MoD phone deal costs taxpayer £600,000

British Telecom profits from decision to pay £30m line rental a year i n advance

The Ministry of Defence was accused last night of wasting thousands of pounds in taxpayers' money by paying its telephone rental charges a year in advance. The Ministry admitted that it had £30m in line rentals to British Telecom a year ahead. Officials estimate that the practice costs the taxpayer about £670,000 a year in lost interest - and presumably makes a similar amount for British Telecom which banks the money.

Treasury officials said that they did not know how many other government departments paid their bills in this way.

Frank Martin, a senior Treasury accounting officer, said that he would "not be surprised if others" followed the arrangement, understood to be a throwback to the days when British Telecom was a government department and the payment was made under Whitehall accounting rules.

Members of the Commons Public Accounts Committee (PAC) who were questioning the Ministry of Defence and the Treasury on the size of the armed forces' annual £61m phone bill, were appalled by their generosity towards British Telecom.

Robert Sheldon, the committee chairman, said that paying a year in advance was "astonishing".

Alan Milburn, a committee member, demanded immediate action by the Ministry of Defence and other government departments.

He said: "Whitehall is squandering millions of pounds of taxpayers' money by doing what no private customer would ever contemplate.

``The Treasury should issue new guidelines immediately prohibiting this profligate use of public money."

Sir Christopher France, permanent secretary at the Ministry of Defence, pointed out that the department had recently negotiated to discontinue the arrangement.

A British Telecom spokesman said that it was up to the individual departments concerned to say if they wanted to pay their rental bills in advance or not.

Despite it being the public's money, he said it was not a matter British Telecom would discuss publicly. Government departments were entitled to receive the same degree of confidentiality as normal private customers, he said.

The PAC continued what is proving to be a long-running theme, of attacking the Ministry of Defence for wasting public funds. Outside the committee room, Mr Milburn said it was outrageous that in a simple, almost random, scrutiny that cost the National Audit Office, the public finance watchdog, £40,000, savings of £600,000 had been identified. Of that sum, £300,000 would recur every year.

MPs were told that the Ministry of Defence was doing its best to prevent servicemen, and officials, phoning chatlines. But it was difficult keeping up with the new numbers as they came on the market. There were "gaps" in the system and abuses, they admitted, had occurred.