Parliament panel attacks British defence overspend

(repeats to more subscribers)

* Watchdog: defence overspend 3.3 billion pounds in 09/10

* Cutting back equipment orders may not be efficient

By Mohammed Abbas

LONDON, Oct 15 (BestGrowthStock) – Britain’s defence ministry failed
to plan properly when buying equipment and raised costs by
delaying hardware projects, but scaling back orders may be
counterproductive, a parliamentary watchdog said on Friday.

The government will on Tuesday outline its Strategic Defence
and Security Review, which is expected to herald major spending
cuts as part of a plan to reduce Britain’s record budget
deficit, now more than 10 percent of national output.

Failing to make “realistic budgetary provision” and “slowing
down projects” resulted in the Ministry of Defence overspending
by 3.3 billion pounds ($5.3 billion) in 2009-2010 financial
year, parliament’s National Audit Office said in a new report,
adding to pressure ahead of next week’s defence review.

The NAO said that although the management of individual
projects had improved in the previous financial year, bad
financial planning had boosted the bill for Britain’s Typhoon
warplanes by 2.7 billion pounds, while delays to a plan to build
two aircraft carriers had raised costs by 650 million pounds.

“Central departmental decisions were taken to balance the
defence budget which had the effect of driving very significant
additional cost and delay into the equipment programme; this
represents poor value for money for the taxpayer,” NAO head
Amyas Morse said in a statement.

Britain had ordered 160 of the Eurofighter Typhoon combat
planes, built by European Aerospace Group EADS (EAD.PA: ), Italy’s
Finmeccancia (SIFI.MI: ) and Britain’s BAE Systems (BAES.L: ). The
5.2 billion pound carrier programme is being led by a consortium
including BAE, Babcock (BAB.L: ) and France’s Thales (TCFP.PA: ).

CUTBACKS INEFFICIENT?

Some defence ministry hardware purchase programmes are
expected to be scaled back or delayed under the defence review,
but the NAO report questioned the wisdom of cutting orders after
big up-front development costs had already been paid.

“Reductions in numbers therefore tend to increase unit costs
and be economically inefficient, especially if made after the
main investment decision has been taken,” the report said.

The report comes at a sensitive time, given the first
defence review since 1998 is due to be published next week. The
defence budget for the 2010-2011 financial year is 36.9 billion
pounds, and is expected to be cut by up to 10 percent by 2015.

The ministry already faces a 38-billion-pound deficit in its
spending plans over the next 10 years.

In a hearing on Wednesday, parliament’s Committee of Public
Accounts criticised the “recklessness and irresponsibility” of
defence ministry financial planners.

They responded by saying that inflationary pressures,
funding the war in Afghanistan and the lack of a defence review
for so many years made financial planning difficult.

Parliament panel attacks British defence overspend