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MoD braced for painful weight-loss surgery next week

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Analysis Next week the government will finally announce the results of the Strategic Defence and Security Review (SDSR), the process by which the armed forces and their plans for the future will be brought into line with the amount of money available to pay for them. So, what's the state of play?

The outlines of the situation are plain enough. Before the current economic crisis began, even before the Twin Towers fell, the MoD's plans for buying equipment had been allowed to escalate out of control. In essence, more expensive things were scheduled into the kit programme than the budget had provided for. This situation developed a full decade ago following many ruinous decisions taken in the 1980s and 90s. The current government's vehement assertions that the whole mess is Labour's fault are quite untrue - the previous generation of Tories should shoulder an equal share of the blame.

During the prosperous early Noughties, however, Labour - in particular the terrifically incompetent defence minister of the time, Geoff Hoon - did nothing to sort the crisis out and indeed made it worse. An excellent illustration of the cross-party culpability for the state of today's MoD is provided by the infamous Eurofighter (nowadays renamed "Typhoon"). It was originally ordered way back in the 1980s, brought to full ruinously-expensive flower under the Tories, and then - incredibly - mismanaged even more idiotically under Labour. According to the just-published 2010 National Audit Office defence major projects report:

Despite the likelihood that it would incur significant costs ... in 2004 the Department decided not to provide budgetary provision for [Eurofighter] Tranche 3 and removed the remaining funding of £978m ...

In July 2009 the Department approved an additional £2.7bn for the Typhoon programme including the purchase of these aircraft, which it believes met its outstanding financial obligations. This represented a new financial commitment for the Department, and was a significant contributor to the gap between estimated funding and the cost of the Defence budget over the next 10 years.

In other words the MoD simply pretended on its own account books that the Eurofighter contract didn't exist for five whole years up to 2009, even though everyone in the world knew that the UK had committed to Tranche 3. Many of us were arguing at the time that Tranche 3 should be cancelled: little did we know, the MoD was pretending to itself throughout that this had already somehow secretly been done, without reference to the partner nations or the penalty clauses in the contract.

Even a simpleton should have realised that the project would still continue to cost some money through 2010-2020, even if Tranche 3 could have been made to vanish in a puff of smoke. But the mandarins and brass hats of the MoD told Mr Hoon and his successors up to last year that Eurofighter simply didn't exist, and the ministers apparently believed them. The resulting fantasy plans thus seemed to almost match the funds available, and the MoD carried on sleepwalking towards financial disaster.

There's plenty of blame to go around here: one might easily smile a cynical smile at the sight of Amyas Morse, nowadays head of the National Audit Office, castigating the MoD over its 2004-2009 Eurofighter fantasy. Mr Morse's old job, funnily enough, was as commercial director at the MoD, "shaping the department's relationship with industry". If anyone at the MoD should have known - and told people - that the Eurofighter books had been cooked, it was Mr Morse.

But the cracks were papered over, both by noticeable increases in defence spending under Labour and by supplements to the defence budget from special Treasury "conflict resolution" funds. These latter were officially provided to cover the added expense of the wars in Iraq and Afghanistan, but are often used to provide things which really should have been there already*.

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