Select Committee on Defence First Report

TAVRA Funding

42. The working group will also address the controversial question of the control of TAVRA funding. Currently, the TAVRAs are allocated annual budgets by Land Command. Once the budget is set, the Associations have full control of it, subject to the usual requirements of accountability. This independence is seen as central to preserving the independence and effectiveness of the TAVRAs. If detailed decisions about the allocation of funds delegated to them is handed over to the Chain of Command, it will leave them holding a merely administrative role in TA and Cadet finances. The TAVRAs have aired their opposition to such a proposal on several occasions[138] and Colonel Putnam reiterated them to us—

At the moment we work very well in partnership with the local chain of command. If that chain of command holds the purse strings, that partnership swings the wrong way in my view and is no longer a partnership.[139]

The TAVRAs also believe that such a move would have important implications on their ability to attract the right calibre of unpaid volunteers to serve on an Association.[140] Colonel Taylor commented that—

... the reason they are involved and are prepared to give up their time is because they feel that they can make a difference. If you stop feeling you are making a difference because you are not decision making, because you are not in control of the financial arrangements, [unpaid volunteers] simply will not be there.[141]

43. The Minister acknowledged that the working group would have to draw its own conclusions on the subject of TAVRA budgets, but he intimated that options were already being formulated within the MoD—

The question of budgets is something where there are changes which devolve power in fact to the TAVRAs. I am not sure we have finalised all of the details on that but in general principle the TAVRAs will be able in the future to allocate their expenditures without reference to the centre, more so than they have been able to do in the past.[142]

If the Minister's position is reflected in the outcome of the working group's deliberations, we will welcome it. Budgetary independence is a cornerstone of the TAVRAs' independence and should not be diminished.

44. The TAVRAs receive their budget allocations quarterly and invest the money allocated to them until such time as it is spent. The interest accrued under this system has provided the TAVRAs with an additional stream of income. However, the MoD recently modified the system of budget allocation so that the following year's budget allocation would be off-set against the level of investment income gained in the previous year. As they explained in a supplementary memorandum—

We believe that the previous system of funding the TAVRAs is capable of improvement and some changes have already been introduced: as the Committee noted in its report, income derived from TAVRA investments is now taken into account in setting budgets, as is forecast income from the sale of properties; the TAVRAs now play a full part in the Department's annual Long Term Costing process; and we have increased delegated financial powers. Recent audits have highlighted a number of areas of concern, and these are being addressed both by the TAVRAs and by the Department.[143]

Whilst we understand the MoD's need to make savings, we believe that the ability to accrue income from investment in itself offers the TAVRAs incentives to achieve greater efficiencies. We believe that the promotion of effective financial management by the TAVRAs (which has been achieved in the past) will be threatened if they have no incentive to efficiency savings other than being forced to work within steadily shrinking budgets.

45. The TAVRAs also generate income from sub-letting properties within their estate. This is not an insubstantial amount and Land Command estimate that the TAVRAs generate, nationally, nearly £1 million a year.[144] The TAVRAs argue that this extra income is very important to their ability to assist the TA. In previous evidence to us witnesses from the TAVRAs explained that such income helps to provide extra services needed by the reserves.[145] To off-set this income against future budget levels, in a similar way to investment income, would have the effect of reducing the amount of money at the TAVRAs' disposal even further. It would also act as a disincentive for the TAVRAs to explore new avenues of generating money. Whilst there may be an argument in favour of the MoD recouping income accrued from investment, it should not include income derived from the investment of money saved from improved efficiency. Nor should income derived from sub-letting property, which provides the TAVRAs with a valuable source of additional income, be included in any form of net-budgeting. We recommend that the budgeting system for the TAVRAs allows them to retain for their own use at least 50% of any efficiency savings made on their annual budget and 100% of accruals from other income generating activities.

46. In spite of their concerns, the TAVRAs were at pains to point out that the "TAVRAs are not against change. We are not against making economies and we actually believe that we could do more with the regular services than we do now".[146] The Minister also emphasised his commitment to the working group and promised that he would not allow it to be rushed into making the wrong decisions.[147] He assured the Committee that—

The working party should look at these issues, take advice, hopefully come to a conclusion. You have my assurance that there will be detailed ministerial scrutiny over what happens.[148]

We welcome this assurance.

138   ibid, QQ 2588-89 Back

139   Q 78 Back

140   Q 79 Back

141   Q 79 Back

142   Q 218 Back

143   Ev p 36 Back

144   Ev p 41 Back

145   Eighth Report, Session 1997-98, The Strategic Defence Review, HC 138-II, Q 520 Back

146   Q 76 Back

147   Q 208 Back

148   Q 216 Back

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Prepared 11 February 1999