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Implementing the White Paper

Financial Summary

Status of White Paper Funding

Defence's departmental funding in 2004-05 and beyond continues to be based primarily on the allocations approved by Government in the context of the Defence White Paper. This additional funding will total $28.1 billion over the 13 years commencing in 2001-02, as shown in Table 1.2, and represents the most specific long-term funding commitment for Defence for more than 25 years.

The additional White Paper funding is being applied to:

  • the Defence Capability Plan, containing a program of capital investment in addition to the investment program already planned;
  • provision for the net through-life support costs of the capability enhancements in the Defence Capability Plan;
  • provision for 2 per cent real growth in personnel costs from 2004-05 onwards, reflecting more accurately the cost of maintaining a highly skilled workforce in a sustainable way. In the 2004-05 Budget, the Government increased this funding provision to 2.5 per cent real growth for military employee expenses; and
  • funding a number of budget baseline cost pressures, including logistics shortfalls, assisted by a programme of administrative savings.

After taking account of the reprogramming of the Defence Capability Plan agreed by the Government in the 2004-05 Budget, actual expenditure totals $2.4 billion over the period 2001-02 to 2003-04. The 2004-05 Budget includes a further $1.7 billion in White Paper funding, and an additional $8.0 billion is included in the forward estimates. The remaining additional funding, totalling $16.1 billion, is to be provided over the remainder of the period to 2013-14.

Table 1.3 provides details of White Paper expenditure to date and future allocations in 2004-05 outturned prices, including the reprogramming agreed in the 2004-05 Budget, and the subsequent bringing forward of $170m of these funds to facilitate the acquisition of two additional airborne early warning and control aircraft.

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Table 1.2 Revised White Paper Funding from 2001-02 to 2013-14 (Outturned 2004-05 prices)
  01-02

$b		 02-03

$b		 03-04

$b		 04-05

$b		 05-06

$b		 06-07

$b		 07-08

$b		 08-09

$b		 09-10

$b		 10-11

$b		 11-12

$b		 12-13

$b		 13-14

$b		 Total

$b
Defence Funding from Government 12.7 12.7 13.8 13.8 13.8 13.8 14.0 14.1 14.3 14.6 20.5 (1) 21.1(1) 21.9(1) 201.1
East Timor / Force Generation 0.7 0.6 0.5 0.5 0.5 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 6.7
Defence White Paper Increase(2) 0.5 0.9 1.0 1.7 1.9 2.7 3.4 4.1 5.2 5.9 0.4 0.3 0.2 28.1
Total 13.8 14.2 15.3 15.9 16.1 16.9 17.9 18.7 20.0 21.0 21.4 21.9 22.7 235.9

Notes

  1. Funding guidance after 2010-11 is assumed to remain at zero growth pending Government consideration of the matter in the 2005-06 Budget context.
  2. The White Paper funding increase has been adjusted to reflect reprogramming of the Defence Capability Plan in the 2004-05 Budget.
Table 1.3 Current Status of White Paper Funding Allocations (Outturned 2004-05 prices)(1)(2)
  01-02

$m		 02-03

$m		 03-04

$m		 04-05

$m		 05-06

$m		 06-07

$m		 07-08

$m		 08-09

$m		 09-10

$m		 10-11

$m		 11-12

$m		 12-13

$m		 13-14

$m		 Total

$m
Major Capital Equipment
Original Allocation 510 1,051 1,506 1,537 1,663 2,234 2,345 2,241 2,749 3,374 - - - 19,210
Reprogramming (3) - -200 - - - - - 220 - - - - - 20
Reprogramming (4) - - -212 -199 -141 -90 - 179 280 162 105 - - 83
Reprogramming (5) - - -500 - - - - 165 169 172 59 - - 64
Reprogramming (6) - - - -74 -303 -374 -133 - 200 135 191 298 213 153
Reprogramming (7) - - 170 - - - - -188 - - - - - -18
Revised Capital 510 851 964 1,264 1,219 1,770 2,212 2,617 3,397 3,843 354 298 213 19,513
 
