

5. Relevance

5.1 User Needs

This bulletin provides context for the MOD ARAc by including time series and additional data. The data in this bulletin has a wide reach externally, being used by researchers, academics, politicians and journalists. This bulletin and the data underlying it are used to answer Parliamentary Questions (PQs) and Freedom of Information (FOI) requests. Main subjects of interest include pay and equipment costs, details of spending broken down into Resource Account Codes, and defence expenditure time series (in cash and real terms). The wide usage of this bulletin contributes to public accountability for MOD.

Within the MOD, this data is used to brief press officers and senior officials. This data is also used to brief ministers and to provide context in documents or speeches by the Minister’s outer office.

This bulletin is also used widely within the Defence Industry. Specifically, users include the ADS Group, BAE Systems PLC, and the Royal United Services Institute (RUSI).

The assessment of R&D spending on defence by MOD is especially important as Defence spending accounts for a large proportion of UK Central Government spending on R&D. R&D spending is an important guide to the levels of investment in the economy and are a key indicator of future growth and competitiveness. Furthermore, this data collection is a legal, EU requirement, as these figures feed into Office for National Statistics (ONS) calculations of R&D generally.

External users of these R&D statistics include ONS (for the Government Expenditure on R&D survey), EUROSTAT (comparing UK R&D figures with those of other countries), the European Commission and OECD. There are also many PQs and FOIs that relate to the R&D figures. Common questions on R&D include requests for historic figures, comparisons with other countries, spend on specific defence projects and with specific companies, and spend in different technology sectors. Internally, the information on R&D spend is used by Dstl.

There have been the following requests from users for additional information to be included in the bulletin:

• Expenditure data by Service. The MOD budget is not arranged and managed in a way that allows this question to be easily answered.
• Expenditure data broken down by region. Expenditure with Industry is now published as the UK Regional Expenditure bulletin.
• Data on the amount of spending on outsourcing. MOD does not collect data on this specifically, as it is difficult to identify.
• Details of suppliers within a category of spend. Accounts data is used to produce outturn by expenditure group. Accounts data does not include supplier information.

5.2 Assessment of User Needs and Perceptions

Users are encouraged to provide feedback on statistical bulletins. The Further Information section contained within each bulletin provides details on how to contact the responsible statistician and there is also the opportunity to do so through the feedback pages on the GOV.UK website. Users can be informed of the latest changes to statistics through the GOV.UK website and through consultation exercises where significant change is proposed.

More informally, we monitor the requests for information that we receive from within the MOD, and from outside, and respond accordingly. We have been actively involved in user engagement and have interacted with the user community and in 2015 the Royal United Services Institute (RUSI) wrote an article entitled ‘Clarity on Spending at Last: Three Cheers for the MoD Statisticians’ which was written after they had read this statistical bulletin.

6. Accuracy and Reliability

The accounts data underlying these tables is subject to international accounting standards and is audited by the NAO.

6.1 For Specific Statistics

Table 4 (Estimated Equipment Expenditure)

This table has not been fully assessed as a National Statistic but is based to a large degree on figures published in the MOD Annual Report and Accounts. There are some assumptions made about the levels of equipment and non-equipment in the Assets Under Construction (AUC) category of spend.

Table 5 (MOD Research & Development Expenditure Outturn)

The survey conducted to compile this table is comprehensive and has a high response rate. Reference material has been produced to help commercial staff identify Frascati R&D spend. However, there are difficulties in identifying intramural and extramural spend; it is not always clear whether an organisation should be classed as part of MOD, such as in the restructuring of AWE PLC (Atomic Weapons Establishment) as an arm’s length Non-Departmental Public Body of MOD in 2021.

Following a data quality review in 2009 it was found that MOD net development spend in 2001/02 and 2002/03 as defined by Frascati may have been overstated by up to 40%. As insufficient records exist for a true estimate to be made, the Analysis Directorate cannot guarantee that the data for these years complies with Frascati guidelines or that it meets all of the high professional assurance standards set out in the Code of Practice for Official Statistics. As such, the historic time series begins from 2003/04 with all currently presented MOD research expenditure figures being unaffected by this review.

In 2019/20 the MOD R&D survey underwent a methodology review resulting in the declassification of around £282 million R&D expenditure as Frascati defined. This methodology change was also accompanied by an additional reduction in actual Frascati expenditure, with the total drop in gross R&D expenditure between 2018/19 and 2019/20 exceeding £600 million.

As a result of the review the MOD R&D expenditure figures for 2018/19 should be considered the end of the previous time series and data from 2019/20 and onwards considered a new time series, with the two datasets being strictly not comparable.

The R&D survey results are now closely aligned with Capital R&D expenditure figures (which are considered Frascati) published in the MOD Annual Report and Accounts. Discrepancies between the two different datasets are recorded and challenged in order to improve on the accuracy of Frascati R&D figures within both publications going forward.

6.2 Data Revisions

Corrections to the Departmental Resources statistical bulletin are signposted online and accompanied by notes to the tables and in the bulletin where appropriate. We follow the Ministry of Defence Revisions Policy while making any corrections.

7. Timeliness and Punctuality

7.1 Timeliness

This publication is aimed to be released in November each year. However, the timeliness of the bulletin ultimately depends on when the source data is released. The publication date is therefore tied to the availability of the MOD Annual Report and Accounts, as well as the results of the Analysis Directorate conducted R&D survey.

The exact release date is announced in the calendar of upcoming statistical releases, as set out in the Code of Practice for Official Statistics.

