Defence cuts 'led to MoD project cost rise'

Costs for the Astute submarine project keep rising

Cuts to defence spending have contributed to a £466m rise in the cost of the UK's 15 largest military equipment projects in a year, the spending watchdog has said.

The National Audit Office said the decision to delay the Astute submarine programme could also leave the Royal Navy short of attack submarines.

The NAO said the cuts and delays represented poor value for money.

But Defence Secretary Philip Hammond said the MoD had "got a grip" on costs.

In an update on the state of the MoD's 15 largest procurement projects, the National Audit Office said costs had continued to increase over the past year.

'Limited options'

The projects - including new submarines, fighter aircraft, helicopters and destroyers - are now £6.1bn over budget compared with forecasts made when the main investment decisions were taken.

Combined delays on the projects now total nearly 27 years, the watchdog said in its report.

The main factors pushing up costs over the past year were a 12-month delay to the Watchkeeper unmanned aerial vehicle project and the decision to further extend the building programme for the new class of seven Astute attack submarines announced in last year's defence review.

This, the watchdog said, had pushed up costs of the submarine programme - which has been plagued by delays since it was first conceived in the 1990s - by another £200m.

It warned this decision also created a dilemma over future capability and ministers must either to extend the service life of existing submarines or "reduce scheduled activity" to fill a possible gap.

On this and a range of other issues, the NAO said the MoD "had limited options to manage a legacy of poor planning and performance on some past projects".

Amyas Morse, the head of the NAO, added: "These circumstances were largely, however, of the department's making and the resulting cuts and delays to capability are not value for money."

Trend halted

Labour said cuts to defence spending had left "serious holes" in the UK's future capability.

But the government has accused Labour of leaving it a £37bn black hole in the procurement budget.

The defence secretary said his department was getting control of procurement costs as a result of "difficult" decisions taken in last year's defence review.

"The trend of vast cost increases seen under the last government has been halted," Mr Hammond said.

"The 0.9% overall increase this year is still too much but it is seven times lower than the last year of the previous administration."

Margaret Hodge, the chairman of the Commons Public Accounts Committee which oversees the work of the NAO, said: "Short-term measures to balance the budget account for a significant cost increase on these projects during 2010-11.

"Delaying projects and reducing what they deliver are not sensible ways to invest in defence capability."

On the issue of attack submarines, the MoD said it would guarantee operational capability by extending the life of the older Trafalgar class boats and the situation remained "manageable".

The Royal Navy currently operates 11 nuclear-powered submarines: six Trafalgar class, four Vanguard class and one Astute.

The Vanguard class, which carry Trident nuclear missiles, will be replaced as part of the renewal of nuclear deterrent system but this is not expected to happen until 2028 at the earliest after the "main gate" decision on Trident was delayed until 2016.

Shadow defence secretary Jim Murphy said the latest overspend figures were "almost unbelievable".

"An efficient procurement policy is central to an effective defence policy. The government have neither. Ministers need to start taking responsibility for their actions.

"We need a new defence industrial strategy which builds equipment to fit requirements, has tough targets on time and cost for industry and ensures greater accountability within the MoD."