Defence Force to stop 'raft' of things due to financial crunch

The Defence Force admits it will have to stop doing a "raft" of things and scale down missions due to its financial crunch.

On Tuesday it confirmed it had a $360m deficit looming next year, after RNZ revealed that earlier in the day.

"So that number, I don't know how it's got out," Chief of Defence Air Marshal Tony Davies told MPs during scrutiny week at Parliament.

While all key missions were still going ahead, with eight or nine deployed, that would become more difficult, he said.

"There's a whole raft of things that we have to pause or turn off to make sure that we can keep our flying sailing, shooting and deploying going.

"There's a lot of things we can't afford to do at the moment."

The likes of training, travel and building relationships with overseas partners would pause or stop but it had "not failed to to deploy or do an operation".

"The issue really is it takes us longer to prepare to do those missions and those deployments, and we might not be able to send the same number of people that we have previously sent or for as long.

Davies confirmed they faced a $360m deficit in operating costs next year.

A memo had gone out last week, which also said an option was to cut its wage bill by another $50m, as RNZ had reported.

"Three hundred and sixty million dollars is the figure we're looking at, at the moment. Now, is that going to result in output failure for us? No," Davies said.

"I'll have to say the leaking of that figure was not intended," he said, after Green MP Teanau Tuiono asked what the plan was to ensure the deficit did not affect national security.

"We were talking to a select group of people within the headquarters to brief them on what's going on with our workforce programme. As we've promised, we are trying to be very transparent with them."

Davies emphasised missions were still going ahead.

Cost pressures

Defence Minister Judith Collins said the forces got funding in this year's Budget that other agencies did not get, but faced very difficult cost pressures.

"Nobody's shying away from that."

Asked how the Defence Capability Plan would deal with the deficit, she said the plan would be out early next year.

The sinking of the survey ship Manawanui off Samoa has added to a weight of rising routine costs for fuel, ammunition and to maintain plant and housing; housing was "under significant pressure", Davies said.

Cutting another $50m from the wage bill might depend on more voluntary redundancies among Defence's civilian workforce, which has dropped from 3300 to about 3100 recently.

Collins said the numbers on the non-civilian side, particularly Navy, were recovering after high attrition under the Labour-led government. Air Force attrition was down to about seven percent, from 17 percent, she said.

Attrition, and fixing it, and the growing tensions of international geopolitics had combined to delay the release of the Defence Capability Plan. Collins said. Also, the work on it had to ensure interoperability with Australia.

The plan, out to 2040, was begun in August 2023 and had been expected to be out earlier this year. The previous government issued the principles behind it and these aimed at building forces more capable of going into combat than before.

NZ firms get small slice of Defence business

The problem of New Zealand companies getting little business from the NZDF came up at the scrutiny week hearing.

Only $119m of Defence's $6 billion budget was spent locally, mostly on niche firms that subcontracted to huge multinational contractors, Defence Secretary Brook Barrington told MPs.

Defence routinely told these "prime" contractors to look for local supply if they could, he said.

It also kept a tight rein on capital spending, such as by using fixed-price contracts when it bought equipment.

"We both try to constrain .. the risk of cost overruns, [and] we have disciplines around contractors to make sure they don't themselves over-run or fail to meet their contractual obligations," Barrington said.

A "bitter lesson" over many years had been to get the user requirements right at the very start; "What exactly does the Defence Force require an asset to do?" was the crucial question, he said.

Defence recently initiated its first meeting with local "emerging" technology firms, and Collins called for more teamwork with tech firms at a defence industry meeting in July:

"In a speech to Defence industry leaders in May, I noted that asymmetric and disruptive technologies, and the requirement to get the technological advantage offered by those capabilities into service quicker, is the modern-day catalyst for change in Defence and Defence industry technology," her speech notes said.

How Defence will afford a raft of new technology amid the financial crunch remains not clear.

"You'll have to wait and see for the DCP (Defence Capability Plan) to be released, and as for the Budget, you'll have to wait for that, too," Collins told journalists on Tuesday.

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