Examination of witnesses (Questions 120
- 139)
TUESDAY 14 MARCH 2000
THE RT
HON GEOFFREY
HOON, AIR
COMMODORE PAUL
LUKER and MR
ROGER PAXTON
120. Was this the 2.2 million that is referred
to in the press?
(Mr Hoon) It was actually nearer 2.4 million, for
the sake of accuracy, but I think we are talking about the same
ball park figure.
121. Did this represent capitation costs, marginal
costs or some other costing?
(Mr Hoon) There are a variety of different terms used,
but I think we are all talking about the same thing. The cost
was based throughout—there was no change in the basis of
the cost on what we call "no loss costs". It is sometimes
called "marginal costs", but it is the standard basis
for charging between all government departments. Essentially,
it is the extra cost that a department sustains if the activity
in question had not been carried out. So what we are looking at
in relation to personnel, for example, is the additional cost
of transport to the required location, subsistence, any extra
allowances, clearly accommodation, but it does not include the
salaries of the people concerned. That is a cost that lies with,
in this case, the Ministry of Defence, but the department that
is providing the asset.
122. You are going to bear that anyway, are
you not?
(Mr Hoon) Exactly. So it is sometimes referred to
as marginal costs, but, as I say, the no-loss cost; that is how
much extra expenditure that department providing equipment or
personnel would have to bear as a result of participating in the
particular activity in question. Similarly, as far as equipment
is concerned, in this case we are talking about helicopters, and
there would be the cost of transport to the required location,
the hourly rates for using the helicopter—fuel and oil consumption
and so on.
123. We have been hearing that, in fact, that
figure which you have just described as a ball park figure, if
I can use that term (rough estimate) was then reduced later on
in the week to half that figure. Was it?
(Mr Hoon) We looked very carefully at these figures,
obviously, in discussion with the Department for International
Development. Let me make it clear: that total ball park figure
included two of the options; it included both the deployment of
helicopters and the deployment of the Marine group with boats
and with hovercraft.
124. I see.
(Mr Hoon) So the reduction was, first of all, an elimination
of the requirement for Marines, because the Department for International
Development judged that, at that stage, they were not necessary
and were not needed. So a significant element of the ball park
figure that we provided came out because we were no longer going
to have to send the Marine team down there. The second change
which we were able to make after consultations with the Treasury,
was that we were able to reduce the cost by the amount that we
would have spent on the exercise in Norway from which we removed
the helicopter group. So these people should have been going to
Norway in the week in question to participate in what is a NATO
operation. We would have faced costs in that and I judged that
it was right, if we could do it—and we had to get the view
of the Treasury—that we were able to reduce the cost still
further, taking account of the costs that would have been faced
in the exercise in Norway. There were one or two other slight
changes, in that the cost of the heavy lift was not quite as large
from the charter company as anticipated, but the two big changes
in the costings were accounted for by the fact that we did not
have to send the Marine team and we were able, with Treasury approval,
to offset the cost of the exercise. I do need to emphasise that
that second stage was a wholly exceptional process, in the sense
that these people were supposed to be in Norway on a training
exercise that is important for their skills in terms of their
ability to do their job on behalf of the country, and sending
them to Mozambique was something quite different. There are very
difficult judgments as to whether it is right to substitute the
cost of their training for the cost of going to Mozambique. I
asked for this decision to be looked at on the Tuesday evening
because I felt it was important to get on with things and that
that was something that we could take account of.
125. What figure did you come down to with the
elimination of those two factors?
(Mr Hoon) Again, these are ball park figures, but
about £1.15 million. Again, none of these are precise. Indeed,
the Committee might be interested in hearing that that figure
has risen to around £1.23 million because the costs of accommodation
and so on in Maputo have proved a little more expensive than originally
estimated. These are estimates; as I said at the outset, these
are not figures that we work on with the benefit of accountants.
We are required under the rules to make an estimate of the likely
cost of providing people and equipment and we do so as quickly
and in as round terms as is sensible.
126. You sort out the details later.
(Mr Hoon) We still, frankly, have not worked on precise
details because those people are still there and they are still
incurring costs.
