Ministry Of Defence Spending Cuts See Project Costs Rise By £500m

MoD Spending Cuts Fuel £500m Rise In Costs

The UK's 15 largest defence projects have seen their costs increased by close to £500m due to Ministry of Defence (MoD) spending cuts, the National Audit Office (NAO) said on Wednesday.

Central planning decisions at the MoD, including delaying the Astute submarine project, cost an extra £237m, £113m was added by improving specific capabilities in the armed forces, £176m was lost to macroeconomic factors, including exchange rate fluctuations, and £53m was lost to cost overruns.

The Astute class nuclear submarine project was launched in 2007 as part of an overhaul of the UK's cold war era fleet. Several boats are under construction, with the final, Ajax, due to come into service in 2024.

As part of the Strategic Defence and Security Review, which took place in 2010, the project's timescale was extended in an attempt to preserve jobs in the shipbuilding industry. The submarines are being built in BAE Systems' facility in Barrow-in-Furness, and the government is under pressure to try to preserve jobs in one of the country's remaining manufacturing centres.

A maritime patrol aircraft project, Nimrod, was also cancelled at that time. By the time it was dropped, the project was 114 months late and £789m over budget, the NAO said.

"The Ministry of Defence has been hampered by a legacy of poor planning and performance on some past projects, and the resulting cuts and delays are not value for money," Amyas Morse, the head of the NAO, said in a statement accompanying the release of the 2011 Major Projects Report.

"But it is welcome news that the Department has finally accepted that the financial position it is in is serious and is actively working towards balancing its books in the longer term."

The total delay across the 15 projects is now 26.8 years, according to the NAO. The cost of these projects has increased by more than 11 percent, or £6.1bn, NAO figures showed. However, that cost would have been even greater if the amount of equipment ordered within the projects had not been revised down. Sticking to the original estimates would have seen costs spiral by 20%, according to the NAO.


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