MoD Overspends Equipment Budget By £6.5bn

The Ministry of Defence has overspent its equipment budget by £6.5bn and some of its major orders are likely to be delivered 39 years late.

The National Audit Office (NAO), in its latest report into the MoD’s spending, has revealed that the 16 most costly projects, which originally totalled £56.5bn when they were approved and should have taken 159 years to deliver between them, now have a combined price tag of £61.1bn and will not be ready for a total of 195 years.

However, the good news is things are improving. This year’s overspend is “only” £468m and most of that is due to the rising cost of fuel, though the NAO report author Tim Banfield said the defence buyers could do better.

He said: “What we see is too much turbulence in the projects, there’s too much change, so if you look at the 16 projects this year that we are covering, 14 of them have got some change in cost or timescales in the last year.

“If you are the MoD trying to budget well, getting that kind of uncertainty and movement makes it very difficult to plan in the long term.”

Defence Secretary Philip Hammond said the huge “blackhole” is a legacy of the MoD ordering during the last Labour Government.

He described a “conspiracy of optimism” between the MoD and contractors in the past and is adamant the current plans are “fully funded”.

Mr Hammond likens balancing the defence budget to “turning round a supertanker”.

“These are huge projects often delivered over periods of five, 10 even 15 years, often they’ve got legacies of poor management and financial control and getting this straight is a big task, but it’s happening,” he said.

The real big ticket items include £17bn for more Typhoon fighter jets, £12bn for transport aircraft, including refuelling tankers and £5.3bn for the two new Queen Elizabeth Class aircraft carriers.

The NAO says that delivery delays in air refuelling aircraft means there is likely to be too few to go around in the next three years, though Mr Hammond said he is already taking steps to prolong the life of the current air tankers by another six months to plug the gap.

The NAO has acknowledged that the lead time for some of these projects is so great and the costs difficult to accurately assess, but nevertheless thinks the MoD could get better at it.

It cites one smaller project for a communications system designed for troops in Afghanistan, which costs £32m but not will be ready until all UK forces are back home.