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28 November 2010 | Angeline Albert
MPs have urged the Treasury and the Ministry of Defence (MoD) to work together more effectively after noting “serious blunders” in defence procurement.
In the Treasury Committee report analysing October’s spending review, the cross-party group of MPs said the MoD had a poor record of dealing with major contracts and repeatedly over-commits its budget.
“The major concern of the committee is the interaction between the Treasury and the MoD over how defence acquisitions, and day-to-day funding, is agreed,” the report said.
The committee said ministers should learn lessons from the previous government’s contract for two aircraft carriers, which would cost more to cancel than implement.
The Treasury published a letter from manufacturer BAE Systems, which said cancelling one of the aircraft carriers would have cost £5.5 billion and led to the closure of all three of the firm’s shipyards by 2013. The resulting loss of 5,000 jobs at the firm and more in other UK companies in the supply chain, would, BAE said, end the UK's capability to build complex warships and bring the defence sector to a halt.
Committee chairman Andrew Tyrie, said: “It is argued that the aircraft carrier contract was unbreakable not just for legal reasons, but also because it was inextricably linked to the strategic need to maintain a stable supply of work for the sole warship-producing supplier in the UK. The Treasury should draw on the lessons from the contract to analyse all future MoD procurement to ensure that value for money is being obtained, particularly when little competition exists in the market.”
Last month, Prime Minister David Cameron announced in the Strategic Defence and Security Review that both carriers would be built but only one would be used. The review said: “We will need to operate only one aircraft carrier. We cannot now foresee circumstances in which the UK would require the scale of strike capability previously planned.”
As a result, the second aircraft carrier will be “kept at extended readiness,” it added.