MoD budget 'pressures' forced cuts

Monday, March 08, 2010

The cost of Britain's defence programme has exceeded the Ministry of Defence's ability to pay for it, according to the MoD's top civil servant.

Sir Bill Jeffrey, Permanent Under Secretary of State at the MoD, told the Chilcot Inquiry into the Iraq war there had been "a serious dispute" between the Treasury and the MoD over spending in 2004, when Prime Minister Gordon Brown was Chancellor of the Exchequer.

"That undoubtedly left the department with a significant problem because the estimated cost of the programme exceeded the budget," he said.

Sir Bill said when he became Permanent Under Secretary in 2005, "pressure in the defence budget was still there."

However, Sir Bill was reluctant to echo comments made by his predecessor Sir Kevin Tebbit, who told the inquiry the MoD had been forced to operate on a "crisis budget" following the 2004 dispute.

"We certainly have had to look consistently at ways of reducing the estimated cost of the programme," said Sir Bill. "Whether that constitutes a crisis, I don't know. It has certainly felt more than quite tight over the last period."

Although the budget had risen by around one per cent in real terms each year, Sir Bill said this was not enough to cover the ministry's rising costs.

"The real problem, and it persists to this day, is that despite those easements the defence budget has been stretched," he said. "The cost of the programme has exceeded our ability to pay for it."

Sir Bill said the cost inflation was due to rising staff and equipment costs, concurrent operations in Iraq and Afghanistan, and the weakening pound. However, he said this "did not mean "defence is 'underfunded' or has been cut, but that we have a very serious management issue".

Sir Bill said this had led to "some reductions in equipment", citing December's cuts in the number of fast jets to pay for equipment needed in Afghanistan.

He also said that running two major conflicts in Iraq and Afghanistan had stretched the UK's armed forces.

"There was some apprehension about running two major operations at the same time," he said. "If we ended up involved in Iraq longer than intended we would become very stretched, as proved to be the case."