Concerns over defence costs despite control

Under-construction HMS Queen Elizabeth Picture: Aircraft Carrier Alliance
Under-construction HMS Queen Elizabeth Picture: Aircraft Carrier Alliance
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CONCERNS remain about military equipment spending despite evidence costs are being brought under control, a spending watchdog is warning today.

The National Audit Office (NAO) says there were no significant cost increases to the Ministry of Defence’s largest equipment programmes last year, with the exception of the navy’s aircraft carrier project.

A report, released today, concludes the MoD’s work to tighten up the equipment budget has had a positive effect on costs.

However, it still expressed concern about the department’s ability to keep control of its budgeted £164bn 10-year equipment plan.

In particular, the NAO said the Ministry of Defence (MoD) had not subjected support costs – which account for £87bn of the budget – to the same level of detailed analysis as the procurement costs.

‘Until it fully understands these costs and the risks associated with them, the confidence it can express in the overall plan is limited,’ the NAO said in its report.

While the cost of the MoD’s 11 largest projects rose by £708m during 2012-13, the NAO said it was almost entirely the result of a £754m increase – reported in The News last November – in the cost of the carriers.

Without the carriers, which are to be based in Portsmouth, there was a net decrease of £46m across the other 10 projects.

Despite the improvements, the head of the NAO, Amyas Morse, said concerns remained.

‘With the exception of the aircraft carriers, the MoD’s largest projects have not shown significant increases in costs over the year and only small in-year delays,’ he said.

‘However, there remains a legacy of large complex projects that have already suffered significant cost increases and delay. Despite the increased stability there are still risks to affordability.’

The report is a change from recent years, in which the NAO has reported significant cost increases in the MoD’s largest projects.

In a statement, Defence Secretary Philip Hammond said the MoD was undoing ‘years of mismanagement’.

‘The NAO’s report is clear evidence that better financial discipline across the MoD is having a positive effect on the way we procure equipment for our armed forces,’ he said.

‘Unlike the past, we do not have to make short-term cuts that delay programmes to simply live within our means.

‘There is more work to be done to better define defence requirements and challenge industry to deliver best value for the taxpayer.

‘I am confident we can build upon the huge progress that has been made in the last 12 months to undo years of mismanagement and ensure we deliver equipment on time and on budget.’

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