Examination of Witnesses (Questions 320
- 339)
WEDNESDAY 12 JANUARY 2000 (Morning)
MR COLIN
BALMER, MAJOR
GENERAL JOHN
KISZELY AND
MR TREVOR
WOOLLEY
320. Does it really have the same effect? If
you knew that you could spend up to £300 million or £400
million on unprogrammed, unexpected expenditure without any need
to worry, surely that gives you more flexibility than a position
whereby you are strictly constrained about what you can spend
and you are worried, and there might be a tendency to slip the
equipment programmes in order to provide more resources for operational
matters for a year until the Treasury gives you the okay? Is there
not more flexibility, from your point of view, and is it not easier
for you in terms of your own management, if there was a sum in
the budget every year for unexpected expenditure on operational
matters of this kind?
(Mr Balmer) For the smaller operations—things
like East Timor—we expect to have to meet those from our
own budget, perhaps £20 million or £30 million. So,
yes, to that extent, we do indeed assume that we will have a range
of those costs and we can programme that. For the larger operations,
they are, by their nature, very unpredictable; their size and
their scale can arise at very short notice—as with Kosovo—and
I do not think we would gain any greater confidence by having
some of that provision already available and then just relying
on it being topped up. Before we engage in an operation like Kosovo
we have a very earnest debate to ensure that we do know how the
costs will be met—whatever they turn out to be. That is
what happened with Kosovo and, as I said, we had the assurance
at the start of the campaign that we would have the extra provision
and, therefore, it would not affect the rest of our budget.
Mr Blunt
321. Can I follow up on Iraq, because you told
us the cost of the on-going operations in the Gulf are being accommodated
from the budget.
(Mr Balmer) Yes.
322. In the memorandum you submitted to us you
told us that the cost of Desert Fox was £10,000.
(Mr Balmer) Yes.
323. That seems rather a low figure. Why is
it that low?
(Mr Balmer) I think because very little has happened
in that financial year.
324. Desert Fox happened—if my memory
serves me right—in December 1998. What has happened? That
cannot be right.
(Mr Balmer) I suspect the way the figures are working
is that the extra costs of the other operations, Warden and Jural—the
controlling of the airspace—is where most of the costs of
the aircraft and fuel is accommodated. So any extra costs specifically
for Desert Fox are, actually, very, very small.
325. What is the cost of a Paveway 2 or a Paveway
3 bomb?
(Mr Balmer) I do not have the figures to hand, but
it is several thousand pounds. You would not get that many for
£10,000. I can see your point.
326. Are any of your colleagues able to assist
on what is the approximate cost of a Paveway 2?
(Mr Balmer) I think the important point here is that
we would not, in that period, have bought another Paveway 2, therefore
there is no extra cost. Even if we drop bombs we do not score
the cost until we replenish them.
327. So these figures here are not a true reflection
of the cost of taking part in Desert Fox, or in the on-going operations
in the Gulf?
(Mr Balmer) That is absolutely true, and it is the
same for the Kosovo costs; the order of costs I have given you
today does not reflect all the costs of replenishing the expended
ammunition.
328. It should do, should it not?
(Mr Balmer) No, because we have not spent the money
yet. All we have put in this estimate is the money we have expended
this year.
329. But this is the basis of your negotiations
with the Treasury.
(Mr Balmer) Yes, and next year, I expect, we will
be spending money on replenishing some ammunition stocks and that
will score against the reserve next year.
330. It will be too late by then, will it not?
(Mr Balmer) No, because we get the money each year.
That is why Bosnia costs have been rolling each year, because
we claim from the reserve the costs we incur that year. So the
Bosnia costs will include vehicles being repaired in the UK which
would have been on deployment in Bosnia in previous years. As
I said, we have incurred very little Kosovo ammunition costs yet,
in terms of replenishment costs. The replacement Paveway 2 kits
are due to start arriving from this month onwards. Once we start
paying for them then we will claim.
331. But you have agreed with the Treasury to
accommodate the costs of the Gulf operation.
(Mr Balmer) For the Gulf operation that is correct.
332. Yet you have dropped 125 Paveway 2 bombs
and 9 Paveway 3 bombs during the course of 1999, although you
do not know how much they are going to cost to replace.
(Mr Balmer) Because we have not yet signed contracts[5]
for their replacement. To the extent that those are costs we would
have incurred—because we normally drop weapons during training
exercises—there would be no extra costs. To the extent that
it is an extra cost for that operation, if it is a Desert Fox
cost then at the moment we would absorb that and if it is a Kosovo
cost then we get it back from the reserves at the point at which
we incur the cost.
333. That is an operational restraint on Bolton.
(Mr Balmer) No, I do not think it is.
334. So they can continue to bomb Iraq as much
as they like with no constraints coming from you about the use
of their ammunition despite the fact that those costs are being
contained within the on-going budget.
(Mr Balmer) I certainly do not and the financial structure
does not put any constraint on the amount of weapons expended
in that operation. Those judgments are made by the Commanders
and sometimes by Ministers in certain circumstances and the cost
will be a factor in that decision, but there is no separate constraint
placed on that operation.
335. How big does this cost have to become before
you go to the Treasury to say the costs of Bolton have to be met
from the reserves?
(Mr Balmer) We do not have an absolute figure agreed
with the Treasury. The arrangement is that what we call costs
of minor operations, which is what this is now judged to be, we
will attempt to absorb.
336. But you do not know how much that is.
(Mr Balmer) Were it to be of the order of £30
or £40 million then we think we can do that, but were it
to become a much more significant operation and cost hundreds
of millions then that will be a different matter and that will
be a major operation and we would seek to claim that against the
reserve.
337. So you do not know how much these bombs
cost?
(Major General Kiszely) You have got an opportunity
to ask the Chief of Defence Procurement and the Deputy Chief of
Defence Staff this afternoon exactly those points.
Chairman
338. Perhaps you would alert him.
(Mr Balmer) Yes, we will do that.
Laura Moffatt
339. There is something I need to get clear.
At the start of this evidence session, Mr Balmer, we were talking
about the way in which under-spends could be carried forward.
Does that apply to all areas of under-spend? Is it within your
gift to use those under-spends for the following year?
(Mr Balmer) Yes it is. All aspects of the defence
budget are covered by that agreement. To the extent that we spend
less than Parliament has provided then the difference can be carried
forward to the following year.
5 Note by witness: we have not yet received
bills for their replacement. Back
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