Further memorandum from the Ministry of
Defence
Government Response to the Committee's
First Report of Session 2008-09: Winter Supplementary Estimates
2008-09 (HC 52)
The Government welcomes the Committee's report
on the Ministry of Defence Winter Supplementary Estimates 2008-09,
published on 15 December 2008, as HC52. The Government's response
to the conclusions and recommendations, which were contained in
the Committee's Report is set out below.
1. We are pleased that the Government,
retaining the general title of "Operations and Peacekeeping"
for Request for Resources 2, in its Estimates now includes direct
reference to "current operations in Iraq, Afghanistan and
the Balkans". (Paragraph 2)
Noted. The Department strives for continuous
improvement in the content and quality of its Estimates, and accompanying
Estimates.
2. We commend the MoD for including
in these figures indirect as well as direct resource costs which
was not the case in last year's Winter Supplementary Estimates.(Paragraph
3)
The Department is fully committed to present
in the House the most accurate, and fullest, forecast of operational
costs at the earliest opportunity.
3. We remain concerned at the very short
amount of time available to committees such as our own, between
the laying of the Supplementary Estimates and the decision of
the House to approve them, to carry out careful and thorough analysis
of these Estimates and engage in a dialogue with Government Departments
over any areas of uncertainty or concern. We remain hopeful that
some mechanism will be introduced that will permit a better examination
of departmental estimates in the future than what currently obtains.
(Paragraph 4)
As set out in the Government response to the
Committee's observations in its combined 2007-08 SSE and 2008-09
Main Estimates Report, Standing Orders of the House dictate that
a minimum of 14 days must elapse between presentation and Parliament's
approval of an Estimate. This was increased from "eight clear
days" in 2004 as part of a package of changes to the Estimates
process. Production of the Supplementary Estimates is already
subject to an extremely tight timetable throughout and a greater
gap than this would not be practical. The Main Estimates are not
subject to such constraints and are usually presented two months
or more before the parliamentary consideration, which for this
year is planned for 2 July 2009. The Treasury-led Alignment Project,
which is looking at the various public spending controls (primarily
budgets, Estimates and accounts), aims to simplify the process
by greatly reducing the differences between the various controls.
This will itself help Committees in the scrutiny of Departmental
spending plans.
4. For the sake of clarity we call on
the MoD in future to provide End Year Flexibility tables in its
future Estimates memoranda, as recommended by the Treasury's guidance.
(Paragraph 5)
The Department has incorporated a Year End Flexibility
Table in its 2008-09 Spring Supplementary Estimates Memorandum.
5. We would be grateful for the MoD
to provide us with an explanation for the changes in the Estimates
relating to the Royal Hospital Chelsea in its response to this
Report.
(Paragraph 6)
The £9.2 million Royal Hospital Chelsea
re-allocation from Voted expenditure to Non-Voted expenditure
reflects a re-classification of costs as required by Treasury,
which we noted in para 2.4 of our 08/09 Main Estimates Memoranda.
This re-alignment erroneously penalised the Department by reducing
its DEL provision. This re-allocation has been reversed in the
Spring Supplementary Estimate. There was no overall impact on
our request for resources. The additional £1 million funding
request comprised increased superannuation payment for personnel;
increased utility costs; increased infirmary operating costs,
including provision of furniture.
6. We would like an explanation from
the Ministry of Defence for this significant reduction in the
Departmental Expenditure Limit for Science Innovation and Technology
and whether it signals a cut in spending, and—if so—what
the consequences of this reduction will be. (Paragraph 7)
When Main Estimates were submitted to Parliament,
the Department's internal planning round had not been completed.
Therefore the figures were to some extent provisional. The Winter
Supplementary Estimate reflected the final outcome of the planning
round. No cuts have been made to any research programmes as a
consequence of this adjustment.
7. The Winter Supplementary Estimates
estimate the additional costs of operations in Iraq and Afghanistan
in 2008-09 as £1,397 million and £2,318 million respectively.
(Paragraph 8)
Noted.