127. Would you confirm that this question of
what it was going to cost did not delay deployment?
(Mr Hoon) Absolutely not at all.
128. Can you tell me why do you have to go to
the Treasury to get permission?
(Mr Hoon) Because we were subtracting a cost which
was not normally the kind of subtraction that would have been
made in this situation. We were subtracting the cost of what these
people should have been doing. In fact, Government Accounting
says in principle that departments should work out the full cost
and that, frankly, includes salaries but the practice between
departments has always been—and if the Committee is interested
I can give examples from other government departments where police
for example are provided from time to time—the practice
within government departments is to supply personnel and equipment
at this no loss cost, the marginal cost which does not include
salaries. In addition to that I was able to reduce the amount
of charge to the Department for International Development by the
further amount that we would have spent in any event on the deployment
to Norway, but that is exceptional simply because what has to
be judged there is whether what the people are doing contributes
to what is their primary function and primary responsibility,
which in the case of helicopters and pilots and equipment is training
and exercising for the kind of military deployment that we rely
on them to carry out.
129. You say really that it is the Treasury
at the heart of this problem of working out what you can and cannot
charge? It is these rules which they impose on you which cause
you to have all this difficulty with figures, is it?
(Mr Hoon) With respect, I do not perceive there to
be a problem. These are standard arrangements. I can give you
examples, if necessary, that go back over a long period of time
between departments. There is a not a problem. This is the standard
way in which different government departments, which have people
and equipment which might be required by another government department,
calculate the likely cost and then later work out the precise
cost. This is something that is done all the time so there is
not a problem and there was not a problem in this context.
130. That was not the perception of the press
or of any of us sitting outside government. It might not be a
problem inside government but it is certainly very difficult for
us to understand why you and the Department for International
Development should be discussing money of the kind you were when
what was needed was helicopters to take people off the top of
trees. You may not have a problem but Britain has a problem in
understanding what you are up to.
(Mr Hoon) Let me make it clear, I do not regard this
as a problem. It certainly did not delay the deployment. This
Committee obviously oversees the Department for International
Development and I am sure that you would be extremely concerned
if, for example, the Secretary of State for International Development
decided simply to spend unlimited amounts of money on getting
helicopters into a situation where that could not be justified.
You would be very concerned if she simply approved her Department
spending huge amounts of money that did not have much effect because
that would be money going from a budget you would be particularly
concerned about.
131. We would be very concerned, you are quite
right, about the Ministry of Defence raiding the budget of the
Department for International Development in order to offset its
own costs because by paying the Ministry of Defence you would
reduce the capacity of the Department for International Development
to provide the assistance and aid which it should be doing.
(Mr Hoon) Let me make it quite clear—and I do
take exception to your word "raiding"—that that
did not happen. I have explained the basis of the charging. There
were no costs the MoD would not otherwise have suffered. We charge
that on a straightforward basis which is wholly consistent with
the way in which other government departments operate. Let me
make this point clear to you. This is why it is necessary to give
some indication of the cost. Having given some indication of the
cost, it is then appropriate for the Secretary of State for International
Development to make a judgment because it is the policy responsibility
of the Department as to whether it is appropriate given resources
to spend that amount of money. If we do not give that sort of
calculation you, I am sure, would be concerned after the event
if we came back and said actually we would like £10 million
for these helicopters, a figure that had never previously been
mentioned, the helicopters had gone, and had then we levied a
charge which you would then complain about, quite rightly.
132. We would certain enquire into it, yes.
(Mr Hoon) So by giving an indication of the likely
cost we allowed, as would happen in any government department
in a similar situation, the Secretary of State to make a judgment
as to whether in the circumstances it is right to pay that amount
of money. This is particularly relevant in the context of what
was taking place in Mozambique because, quite rightly, earlier
in the week the Secretary of State had judged that what was of
paramount importance was to get helicopters into Mozambique as
quickly as possible and the best way and cheapest way of doing
that was to hire locally or regionally available helicopters and
that was done. Once the situation was deteriorating then clearly
what she did was to look at the other options that were available—and
my understanding is that something like five were hired locally—and
then to consider whether the situation was so grave that it justified
what was inevitably going to be a very considerably extra cost
of getting helicopters down from the United Kingdom. Out of that
£1.15 million ball-park estimate for the strategic lift requirement,
that is the cost of carrying the kit down there, the helicopters
and relevant personnel plus other relevant equipment, was in the
order of £740,000.
