House of Commons - Ministry of Defence Annual Report and Accounts 2013-14

Ministry of Defence Annual Report and Accounts 2013-14 - Defence Contents

2 MoD performance and risk management

Reporting of MoD performance to Parliament and the public

19. The MoD reports its performance against certain input and impact indicators in its Annual Report, see Table 1 below. We have frequently criticised these indicators and asked the MoD to review its performance reporting and recommended that the MoD include additional information in the Annual Report and Accounts to cover:

· Readiness levels

· Manning levels for each Service by officers, non-commissioned officers and other ranks

· Pinch point trades, both operational and manning

· Harmony guidelines for each Service

· Voluntary outflow statistics for each Service

· Recruitment level and targets for each Service

· Indicators reflecting the delivery of Defence Transformation and structural reform priorities including the New Employment Model

· Performance against Future Force 2020

· Performance of DE&S including Major Projects

· Performance of Defence Infrastructure Organisation in managing the estate including personnel accommodation

· Other efficiency, effectiveness and sustainability measures of the MoD's performance in supporting the Armed Forces[24]
Table 1: MoD Input and impact indicators for 2013-14

Indicators FY

2013-14 FY

2012-13 Comment

Input indicators

Additional cost of operations in Afghanistan, per Service person deployed. £233,151 £297,025 This is the Net Additional Cost of Military Operations in Afghanistan (including urgent Operational Requirements) over the year, divided by the average endorsed manpower level (9000 from 1 Apr 13 to 31 Dec 13 reducing to 5200 from 1 Jan 14 to 31 Mar 14). This figure is lower this year due to authorised reductions in manpower and base closures as a result of progress on the ground, increased Afghan National Security Force capability and the rate of transition.

Additional cost of new equipment (Urgent Operational Requirements (UOR)) for operations in Afghanistan, per Service person deployed. £11,065 £37,000 This is the total spend on UORs over the year, divided by the average endorsed manpower level (9000 from 1 Apr 13 to 31 Dec 13 reducing to 5200 from 1 Jan 14 to 31 Mar 14). This figure is significantly lower this year representing the completion of the major UOR projects (such as protected mobility vehicles) and in line with authorised reductions in manpower and base closures as a result of progress on the ground, increased Afghan National Security Force capability and the rate of transition.

Average percentage by which the cost of the Department's Equipment Programme (EP) varies compared to forecasts in year. -0.22% 0.26% This figure is the average percentage by which the forecast costs of the Department's largest equipment procurement projects have varied over the year. This year the figure is negative, meaning that the forecast cost of these projects has fallen on average by 0.22%.

Cost of major Force Elements (FE):
Ship
Brigade
Aircraft (fixed wing)
Helicopter

£33.74M
£668M
£7.56M
£3.74M

£33.5M
£654M
£8.34M
£3.62M
This figure was previously calculated by attributing Defence expenditure to each of the major Force Elements. It can no longer be calculated as a consequence of changes under the delegated operating model. The figures provided for 13/14 are therefore estimates.

Direct personnel costs, per Service person. £52,552 £55,024 This shows the average costs of each of the armed forces personnel who have been employed on a full time basis over the financial year. It has remained similar between 2012-13 and 2013-14.

Impact indicators

Progress towards a stable and secure Afghanistan. 97% 96% This is the percentage of Afghan National Security Forces against the NATO target.

Number of Service and MOD civilian personnel deployed on all operations in a year. 8,529 11,476 This is the total percentage of personnel deployed on operations both in the UK and overseas as at 30 March 2014.

Percentage of Service personnel that are deployable. 90.5% 91.1% This is the total percentage of personnel deployed on operations both in the UK and overseas at 30 March 2014.

Number of Force Elements (FE) (typically ships, ground force sub-units and aircraft) showing critical or serious weakness against the total number of FE for Strategy for Defence (SfD) priorities. — 8% This indicator can no longer be calculated as a consequence of changes under the delegated operating model.

Percentage of Service personnel (split by Officers and Other Ranks (OR)) who are satisfied with Service life in general. 58 / 48% 59 / 50% This drop is likely to be the continued effect of pay restraint and redundancy implementation.

Overall public favourability of the UK Armed Forces. 85% 85% The 2013-14 figure is consistent with the percentage reported for 2012-13.

