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MoD 'over-optimistic' about budget
10 February 2012
The Public Accounts Committee (PAC) found that the Ministry was only able to say that finances were "broadly in balance" after cuts made during the Strategic Defence and Security Review in late 2010.
The PAC report on MoD major projects found that the ministry's 15 biggest projects had increased in cost by more than £6.1bn since their approval, with more than £466m of increases in 2010/11. The projects have also been delayed by a collective total of 322 months.
The total cost of the projects stands at over £60bn, an average 11.4 per cent increase since inception. Projects approved since 2002, however, have shown "significantly" lower cost growth than older projects, and technical issues are not said to have led to increased costs on projects since 2008.
"In the past, the department has repeatedly failed to challenge unrealistically low estimates for the largest and most complex equipment projects from suppliers," the committee wrote.
"The Astute submarines have been delayed, leading to increased costs of £1.9bn. Cancelling the Nimrod at this late stage has resulted in £3.4bn being wasted with no new capability being added. In the case of the Queen Elizabeth aircraft carriers the forecast cost has so far risen by £2.8bn since they were first approved in 2008.The taxpayer has had to pick up the bill when decisions on these projects were taken.
"While we welcome the trajectory of improvement, the department is still unable to set out openly the extent of the gap between income and expenditure it still faces, and how and by when any shortfall will be resolved. We are concerned that the assumptions the department is making about its budget in the future may now prove unrealistic."
PAC chair Margaret Hodge welcomed the improvements but said financial controls at the Ministry still needed to be tightened.
"Rather than the over-optimism which has held sway at the start of major projects, what is needed is realism: about the complexities of projects, the long-term costs of decisions taken today and the implications down the line of short-term budget cuts," she said.
"…Parliament is also still waiting for the department's promised 10-year Equipment Plan so that we can assess whether the department will live within its means over time."
Hodge also warned that it may be "unrealistic" for the MoD to plan for the coalition government's 1 per cent real terms rise in its budget post-2015 as a new government could be in power.
Defence Secretary Philip Hammond said the government was "close to eliminating the black hole in the MoD's finances" and would soon set out its "affordable, deliverable programme" in the 10-year plan.
"This will see us invest more than £150bn in the right equipment for our armed forces while achieving value for money for UK taxpayers," he said.
"The overall increase this year was seven times lower than Labour's last year in office, which saw a cost increase of over £3.3bn.
"Scrapping the ill-fated Nimrod MRA4 was one of many tough but necessary decisions we had to take to deal with an equipment programme that was out of control. The aircraft were more than eight years late, almost £800m over budget, and the unit cost of each aircraft had soared by 200 per cent, with no guarantee they would ever be fit to fly.
"The Astute programme is now on a much firmer footing with the first boat in service and the second due to leave Barrow soon," he said.
Shadow Defence Secretary Jim Murphy said: "Instead of reform we have capability gaps, unfunded liabilities on the balance sheet and depleted and demoralised armed forces. David Cameron has lost his credibility on defence."
HAVE YOUR SAY
10 February 2012
'"Scrapping the ill-fated Nimrod MRA4 was one of many tough but necessary decisions we had to take to deal with an equipment programme that was out of control. The aircraft were more than eight years late, almost £800m over budget, and the unit cost of each aircraft had soared by 200 per cent, with no guarantee they would ever be fit to fly. '
Garbage!
1 More than one prototype flew I think.
2 The unit price went up because we reduced the number ordered from 21 to 9! You do the math - doh
3 The point previously stated re rebuilt rather than new build airframes
BAE should sue the MOD for slander!
Martin Bayliss - Stroud
10 February 2012
Quite frankly this is just bull. I'm getting so tired of MP's, Defence Secretaries, Chancellors and Prime ministers seeking to use Defence as a way to attack the other party at the cost of national security.
You want to know what the major increase in costs are, as hinted at by the committee, POLITICAL DELAYS. The Type 45 is a perfect example of this, the constant changing of the Queen Elizabeth another one. Now we have some MP's going "Another party might not increase the defence budget but reduce it". How about we put them on a warship for 9-10 months that then has to stay in theatre for another 2-3 months when something goes wrong and we don't have enough ships to replace it. How about we put them on a patrol in Afghanistan and see how they like now having the correct kit?Oh wait, "You do the fighting, I'll do the talking" would be the reply.
I have a very low opinion of politicians at the moment. While I understand we are in a recesion one could argue that part of that is the failure of those who are elected to be strong and wise enough to govern us. They are fine though, with cushy retirements and large salaries that haven't been cut. How about we see a little self-sacrifice and leading by example!! So what if they are now buying suits from more austere shops, that's just some stupid publicity stunt as the money they save still belongs to them.
I'm really struggling to get across how angry I am with the constant indecision, cowardice and medelling in our national security that our forces have to put up with... God knows I bet the top brass would prefer to be operational against an enemy they can fight rather than trying to deal with the cloak and dagger, self interested, cowardly, pompous and arogant fools in parliment.
Anthony - Bristol, United Kingdom
10 February 2012
Bravo Bravo to you Anthony spoton
Jack - UK
10 February 2012
From the oral evidence given to the Public Accounts Committee:
"Bernard Gray: You start at the top of the organisation, and work your way down on these things. Why do I say it is a matter of time? We know, in my study and in a bunch of other places, that we do not have sufficient finance-qualified staff, partly as a result of the difficulty of attracting them at the rates that we pay. So half of my management accounting staff are not CIMA qualified management accountants, because I cannot get them at that rate. I definitely have an issue with all those functional skills, and some of the changes that we will be bringing in are designed to increase our programme and project management, finance, commercial supplier management and engineering expertise—all those areas. The first step is to get myself the finance director who is going to do that. "
If it is the case that there are inadequate numbers of qualified staff, why is DE&S reported to have too many, and trying to get rid of qualified and skilled staff? Why have the financial training programmes been suspended?
AlMiles - Bristol, UK
10 February 2012
Jack-UK,
Bravo Bravo?
Bravo Zulu I am well aware of but the above I am not,can you enlighten me.
michael - notts
10 February 2012
For once I agree with Anthony, Political Dithering is the cause of delay & cost increases.
I think we should make more effort at the start of a project to get it right. Not wait til it is in trouble.
So the proposal goes from the MoD to the Parliamentary Defence Committee. They call witnesses from the military/treasury/industry/think tanks. Make sure we have ordered the right kit, to the right spec, in the right numbers & found the most cost effective way of doing it. Then HUGE penalties if the Treasury tries to cancel or industry delivers a duff product.
John Hartley - Woking/Surrey/Uk
11 February 2012
I wonder if anyone can confirm the number of Puma upgrades to be made?
j.cassford - Arundel
13 February 2012
FAO Anthony
you forgot one thing
"you do the fighting, and you will do the dying, I" do the talking.
playing at numbers yet again
Royal - GB
13 February 2012
John Hartley - Woking/Surrey/Uk;
Indeed, I like the idea of a balanced penalty clause... Ie if the MoD/Parliament meddles too much then they get huge penalties (like the aircraft carriers) BUT if Industry gets it wrong (swapping to CAD and having problems with it in the Astute project) then THEY suffer the penalties.
It's a way we could keep buying British but encourage our industries to be more lean and competitive which in turn might make them more able to win sales on the political stage because projects wouldn't go so over budget
Anthony - Bristol, United Kingdom
13 February 2012
I hear the RAF Puma upgrade has been shelved, halfway through the programme, "to save money" (less the cancellation fees), and, if the RAF Merlins are used to replace the RN Seaking HC4, that leaves the RAF with the Chinook, orders for which have been cut.
j.cassford - Arundel