Select Committee on Defence Minutes of Evidence

Examination of witnesses (Questions 1200 - 1219)



  1200. We used to call that "creative accounting".
  (Mr Hoon) It is not creative accounting, but it is a requirement that, in effect, Parliament imposes on government departments.

  1201. Is it not correct, though, as I think I understood from a witness in an earlier meeting, that the Ministry can now roll money over to the next year? Is that correct, and do you think that is right?
  (Mr Webb) Yes, there is a provision, because on large capital items like works or large pieces of equipment you can get a big bill which can fall one week or the next, and that can have an effect on this. To stop us getting into a silly situation of paying bills earlier than we should—sometimes we want to hold the money up to make sure the contractor has done it—there is an arrangement with the Treasury to roll over, so that a lot of the money that is underspent one year just gets added onto the next year in a sensible arrangement. I don't have lots of detail on this year. There is a roll-over facility which aims to get round these problems.
  (Mr Hoon) Can I also point out that it works in another way. Not only is there the question of not paying a bill this week rather than next week, there are also, certainly as far as the department is concerned, receipts. It may well be that any large receipts arrive shortly before the end of the financial year. If it arrives two or three days earlier, that then looks like an underspend. The reality is that that money that was coming into the department was always going to come into the department; it happened to come in one financial year rather than another. It does not have any effect. I think what I want to emphasis is that none of this has any effect whatsoever on the amount that the department has available to spend or spends, nor has any consequences at all on money going back to the Treasury or not going back to the Treasury. The reality is that because of parliamentary and constitutional constraints, we are required to hit a particular target on a particular date. That is somewhat artificial in the broad scheme of things, but nevertheless that is a constitutional requirement placed on government departments. We are no different from any other government department in that respect. But I assure you that the spending that the department has will not be affected by the fact that on a given day at the end of the financial year we appear to have a £318 million underspend.

  1202. I understand that, Secretary of State, and I understand what Mr Webb said. I used to do it with my electric bill. There is a lot of difference between 31 December and 1 January.
  (Mr Hoon) Exactly. Dickens put it rather well, did he not?

  1203. There is a deeper point here, is there not? Do you think it is appropriate—because I do, let us be quite plain about it—for you to be able to value your budget, if it suits you, into next year's and on top of next year's budget, if it suits the efficiency of the operation of the department?
  (Mr Hoon) We can do that, and that is the point. We are able to do that. I think the broader issue is, with respect, more a matter for you than it is for me. The broader issue is whether, for example, it should be as easy, because when you are managing a budget of £22 billion plus it is actually quite difficult to hit that target on a given day, and frankly—and I speak from some experience of other government departments—it is a rather artificial exercise. It might be that that is something that Parliament itself might want to look at in terms of whether we want to be quite as precise about those totals and dates in the way that we are at the moment.

  Chairman: There is much more ability to carry over now, is there not, than there was before?

  Mr Cann: Chairman, I have gone a long way to get to this point.

  Chairman: Sorry.

Mr Cann

  1204. Your predecessor—or the people who worked for your predecessor, more likely—decided that the way the finances of the TAVRAs were managed should be altered. Previously they were able to save up money out of their present year's budget and carry it over as a reserve and use it to improve the service. Your predecessor stopped that. If they got an excess at the end of the year, that was removed from them. Most of us regarded that as a very bad move indeed. It encourages 31 March spending, does it not?
  (Mr Webb) No.

  1205. That is correct. We took evidence on it. It encourages the sort of mentality to make sure that all road works are done in March to burn up the budget, rather than using it efficiently, which you can do if you carry it over. Would you be prepared to have another look at that decision?
  (Mr Hoon) Certainly if that is the case, I shall go away and have another look at it, yes. Can I say that the real pressure that I find is not the question of burning up the budget, but making sure that we are not overspending the budget. That is the real issue. When any government department has recurrent bills, has considerable expenditure, then the difficulty is to try and land the aircraft on the runway at precisely the right time that you need to as far as the bills are concerned. So it is a question sometimes of slowing things down in order to make sure that you hit that target. It would be much easier if there was greater flexibility in the approach.

Mr Brazier

  1206. I would certainly echo that from Jamie. To bring you back to your first answer to Jamie Cann, when you said that you could indeed guarantee that the additional costs of Operation Allied Force would not come off the defence budget and would not affect our other defence spending, you have just said that the year-end arrangements are entirely theoretical, but in answer to earlier questioning a few months ago we were told that in deciding how much should be allocated from the Contingency Fund to pay for operations, the Treasury also took account of any surplus which might arise in that year's defence budget. So can you assure us now that whether it is a 1.5% or some other completely different figure, there is not a bill being applied to the defence budget that arises from additional costs from the Kosovo operation, and it arises because the Treasury says you have some money left over at the end of the year?
  (Mr Hoon) Let me make it quite clear. If I gave the impression that what I am describing is theoretical, then I apologise for that. It is not theoretical, it is very eminently practical. We are given a particular budget by Parliament.


  1207. By the Government.
  (Mr Hoon) Approved by Parliament and actually—

  1208. Perhaps approved, but not given by Parliament.
  (Mr Hoon) I would go further than that: granted by Parliament, and a very important constitutional principle, as also as a Member of Parliament I would recognise. So I think it is very, very important that we stay within that budget. All I can say to Julian is that I have no difficulty in spending the budget.

