2 The MoD Supplementary Estimate
4. The MoD sought, in the Estimate, a net increase
in Resource Departmental Expenditure Limit (DEL)[6]
of £398 million and a net reduction in Capital DEL of £1,957
million. It also sought a reduction in Resource Annually Managed
Expenditure (AME)[7] of
£685 million and an increase in Capital AME of some £35
million.[8] Table 1 provides
a breakdown of the overall requests for increases or decreases
in expenditure.
Table 1: Changes in Resource and Capital Expenditure
in the Supplementary Estimate 2012-13
| Resource Expenditure
| £ M |
| Provision of Defence Capability (Resource DEL)
| 758 |
| Operations and Peace Keeping (Resource DEL)
| (360) |
| Net increase in Resource Departmental Expenditure Limit (DEL)
| 398 |
| Reduction in Annually Managed Expenditure
| (685) |
| Total Net reduction in Request for Resources
| (287) |
| Of which: administration expenditure
| 140 |
| programme | (42)
|
| Capital Expenditure
| |
| Reduction in Provision of Defence Capability (Capital DEL)
| (1,807) |
| Operations and Peace Keeping (Capital DEL)
| (150) |
| Net reduction in Capital Departmental Expenditure Limit (DEL)
| (1,957) |
| Increase in Capital Annually Managed Expenditure
| 35 |
| Total Net Request for Capital
| (1,932) |
| Total Change in Capital and Resource expenditure
| (2,209) |
Source: Ministry
of Defence[9]
Decrease in the level of expenditure
requested
5. The reasons behind the overall reduction in
estimated expenditure for 2012-13 of over £2.21 billion
are detailed in the MoD Memorandum, in particular, the impact
of reductions in expenditure on the Equipment Programme and lower
than anticipated redundancy and other restructuring costs.[10]
The MoD has been allowed Budget Exchange[11]
of some £1.59 billion and wishes to use this money in
2013-14 and 2014-15.[12]
BUDGET EXCHANGE
6. We asked the MoD to break down the underspends
which led to the need for Budget Exchange. The MoD told us they
resulted from:
- The Departmental Unallocated
Provision of £480 million—a sum set aside as a risk
provision against unforeseen events creating pressure on the Defence
programme—which was not needed; and
- Changes to the plans to deliver
commitments made in the Strategic Defence and Security Review
and involving the Equipment Programme and redundancies in the
Armed Forces—£550 million of a provision for redundancy
payments and industrial restructuring, £200 million for faster
than planned drawdown of manpower due to higher rates of voluntary
outflow and £250 million from the Equipment Programme because
of project slippages and [lower costs through] successful commercial
negotiations.[13]
7. We welcome the availability
of Budget Exchange. We will continue to monitor the future use
of Budget Exchange by the MoD.
Additional costs of military operations
8. The additional costs of military operations
are met by the Treasury Reserve and not by the MoD. The MoD now
estimates the bulk of the costs of operations in Afghanistan and
elsewhere at the time of the Main Estimates and only requests
adjustments in the Supplementary Estimate. In the early years
of the operations in Afghanistan and Iraq, the MoD requested expenditure
for such operations only in the Supplementary Estimate. In April
2012, the Treasury required the MoD to request at least 90 per
cent of the cost of operations in the Main Estimate—we are
exploring the rationale behind the use of a percentage with regard
to the Main Estimate 2013-14.
9. The MoD identified the costs of operations
in Afghanistan, the Wider Gulf and the Conflict Pool within the
Supplementary Estimate separately in its Memorandum.[14]
The amount now requested for these operations in 2012-13 is some
£3.2 billion, a 14 per cent reduction—some £0.5
billion—in the sum requested at the time of the Main Estimate.
A summary of the costs of operations is given in Table 2 below.
Table 2: Forecast costs for operations
in Afghanistan, the Wider Gulf and for the Conflict Pool
| | Supplementary Estimate 2012-13
|
| Theatre of operation
| Total Main Estimate 201213
£m
| Direct Resource DEL
£m
| Non cash Resource DEL
£m
| Capital DEL
£m
| Total AME request
£m
| Total Supplementary Estimate 201213
£m
|
| Afghanistan | 3,610.4
| 1,972.3 | 519.6
| 597.0 | 9.3
| 3,098.2 |
| Wider Gulf | 42.7
| 38.7 | 0
| 4.0 | 0
| 42.7 |
| Conflict Pool |
52.2 | 54.3
| 0 | 0
| 0 | 54.3
|
| Total | 3,705.3
| 2,065.3 | 519.6
| 601.0 | 9.3
| 3,195.2 |
Source: Ministry of Defence[15]
AFGHANISTAN
10. The additional cost of operations in Afghanistan
is forecast at some £3.1 billion in 2012-13, some 14 per
cent less than the forecast at the time of the Main Estimate.
