Defence: Procurement

Ministry of Defence written question – answered at on 18 December 2017.

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Photo of Lord Lee of Trafford Lord Lee of Trafford Liberal Democrat

To ask Her Majesty's Government, further to the reply by Earl Howe on 5 December, what percentage of defence capital spending on procurement from overseas is currency hedged.

Photo of Earl Howe Earl Howe The Minister of State, Ministry of Defence, Deputy Leader of the House of Lords

The Department uses forward purchase contracts for US Dollars and Euros to provide a degree of stability for budgetary planning over the medium-term. The forward purchase programme is structured to provide an increasing level of cover in the three years before the requirement. The Department purchased in advance 89 per cent and 99 per cent of expenditure in US Dollars and Euros respectively in financial year 2016-17 and has secured prices for approximately 90 per cent of forecast demand in financial year 2017-18. Given this is a rolling programme, we have already placed contracts for 70 per cent of expected demand in 2018-19 and a smaller proportion in the following years. The consequences of sustained adjustments to exchange rates are dealt with as part of the Department's routine financial management by allocating appropriate levels of contingency, including in the Equipment Plan.

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