By Maximilian Clarke

Attempts to cut costs at the Ministry of Defence are leading to increase costs and do not represent value for money for the taxpayer, Public Accounts Committee chair Margaret Hodge has said following a report published today (Friday).

Over the past year the combined cost of the MoD’s 15 biggest projects rose again by £500 million, and whilst the rate of cost increase is showing signs of abating, taxpayers continue to incur heavy costs.

Cancelling the Nimrod aircraft at such a late stage has resulted in £3.4 billion of taxpayers’ money being wasted and delaying the Astute submarines has increased the cost to the taxpayer by almost £2 billion.

“Rather than the over-optimism which has held sway at the start of major projects, what is needed is realism: about the complexities of projects, the long-term costs of decisions taken today and the implications down the line of short-term budget cuts,” quoth Hodge.

In 2010-11 the forecast costs to complete the 15 largest defence projects increased by £466 million. Since their original approvals the estimated costs of these 15 projects have increased by £6.1 billion and now stand at approximately £60 billion (an 11.4% increase). In aggregate these 15 projects are forecast to be completed 322 months later than originally planned.

Large defence equipment projects have contributed disproportionately to overall cost growth. In the past, the Department has repeatedly failed to challenge unrealistically low estimates for the largest and most complex equipment projects from suppliers. The Astute submarines have been delayed, leading to increased costs of £1.9 billion. Due to repeated delays, cancelling the Nimrod at this late stage has resulted in £3.4 billion being wasted with no new capability being added. In the case of the Queen Elizabeth aircraft carriers the forecast cost has so far risen by £2.8 billion since they were first approved in 2008.The taxpayer has had to pick up the bill when decisions on these projects were taken.


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