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Military capability 'at real risk'

Britain's military capabilities are at "real risk" from multibillion-pound cost overruns and potential Government spending curbs, an influential group of MPs has warned.

The Public Accounts Committee (PAC) said the Ministry of Defence (MoD) had admitted the bill for its 10-year equipment plan could rise by at least £5.2 billion from the original £163 billion budgeted.

It also said it was "not confident" £4.1 billion of slated cost savings could be achieved, and expressed concern that the department was assuming funding would rise 1% in real terms in the years after the election.

Chairwoman Margaret Hodge said Defence Equipment and Support (DE&S), which buys and maintains kit, still did not have the skills to manage programmes properly.

"Ironically, DE&S is planning to spend £250 million over the next three-and-a-half years on contractors to advise on how it can reduce its over-reliance on contractors," she said.

"We welcome the progress the Ministry of Defence has made in getting to grips with its budget and military equipment costs, but real risks remain to the affordability of its 10-year equipment plan.

"The department admits that the costs of its £163 billion plan could be understated by at least £5.2 billion - a figure that could grow as it develops a better understanding of the support costs involved.

"If this turns out to be the case, the department's contingency of £4.6 billion will not be sufficient and the department would need to draw on funds it has set aside to deliver other military capabilities.

"We are not confident that the department can deliver all the efficiency savings required from its equipment budgets. £800 million of the £4.1 billion savings required has yet to be identified."

Mrs Hodge said the MoD was "assuming" it would receive increases in its equipment budget of 1% above inflation over the next 10 years. "If it receives future funding cuts, this could impact on capability unless sufficient efficiencies can be made to compensate," she added.

The committee also said it was still concerned about plans to boost the Army reserve number to 30,000 by 2020 to offset reductions in the regular forces.

The report said the MoD had yet to show it had adequately assessed whether the policy could be achieved, or planned for what would happen if the goal was not reached.

"Risks to manning the Army remain and the department acknowledges that meeting the target beyond 2016 requires a significant improvement in performance," the MPs said.

Defence Secretary Michael Fallon said: "The £163 billion we plan to spend over the next 10 years on cutting-edge equipment is a landmark investment and I welcome the committee's acknowledgement that this Government has got to grips with both MoD budget and military equipment costs.

"The committee's concerns on costs are overstated - our major project costs were reduced by £400 million last year and we are confident of delivering the further savings.

"For the third consecutive year, we have a realistic and affordable equipment plan with substantial contingency funding.

"The greater freedoms afforded to Defence Equipment and Support are already allowing us to recruit and retain people with the right skills to manage major procurement projects and ensure good value for the taxpayer.

"We have set ourselves challenging recruitment targets, but Army 2020 plans are on track to deliver the force we need to counter the wide range of threats we face, and retain the capability to bring to bear on the battlefield.

"Recruitment is moving in the right direction - the number of Army reserve new entrants enlistment in the first nine months of the financial year is 2,270, up 120% on the equivalent period last year."

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