133. That is the hire of the Antonov?
(Mr Hoon) The hire of the Antonov was part of that.
The hire of the Antonov was getting on for half a million pounds
plus we also had a Tri-star that was going to be available. It
is absolutely right that the Secretary of State for International
Development should make a judgment as to whether you, for example,
in looking at this matter after the event would say that this
was a reasonable use of what are inevitably scarce resources to
get four helicopters down to Mozambique. If we had not given her
that estimate of the cost she would not have been in a position
to make that judgment. If things had been improving by Tuesday
or Wednesday in Mozambique she might have said, quite rightly,
"I cannot justify that enormous cost"—and I recognise
it is an enormous cost—"to hire an Antonov to put four
Pumas inside", but the situation was grave and she judged,
and I agreed, that we should get them there as quickly as we could
and that is what we did.
134. Obviously the costs that you attribute,
however roughly, to the exercise, as you say, has to be part of
the judgment of the Secretary of State for International Development
as to whether or not she will buy what you are offering at that
price. That is what I think you are saying.
(Mr Hoon) Yes "buy" and "price"
are perhaps— She has got to make a judgment and she has
got to have the information on which to make that judgment.
135. And the figure is important?
(Mr Hoon) And the figure is vitally important.
Chairman: Tony Worthington?
Mr Worthington
136. Can we return to the Antonov which is the
thing that puzzles me. We have all the resources of NATO and we
have had crisis after crisis, emergency crises, either humanitarian
or military, in lots of parts of the world and every time it comes
down to logistics and every time heavy lift is mentioned. Why
is it when we have a crisis like this that the NATO defence forces
have to go and hire a commercial plane at £750,000 in order
to move helicopters?
(Mr Hoon) It would be unfair to those people responsible
for making the aircraft available if the figure of £750,000
went unchallenged. It is in the order of half a million for the
Antonov. The extra costs were for the costs of getting a Tri-star
down there.
137. But the point remains.
(Mr Hoon) But the point remains, I accept that. It
is a point that, frankly, the Secretary of State for Defence has
to struggle with because lessons learned from Kosovo and similar
operations demonstrate that the basic problem that we face in
Europe is the shortage of heavy lift aircraft. It is a problem
identified in the Strategic Defence Review. It is a problem that
the United Kingdom has had for some time. It is a problem we are
seeking to address and there is a substantial procurement programme
underway reaching resolution shortly, that is designed to identify
specifically that problem.
Chairman
138. I understand the Ministry of Defence's
answer on heavy lift as to why they have not got it is that "the
Americans will take us there if we want to go." Is that the
position?
(Mr Hoon) No, because the reality as far as the United
Kingdom is concerned is that we identified in our Strategic Defence
Review a shortage of heavy lift, which was something that was
clear as well in the context of the Kosovo campaign, something
identified by my predecessor in his initial reaction to lessons
learned from Kosovo last October, and it is something we are seeking
to address. As I say, there is a procurement programme designed
to provide heavy lift aircraft.
Mr Grant
139. On a separate issue, Secretary of State,
I am a very simple person and I watched the pictures on television
of people hanging from trees and out of houses and they were surrounded
by water. Why could the Ministry of Defence, for example, not
drop inflatable dinghies, drop floats, drop something which would
allow those people to get out of the trees and try and make it
to land?
(Mr Hoon) Can I answer that first because in the first
place we would have had to have got those dinghies and that equipment
down to Mozambique and essentially the debate/discussion we have
had so far is about how you get those pieces of equipment to where
they are needed, and we would face both time delays and costs
in achieving that. Can I absolutely assure you that I also watched
those pictures on television with the same horror and concern
that I am sure you felt and I wanted to ensure that we played
our part if the Department that is responsible judged it appropriate
for us to assist. That is why from Monday morning onward in the
week in question a number of plans were prepared ready to execute
once the Department for International Development judged it appropriate.
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