MoD's £35bn defence black hole is 'lethal'

Government has wasted taxpayers' money for a decade, leaked report shows

The Government's record on protecting British troops serving in Afghanistan has been called into question by a scathing leaked report revealing failures in buying defence equipment.

An official inquiry found evidence of "endemic" problems, with projects spiralling £35bn over budget and running five years late. It says that enemies such as the Taliban "are unlikely to wait for our sclerotic acquisition systems to catch up".

The highly critical findings will fuel the controversy over whether British lives are being put at risk in Afghanistan by a lack of equipment. Ministers insist that adequate resources are reaching the front line. But Downing Street is believed to have shelved publication of the report last month in an attempt to limit the damage at a time when a shortage of helicopters was being partly blamed for the deaths of servicemen.

Bernard Gray, a former special adviser at the Ministry of Defence (MoD), asks in his hard-hitting report: "How can it be that it takes 20 years to buy a ship, or aircraft, or tank? Why does it always seem to cost at least twice what was thought? Even worse, at the end of the wait, why does it never quite seem to do what it was supposed to do?"

His 296-page report, leaked to The Sunday Times, suggests that the average increase in cost while projects are developed is 40 per cent or £300m. It says that "lethal" weakness in government programmes "cause damage to UK military output."

Mr Gray rejects Labour claims that the problems were inherited from the Tories, insisting they affect "projects old and new, large and small, to a greater or lesser extent".

He criticises ministers for failing to hold a wholesale defence review since 1998. "In corporate life, no enterprise would persist with a 12-year-old strategy without at least re-evaluating it fully on a regular basis. Few who would expect to prosper would even try to do so," he says.

The report argues that Britain is not devoting enough resources to defence to meet its commitments. "Either we find substantially more money which, to be polite, seems difficult to imagine in the current economic conditions... or we may be forced to choose, and the choice will be painful."

The Government denied the review had been suppressed and said it would be published this autumn alongside a Green Paper on defence. An MoD spokesman said: "This report is currently in draft format and we are working hard with him [Mr Gray] on the issues he has identified. We are constantly improving the procurement process which has seen us deliver £10bn of equipment to the front line over the last three years."

But Liam Fox, the shadow Defence Secretary, said the report had exposed a "black hole" in the defence budget and called for the document to be published in full immediately: "It is serial incompetence by the Labour Government and the MoD to allow our defences to get to this state. There is a catastrophic black hole, so much so that the defence budget is little more than a con-trick at the present time where the Government pretend that they have procured equipment for the future when they have never actually set aside the money to do so."

Nick Harvey, the Liberal Democrats' defence spokesman, said: "It beggars belief that the Government tried to keep this report hidden. It is essential to the success of our current and future operations abroad, and to the safety of our troops that Labour faces up to the procurement and spending shambles over which it has presided."

He added: "We need a completely honest, fully informed review of defence spending and MoD projects. Only then can we begin to deal with the gaping black hole in the defence budget."