House of Commons - Defence - Fourteenth Report

Select Committee on Defence Fourteenth Report

III. THE CONDUCT OF THE CAMPAIGN

Costs

284 We examined how much the intervention cost, and what its implications were for the future of the defence budget. The Kosovo campaign tied up a considerable amount of the military resources of NATO's lead nations. The US carried the lion's share. Like the MoD, the US Department of Defense monitors the additional, rather than the total, costs of such operations ("contingency" operations in the US; "unprogrammed" operations in the UK). The DoD estimated in June 1999 that in the full fiscal year to September 1999, assuming the conflict would continue, it would require an additional $5,184million— $3,301million for operations and personnel costs, $1,548million for munition replenishment, and $335million for humanitarian assistance.[658] With the conflict ending later that month, some of these costs were avoided, but others also arose such as the redeployment and 'reconstitution'[659] of forces previously engaged in the conflict. As a result, the US General Accounting Office has calculated that in the year to September 1999, for operations in Kosovo[660] the additional costs were $3,000million for the DoD and another $256million for other US agencies.[661] For the 2000 fiscal year, there would be further costs, expected to be $2,025million and $302million respectively.[662] Some of the major costs in the year to September1999 included $1,556million for the air operation, $1,157million for the US contribution to KFOR, $351million to redeploy and reconstitute forces stood down after the end of the air campaign, and $173million on assisting refugees.[663]

285 These figures, however, do not include expenditure on replacing munitions or lost US aircraft.[664] The DoD spent $445million on replacing TLAM cruise missiles, $253million on US Air Force cruise missiles and aircraft towed decoys, and $300million on other items of equipment expended during the conflict (including $40million for replacing lost UAVs).[665] In addition, Congress has made a further provisional $1,100million available for other equipment/munitions replacements and to implement 'sustainability enhancements' identified as necessary after the campaign.[666]

286 Though on a more modest scale, the resources contributed by the UK were proportionately no less significant. These were provided not just by the MoD but also by other government departments (on humanitarian aid, for example) and local authorities (care of refugees in the UK). Post-conflict, there are also costs for the international community in rebuilding some of the infrastructure destroyed in the war. For the MoD, the conflict imposed costs on its budget included additional operating costs for the aircraft involved in the air campaign, the consumption of missiles and bombs, the chartering of ships and transport aircraft, and the provision of accommodation in-theatre. There are also further continuing costs as a result of the MoD's involvement in post-conflict peace-keeping commitments.

287 The bulk of the additional cost for the MoD arose in 1999-2000 and will continue in subsequent years. In February 2000, the MoD estimated the additional costs of the Kosovo operations in 1999-2000 at £206million, and a further £136 million to pay for Urgent Operational Requirements (much of which will provide enhanced capability beyond the end of the conflict):[667]

Additional Operating Costs
Personnel	£46 million
Flying	£33 million
Consumables	£31 million
Equipment support	£31 million
Transport	£30 million
Other	£35 million
Sub-total		£206 million
Urgent Operational Requirements
Accommodation	£69 million
Communications	£24 million
Aircraft enhancements	£14 million
Vehicle enhancements	£12 million
Munitions	£8 million
Others	£9 million
Sub-total		£136 million
Total		£342 million

Earlier, when the MoD had presented its Spring Supplementary Estimate for 1999-2000 it had expected the extra cost to be £398million (the subsequent lower figure reflected a slippage in payments for some UORs[668]), and we sought from the Department details of the major adjustments in the revised Estimate.[669] This showed that the additional costs of operations in Kosovo for the year had fallen mainly on RAF Strike Command (£40million), Chief of Joint Operations (£50millon), Defence Logistics Organisation (£144millon) and Adjutant General (where additional pay and allowances generated £19million extra expenditure).[670]

288 These cost figures represent the additional cash outlays that were needed within the 1999-2000 year. As such they do not take account of the resources consumed. Most importantly, such cash figures do not subsume munitions consumed or equipment lost until they are replaced. They exclude, therefore, consumed ordnance valued at £45 million (on an historic cost basis),[671] as well as the C-130 and UAVs lost during the operation. The MoD has recently announced orders worth £25million for guided munitions, including 23 TLAM missiles (£1.1million each) and 18 Paveway II bombs (£18,000 each[672]), but only a part of this should be seen as a cost of the Kosovo campaign. In similar vein, many Urgent Operational Requirements represent expenditure on assets not consumed in the conflict, but were simply outlays brought forward. The NAO's report on the campaign also highlighted that although additional cost figures for the sorties flown were calculated on the basis of the extra flying hours completed, the sort of flying involved was less wearing on the aircraft than the low level training that was displaced.[673]

289 Some of the MoD's costs for the Kosovo operation have been shared with other government departments (for example the Department for International Development and the Foreign and Commonwealth Office) and with other nations (for example the costs of NATO and the UN Mission). By January 2000, the MoD had recovered £5.7 million with a further £4.9 million to be recovered.[674] Parliament needs to be informed of the extent to which the costs of the Kosovo conflict and its post-conflict commitment are being refunded to the MoD by other government departments and by the Treasury, or whether substantial costs are ultimately being borne by the defence budget.

290 The introduction of Resource Accounting and Budgeting should allow the Department to produce more meaningful analyses of the resources consumed in military operations. In the meantime, a better view of the additional costs is possible by looking across a number of years, removing the distortions produced when consumed items are only replaced some time later. Indeed, many of the additional costs associated with operations in Kosovo will be borne in the current and subsequent years. The NAO's report on the conflict sets out the MoD's estimate of the £866 million additional cost of its Kosovo commitment over the five years to 2002-03, of which Urgent Operational Requirements account for 27% (£234 million).[675] In the recent Spending Review the Secretary of State announced an additional £200million for the MoD's current (2000-01) budget, in particular to help address the main equipment lessons learned from the Kosovo campaign[676] (including providing an all-weather precision-guided bombing capability, Maverick anti-armour missiles, and enhanced secure air-to-air communications). The MoD further estimates that the additional costs of operations in Kosovo will be some £300 million over the three years of the latest Spending Review,[677] including £25 million to replenish consumed munitions.[678] Such additional costs of so-called 'unprogrammed operations' are usually added to the MoD's budget in Spring Supplementary Estimates, and then only if they cannot be absorbed within existing allocations.[679] The National Audit Office Report on Kosovo expressed its concern about the 'scale of uncertainly regarding future costs'.[680] The Ministry of Defence needs to keep Parliament fully informed of the future costs to the defence budget of the UK's Kosovo commitment. We will be continuing our annual monitoring of the MoD's Estimates and annual reporting documents to ensure that the Defence budget is fully reimbursed for the costs of operations in Kosovo, as well as other critical operations. We will also be examining how the proposed joint MoD/Foreign Office/DfID 'Conflict Prevention' budget, announced in the 2000 Spending review,[681] will allow a proper planning and provision for the resources needed to defuse or (if need be) to tackle future crises.