Question to the Ministry of Defence:

To ask the Secretary of State for Defence, for what reasons exchange rates used by his Department in respect of costs associated with the Equipment Plan do not reflect the market rates at the date of that plan.

Ministry of Defence Head Office directs the use of standard exchange rate assumptions for forecasting 10-year costs across the Department. The full cost of required foreign currency at forecast exchange rates is recognised separately in the Department's budgetary planning process with a provision allocated corporately for the difference between costs at forecast rates and planning assumption rates. This mechanism ensures that the total forecast cost of foreign currency is recognised and managed in the context of the overall financial position of the Department, while allowing individual budget holders to focus on managing foreign currency demand rather than reacting to exchange rate changes.