Defence overspend reaches £8billion

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RADICAL action needs to be taken to stop Britain’s defence spending continuing in a ‘cycle of failure’, MPs have warned.

A committee has found that defence equipment projects are over-spending at a cost to the British tax payer of more than £8bn.

The Public Accounts Committee’s Major Projects Report 2010 responded to a National Audit Office report.

It found in October that the “black hole’ in MoD procurement increased by £3.3 billion in Labour’s final year in office alone to reach around £36 billion.

The PAC report considered decisions in four projects which between them cost the taxpayer more than £8 billion, including a £1.6bn overspend on the two new aircraft carriers which were to be based at Portsmouth, and the decision to scrap nine Nimrod MRA4 spy planes after 15 years in development, which wrote off some £3.6bn of taxpayers’ money.

Committee chairman Margaret Hodge said: ‘Unaffordable decisions taken in the short term lead to inevitable waste of billions of pounds over time.

‘In the wake of the Defence Review the Ministry of Defence still has to spell out whether and how it has got its defence procurement budget under control.’

The committee also highlighted the decision-making process which led to the coalition Government saying it will only take possession of one of two aircraft carriers on order. The other will be immediately mothballed after it is built while the Government decides how to dispose of it.

Mrs Hodge added: ‘The MoD does recognise that it must finally tackle the problems which have affected defence procurement for decades and on which our predecessors in the Committee have commented extensively.

‘If it does not, the cycle of failure will continue, with badly needed military capabilities suffering delay or being crowded out of the equipment programme by predictable cost increases or deliberate overprogramming.

Defence Secretary Liam Fox will later respond to the committee’s criticism, and announce the creation of the Major Projects Review Board.

It will be tasked with providing greater oversight of the procurement process, allowing the public and defence industry shareholders alike to keep track.

Dr Fox will say: ‘This will be chaired by the Secretary of State and will receive a quarterly update on the Ministry’s major programmes to ensure that they are on time and within budget.’