2The Department’s strategy for the defence estate
8.On the basis of a report by the Comptroller and Auditor General, we also took evidence from the Ministry of Defence (the Department) on its strategy to provide a defence estate that meets military needs and is affordable within available resources, and on whether it has an appropriate operating model in place to support its strategy.16
9.The Ministry of Defence holds one of the largest estates in the country, accounting for approximately 1.8% of the UK land mass and valued at £31 billion. The defence estate is crucial to the country’s defence capability. It includes land and also buildings such as offices, houses, storage units and training facilities (the built estate). In 2015–16, the Department spent £4.8 billion (12% of its budget) on the estate, mainly on maintaining, building and upgrading it.17
10.In 2011, the Department established the Defence Infrastructure Organisation (DIO) to manage the estate centrally. The objective was to cut costs, drive further rationalisation and create commercial opportunities for using the estate.18
11.The Government has set targets for the Department to reduce its built estate by 30% by 2040 and, as part of its spending review settlement, it must also make £1 billion between 2016–17 and 2020–21 by disposing of estate that it no longer needs. The Department is also the largest contributor to the Government’s objective of releasing land to build 160,000 new homes between 2015 and 2020, and has a target of releasing enough land to build 55,000 homes.19
The Department’s estates strategy
12.The defence estate is an important element of defence capability, enabling the Armed Forces to train and undertake operations, and providing accommodation for personnel and their families. Because of long-standing pressure on its budget, in 2009 the Department stopped undertaking any preventative maintenance on its estate and reduced service levels to those necessary to provide a safe and legal estate. As a result there has been a steady decline in the overall condition of the estate and there is now a significant risk that its poor condition will affect the Department’s ability to provide the defence capability needed.20 The Committee has reported several times on issues relating to the defence estate in recent years.21
13.In April 2012 the Department committed to producing a strategy setting out the future size, location and composition of the estate, which would help it to support the delivery of defined military capability within available resources. In December 2016, the Department published its Better defence estate strategy which set out its planned approach to supporting military capability by providing a smaller but better estate for the armed forces and their families and included a list of parts of the estate of which it planned to dispose.22
14.We welcome the fact that there is, at last, a plan to turn the military estate into one that is fit for the 21st century and appreciate the complexity of this task. However, even if the strategy is successfully implemented, there will still be an estimated £8.5 billion funding gap in relation to the defence estate over the next 30 years.23 The Department told us that it did not think its estates strategy should be looked on as anything other than the first step in what is going to be a very significant and ambitious programme. It also acknowledged that the strategy does not go far enough to be able to put the financing of the estate on to a sustainable level.24
15.As part of its solution to the financial challenges it faces with the estate, the Department intends to incentivise the Front Line Commands (the Commands) to actively seek out opportunities to release further estate in order to generate receipts and reduce running costs.25 However, it acknowledged that the Commands would not necessarily be able to keep the receipts generated from their disposals and that decisions would be determined on a case by case basis. The Department said that it was looking closely at incentives and intended that the Commands would reap some of the benefits of reducing the size of the estate.26
Decision making in relation to the estate
16.If it is to succeed in implementing its plan to rationalise its estate the Department will be required to reconcile some different, and in some cases conflicting, pressures. These include the need to achieve £1 billion of disposal receipts before 2021; release land for 55,000 homes before 2020; and at the same time deliver an estate which meets military needs and provides decent accommodation for service personnel and their families.27 We questioned the Department on the principles it had used to develop its plan for the future estate and how decisions about individual sites had been reached. The Department explained that at the strategic level it had combined information on issues such as the condition of the estate and future costs with information on military capability. The latter information included the ability to recruit and retain staff, and to make decisions on which elements of the estate to dispose of, and which to keep.28 Decisions on individual sites had been agreed by the relevant Commands who, together with the Department’s Head Office, were effectively responsible for prioritising the estate.
17.The Department has divided all of the planned disposals and investment activity into a series of 37 business case groupings. It acknowledged that it would need to refine the overall plan continuously as a result of possible changes arising from improving the information underpinning the individual business cases. This information included further consideration of whether the changes might have a negative impact on the Department’s ability to recruit and retain personnel.29 It noted that in some cases there would be “softer effects”30 of some of the planned changes, such as the impact on local communities. Whilst we support the Department’s intention to rationalise the estate we are concerned that the Department has not sufficiently taken account of the “softer effects”31 around some of its decisions, such as the planned disposal of Kneller Hall in Twickenham and Cavalry Barracks in Hounslow.32
18.Ultimately, the success of the Department’s estate strategy depends on its ability to maintain its focus over a 25 year period and deliver a very complex set of interdependent disposals, moves and re-provisioning activities. The Department noted that a delay or problem in one area could have a “domino effect”33 and cause significant delay elsewhere, and that it needed to do some more work to make sure that the strategy could be delivered. There is a risk that in some cases, such as in relation to Stonehouse Barracks in Plymouth, the Department may have been over-optimistic about the amount of receipts it will generate from the disposal of individual sites and the amount it may cost to re-provide the necessary capability.34 We also note that 40% of anticipated disposal receipts relate to a few sites in London and that there is considerable uncertainty regarding whether these disposals will proceed as planned.35 It is therefore very important that, within the rules set by HM Treasury, the Department maximises the amount it can obtain for individual sites by, for example, applying for planning permission in advance of disposal where appropriate.36
16 C&AG’s Report, Delivering the defence estate, Session 2016–17, HC 782, 15 November 2016.
17 C&AG’s Report, para 1
18 C&AG’s Report, para 3
19 C&AG’s Report, para 4
20 C&AG’s Report, para 11 and 1.9
21 Committee of Public Accounts, Ministry of Defence: Identifying and selling surplus property, Tenth Report of Session 1998–99, March 1999; Committee of Public Accounts: Ministry of Defence: Managing the Defence Estate - Quality and Sustainability, Sixty-first Report of Session 2006–07, February 2008; Committee of Public Accounts, Ministry of Defence: Managing the defence estate and budget; Tenth Report of Session 2010–11, December 2010.
22 Ministry of Defence, A Better Defence Estate (December 2016)
23 Q 60, C&AG’s Report, para 16
27 C&AG’s Report, para 2.20
29 Q 61, C&AG’s Report, para 2.18
35 C&AG’s Report, para 2.17
20 March 2017