Cost-cutting 'could hit military'

A Ministry of Defence review cut £781 million from the bill for its 20 biggest procurements. But a report from the House of Commons Public Accounts Committee warned that more than half of the money involved has simply been moved onto other military budgets, which may have to find cuts as a result.

Even after the savings, the total cost of the projects is still forecast to be £2.6 billion (11%) over budget, the House of Commons Public Accounts Committee found. Forecast in-service dates slipped 33 months over the course of the year, and there is a cumulative delay of 433 months for the projects over their lives so far.

The committee's chairman, Conservative MP Edward Leigh, accused the MoD of "massaging figures". And he said it was too early to be confident the department would achieve the projected savings, warning its record of handling major hardware projects was "pretty dire".

He called on the Government to learn the lessons from past equipment overspends when it embarks on the £19 billion replacement for Britain's independent nuclear deterrent, pointing to the £1 billion overspend on the Astute-class submarine as an example of what not to do.

The report pointed out that the £781 million reductions in projected spending claimed in the MoD's Major Projects Report last year included £448 million re-classified or transferred to other budgets, £91 million in tax rebates and exemptions and just £242 million in "real savings" from better management and greater cost-effectiveness.

Committee chairman Edward Leigh said: "The Ministry of Defence is confident that its performance in implementing big defence equipment projects is improving. Fourteen projects have been reported as incurring no new delays in the last year. But the truth is that the Department's track-record in managing these projects is pretty dire and it is too early to say whether its confidence is genuinely justified.

"The total cost of 20 of the biggest projects is now forecast to be some £2.6 billion higher than the budget agreed at the outset. If the MoD is to keep the costs and delivery timetable of future large projects firmly under control, then it must learn from its mistakes in respect of some of the biggest current projects."

He went on: "For years this Committee has urged the MoD to live within its means. We are pleased to see efforts by the Department to control the costs of projects.

"But old habits die hard. More than half of the sum which the MoD has claimed to save has simply been loaded on to other budgets. We have no idea what cuts will have to be made to other activities of our Armed Forces as a result of this massaging of the figures."