The Ministry of Defence’s equipment plan reveals a “broken system” that could undermine the UK’s ability to contribute to Nato, an influential group of MPs has said.

In a damning report published on Wednesday, the Public Accounts Committee warned that the department’s 10-year plan is “out of date” and fails to reflect lessons emerging from the war in Ukraine a year into the conflict.

The committee noted the MoD’s quick response in assisting Ukraine, but said it was not convinced there was “sufficient urgency” to deliver new capabilities needed by the UK’s own armed forces.

The report outlined doubts about whether the department’s rolling 2023/33 plan is affordable or agile enough to react to new volatilities.

It highlights Russia’s invasion of Ukraine as evidence of the need for a “responsive” programme which ensures the MoD can “quickly develop the capabilities of our armed forces”.

There is an “optimism bias” affecting budget planning in the department, the report said, which ignores the worsening economic environment.

For example, the ministry has not included external cost pressures, including inflation and foreign exchange movements, in its assessment of the plan’s affordability.

The MoD has a forecast deficit of £2.6 billion in the first seven years of the plan.

To remedy this, it relies on having a budget surplus of £5.2 billion in the final three years, MPs said.

The plan’s affordability also assumes a reduction in project costs by £30.4 billion during the next 10 years, which depends on the MoD achieving all planned efficiencies and savings.

If the MoD does not act swiftly to address the fragility of its supply chain, replenish its stocks and modernise its capabilities, the UK may struggle to maintain its essential contribution to Nato

There are no plans for £1.6 billion cost reductions and £3.4 billion efficiency savings, of which the department needs more than £2 billion in the next three years, according to the report.

The report makes six recommendations, including for the department to set out its progress in developing a plan to improve the scale and efficiency of its supply chain.

It also recommends the department urgently reassess the affordability of its equipment procurement and support programmes, assessments of which have so far “ignored the worsening economic” and inflationary pressures.

Sir Geoffrey Clifton-Brown, deputy chairman of the committee, said: “If the MoD does not act swiftly to address the fragility of its supply chain, replenish its stocks and modernise its capabilities, the UK may struggle to maintain its essential contribution to Nato.

“The 2022/23 equipment plan is already somewhat out of date. It doesn’t reflect the lessons emerging from Ukraine, more than a year in. And every year it’s the same problems – multibillion-pound procurement problems.

“Equipment arrives in service many years late and significantly over budget, and some of it just isn’t arriving at all. The MoD still does not have or seem to be able to attract the skills it needs to deliver the plan.

“Neither taxpayers nor our armed forces are being served well. There needs to be meaningful change of this broken system. The department needs to break from this cycle of costly delay and failure and deliver a fundamental, root-and-branch reform of defence procurement.”

Ministers must ensure our troops have the right kit to fight and fulfil our Nato commitments

John Healey, Labour’s shadow defence secretary, said: “The Conservatives are failing to secure Britain’s national defence for the future.

“This report reinforces the serious questions over critical capabilities and the ability to field a war fighting division which are threatening to undermine the UK’s contribution to the Nato.

“Ministers must ensure our troops have the right kit to fight and fulfil our Nato commitments. Labour would apply a ‘Nato test’ to major defence programmes to ensure our alliance obligations are on track.”

An MoD spokesperson said: “The Public Account Committee’s assessment that our equipment plan does not align with the lessons learnt from the Ukraine conflict is unsubstantiated.

“The lessons we have seen from Ukraine have largely confirmed our 2019 warfighting analysis, which underpinned our subsequent investment decisions, meaning we have not needed to substantially reform our equipment pipeline.

“Nor do we recognise the broken procurement system painted by this report. The department routinely assesses time, cost and risk factors on all projects, and delivers the vast majority on time and in budget, and we have made numerous changes to improve procurement practices where projects have fallen short.

“Some of these projects are decades long, and many of our reforms will take time to deliver results.”