Third further memorandum from the Ministry
of Defence
GOVERNMENT RESPONSE TO THE HOUSE OF COMMONS
DEFENCE COMMITTEE REPORT ON THE COSTS OF OPERATIONS IN IRAQ AND
AFGHANISTAN: WINTER SUPPLEMENTARY ESTIMATES 2007-08 (HC 138)
The Government welcomes the Committee's report
on the Ministry of Defence Cost of operations in Iraq and Afghanistan:
Winter Supplementary Estimates 2007-08, published on 5 December
2007, as HC 138. The Estimate sought Parliamentary approval for
funding for operations in Afghanistan and Iraq; draw down of the
Department's End Year Flexibility entitlements (Carry over of
under spends from 2006-07); inter Department Government budgetary
transfers; and budgetary flexibility from Capital to Resource
to reflect in year pressures in resource (operating costs). The
Government's response to the high-lighted conclusions and recommendations,
which were contained in the Committee's report is set out below.
1. We commend the MoD for renaming Request
for Resources 2 "Operations and Peacekeeping", which
more accurately describes what it covers (Paragraph 2)
The Department welcomes the Committee's recognition;
we are always trying to improve the clarity of the information
we provide on activities in the public domain.
2. We continue to believe that the estimated
costs of military operations should be presented in the Main Estimates.
We are disappointed that the Government has not been persuaded
of this. We reiterate our compromise suggestion that—at
least—the MoD provide in its estimates memorandum for the
Main Estimates an account of its planning assumptions for the
costs of military operations in the financial year ahead. Notwithstanding
the uncertainty of cost estimates at the beginning of the financial
year, the MoD must surely have planning assumptions. We can see
no reason why these should not be shared with Parliament. We expect
the MoD to respond fully to this recommendation in its response
to this Report (Paragraph 7).
It is not possible to provide a realistic estimate
of the cost of military operations at the start of the financial
year. Nevertheless, we recognise the Committee's continuing concern
over this issue, and therefore we will include in the memorandum
for the Main Estimates the central estimate of future Urgent Operational
Requirements, which forms the single largest element of operational
costs.
3. We repeat our earlier recommendation
that provision for operations in the Balkans should be set out
in the MoD's Main Estimate, and hope that this will be done in
the Main Estimates 2008-09 (Paragraph 9); and
4. Unless the MoD can present, in the
response to this report, a compelling reason for continuing current
practice, we shall expect provision for operations in the Balkans
to be made in the MoD's Winter Supplementary Estimate 2008-09—if
not already made in the Main Estimates (Paragraph 10).
Following consultation with the FCO, we will
include an initial estimate of the cost of operations in the Balkans
at Main Estimates, although this is likely to need to be supplemented
in the Winter Supplementary Estimates and further refined in the
Spring Supplementary Estimates.
5. The Winter Supplementary Estimate
estimates the additional costs of operations in Iraq and Afghanistan
in 2007-08 as £1,315 million in resources and £604 million
in capital. The forecast net additional costs of operations in
2007-08 are £955 million for Iraq and £964 million for
Afghanistan (Paragaph 11).
Noted and agreed.
6. The cost of operations in Afghanistan
is forecast to increase by 39% in the current year. Given the
increase in UK Forces in Afghanistan in the current year, and
the continuing high operational tempo, this is perhaps not very
surprising. It is striking, however, that three-quarters of the
increase is attributable to capital additions. We recommend that,
in the response to this report, the MoD provide more detail on
the capital programmes involved (Paragraph 13).
Over 80% of capital spending Afghanistan this
year is the result of Urgent Operational Requirements reflecting
the level of operational activity in Helmand province. Recent
high value equipment requirements include Protected Patrol Vehicles,
Electronic Counter Measures and communications upgrades. We will
provide further details of the capital spend in our 2007-08 Annual
Report and Accounts.
7. It may seem surprising that the cost
of operations in Iraq is forecast to increase in the current year
by 2%, despite the drawdown in UK Forces over the year. The increase
is accounted for by large increases in infrastructure costs, equipment
support costs and capital additions (Paragraph 14).
As the Committee notes the increased Iraq costs
in the current year is accounted for by large increases in infrastructure
costs, equipment support costs and capital additions.
The requirement to invest in facilities at Basra
Airport, and to improve force protection, appears to explain the
increase in the cost of operations in Iraq this year (Paragraph
14).
Agreed. This explains the increased infrastructure
costs in Iraq.
8. It is, however, a little surprising
that the military personnel costs for Iraq are expected to fall
by only 5% this year, despite the considerable drawdown of UK
Forces over the year. And it is striking that the forecast military
personnel costs for Iraq (£95 million) considerably exceed
those for Afghanistan (£62 million) (Paragraph 15).
At the beginning of the year Iraq had appreciably
higher manpower levels than Afghanistan, however, by mid year
these had reduced to a point where both had similar levels. The
result is a higher annual forecast cost for Iraq. As manpower
levels and associated costs in Iraq decrease it is expected that
they will reduce below Afghanistan levels.
We recommend that, in the response to this report,
the MoD explain in more detail why military personnel costs for
Iraq are expected to fall by only 5% in the current year (Paragraph
15).
The majority of military personnel costs comprise
the operational Welfare package and additional allowances. Reduction
in actual manpower levels are not immediately reflected in reduced
costs in these areas. This is because operational welfare costs
lag behind changes in personnel numbers, and the lump sum operational
allowance is paid after personnel return from operations—sometimes
in the following financial year.
9. It is likely that the actual additional
costs of military operations in 2007-08 will exceed the amounts
requested in the Winter Supplementary Estimate, and that the MoD
will be required to ask for more money for operations in the Spring
Supplementary Estimates (Paragraph 19).
The Department pointed out in its 2007-08 Winter
Supplementary Estimate Memorandum at section 8 that, as usual,
additional resources would be requested in its Spring Supplementary
Estimates.
10. The outturn for 2006-07 operations
was less than the sums planned by the Department: the MoD over-estimated
the cost of its operations and peacekeeping by £75 million
(4%). This comprised an underspend on capital costs of £101
million, offset by a resource overspend of £26 million (Paragraph
22).
We provided a full explanation in our 2006-07
Annual Report and Accounts, as the Committee has noted.
11. We welcome the inclusion in the Annual
Report and Accounts of an explanation of the variation between
voted provision and outturn for 2006-07. Given the unpredictability
of military operations, it is understandable that there should
be variation between the Estimates and the outturn. However, we
look to the MoD to ensure that its estimates are as robust as
possible and, in particular, that the estimates on capital costs
should be based on realistic expectations of when Urgent Operational
Requirements will be delivered (Paragraph 24)
The Department always strives to provide realistic
and robust Estimates provision and welcomes the Committee's recognition
that the unpredictability of military operations makes this very
difficult. Action is underway to refine our accounting procedures
in 2008-09 to provide more accurate predictions of UOR spend.
12. We recommend that the House of Commons
approve the request for resources set out in the MoD's Winter
Supplementary Estimate. The £1,919 million requested to meet
the forecast cost of operations in Iraq and Afghanistan in 2007-08
is a large amount of public money, but it is essential that our
Armed Forces are properly resourced to carry out the task which
they have been given. The sum requested includes investment in
new equipment and force protection, which has been welcomed by
all sides of the House (Paragraph 25)
The Department welcomes the Committee's continued
support for our Armed Forces.
3 March 2008
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