Providing the UK's Carrier Strike Capability - Public Accounts Committee Contents


1  Part 1: The decision-making process

1. The 2010 Strategic Defence and Security Review (SDSR), in contrast to previous Strategic Defence Reviews, was cross-departmental, rather than focusing on the Ministry of Defence (the Department). The key objectives of the SDSR were to "set a clear target for the national security capabilities the UK will need by 2020, and chart a course for getting there."[7] The SDSR changed the way in which the Department will use and deliver Carrier Strike capability. Both carriers will be built, but only one will be fitted with catapults and arrestor gear so that the newly selected carrier variant planes can be launched from it.[8]

2. The Accounting Officer confirmed that a policy decision was taken in the SDSR to have aircraft carriers.[9] However, decisions on how to deliver this capability were operational judgements with major cost and value for money implications. In undertaking its original examination the National Audit Office only saw information produced by the Department on the cost of the options being considered. The Cabinet Office withheld papers from the National Audit Office showing how this information was used when the decision was made limiting our ability to understand how the Accounting Officer had been able to reach a judgement on the value for money of the SDSR decision.

3. In response to our concerns about these restrictions the Prime Minister wrote to the Chair of this Committee on 5 September 2011 explaining that, in the interests of transparency, he and the Cabinet Secretary had decided to allow the National Audit Office access to the relevant material on an exceptional basis. Having reviewed the papers, the National Audit Office concluded that the policy decision had been taken on an informed basis which could have given the Accounting Officer confidence that the overall strategic direction was sound and could offer value for money.

4. The briefing papers prepared by the National Security Secretariat set out a range of options for the future of Carrier Strike. The papers examined the implications for affordability, military capability and inter-operability with allies of each option and were supported by detailed analyses of the industrial implications and the choice between retaining Harrier or Tornado aircraft. The minutes of the key National Security Council meetings record that the relevant issues were discussed and the implications of each assessed.[10] The decision was taken on proper policy grounds, not on the basis that the UK was locked into contracts which would have cost more to break than to maintain.

5. The SDSR was conducted in parallel with the Spending Review and the available level of funding was only determined at the end of the process. As a result, there was considerable uncertainty with regard to future budgets when strategic decisions were being made. The Department initially anticipated larger cuts to its budget, and put forward four options for the Carrier Strike programme which did not include the carrier variant even though it considered that this aircraft offered the best value for money.[11] The Department confirmed that this option was not presented initially because converting the carrier to fly the aircraft was not considered to be affordable at the time.[12]

6. The Department supported the SDSR by providing cost and analyses for a range of options to support strategic decisions. It originally produced four options and then responded to requests from the National Security Secretariat to prepare other options. The initial four options were subject to a good quality decision-making process and had a sound evidence base.[13] The option selected in the SDSR was subject to less scrutiny and rigour than the other options considered.[14]

7. The Department has set out in the past that it has had a £36 billion to £38 billion deficit in the overall defence budget.[15] Having signed the carrier contract, the Department realised it could not afford it and to make short term savings it delayed the project increasing estimated costs by £1.6 billion.[16] The Accounting Officer confirmed that the Department is now committed to living within its budget and that the Department will only commit to spend on projects when it has the budget to do so.[17]

8. The Department believes that the SDSR decision will result in overall savings in the next ten years of £3.4 billion (Figure 1). These savings will come from changes to current and future carrier and associated aircraft projects. They are a mixture of real cash savings and deferral of costs.[18] The expected cash savings to be realised are £0.6 billion achieved by introducing a capability gap by the withdrawal of the existing carriers and Harriers. The remainder of the £3.4 billion savings to be made relate to the deferral of the JSF to the next decade.[19] There remains however considerable uncertainty about the actual costs of the decisions made to switch to the carrier variant aircraft.

Figure 1:

Savings on Carrier Strike in 10 year period to 2021  
 £ billion  
Cash saved on withdrawal of current carriers and Harriers   (1.6)  
Conversion costs for catapult and arrestor gear   1.0 
Net cash saved in ten years   (0.6)  
Deferral of JSF to after 2021   (2.8)  
Overall Savings   (3.4) 

7   C&AG's Report, para 2.3 Back

8   C&AG's Report, para 2.1 Back

9   Q 13 Back

10   Ev 22 Back

11   Q 13 Back

12   Qq 34, 35  Back

13   Q 80-82 Back

14   Q 82, C&AG's Report, para 2.12 Back

15   Q 37 Back

16   Q 1, Committee of Public Accounts, The Major Projects Report 2010, Twenty-third Report of Session 2010-11, HC 687 Back

17   Qq 162, 164 Back

18   Qq 26-Q28 Back

19   Q 27 Back


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Prepared 29 November 2011