Defence CommitteeWritten evidence from Francis Tusa

Outline: This extract has been drawn up for the House of Commons Defence Select Committee to explain some of the methodology of calculating the costs of Operation Ellamy, the UK contribution to Operation Unified Protector.

The issue of operational costs is complicated by an opacity of detail—deliberate?—from the MoD and Treasury, as well as accounting rules that are far from easy to grasp. This leads to potential, and understandable confusion.

“Lord Strathclyde: Of course the noble and gallant Lord, with all his considerable experience, understands the cost of these arms, but this is the kind of action that we would expect our Armed Forces to be able to deal with. If costs escalate substantially over the next few weeks, no doubt the Secretary of State for Defence and the Chancellor of the Exchequer will need to discuss where this money will come from.”

21 March 2011, House of Lords

“Mr Osborne: My hon. Friend alerted me to the fact that he might ask this question. The House will understand that it is too early to give a robust estimate of the costs of the operations in Libya, but I can say that they should be modest compared with some other operations, such as Afghanistan. The MoD’s initial view is that they will be in the order of tens of millions of pounds, not hundreds of millions. I can tell the House today that whatever they turn out to be, the additional costs of operations in Libya will be fully met from the reserve.”

22 March 2011, House of Commons

There is a “Conspiracy of Optimism” here, right from the outset, that any operation would last a very short space of time, and would cost very little;

Note Lord Strathclyde’s comments that everything would be fine until an operation goes over a couple of weeks: this provides an important piece of information, that the defence budget does not include the cost of any significant operations beyond the barest minimum; and

This is backed up by the fact that the largest defence vote, “Request for Resources 1”, does not include contingent expenditure, and which is occasionally described as “being prepared for tasks”, a sign that it does not cover actual missions beyond a very small level.

Taking air operations, which were the major element of Operation Ellamy, a 26 January 2010 Written Answer stated about flying hours and costs:

“By way of illustration approximately 40% of the Harrier and 30% of the Tornado GR4 hours in the table were actually consumed on operations. A proportion of Typhoon and Tornado F3 hours were consumed in the Falkland Islands and performing Quick Reaction Alert missions.”

Note that in this statement, there are seen to be three levels of costing:

The forecast operational costs of an enduring operation such as Operation Telic/Herrick;

The forecast costs of enduring defence missions such as QRA or air defence of the Falklands Islands; and

The level of training required to meet these tasks/missions.

Note that contingent operations are not covered by the budgeting for such things as flying hours, training etc.

Conclusion: The defence budget does not have a contingency reserve for unforeseen operations, such as the starts of Operations Telic and Herrick, or Ellamy. These are entirely unfunded from the defence budget.

For reference, the budgeted flying hours for the Tornado GR4 fleet have been constant at around 22,000 hours per year for the past few years. This includes the baseline hours required for air support of Operation Herrick.

No similar statistics are as yet available for the Typhoon, but looking at planned hours per pilot for training and QRA, multiplied by the number of airframes gives a figure of 12–15,000+ flying hours per year.

Basic Calculations

Flying cost data comes from Written Answers as up-to-date as January 2011. Typical data includes:

Tornado GR4	£35,000 per hour
Typhoon	£70–90,000 per hour

The data tends to get followed with a paragraph:

“This includes forward and depth servicing, fuel costs, crew costs, training costs and the cost of capital charge and depreciation. The Typhoon cost per flying hour reflects the smaller numbers of aircraft currently in the fleet and their relatively short period in service. This is expected to reduce significantly over the in-service life of the aircraft.”

Other costs for support aircraft have tended to revolve around £30–40,000 per flight hour. In all calculations, low costs have been adopted to avoid over-inflating figures.

The point about the c£35,000 per flight hour is that this is the basis on which the MoD has to account for such activities, that is it has to take account of spare parts, maintenance contracts and the like. It is a very “global” figure, but it is an accurate one.

Another figure has been provided for the cost of a flight hour, based solely on fuel costs. This, for a Tornado GR4 is £5,000. When undertaking fuel-only calculations for all aircraft, this is the cost per hour that has been used, which hides the fact that the VC10, Nimrod R1, and E3 Sentry have four engines, all of which are fuel hungry.

To give a very simple set of calculations, consider the following, based on the outline number of hours flown by the main combat aircraft:

TORNADO GR4

7000 hours flown each @ £35,000	£245,000,000
7000 hours flown each @ £5000	£35,000,000

TYPHOON

2519 hours flown each @ £35–40,000	£88,165,000–100,760,000
2519 hours flown each @ £5000	£12,595,000

Note that the “fuel only” cost, even adding an extra increment for the support aircraft, doesn’t come remotely close to the stated cost of operations of some £160 million, excluding weapons costs. This would seem to show that “official figures” are not a true and realistic calculation of the costs of operations.

November 2011