14 May 2004
Senior MPs have expressed concerns that the Ministryof Defence is facing a cash crisis in the run up to this year's Spending Review, despite denials from the department's permanent secretary.
Influential members of the Commons' defence committee told Public Finance there is a growing unease about the government's latest round of spending cuts and efficiency targets in the context of the MoD's financial commitments to the coalition forces in Iraq.
Conservative committee member Crispin Blunt, a former adviser to ex-defence secretary Sir Malcolm Rifkind, said the two aims were now in direct conflict, particularly as co-ordinating operations with the better-equipped US forces has further stretched the UK's limited budget.
'The department is facing serious challenges that require an increase in defence expenditure. But the money is not being supplied,' he added.
MPs also claim that the MoD's recent switch to new accounting practices, imposed by the Treasury, has further restricted the department's spending options by requiring tighter controls on the way cash is managed.
Blunt's comments followed claims made by Admiral Sir Alan West, the First Sea Lord, that the Royal Navy faces severe cuts of up to a fifth of its frigates and reductions in personnel under government plans to overhaul Britain's defences. Blunt claimed these cuts equate to £1.2bn.
Speaking at a defence committee hearing on May 12, MoD permanent secretary Sir Kevin Tebbit denied that these factors amounted to 'critical mass' at the department, saying 'we don't have a cash crisis'.
He denied that the Navy cuts would total £1.2bn, but said he was unable to provide more accurate figures because the MoD is still negotiating this year's budget with the Treasury. 'This £1.2bn figure would be...higher than the [real] figures, were I able to give them,' he said.