Ministry Of Defence's Budget Is 'Over-Optimistic' Warns Margaret Hodge

'Unacceptable, Unrealistic And Over-Optimistic': Defence Budget Slammed
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The Ministry of Defence may still be overspending, as MPs describe the MoD's suggestion that it has got to grips with its spiralling equipment budget after years of overruns and delays as "over-optimistic."

The MoD tentatively described their defence budget as "broadly in balance" despite the 2010 Strategic Defence and Security Review and two subsequent cost-saving exercises.

The Commons Public Accounts Committee said in the light of the continuing public spending squeeze, the defence departments planned increases in the equipment budget from 2015 may prove to be "unrealistic".

"It is unacceptable that the department still cannot identify the extent of the current gap between resources and expenditure," the committee said.

"The department is basing its current 10-year equipment plan on Treasury planning assumptions that are now likely to prove over-optimistic.

"The department was told at the time of the comprehensive spending review settlement that it could expect 1% real terms equipment budget increases from 2015.

"It is planning its budget on this basis, but in the light of current economic conditions that assumption may be unrealistic."

The committee said that despite signs of improvement in the equipment programme, the estimated cost of its 15 largest projects still rose by £466 million in 2010-11.

Since their original approvals, the total costs of the projects had risen by £6.1 billion to stand at £60 billion - an 11.4% increase - while total delays now stood at 26 years and 10 months.

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Committee chairman Margaret Hodge said there was a need for greater realism within the MoD towards procurement process.

"Much of the cost increase over the last decade has been down to the fact that the estimates for large programmes significantly underestimated the real cost," Hodge said.

"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."

Defence Secretary Philip Hammond said that, as a result of the actions taken by the Government, it was now close to eliminating the "black hole" in the defence budget.

"Through a radical reform programme we have taken firm steps to grip the equipment programme and halt the trend of vast cost increases of the past.

"The overall increase this year was seven times lower than Labour's last year in office which saw a cost increase of over £3.3 billion," he said.

"Much has been achieved in clearing up the mess left by the last Government and we are now close to eliminating the black hole in the MoD's finances and will soon set out an affordable, deliverable programme."