7.2 Punctuality

There is usually a six month gap between the end of the financial year and publication of this bulletin to allow for data collation and analysis.

8. Coherence and Comparability

The accounting data used in these statistics is produced to International Financial Reporting Standards (IFRS) and the underlying data feeds into the MOD resource accounts and the National Accounts. However, changes to accounting methods have reduced comparability over time. These are described in the footnotes to the tables in various editions of UKDS (pre-2012) and the Departmental Resources bulletin (post-2012).

Table 1 and Figure 3 present changes in Defence expenditure over time. They show MOD cash figures from 1981/82 until 2000/01 and then the Net Cash Requirement (NCR) from there onwards. The NCR is the actual money that MOD requests from the government in order to fund its activities and takes account of movements in workings capital levels (such as debtors, creditors and stock) whilst excluding all non-cash costs. The NCR figures are the nearest comparable figures to the ‘Cash’ totals presented up to 2000/01.

Table 2 provides a comparison between Defence spending and spending in other areas of government which is from the Public Expenditure Statistical Analysis (PESA) data published by HM Treasury. There are some coherence issues with PESA data. The MOD data is based on Departmental accounting frameworks whereas PESA use the Classification of Functions of Government (COFOG) definition of Defence. Treatment of pension costs also differ. Full notes detailing how the PESA definitions are applied can be found at the Treasury website.

The tables in this bulletin are for historic and current outturn expenditure data. This is different to the budget (plans) data commonly quoted and used in the Defence Plan and Spending Review documentation. There are a number of reasons for these differences, particularly that the additional cost of operations are included in expenditure data but not budget data.

There are some differences between the figures in Table 3 (Expenditure by Commodity Block) and government transparency data. This is because Table 3 includes all MOD spend as recorded in the accounts, whereas some transactions have been redacted from the transaction data (which is at a lower level of granularity) for national security reasons. For more information on this issue please see Statistical Notice to Tables 1.17 & 1.17a of UKDS.

From 2011/12 the introduction of Commodity Blocks into the MOD Accounts has meant that the equipment support costs category of Table 3 has been extended to include operating leases and equipment support Private Finance Initiatives (PFIs) that had previously been reported separately.

The R&D figures provided in Table 3 (Expenditure by Commodity Block) include R&D Resource costs, which are considered outside the Frascati definition, and are not comparable with Frascati figures found in Table 4 (Estimated MOD Equipment Expenditure) and Table 5 (MOD Research & Development Expenditure Outturn).

In order to permit comparisons of R&D expenditure across departments and between countries, the Organisation of Economic Co-operation and Development (OECD) produce guidelines on the categorisation of R&D. This international standard is used to ensure all R&D activity is measured in the same way. These are known as Frascati guidelines. These seek to divide R&D expenditure into three top level categories: Basic Research, Applied Research and Experimental Development. Frascati defines the three categories thus:

Basic Research is experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view. The MOD does not perform Basic Research as all MOD projects have an intended objective or outcome.

Applied Research is also original investigation in order to acquire new knowledge. It is, however, directed primarily towards a specific practical aim or objective.

Experimental Development is systematic work, drawing on existing knowledge gained from research and practical experience that is directed to producing new materials, products, and devices; to installing new processes, systems and services; or to improving substantially those already produced or installed.

9. Accessibility and Clarity

The statistical bulletin can be accessed on the GOV.UK website where it is available to download in HTML format. Its release is noted in the ‘Finance and Economics’ section of MOD’s list of national and official statistics by topic and can also be found by using an internet search engine.

All tables and data behind any graph or chart in the report are available as accessible Open Data Source (ODS) tables.

The main report begins with initial key points and introductory comments. After this it is split into sections with details on defence expenditure at a high level presented before those at a more granular level. Visualisations have been chosen to best display patterns and trends within the data. Terms used in the commentary are defined within the glossary of the HTML bulletin.

Figures within the bulletin and ODS tables are often rounded to aid with clarity. In these instances, we have followed the Ministry of Defence Rounding Policy.

Should you have any feedback on the accessibility of any part of the bulletin or accompanying data tables then the Analysis Directorate encourages you to get in touch via any of the means noted in the Contact Details section.

10. Trade-offs between Output Quality Components

There have been changes to the structure of the MOD over time. Although major changes are reflected in the figures and footnotes, smaller changes will affect comparability over time. Changes in accounting standards also reduce comparability over time. There is little we can do about this but we do clearly document changes in the commentary.

11. Cost and Respondent Burden

In producing these statistics, our main data source is administrative data. Data is extracted from MOD administrative systems and quality assured by MOD accountants before audit by the NAO. We conduct a survey to obtain information used to compile Table 5; this is the only way to obtain this information, and burden on respondents is reduced by using administrative data to identify participant and to validate the data received.

12. Confidentiality and Security

12.1 Confidentiality - Policy

In producing these statistics, we adhere to the MOD Analysis Directorate Confidentiality Policy.

We adhere to the principles and protocols laid out in the Code of Practice for Official Statistics and comply with pre-release access arrangements. The MOD Statistics Pre-Release Access Lists are available on the GOV.UK website.

12.2 Confidentiality - Data Treatment

The Analysis Directorate maintains good links with policy colleagues to ensure that these statistics are understood and to prevent misuse. We regularly review our commentary and visualisations to ensure the data is presented in the best way possible.

12.3 Security

The team operate a secure environment for the storage of sensitive commercial data and other linked data. All data used in this bulletin is stored and managed securely on an internal SQL server.