Mr Brazier

  1209. Then your original answer was misleading, forgive me. You cannot give us the assurance that you gave to Mr Cann that none of the additional costs involved in the Kosovo operations have been borne by the defence budget?
  (Mr Hoon) No, I can give you that. I gave you that assurance earlier, and I am giving you that assurance that the department was reimbursed for the cost—

  1210. In full, for the additional costs of the Kosovo operation?
  (Mr Hoon) In full, for the additional costs, yes.

  Mr Brazier: Thank you.


  1211. Is the £6,000 that is going to be given to that convicted fraudster Foxley going to come out of this year's budget or next year's budget? You have not read it?
  (Mr Hoon) I do not know.

  1212. The biggest fraudster ever in the Ministry of Defence, who salted away hundreds of thousands of pounds, is now going to be donated £6,000 because somebody opened his letters. You must have a chat to your colleagues or the Lord Chancellor, about how the law comes into appalling disrepute when crooks like that are rewarded out of public money. Now the last question, and the easiest of all, Secretary of State. From what you said, a lot of us spent some pretty sleepless nights on days 40, 50, 60, 70, 80 thinking were we going to get away with it, and if the bombing strategy had not been successful—which eventually it was—what further tools in the toolbox did we have. How far would you be prepared to go in endorsing this statement? Was it a lucky outcome for the operation that Milosevic threw in the towel when he did?
  (Mr Hoon) It was not at all lucky, it was not fortunate, it was the result of a sustained and determined campaign by the Allies, by our armed forces and the armed forces of other countries, which eventually produced the result. As I said earlier, we do not know precisely what it was that eventually persuaded Milosevic to back down, but he did back down, and I think he backed down because of the sheer professionalism of our armed forces and the armed forces of other countries involved in what was a difficult enterprise and one that they carried through very, very successfully.

Mr Cohen

  1213. This is about targeting policy, so it can be put into one long question. One aspect of targeting policy was cluster bombs and the use of cluster bombs. In an answer to me, you said that the failure rate figures were provided by the cluster bomb manufacturers, and that the MoD had done no independent research into failure rates. If there has been no independent research carried out, how can the MoD be so sure that the failure rates do not change when the cluster bombs are used in a different manner, such as height, speed and angle at which they are released? The Minister of State also said that the possibility of some munition failure is taken into account when reaching decisions on the UK's use of cluster bombs. What failure rate does the MoD then consider acceptable? Is it not the case that the decision to use cluster bombs at a great height was based really on the military achieving the total safety of pilots but without concern for what happened on the ground to civilians or, indeed, refugees who we were supposedly trying to help? Did you not get a distorted balance there?
  (Mr Hoon) No.

  1214. Then on the bombing, the second targeted aspect, the bombing of the Chinese Embassy, was the UK Government consulted about that? Why was the Chinese Embassy—

  Chairman: Will you answer the first part of the question, Mr Hoon, please?
  (Mr Hoon) As far as cluster bombs are concerned, I regret that munitions are not always as effective as we would like. The fact is that there are still Second World War bombs turning up under the streets of the United Kingdom long after the campaign when they did not explode. We were aware that there was a small failure rate, in the order of 5%, estimated by the manufacturers as far as cluster bombs were concerned, but a judgment has to be made. These are extremely effective weapons. They are the most effective weapons against armoured and certain kinds of soft skinned vehicles and, frankly, if we did not use the most effective weapons available to us we would be putting our armed forces at risk. I would face, rightly, criticism from this Committee if, in an exercise such as we are conducting now, I did not use a weapon that was available to us and our armed forces were put at risk in the process.

Mr Cohen

  1215. How many refugees and innocent civilians is a pilot worth?
  (Mr Hoon) I do not think it is proper for me to try and deal with that.

  1216. In your assessment?
  (Mr Hoon) Judgments are made. Military campaigns inevitably involve risk both for the armed forces of this country and, indeed, for civilians of other countries. That is something which is taken into account which is why we take account of relevant principles of international law both in terms of the targets that we select and, indeed, in terms of the equipment that we utilise.

  1217. Is it not likely that a lot less civilians could have been killed without those cluster bombs being let out at 20/25/30,000 feet? Was that decision not made because, firstly, you wanted to impress the Americans that you were doing something, because in the early part you were not doing anything because of the bad weather, and, secondly, you wanted the total safety of the pilot, perhaps a laudable aim but the end result was that you slaughtered a lot more civilians and refugees than you should have?
  (Mr Hoon) I do not accept that we slaughtered any civilians or refugees. What I would say is that we used the most effective weapons in the circumstances. There is not any evidence actually that I am aware of that the failure rate is anything to do with—

  1218. Why have you not got the evidence?
  (Mr Hoon) Harry, I have not even finished my sentence. There is no evidence that the height from which the bomb is dropped has any particular impact on its failure rate. Can I make this point clear as well. Since then British forces and other armed forces from other countries have been engaged in some very dangerous work in clearing unexploded ordnance, not only ordnance that we were responsible for but ordnance left behind as well. I have seen those people engaged in astonishingly dangerous work and they have done a quite remarkable job in the process.

  1219. Was there not a report recently of children killed by a land mine left from a cluster bomb in dreadful circumstances? Have there not been other deaths as a result of those failed cluster bomb munitions?
  (Mr Hoon) To repeat: in a military campaign there will be casualties. We were remarkably fortunate that there were no casualties amongst allied forces in the course of the actual campaign. We all regret that there are civilian casualties in a military campaign but if you want to preserve human rights, if you want to preserve democracy, there are times when it is necessary to use force. That was what we did.

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