Value for Money at the MOD (excerpt)
(Source: UK Ministry of Defence; issued Feb. 22, 2011)
Introduction

Being the Secretary of State for defence was always going to be one of the toughest jobs in the new Government. Defence was the worst in a grim set of inheritances.

As the Chancellor said, Defence was the “most chaotic, most disorganised, most over-committed” budget he had seen. Labour had avoided a strategic defence review for 12 years.

As a consequence we were always going to need a step change not incremental reform.

The black hole in the MoD budget by the end of the decade was more than one year’s entire defence spending.

This had resulted from the serial failure of Labour ministers to take difficult decisions and what Bernard Gray described as ‘the conspiracy of optimism’ in the department's planning.

On top of this was the need to contribute to the deficit reduction.

Next year's interest payment on the national debt will be bigger than the defence, foreign office and the international aid budgets combined.

Unless we deal with the deficit it will become an increasingly dangerous national security liability as more and more money is swallowed up in interest and less is available to spend on the safety of our country.

In less than a year huge progress has been made in turning these problems round.

The SDSR set a clear direction for policy, implementing the National Security strategy.
It decided on an adaptive posture for the UK - neither Fortress Britain nor overcommitted expeditionary forces on the other.

We had inevitably to divest ourselves of some legacy to enable us to invest in dealing with the threats of the future, not least in cyberspace where government will now spend an extra £650m.

But the SDSR was not a single event, it was part of a cycle of five yearly defence reviews designed to constantly adapt to changing global security circumstances.

The 12 year gap in defence reviews, the budgetary black hole and the need for deficit reduction inevitably meant that we would have to take tough and sometimes unpopular decisions.

But we were able, nonetheless, to show a path to the Future Force 2020 where Britain's defences will be coherent, efficient and cutting-edge.

But the change cannot stop there.

Across Government, we must transform the way public services are delivered.

For years successive Defence Secretaries have failed to get a grip on the equipment programme and failed to hold the department and industry to account for delays and poor cost-estimation

Only today we are reminded by the Public Accounts Committee of Labour’s desperate legacy.

In their final year in office just two programmes reported an increase of cost by a staggering £3.3 billion.

The MoD must fundamentally change how it does business and today I want to set out how this change will come about.

The drivers of structural financial instability and the institutional lack of accountability, from ministers down, must be tackled if we are to avoid history repeating itself.

The constant postponement of difficult decisions created a bow wave in the department’s finances which became increasingly difficult to handle.

It would be folly to tackle this, as are doing, only to allow the systemic failures which created it to continue.

We need greater accountability and transparency to ensure that our resources genuinely match our ambitions and cost control is rigorously enforced.

Too often when ministers have wanted to pull levers they find themselves pushing string instead.

So there are a number of changes that are crucial.

First, the so-called conspiracy of optimism, through which the risks and costs in new projects are under-estimated, only to find mushrooming costs later, needs to end.

Second, future programmes should not be included unless there is a clear budgetary line for development, procurement and deployment.

Third, we must end the lack of real time cost control with tight budgetary discipline.

And fourth, we must rebalance our relationship with industry so that we achieve maximum value for money, remembering that the primary purpose of the procurement process is to give our Armed Forces to the need when they need it at a reasonable cost to the taxpayer. (end of excerpt)


Click here for the full text of the speech, on the UK MoD website.


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