8. While we are aware that in future
memoranda accompanying its Main Estimate the MoD intends to give
a more robust sense of expected operational costs over that Financial
Year, we are disappointed that the figure given in its Main Estimate
memorandum for this Financial Year appears so loose. (Paragraph
9)
The Department will seek a formal request for
resources in its 2009-10 Main Estimates for Peace-keeping and
Operations. Details of our request will be incorporated in the
accompanying Estimates memorandum. Inevitably, circumstances may
change during the financial year, for example, to reflect any
changes in operational tempo. The Department will seek additional
provision in the Supplementary rounds as required.
9. We restate our hope that the MoD
manifests no complacency with regard to its forecast of operational
costs made early in each Financial Year. (Paragraph 10)
The Department strives to present taught and
realistic forecasts of operational costs.
10. We understand the volatility that
inevitably accompanies forecasts for operational costs. However
we remain to be convinced that these forecasts are as robust as
they ought to be. (Paragraph 11)
The Department is always striving to make its
forecasting processes as robust as possible as we stated in response
4 to the Supplementary Memorandum contained in the HCDC 2008-09
Main Estimate Report. The Department intends to undertake a further
review of processes in 2009-10 in time to inform Supplementary
Estimates.
11. We are aware that Treasury processes
make the preparation of the Supplementary Estimates a longer process
than is ideal for the presentation of up-to-date costs. Nonetheless
we continue to believe it unsatisfactory that the House is asked
to agree to Supplementary Estimates that represent such out-of-date
forecasts of costs for operations overseas without it having sight
of any more up-to-date assessments of those costs. (Paragraph
12)
12. We would be grateful if the MoD
could provide us with the working forecast used to prepare the
Spring Supplementary Estimates in whatever form it considers most
appropriate early in the New Year. The MoD might also look to
attach to its Winter Supplementary Estimates memorandum in future
an indication of this forecast, if it is available by then, or
make it available to us before the Estimates are considered in
the House each Winter. (Paragraph 13)
The Department has now provided a more current
forecast of operations costs before the scheduled publication
date of the 2008-09 Spring Supplementary Estimates.
13. We hope that the interim forecast
we have asked for from the MoD and the estimate of operational
costs which will appear in a couple of months time in the Spring
Supplementary Estimates will show less significant changes than
has been the case in the last two Financial Years. (Paragraph
14)
Noted.
14. We call on the Ministry of Defence
to provide us in its response to this Report with an explanation
for the continuing high level of costs in Iraq, and in particular
for the significant increases to military personnel and equipment
support costs. (Paragraph 15)
There are currently some 4,100 UK troops in
Southern Iraq who are principally engaged in completing the task
of mentoring and training the 14th Division of the Iraqi Army
in Basra. Our troops, together with Royal Navy, are also continuing
to provide security for Iraq's offshore energy infrastructure,
as well as helping to train the Iraqi Navy. The Royal Air Force
currently provides essential support to both the Iraqi Security
Forces (ISF) and the Coalition. UK forces will support Iraqi-led
security efforts over the period of provincial elections in January
2009.
As the Prime Minister set out in his statement
to Parliament on 18 December 2008, the Department will have completed
its remaining military tasks by 31 May 2009 at the latest, and
all but around 400 UK troops will have been withdrawn from Iraq
by the end of July. Whilst draw-down from Iraq will reduce military
personnel costs in the next financial year, the preparation for
drawdown may substantially increase indirect costs. We have requested
a contingency provision for these costs in our Spring Supplementary
Estimate. More explanation of these cost elements will be provided
in the Department's Estimates Memorandum, although the details
are still being worked through.
Following the restructuring of cost gathering
responsibilities for operational allowances, a major contributor
to Service Personnel costs, an over-forecast at Winter Supplementary
Estimates has been identified and is being rectified at Spring
Supplementary Estimates. The construction of Camp Bastion and
Gereshk has resulted in increased life support equipment support
costs.
