The MoD is spending hundreds of millions of pounds a year unnecesarily because it has commissioned more work than it can afford to pay for, a Parliamentary report has found.
The Commons Defence Select Committee found that both major pojects and acquisitions are running at unaffordable levels. A prime example is the delay of the Future Carrier Programme. This has achieved short term savings but bigger long term cost increases. The £674 million-plus cost of delay represents over ten per cent of the current estimated total cost of £5.2 billion for the two carriers.
The most shocking finding of the committee, however, is that the MOD has been delaying projects without considering whether the full extent of these delays will lead to higher costs in the long-run. If true, it is hard to escape the conclusion that short-termism is ruling Defence procurement.
The Report also criticises the management of the lengthy development of the FRES programme to produce a new family of armoured vehicles – now effectively closed. It is not clear whether the end of this programme is due to cost implicatons of a change in the operational requirments for armoured vehicles.
Chairman of the Committee, James Arbuthnot, says “We have tried on many occasions in the past to elicit details about FRES from the MoD without ever receiving clear answers. We can only conclude, with regret, that the MoD has none to give.” During the inquiry, the MoD told the Committee that it had reduced the overall equipment funding gap from £21 billion in 2008 to £6 billion in 2009 but could not explain how this had been achieved. I’m really not sure how they can claim to have made such savings but have no idea how they happened!
The research and technology budget has fallen from £540 million in 2007-08 to £471 million in 2009-10 and will decrease further in 2010-11 to £439 million. This fall in investment in research and development will have long-term implications for the Defence Industry, all for the sake of relatively small short term savings.
It does seem that there is no one at the helm at the MOD. Why the lack of transparency? Why such poor financial management? The MOD is supposed to be about military operations, not sloppy planning and incompetence. Behind the numbers, there are en going to war with indequate equipment. Are the Treasury and No 10 driving the MOD remotely? It does seem so. There is something sad about our armed forces higher management having to firefight from one budget to the next.