MoD haemorrhages more cash even when it tries to save, says watchdog

Published on Monday 14 December 2009 21:35

SWINGEING defence cuts will be revealed by ministers today as a major report warns that the government's military projects and operations are unaffordable.

• The planned new Royal Navy aircraft carrier - HMS Queen Elizabeth. Picture: PA

Defence Secretary Bob Ainsworth is due to unveil how resources will be diverted to the war in Afghanistan as his department tries to come to grips with a crippling budget shortfall.

He will speak as a damning report is published by the National Audit Office (NAO) on major defence projects. It points to a deficit of 36 billion even before a spending review leads to more cuts.

Some of the cost-cutting has come at the expense of helicopters, the report said, in a disclosure that will inflame the debate over equipment shortages. The number of Lynx Wildcats had been reduced by 23 per cent, from 80 to 62 helicopters. This had cut planned flying hours by a third.

The NAO, the country's spending watchdog, condemned the Ministry of Defence's "save now, pay later" strategy.

It said that ministers had tried to show they were saving money by slowing down implementation of programmes, such as the two super aircraft carriers to be used for planes from Lossiemouth.

The Queen Elizabeth class aircraft carrier project has been delayed to save 450 million over the next four years. But far from saving taxpayers cash, that decision will increase costs by 1.12bn over subsequent years – a net increase of 674m.

The NAO's annual report on major military projects found that, in 2008-9, the price tags for the 15 biggest schemes rose by 1.2bn, with 733 million of that due to deliberate delays. And it blamed a flawed supposed cost-cutting approach.

Major cuts are expected to be announced to equipment and staff today, and defence sources suggested the Nimrod fleet could be drawn down early.

Amyas Morse, head of the NAO, said: "The MoD has a multi-billion-pound budgetary black hole which it is trying to fix with a 'save now, pay later' approach. This gives a misleadingly negative picture of how well some major projects in MoD are managed, represents poor value for money and heightens the risk that the equipment our armed forces require will not be available."

Edward Leigh, Tory chairman of the Commons public accounts committee, which oversees the work of the NAO, said the MoD's plans were "unaffordable" and warned major projects would have to be axed.

"The consequences for our forces on the front line are far from theoretical," he said,

adding there could be no "sacred cows", and that even the form of the Trident nuclear deterrent should be considered.

Nick Harvey, the Liberal Democrats' defence spokesman, said it was "absurd" to exclude Trident from a defence review.

But defence equipment minister Quentin Davies said the report focused on only a fraction of the MoD's 2,000 projects, and that Afghanistan was the priority.