15. We believe that in future within
each Supplementary Estimates memorandum there should be some explanation
of significant changes in operational costs since the presentation
of the last figures, whether from the previous year's outturn,
from the memorandum accompanying the Main Estimate or from the
Winter Supplementary. Estimates. This information would clearly
be of interest and use to us and to the House as a whole. (Paragraph
16)
The Department will endeavour to provide more
explanations of variances between Estimate requests. Inevitably,
some of the differences will arise because of changes in operational
tempo, which are very difficult to forecast.
16. We would be grateful for an indication
from the MoD in the response to this Report of whether spending
on Urgent Operational Requirements beyond £1,065 million
is expected this Financial Year, and, if so, what the impact of
that spending will be on the MoD's 2010-11 budget, including any
current assessment of which equipment programmes could be affected
in that year. We call on the MoD to provide in future with the
Supplementary Estimates more detail of expected spending on Urgent
Operational Requirements. (Paragraph 17)
In the Estimates Memorandum to the 2008-09 Main
Estimate the Department forecasted its overall request for UORs
in the current Financial Year (FY), having taken into account
some rollover from FY2007/08, as £1.065 billion. The forecast
for UOR expenditure for the current Financial Year in the 2008-09
Spring Supplementary Estimate is £1,054 million. The latest
forecast for UOR expenditure for FY2008/09 remains at this level;
this falls comfortably within the earlier estimate plus rollover,
and therefore MoD does not at this time anticipate having to bear
any cost for UORs in FY2008/09. We do not therefore anticipate
any impact on the MOD's 2010-11 budget or equipment programme.
UORs by their very nature reveal a capability
gap and are therefore highly sensitive. Nevertheless, we will
endeavour to provide the Committee with more detail on UOR expenditure
as appropriate.
17. We would for future Financial Years
like the MoD to provide us with:
— a more detailed account of operational
costs expected in the Financial Year in the memorandum accompanying
the Main Estimate, explaining any significant change between those
costs and those in the previous Financial Year's outturn;
The Department will provide a more detailed
account of operational costs in its 2009-10 Main Estimates peace-keeping
and operations request for funds. The 2008-09 audited outturn
figures will not be available at this point in time. We will provide
an explanation of any variances against the Estimates in our Annual
Report and Accounts for that year.
— a further forecast of operational
costs before the summer, or as soon as possible thereafter;
The Department will endeavour to provide
this forecast if there are significant changes.
— an explanation in the memorandum
attached to the Winter Supplementary Estimates of any significant
changes between its figures for operational costs and those in
the memorandum accompanying the Main Estimate;
The Department will provide an explanation
for any significant changes in its Winter Supplementary Estimate
memorandum.
— a third forecast of operational
costs shortly after the Winter Supplementary Estimates are laid,
preferably before they are considered by the House;
The Department will provide this information
if there are significant changes from the Winter Supplementary
Estimate.
— more detail where appropriate,
in the documents between the Main Estimate and the subsequent
Annual Report and Accounts for that year, of expected and final
spending figures for Urgent Operational Requirements; and
The Department will provide this information
if there are significant movements.
— an explanation in the memorandum
attached to the Spring Supplementary Estimates of any significant
changes between its figures for operational costs and those in
the memorandum accompanying the earlier Winter Supplementary Estimates.
We are aware that the MoD has already made
clear its intention to provide the first of these from 2009-10
onwards and already provides the last.
Noted.
We hope the MoD will be able to take the
other three proposals on board also which will enable better scrutiny
of its Estimates by our Committee and by the House of Commons.
(Paragraph 18)
The MoD will endeavour to facilitate better
scrutiny of its Estimates by both the Committee and the House
of Commons.
18. We recommend that the House of Commons
approve the request for resources set out in the MoD's Winter
Supplementary Estimates. The £3,739.112 million requested
to meet the forecast cost of operations in Iraq and Afghanistan
in 2008-09 is a very significant sum of public money, but it is
vital that our Armed Forces are properly resourced to carry out
those important tasks which they have been given.(Paragraph 19).
The Department welcomes the Committee's continued
support for our Armed Forces.
12 February 2009
| 