All indicators will be reviewed and updated for Annual Report and Accounts (ARAc) 2014-15

Source: Ministry of Defence[25]

Jon Thompson told us that the MoD had implemented nine of the 11 recommendations made by the Committee in this area although he acknowledged that the MoD was struggling to assess the MoD's impact and devise appropriate indicators.[26] Work was underway to review the data that the Department publishes to identify topics likely to be of interest to the general public for inclusion in the indicators table within the 2014-15 Annual Report and Accounts. Decisions in the next Defence and Security Review and Comprehensive Spending Review were likely to require the Department to develop a new set of indicators, reflecting its changing priorities over the next five years.[27]

20. We recognise the difficulties that the MoD has in devising a relevant and comprehensive set of input and impact indicators. We welcome PUS's confirmation that the MoD has implemented most of our recommended indicators and look forward to seeing further details. We reiterate our recommendation that more of the information provided to the Defence Board should be provided to us and incorporated in the Annual Report.

The future defence budget

21. We asked Jon Thompson whether the MoD could absorb further cuts in the defence budget. He replied that it would depend on the level of reduction required but that the MoD was continuing to pursue efficiency savings delivering efficiencies of £4.3 billion over the lifetime of this Parliament (illustrated in Table 2 below).[28]
Table 2: Achievement of savings

Military Manpower (£1.646 billion)
These savings were within the 'non-front line' structures of the Armed Forces, such as in Headquarters functions and Regional Command structures. The savings also include changes made to military allowances.

Civilian Manpower (£1.414 billion)
These savings reflect the Strategic Defence and Security Review (SDSR) decision to reduce the MOD civilian workforce by 25,000, as well as reflecting savings made to civilian allowances.

Equipment Procurement (£88 million)
There were a number of relatively minor contractual renegotiations, which were assessed at the time to save the Department £88M.

Equipment Support (£210 million)
These savings were projected to come from a range of efficiency measures in the Equipment Support Plan (ESP), rather than savings from reducing particular fleet sizes (or deleting fleets in total, e.g. Harrier and Nimrod). This work is being taken forward with Private Sector Support to help identify cost savings across the largest support projects and develop enduring methodologies for reducing the cost of equipment support. Nearly £3Bn of potential savings over the next ten years have already been identified. £210 million

Estates and Utilities (£629 million)
We have recently appointed a strategic business partner in the Defence Infrastructure Organisation. They are contracted to deliver significant savings over the next ten years building on almost £500M of savings achieved in running cost savings since 2010/11

IT and Communications (£154 million)
These savings reflect decisions taken in the SDSR, including the reduction in IT terminals required (to reflect a reduced workforce) as well as the consolidation of the number of IT inventory systems as part of the Department's efforts to improve the management of its inventory.

Other (£205 million)
Our Spending Review 10 settlement included key asset sales, such as the sale of the Met Office, sale of Marchwood port, and the sale of the Defence Support Group. The Met Office has now transferred to BIS and is no longer the responsibility of the MOD. We are progressing innovative options to make better use of spare capacity at Marchwood Port, as opposed to an outright sale. The recent sale of the Defence Support Group to Babcock in December 2014 for £140M is a particular success, and will provide the organisation with the investment it needs to support defence equipment more effectively.

Total £4.346 billion

Source: Ministry of Defence

22. The MoD told us that it was on track to achieve the majority of these savings; and where savings have not been made, it had been able to continue to operate within the budget provided by HM Treasury through savings made elsewhere in the Defence Programme.[29]

Ebola

23. The Armed Forces have made a significant contribution to the treatment of Ebola in Sierra Leone. Jon Thompson outlined the extent of the UK's commitment:

24. As at 12 January 2015, there were 680 military personnel including 37 members of the Canadian Armed Forces working on this operation. These included 340 in Sierra Leone, 324 on RFA Argus just off the coast of Sierra Leone, 12 in the UK, three in Ghana and one in Liberia.[31] Jon Thompson told us that the entire cost of the operation was being met by the Department for International Development.[32]

24 Defence Committee Report: Ministry of Defence Annual Report and Accounts 2012-13, Eighth Report of Session 2013-14, HC 653 Back



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