The MoD told us that this reduction of some £512 million
was due to the "announced reductions in UK troop levels in
Afghanistan in 2013 and consequent fall in activity costs".[16]
We asked the MoD to provide us with a more detailed explanation
of this reduction. Table 3 shows a comparison between the expenditure
figures from the Main and Supplementary Estimates with accompanying
explanatory notes.[17]
Table 3: The Estimated Cost of Operations
in Afghanistan for 2012-13
| Cost Type | Main Estimate
£m
| Supplementary Estimate
£m
| Difference
£m
| Percentage Difference
|
| Direct Resource DEL
| | | |
|
| Civilian Personnel |
32.1 | 32.1
| 0 | 0
|
| Military Personnel |
240.2 | 235.0
| (5.2)A | (2%)
|
| Stock/Other Consumption
| 716.1 | 654.0
| (62.0)B | (9%)
|
| Infrastructure Costs |
233.1 | 176.1
| (57.0)C | (25%)
|
| Equipment Support Costs
| 652.3 | 482.3
| (170.0)D | (26%)
|
| Other Costs and Services
| 483.0 | 415.0
| (68.0)E | (14.)
|
| Income Foregone/ (Generated)
| (28.0) | (28.0)
| 0 | 0
|
| Non nuclear charge against provision
| 5.7 | 5.7
| 0 | 0
|
| Total Direct Resource DEL
| 2,334.4 | 1,972.2
| (362.2) | (11%)
|
| Non cash Resource DEL |
519.6 | 519.6
| 0 | 0
|
| Total Resource DEL
| 2,854.0 | 2,491.8
| (362.2) | (9%)
|
| Capital DEL |
| | |
|
| Other capital (fiscal)
| 325.7 | 213.7
| (112.0) | (34%)
|
| Single Use Military Equipment
| 421.3 | 383.3
| (38.0) | (9%)
|
| Total Capital DEL
| 747.0 | 597.0
| (150.0) F
| (20%) |
| TOTAL ESTIMATED DEL COSTS
| 3,601.1 | 3,088.8
| (512.2) | (14%)
|
A:
Council Tax relief for troops deployed on operations in Afghanistan
are now included in the cost of Defence Capability and is no longer
met from the Special Reserve.
B: The progress made in
Afghanistan and the increasing ability of Afghan National Security
Forces (ANSF) to lead operations means that less consumables,
such as fuel, certain types of ammunition and vehicle spares are
required by UK Forces. In addition, the reduction of UK troops
to 9,000 at the end of 2012, and the announced reduction to 5,200
by the end of 2013 means that less materiel will be required for
Afghanistan-specific pre-deployment training.
C: The ongoing and on-track
transition process in the UK Area of Operations means that locations,
such as Patrol Bases, are being handed over to the ANSF or closed,
reducing the infrastructure costs. As the UK draws down, less
additional infrastructure to support Afghanistan PDT will be needed.
D: Efficiencies in contract
management, better use of existing resources and a change in operational
tempo has resulted in a reduction in the cost of maintaining and
supporting equipment in Afghanistan. The entry into service of
the bulk of the Protected Mobility fleet, procured under the Urgent
Operational Requirements (UOR) process, means that these support
costs are being anticipated and managed more effectively.
E: Additional costs have
been reduced in line with the current and forecast troop levels.
In particular, skill transfer to MoD personnel has reduced some
of the cost of external specialist support.
F: A proportion of this
reduction reflects the reduction in operational tempo and hence
consumption of capital spares. However, the majority is simply
the result of the £5.8 billion investment in equipment. through
the UOR process since operations began. The success of this equipment
purchased means that the MoD has reduced its requirement for further
expenditure this year.
Source: Ministry of Defence[18]
11. The handover of responsibility for security
in areas of Afghanistan to the Afghan National Security Forces
has resulted in lower than expected expenditure. The closure of
some forward operating bases and reduced numbers of patrols by
UK Armed Forces has led to the need for less materiel, fewer capital
spares and reduced infrastructure costs.[19]
12. As we noted in our recent Report: Securing
the Future of Afghanistan,[20]
the MoD has already started to withdraw some equipment and
materiel from Afghanistan and we remain concerned that equipment
should not be withdrawn early in such a way as to cause difficulties
for the UK Armed Forces still in Afghanistan.
13. We welcome the fall in the
costs of operations in Afghanistan reflecting a reduced involvement
in combat operations. But the closer we get to final withdrawal
the riskier the circumstances in which UK Forces will be operating.
The MoD should not withdraw equipment early or reduce costs to
the extent that would put the lives of UK Armed Forces personnel
at risk or that would leave them living or operating in circumstances
which place them at unnecessary risk.
6 Department Expenditure Limits (DEL) cover all administration
costs and programme expenditure except where programme expenditure
cannot be subject to close control over a three year period or
spending relates to non-cash costs other than depreciation and
impairments-Public Expenditure Statistical Analyses 2012 Cm 8376.
Back
7
Annually Managed Expenditure (AME) is spending which does not
fall within DELs. Expenditure in AME is generally less predictable
and more difficult to control than expenditure in DEL-Public Expenditure
Statistical Analyses 2012 Cm 8376. Back
8
Ev 1 Back
9
Ev 1-2 Back
10
Ev 4 Back
11
Budget Exchange is mechanism by which Departments can carry forward
underspends in resource an capital budgets subject to rules set
out in the Consolidated Budgetary Guidance by HM Treasury. Back
12
Ev 4 Back
13
Ev 15 Back
14
Ev 7 Back
15
Ev 7, Table 9 (modified) Back
16
Ev 7, paragraph 5.2 Back
17
Ev 16 Back
18
Ibid, Table 8 and notes Back
19
Ev 7 and Ev 16 Back
20
Defence Committee, Securing the Future of Afghanistan,
Tenth Report of Session 2012-13, HC 413 Back
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