Select Committee on Defence Written Evidence

Third Memorandum from the Ministry of Defence on the Spring Supplementary Estimates 2005-06

You sought further details on the rationale, and the historical basis, for the Ministry of Defence seeking Parliamentary authority for expenditure on operational deployments (including those of a long-term and anticipatable nature) only in the Spring Supplementary Estimates.

  Expenditure on operations such as those in Iraq and Afghanistan varies depending on troop numbers, activities and force protection requirements. As a consequence we cannot provide a detailed forecast at the beginning of the financial year that is accurate to the standards which we would normally place before Parliament for figures for that financial year. At the time the Winter Supplementaries Estimates are prepared, the most up to date financial information on operations would be complete up to August: clearly much can change between then and the end of the year. We have therefore historically taken the view that it would be better to wait to provide a forecast until later in the year when the underpinning figurework is more robust and we have a more detailed understanding of the likely operational profile to the end of the year. We have therefore delayed the Estimate for operations such as Iraq and Afghanistan to Spring Supplementaries.

  Funding for the operations in the Balkans, which is now considered to be financially stable, is currently sought by the FCO at Main Estimates, and transfer made to MoD at Spring Supplementary Estimates.

You asked why we judge we need to include such a large element of contingency, so near to the end of the financial year and how each of the contingency figures given in Table 1 and Table 2 of our memorandum of 6 March were calculated.

  The Request for Resources is based upon forecast costs two thirds of the way through the financial year. Due to the often rapidly changing operational situation it is prudent to include a contingency figure within the estimates. This figure is based upon a comparison of previous years' final outturn figures and the latest forecasts available when we prepare Spring Supplementaries (effectively November), and an analysis of past UOR costs to give an indication of potential short notice operational equipment requirements.

  More specifically, in Direct Resource DEL the contingency figure for Afghanistan was added because when we prepared the Estimate there were remaining uncertainties over the planned expansion of our commitments. In the case of Iraq the contingency of £40 million represents only around 5% of the total cost and reflects the uncertainties mentioned above. In addition to this HM Treasury has recently approved additional expenditure for equipment support to the Iraq Security Services of which £15 million is expected to be expended in this financial year.

  In Capital DEL the bulk of the contingency arises from our need to be able to respond to the rapidly evolving threat to our forces on both a tactical and technical level. Against that need we seek additional funding for unforeseen Urgent Operational Requirements (UORs) for the purchase of, for example, force protection equipment.

You asked what the "income foregone" in Table 1 is, in respect of each operation.

  When bidding for RFR1 at Main Estimates the MoD reduces its request by known income generating activities from spare capacity. This anticipated receipt is included in the "Appropriation in Aid" section in the Main Estimate. If during the course of the year this spare capacity is used on operational activities and the expected income is foregone, the loss of programmed income is a legitimate charge to the operation.

You asked if all the costs of overseas operations fall under RfR2 ("conflict prevention").

  MoD charges the net additional costs it has incurred on the three Conflict Prevention Operations Op Telic (Iraq), Op Herrick (Afghanistan) and Op Oculus (Balkans) to RFR2. The costs that the Department would have incurred regardless of the operation taking place, such as wages and salaries, are not included. Savings on activities that have not occurred because of the operation—training exercises for example—are taken into account in arriving at the net figures.

  The MoD also charges to RFR2 the cost of Conflict Prevention Programme expenditure. This is a number of peacekeeping strategies agreed by the Conflict Prevention Pool partners (MoD, FCO and DFID), the bulk of the MoD element of which is bid for at Main Estimates. The total estimated cost for 2005-06 is £51 million.

  MoD conducts other overseas activities in support of UN and humanitarian aid activities which are funded either through RFR1 or on a repayment basis.

You asked for the Department to provide a breakdown by financial year, and by purpose, of the £1 billion estimated cost of UK deployments in Afghanistan over the five years 2005-06 to 2009-10.

  As highlighted above, expenditure on operations varies depending on troop numbers, activities and force protection requirements. As a consequence we cannot currently provide a breakdown of the estimate that is accurate in detail to the standards which we would normally place before Parliament.

9 March 2006

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