MPs lament ‘astonishing’ £36bn defence overspend

By staff

Errors of financial management at the Ministry of Defence (MoD) have survived the strategic defence and security review (SDSR), MPs have admitted.

The influential public accounts committee’s report released today highlights how spending decisions at the MoD have been lacking “the robust financial management necessary to control its resources effectively in the long term”.

Committee chair Margaret Hodge said: “The MoD’s poor financial management has led to a potential shortfall of spending against funding over the next decade of £36 billion.

“It is astonishing that the department has hitherto failed to develop a proper long-term financial strategy linking its funding to its core priorities and providing a clear basis for making cuts.”

The news presents problems for the government, which has insisted the financial situation at the MoD has been addressed by the provisions of the SDSR – a conclusion which the MPs implied was inaccurate.

Of the £36 billion figure, MPs said the defence review “did not explicitly set out how this long-standing gap between defence spending and funding would be resolved.”

Although the committee praised the introduction of a qualified finance director, it said the MoD needs to “give him the powers he needs” to address inefficiency.

The procurement process between two new aircraft carriers came in for particular criticism in the report.

The five billion pound commitment – which survived the defence review on the back of punishing penalty clauses in the contract – would have cost the taxpayer more than pushing ahead if it had been cancelled.

The report said the previous government “signed a contract to buy new aircraft carriers which was unaffordable, without having identified compensating savings.

“Because these savings were not subsequently found, it was necessary within a year to delay the project, resulting in an enormous cost increase and poor value for money.”

But most of the committee’s concerns revolved around a general lack of strategy at the department, especially when procuring kit and managing its estates – valued at over £20 billion.

The MoD is further castigated for its “serious organisational failings and a dangerous culture of optimism”.

Ms Hodge added: “The situation must change without delay.”

The controversy surrounding the new aircraft carriers has been a source of embarrassment to the government highlighting long-standing criticisms of the MoD’s procurement policies.