Slo-mo MoD budget traincrash rolls on

Analysis A grim picture of the financial crisis in the UK Ministry of Defence was painted today, as it was revealed that an almost total freeze has been put in place on new equipment projects. In a related development, the MoD announced that it has funded a Scottish company to develop wireless camera projectiles which troops could shoot round corners or into rooms.

The scale of the MoD's financial difficulties were made clear in a memo from General Sir Kevin O'Donoghue, chief of defence materiel - the purchasing boss. A copy of the memo has come into the posession of the Financial Times.

The General effectively ordered that no new equipment projects were to start up, and those that had would not have any further funding commitments made until further notice.

"No business cases are to be put to the approving authorities for approval," wrote Sir Kevin.

“Projects that have already received approval are not to incur financial commitment.”

Cost overruns and delays in long-running equipment projects such as the Eurofighter, the Merlin helicopter, the Nimrod MRA4 subhunter planes and the Astute-class submarines began to seriously affect the MoD's finances as long ago as the late 1990s. Most of these projects are still in the delivery stages, costing heavily, many years after they had been planned to finish and drop down to maintenance expenditure.

Nonetheless, Geoff Hoon - Defence Secretary from 1999 to 2005 - not only failed to deal with this situation but signficantly worsened it. He added new and expensive plans like the Type 45 destroyer, the Future Carriers, the rejuvenated Bowman comms network and the F-35 supersonic jumpjets, all without cutting a single one of the previous projects.

Hoon managed to balance his books temporarily in 2004 by swingeing cuts to existing combat units across all three armed services, most controversially by cutting ten per cent of the Army infantry in the midst of one big infantry war and with another looming on the horizon. He was removed and demoted in 2005, before the new Prime Minister's need to rebuild support in his own party brought him back this year in charge of Transport.

But the slo-mo train wreck in the MoD's budget continues, with a £2bn shortfall foreseen in the coming financial year and no real end in sight before the end of the next decade. By that point, however, the need to replace the country's nuclear arsenal will be pressing and it seems likely that the strains will continue; the more so without any economic growth to swell the tax revenues.

Today's project-freeze news could lead to some black comedy, as it has been confirmed that the Royal Navy will buy some new aircraft carriers - but not yet that there will be any planes to fly off them.

The most obvious way to sort matters out would be to cancel some equipment projects, if necessary buying cheaper alternatives from other suppliers. Prime candidates for the chopping block would include Eurofighter Tranche 3 (if the other partner nations could be got to agree), the Nimrods, the "Future Lynx" light helicopters, the "Watchkeeper" drones and the FIST super-soldier rigs.

But the British arms industry would howl, and fire people in big lumps - rather than in a slow steady trickle as they normally do. (BAE Systems, just to pluck a name from the air, has ditched more than three in every four Brits it employed in 1990. The firm has made UK workforce cuts of more than 15 per cent just since 2003.) Politicians find that sort of thing hard to resist, and senior forces officers find it hard to resist politicians.

And there is a persistent view that in fact the defence budget isn't actually meant to provide powerful combat forces, well equipped and well treated. It's really seed money for British industry, apparently.

Certainly this view appears to lie behind the MoD's blithe announcement today that it is funding the "I-Ball" from Edinburgh company Dreampact. The "wireless, projectile camera ... could be fired from a grenade launcher or thrown into a room to give troops in theatre vital information of who - or what - is on the ground".

"The initial development of I-Ball has been successful," says the MoD's Andrew Baird. "[It] shows great promise and we are considering what further development is possible."

That's super, obviously, though some troops might sooner have a pay rise, or their unit at full strength, or more chance of helicopter when they needed one, or something mundane like that - and get by with a mirror on a stick for looking into dodgy rooms. Or just buy a camera-grenade off the shelf, if they actually wanted one.

But that wouldn't help make Blighty into a recession-proof Innovation Nation, would it?

The FT piece is here. ®