MPs have said they are “not confident” the Ministry of Defence (MoD) can achieve efficiency savings of £4.1 billion, while failure to improve skills will “undermine efforts to improve cost control”.
In a report the Public Accounts Committee (PAC) said the MoD’s £163 billion 10-year equipment plan “could be understated by at least £5.2 billion”, and if so a contingency of £4.6 billion “will not be sufficient”.
The PAC said the MoD was “confident it could deliver the planned £1 billion savings from the submarine programme” but was “less certain about whether it can deliver the £1 billion savings required from the budgets for complex weapons such as guided air-to-air and anti-ship missiles”.
MPs were concerned about skills in Defence Equipment & Support (DE&S) and in 2013/14 £480 million was spent on contractors, while there were plans to spend £250 million on consultants to advise the department on how to reduce reliance on contractors.
Margaret Hodge, Labour MP and PAC chairman, said the committee “welcomed the progress the MoD has made in getting to grips with its budget and military costs”, but “real risk remains to the affordability of its 10-year equipment plan”. “We are not confident the department can deliver all the efficiency savings required from its equipment budgets. Eight hundred million pounds of the £4.1 billion savings required has yet to be identified,” she said.
“Failure to improve the skills of DE&S, which buys and maintains military equipment, will undermine the department’s efforts to improve control over its finances.
“Ironically, DE&S is planning to spend £250 million over the next three-and-a-half years on contractors to advise on how it can reduce its over-reliance on contractors.”
The PAC recommended that “DE&S should set out the measures it will use to ensure a successful skill transfer from consultants to permanent staff over the next three-and-a-half years, rather than continuing to buy in expensive contractor support”.
In December 2013 the government announced plans to outsource defence procurement would be scrapped and instead DE&S would be turned into a “central government trading entity”, known as DE&S+.