Spending plans on military equipment have spiralled out of control under Labour according to a “suppressed” government report, contradicting ministers who have blamed cost overruns and delays on past government mistakes.
An unpublished report by Bernard Gray, a former defence adviser, finds planned spending on equipment over the next 30 years soared by £95bn in four years, rising from £140bn in 2005 to £235bn in 2009.
Senior industry figures described the Ministry of Defence commitments as “unaffordable under any realistic scenario”. The funding shortfall for long-term equipment is a constraint on ministers as they come under pressure to spend more on supporting current operations in Afghanistan.
Of the £95bn rise in spending commitments, the Gray review finds that one-third is due to the ballooning costs of existing projects. Two-thirds stem from the military’s requests to add new kit, such as drones, without cutting existing demands.
The findings contradict claims by Quentin Davies, defence minister, who said overruns were due to legacy projects such as the Astute submarines that were contracted under the previous government. He said controls had since improved, adding: “We’ve raised our game considerably and we’re much more efficient.”
Over the past week, details of the Gray review – ordered by John Hutton, former defence secretary, and completed last month – have dripped out in spite of the last-minute decision to delay its publication.
Liam Fox, the shadow defence secretary who has accused Gordon Brown of “suppressing” the review, said it was clear Labour’s defence equipment programme was “little more than a wishlist without funding”.
He said Mr Davies’ “pathetic protestations” had been shown up by a review that made clear the budget problems were “due to Labour’s utter incompetence”.
According to industry figures, the report describes a procurement process hard-wired for cost-escalation and delay. The three services have incentives to bid for as much kit as they can and underestimate the cost because there are no service-specific penalties for overruns. Meanwhile, fear of job losses or breaching spending limits leads the civil service to delay rather than cancel projects.
To solve the problem, the report recommends measures to tackle unrealistic expectations and poor delivery. Suggestions to improve forward planning include giving the MoD a 10-year, ringfenced budget and forcing it to account annually to parliament for any slippages.
Many of the findings were presented in June to the National Defence Industries Council, a committee of ministers and top defence businesspeople, and also at a workshop at the UK Defence Academy in Shrivenham.
Downing Street considered some conclusions on the state of the defence budget so damning that it refused to publish the completed report, according to people involved with the decision.
The MoD refused to comment on “leaked documents” but said Mr Gray’s work would feed into a green paper on defence.
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