Original URL: http://www.theregister.co.uk/2008/07/24/mod_accounts_cpac_grilling/

MPs probe MoD accountancy shenanigans

'The arms industry are your masters, aren't they?'

By Lewis Page

Posted in Government, 24th July 2008 07:02 GMT

Analysis The UK Ministry of Defence has taken yet another lengthy roasting from the House of Commons Public Accounts Committee, PAC, which has been examining its recently audited accounts. The MoD is accused of "masking" the costs of its biggest and most expensive equipment projects by creative accounting, and responds by pointing out that some of these costs are not of its own making but result from political meddling.

The arguments in question centre around the annual Major Equipment Projects report into big MoD purchases, which is prepared every year by the beancounters of the National Audit Office in cooperation with the MoD. In essence, the projected total cost of all the big kit projects in the MoD has been brought down by about £1bn this year, because the ministry has put some costs which would previously have been listed under these projects in other parts of its accounts.

One big shift comes in the Type 45 destroyer costs, which are £78m less this year. The MoD now reports the missing £78m under "Measures in line with the Defence Industrial Strategy ... a move of ship build from Barrow to the Clyde". In other words, the Labour government ordered that work be given to the Clyde shipyards under the fig-leaf of "preserving sovereign military manufacturing capability", and this decision cost the MoD £78m.

As the Type 45s' weapons and electronics are largely French and Italian, and it appears that Barrow could have done the work perfectly well, the idea that British sovereignty is at stake here looks rather thin. It could be that Labour's serious political difficulties in Glasgow - indeed, in Scotland as a whole - had more to do with this part of the Defence Industrial Strategy, and indeed with the decision to place much of the work on the navy's new aircraft carriers in Scottish yards too.

The MoD has also refused to put £227m of projected spend under the heading of the new Astute class submarines. This money will be paid in the closing stages of the project, not for work to be done on the Astutes, but simply so that BAE Systems won't fire employees and offload plant at the Barrow submarine yard as the project winds down. The MoD will pay (at least) a quarter of a billion pounds just to keep Barrow open until it next wants some submarines, which will be when the Trident replacement boats are ordered.

These two cases seem fair enough. If politicians order the MoD to keep certain factories and shipyards alive regardless of whether this is a defence priority, they can hardly complain when the MoD discloses the resulting costs. And indeed the PAC MPs seemed surprised at this arguably rather wasteful and expensive aspect of the Defence Industrial Strategy (some of us have been banging on about it for years):

The Department does not have measures in place to assess whether it is getting value for money from these payments ... or, if in applying the principles of the Defence Industrial Strategy, it is maximising economic benefit to the UK...

There were other funding shifts which looked a lot more like MoD coverups, however. The headline cost of the major projects went down by another £67m as the MoD shifted the costs of fitting out its strike jets with new smart bomb targeting pods: out of "Precision Guided Bomb" and into various planes' ongoing budgets. The planes didn't show in the "Major Projects" report as not enough money was spent on any given one to make the high rankings. (One does note that the Eurofighter will be back up in the top twenty next year, as its long-dreaded "Future Capabilities Programme" begins to cost money.)

When one reflects that the RAF's bomber force was already supposed to have proper smart bomb targeting one can see why the MoD might want to minimise the visibility of the "Precision Guided Bomb" project, in which the rubbish TIALD pod's problems are being sorted out, and the Eurofighter's total lack of air-to-ground capability also addressed. Similarly, moving some £64m for replacement four-ton trucks from "procurement" to "in-service support" also looks like jiggery-pokery.

Then there's an interesting one. It appears that the Royal Artillery have decided to stop buying their new GPS-guided bombardment rocket (GMLRS) and use the cash planned for that to get "loitering munition" flying prowler-bombs instead - to the tune of £165m.

The artillery claims to love GMLRS, which has only just come in. It's essentially a modernised, guided variant of the old-school Multiple Launch Rocket System. This was a twenty-ton tracked vehicle intended to ripple off its whole load of massive rockets in one go, totally devastating a huge area of land far away (and incidentally leaving the scorched and cratered earth sown with very dangerous unexploded bomblet submunitions).

The basic MLRS splatter-weapon might have made some sense back in the Cold War, but its indiscriminate destructiveness and landmine littering side-effects have ruled it out since 1991. A GMLRS rocket, by contrast, is normally fired solo to strike with a single warhead within metres of its aim point. The artillery likes to play up its usefulness in modern counter-insurgency work, calling it the "long-range sniper" of Afghanistan.

But the fact is that GMLRS ranges to only 40km or so. This means that you only get fire support within that distance of heavy twenty-ton vehicles, which need an escort whenever they leave a secure base. GMLRS rockets are being fired, but the limiting factor on real operations in Afghanistan is the availability of air cover. The Royal Artillery is desperate not to be put out of business by the air force and army aviation. Hence it's suddenly decided that it only needs to hold stocks of 1400-odd GMLRS rockets, rather than six thousand as planned.

That would still be a good ten years' supply, at the very slow rate the GMLRS is being used in real life - though the army's rocket regiments could fire off the lot in just four salvoes, a couple of hours' work at most. (That last figure possibly illustrates just what a massive waste of capacity it is to have two regiments' worth of vehicles, gunners and associated support troops in order to pop off a rocket every few days.)

Spending an initial £165m on "loitering munitions" (essentially one-shot robo-kamikaze miniplanes) might help to keep the artillery from having to go and become infantrymen permanently, but some taxpayers might rather see it spent in other ways. That money, by the MoD's own estimates, would buy the UK another sixteen Reaper roboplanes or an even bigger fleet of the latest Sky Warriors, each of which can do all that a constant stream of loitering munitions and a planned £17m Watchkeeper drone does - all in one.

Funnily enough, the Loitering Munition and the Watchkeeper are another couple of UK products resulting from the Defence Industrial Strategy. It's refreshing to see the MoD separating out the costs of keeping up the British ship and sub yards in the case of Astute and Type 45, and it would be nice to see similar efforts made in other areas.

Why don't we help out a bit? Roughly speaking, if we give the UK systems every credit and say that 54 Watchkeepers + Loitering Munitions (total cost £1bn+) = 54 armed Reapers/Sky Warriors (£540m max) in capability, the cost of keeping up UK industry in this case is around £500m - more than twice what it will cost to maintain our UK nuclear-submarine yard until the end of the Astute project.

One might indeed, like the PAC MPs, wonder if all this is really value for money. One might also wonder about other industry-maintenance projects, like the Taranis robot stealth bomber and the just-announced Mantis UAV (price kept secret). One might even wonder why everyone's banging on so much about Mr Brown's shipyards, when far more money is being wasted on the upkeep of - or the setting up of - other weapons factories. (Why, it's almost as if some people in the MoD don't much like Gordon Brown.)

All in all, it's hard not to agree with Grimsby MP Austin Mitchell, speaking to Sir Bill Jeffrey of the MoD about the UK arms sector:

"This must be the only section of Government that is doing this, keeping a sector alive by feeding it projects ... they are your masters ... they can come to you and say, 'We need to keep this going'... it does put you at their mercy ... you cannot be too keen to cut the costs because you endanger the existence of the Defence Industrial Strategy."

(Page 26 of the report pdf.) Just so. ®