The Ministry of Defence has a funding black hole of at least £7bn in plans for equipment for the armed forces due to government dithering over which projects to fully finance, cancel or scale back, the Commons public spending watchdog has said.

MPs on the public accounts committee (PAC) said in a report that the MoD “lacks the capability to accurately cost programmes within its equipment plan”, and the actual shortfall in funding could amount to £14.8bn or more by 2028.

The MoD was assuming it would achieve significant savings despite not having a “coherent and credible plan” to monitor and deliver them, the cross-party committee said.

It concluded the 10-year equipment plan “remains unaffordable as government continues to delay decisions on its priorities, and on whether to increase funding or stop, delay or scale back programmes”. The committee added: “We remain sceptical that the department is close to reconciling what it says it needs with the funding it has available.”

The MoD insisted it would deliver this year’s element of the equipment plan within budget, and was addressing the “financial challenges posed by ambitious, complex programmes”.

The PAC demanded more information on the risks associated with major projects, including the purchase of F-35 stealth jets and Type 31e frigates.

The committee’s chair, Meg Hillier, said: “In terms of poor financial planning, the Ministry of Defence is a repeat offender.”

Progress in addressing concerns raised by the committee in May 2018 had been “woeful” she said, adding: “The MoD simply cannot afford everything it says it needs and it is not acceptable for officials to continue deferring decisions that have a bearing on its current affordability gap and longer-term risks.

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“A department that is unwilling or unable to take the action required to help it live within its means is failing taxpayers, who rightly expect government to deliver the best possible value for their money.

“We urge the MoD to act on our recommendations now, work with the Treasury to ensure its funding and planning models are fit for purpose and bring some much-needed clarity to its priorities and costs.”

An MoD spokesman said: “We are confident that we will deliver the equipment plan within budget this year, as we did last year, as we strive to ensure our military have the very best ships, aircraft and vehicles.

“At the same time, we are addressing the financial challenges posed by ambitious, complex programmes, after securing a £1.8bn financial boost for defence and reducing forecast costs by £9.5bn through efficiency savings.

“We are grateful for the PAC’s report on the equipment plan, and we will carefully review all of its recommendations.”

Gary Graham, the deputy director general of the Prospect union, said: “Behind the huge gap in defence funding are real jobs and skills in the UK defence sector that are in real danger of being lost forever if this is not urgently addressed. We have already seen significant layoffs over the past year as a result of uncertainty and delays on future funding.”

The former head of the army Richard Dannatt said the defence secretary, Gavin Williamson, had “a very strong case to make” for increased budgets for the armed forces.

“This nation wants to stay in the first tier of military-capable nations, but can we really afford to do it?” said Dannatt, who was chief of general staff from 2006-09. He added: “We can only afford to do it if we are prepared to put some more money into defence.”

Dannatt told BBC Radio 4’s Today programme: “You can’t have a nation like ours’ defence on the cheap. Two per cent of GDP is the lowest we’ve ever spent on our defence since the second world war, and it’s bought us the smallest army, navy and air force we’ve ever had.”

He said that putting off spending decisions could lead to bigger bills for the MoD in the future. He said: “They will try their hardest in the next couple of years to make sure the budget balances, and they know that they are making the problem worse further down the line. It needs more money.”