MoD 'juggled' project budgets

The House of Commons Public Accounts Committee said Parliament was not being given the full picture of the expense of the massive purchases as a result of the practice, which may force other parts of the MoD to cut back on other activities to balance their books.

It accused the MoD of "juggling its budgets" because it is struggling to afford all the equipment it wants to buy.

The report said that a "conspiracy of optimism" in the MoD and the defence industry led to unrealistically low estimates of the cost of major pieces of kit, which have to be revised upwards during production.

The total forecast cost of the 19 largest military projects - not counting the purchase of Typhoon aircraft for the RAF, details of which are excluded on grounds of commercial sensitivity - now stands at £28 billion, some 11% up from the expected price-tag when the main investment decision was taken, the report found.

The committee was also critical of the MoD's slow decision-making in major procurement projects, such as the Royal Navy's two new aircraft carriers, which were approved after five and a half years' consideration despite being crucial to the viability of the UK's shipbuilding industry. And it warned that a decision to cut the number of munitions being ordered for a new guided multiple launch rocket system created a risk that frontline troops could go short of ammunition.

Despite a series of reforms designed to enhance the procurement process and cut cost and time over-runs, the MoD seemed "unable to bring about lasting improvements", the committee's Major Projects Report found.

Chairman Edward Leigh said: "The Ministry of Defence is trying to persuade Parliament that the forecast costs of major defence equipment projects are under control - by moving expenditure from those projects to other defence budgets.

"This is not acceptable: it diminishes Parliamentary accountability; and the transferred costs will doubtless have resulted in those budget holders who have taken them on having to cut their own defence activities.

"It is a well-established principle that delaying major equipment projects leads to higher costs in the long run. The Department should identify lessons from the five and a half years it took to award the contract for the Royal Navy's two new aircraft carriers."