MoD 'living beyond its means'

Wednesday, 21 July 2010 12:00 AM

By politics.co.uk staff

The Ministry of Defence's (MoD) failure to manage its purse-strings is an ongoing problem, the public spending watchdog has warned.

A report from the National Audit Office (NAO) published today found the department has a tendency to ignore financial concerns when making important strategic planning decisions.

It found the department's spending by July 2009 had exceeded its budget by £700 million by that year.

This has forced financial managers to seek extra savings at short notice, which the NAO says is "time-consuming and destabilising".

"A crucial question for the Ministry of Defence is whether it can use strategic financial management to stop living beyond its means," NAO chief Amyas Morse said.

He warned that while the strategic defence and security review will provide it with an opportunity to balance its books in the short-term, the "greater challenge" was establishing affordable spending plans in the long-term.

Mr Morse added: "The department is not at present placing enough emphasis on financial management to be able to do this."

Defence secretary Liam Fox said the defence acquisition reform programme would help in the longer-term.

"In addition, over the coming months, the MoD will embark on a radical programme of reform to re-organise the structure of the department," he said.

"Among other things, the intent is to ensure that the MOD financial management arrangements are effective."

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• defence
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• defence procurement
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• foreign policy