14 December 2010
‘Serious organisational failings’ in the Ministry of Defence have led to inefficiency and long-term additional costs, a damning report from the Public Accounts Committee has said.
The report, Managing the defence budget and estate, published today, says the department had ‘failed to exercise the robust financial management necessary to control its resources effectively in the long term’. Neither had it matched its future plans ‘to a realistic assessment of the resources’.
Because of this, decisions over defence equipment were ‘made very late in the day, leading to inefficiency, poor value for money and longer-term additional costs’.
The report concludes: ‘The department’s consistent pattern of planned overspend demonstrates serious organisational failings and a dangerous culture of optimism.
‘The underlying reasons for the systemic failings in budgetary controls are the tendency towards financial over-commitment, weaknesses in the financial planning processes and a division in responsibilities and accountability for financial stewardship.’
It cites an example from 2008, in which the MoD signed a contract to buy new ‘unaffordable’ aircraft carriers, which led to a year’s delay and ‘enormous’ increased costs.
This report follows a series of critical reports from the National Audit Office on financialmanagement and projectcosts.
Today’s PAC report acknowledged that there had been ‘some inroads’ in improving the department’s financial management, including the appointment of a professionally qualified finance director. However, it added, the MoD ‘has yet to give financial management the serious consideration that it deserves’.
Defence Secretary Liam Fox said: ‘The PAC has rightly acknowledged that improvements have to be made to the way the MoD manages its budget. I am determined to do away with the “delay to spend” mentality that characterised the last government.
‘The Strategic Defence and Security Review made difficult decisions to rebalance the MoD’s programme and bring it in line with the National Security Strategy. Acquisition reform is one of the key issues that the Defence Reform Unit is considering, as part of its work to develop a department which is simpler, more cost effective and efficient.’