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Defence Secretary Liam Fox has promised that the Ministry of Defence will end its free-spending ways, following a highly critical report from the Public Accounts Committee.

The MoD has written off £5bn this year by cancelling the Nimrod and Sentinel projects.

The committee of MPs noted that defence spending exceeds forecast budgets by £36bn over the next 10 years.

The basic ineptitude of MoD planners meant the committee found an eye-watering £8bn of public money had been lost or written off due to delays. This figure is an estimate from just four MoD projects that the committee looked into.

Margaret Hodge MP, chair of the PAC, said: "Unaffordable decisions taken in the short term lead to inevitable waste of billions of pounds over time. In the wake of the Defence Review, the MOD still has to spell out whether and how it has got its defence procurement budget under control."

Hodge said that short-term decisions by the MoD to delay or re-spec some projects had added £3bn to costs in just one year. Almost £5bn was lost due to late cancellation of projects. Spending on aircraft carriers was described by PAC as providing "a new benchmark in poor corporate decision making".

Fox told the BBC that the MoD had to balance resources with aspirations. He said he had asked the new Chief of Defence Materiel, Bernard Gray, to "ensure that no projects begin unless we're sure that there's a budget for development, procurement and deployment – because otherwise we end up with fantasy projects which are not much more than a wish list".

Fox said progress had been made but that the department still needed to fight "the culture of optimism or the 'conspiracy of optimism' as it's sometimes called".

The PAC recommended keeping project leaders in their posts until a project is delivered, instead of moving them around every two or three years.

It also suggested that the MoD refrains from signing contracts which it knows will exceed its budget. The MoD should also take less high risk decisions – for example cancelling tranche 3 of Typhoon spending, which ended up costing taxpayers even more.

Read the PAC report on MoD major projects here. ®

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