Damning criticism over MoD's budget shortfall

The Ministry of Defence was accused today of giving MPs "disingenuous" information about a massive shortfall in its budget.

The influential Commons Defence Select Committee said responses to its questions over a £21 billion funding gap were "at best confused and unhelpful and at worst deliberately obstructive".

The damning criticism came in a report into the MoD's equipment and procurement activities.

The MPs highlighted National Audit Office (NAO) findings last year that the department had been delaying projects to help its immediate cashflow - a tactic which has added hundreds of millions of pounds to final bills.

But, according to the committee, when it quizzed witnesses on the funding problems last year, they failed to give straight answers.

"The evidence suggests that at the time that MoD witnesses gave evidence to our Defence Equipment 2009 inquiry, the MoD was in the process of taking steps to manage a funding gap of £21 billion," the report said. "Witness denials at that time of the existence of such a gap now appear disingenuous.

"The minister for defence equipment and support told us he could not provide any information about how the gap was reduced to £6 billion, nor the proportion of expenditure which was merely postponed beyond the planning period.

"When we pressed in writing for further details, the MoD provided little extra information."

The MPs also said they did not believe the MoD's claim that it had reduced the number of Type 45 destroyers from 12 to six due to a "better understanding of the capabilities of the ship".

"Any one ship can only be in one place at a time," the committee said. "Whilst new technology may well have provided some better than expected capabilities, the spiralling costs of the ship and the pressure on the equipment programme budget suggest that the reduction in numbers was in fact primarily down to affordability.

"The misleading explanations provided by the MoD in this case are another example of the unhelpful nature of MoD responses to our questions."

The report concluded: "The evidence we have received indicates that the MoD's responses to our questions about the funding gap in our Defence Equipment 2009 inquiry were at best confused and unhelpful and at worst deliberately obstructive."

The chairman of the committee, Tory MP James Arbuthnot, warned that its scrutiny role was being undermined by the MoD's failure to be open.

"The MoD will need to provide the next Defence Committee with more accurate and complete information," he added.

Shadow defence secretary Liam Fox said: "It is clear that the MoD's procurement programme may as well have been operating in Wonderland. It is nonsensical to deny the very existence of a deficit, refuse to share crucial information with the Defence Committee and consistently order equipment with no means of paying for it.

"Merely tinkering with this failed system is not enough. A radical overhaul is needed, which only a new Conservative government has the energy to provide.

"It would be irresponsible for any large procurement decisions to be made at the tail-end of this dying Government, and so we hope that the MoD will refrain signing any major non-urgent contracts until the procurement programme is fit for purpose."

Ian Godden, chairman of the defence trade organisation ADS, said: "Any criticism of the Ministry of Defence (MoD) must be seen in the light of the defence budget having fallen from 4.4 per cent of GDP 20 years ago to 2.3 per cent today while many other departmental budgets have continued to grow.

"The MoD has been given an insufficient budget by the Treasury with which to support our armed forces during a period of increased operational commitments. There is, of course, significant room for improvement in MoD procurement and the industry believes it can assist in partnership with the MoD in delivering this much-needed reform."

Defence minister Quentin Davies said: "We are currently managing some 2,000 projects and over the past two years, nearly 90 per cent have been delivered to cost and over 80 per cent have been delivered to time, but we recognise that further improvements must be made.

"That is why we commissioned the Bernard Gray Review into defence acquisition, accepted the majority of the Review's recommendations and published the Strategy for Acquisition Reform.

"This strategy includes clear commitments to improve the way we manage our future equipment programme, by bringing costs into balance and being more transparent - all of which will ensure the MoD delivers the future equipment our Armed Forces need effectively and efficiently."

He went on: "The Committee's report does not criticise the way we currently equip our forces on the frontline.

"Our forces in Afghanistan will continue to receive the equipment they need, when they need it."