Through-life Support Costs for Defence Capability Plan Projects
Original allocation - - - 193 234 284 418 500 591 630 - - - 2,850
Reprogramming (8) - 8 21 -133 -62 -5 - 13 83 75 - - - 0
Revised Allocation - 8 21 60 172 279 418 513 674 705 - - - 2,850
 
2% Real Growth In Personnel Costs
Allocated - - - 236 367 428 454 482 508 580 - - - 3,055
Unallocated - - - - - 77 196 323 457 600 - - - 1,653
Total Allocation - - - 236 367 505 650 805 965 1,180 - - - 4,709
 
Baseline Adjustment - - - 116 130 137 143 149 155 156 - - - 986
Total 510 859 985 1,676 1,887 2,693 3,423 4,084 5,191 5,884 354 298 213 28,058

Notes

  1. Figures may not add due to rounding.
  2. The figures shown in 2001-02, 2002-03 and 2003-04 represent actual expenditure, whereas the figures from 2004-05 onwards are planned.
  3. $200m underspend in 2002-03 held in Defence's appropriation receivable, reprogrammed to 2008-09.
  4. $642m relating to increasing the slippage rate from 15 per cent to 20 per cent that Government agreed in the 2003-04 Budget, reprogrammed to 2008-09 - 2011-12.
  5. $500m representing the projected underspend in the Approved Major Capital Equipment Program in 2003-04, reprogrammed to 2008-09 - 2011-12.
  6. A reduction of $884m reflecting changes to the Defence Capability Plan and revisions to the rate of capital expenditure, in funding in the period 2004-08, with this amount reprogrammed to the period 2009-10 to 2013-14.
  7. Represents the bringing forward of $170m associated with the decision to proceed with the acquisition of a further two airborne early warning and control aircraft.
  8. Reprogramming of the original allocation to reflect the revised timetable for entry of equipment into service.
 

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Major Capital Equipment

The additional funding of $19.5 billion (in 2004-05 outturned prices) was allocated to the Unapproved Major Capital Equipment Program and now forms part of the overall investment program. The additional funding was not for the entirety of the Defence Capability Plan funding but represented a top-up of the existing Major Capital Investment Program, which covers both the Unapproved Major Capital Equipment Program and the Approved Major Capital Equipment Program. To the end of 2003-04, $2.3 billion of the $19.5 billion has been spent on new projects.

Through-life Support Costs for Defence Capability Plan Projects

The net through-life support costs of new capability acquired as part of the Defence Capability Plan are being progressively allocated as new equipment enters service. The funding is to ensure that sufficient trained personnel and operating costs are available to operate the equipment on delivery. The phasing of the funds has been adjusted to reflect revised delivery dates of the equipment and is now estimated at $2.9 billion over the decade.

Two per cent Real Growth in Personnel Costs

The allocation of $4.7 billion for the 2 per cent real per capita growth in personnel costs commences in 2004-05. Of this, $3.1 billion has already been allocated over the period to 2010-11 to cover part of the cost of the new ADF Workplace Remuneration Arrangement and the Defence Employees Certified Agreement. Funding has also been allocated for the last Service Allowance increase and to cover cost increases in housing, health and fringe benefits tax, which are rising at substantially higher rates than the non-farm gross domestic product deflator. An amount of $1.7 billion remains unallocated and has been quarantined to contribute to the funding of future salary, allowance and conditions of service increases as they arise, including health services, housing and fringe benefits tax.

Operating Baseline Adjustment

An amount of $1.5 billion was allocated to meet cost pressures identified through the Defence White Paper 2000 process including logistics shortfalls, some of which were also required to be offset by the now-complete $200m Administrative Savings Program, which is complete. On the basis that the allocations are now embedded in baseline allocations and will be spent in the years concerned, this aspect of the Defence White Paper is now considered complete.

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