MoD 'has £4bn of unwanted supplies'

The Ministry of Defence is wasting billions of pounds of taxpayers' money on military supplies it does not need, according to a public spending watchdog.

An investigation by the National Audit Office found 54 years' worth of bomb dropping equipment from an old model of the Nimrod aircraft was being held in stock despite it being retired from service in 2010.

It also discovered a 10 year supply, excluding war reserve contingencies, of a particular size of fire-resistant coveralls even though just under 200 a year are being issued. The MoD stopped buying the garment in 2008.

Overall, the critical report found £4.2 billion worth of non-explosive stock, excluding VAT, was being held despite no demand being shown for it over the last two financial years.

Supplies and equipment are increasing and the MoD is failing to dispose of the stock it does not need, the NAO added.

Storing the supplies and spares, known as inventory, which covers everything from ammunition and missiles to clothing and medical supplies, costs £277 million in one year.

Plans to bring back the armed forces from Afghanistan by 2015 and from Germany by 2020 will heap further pressure on storage, the NAO warned.

It criticised the MoD for spending money on "unnecessary" stock when the cash could be used elsewhere in government.

An estimated £12.5 million was spent in 2010/11 on non-explosive inventory even though central depots already held five years' worth of that stock, it said.

The NAO report found £2.9 billion went on supplies in 2010/11 and the MoD is expected to spend between £1.5 billion and £2 billion each year for the next five years.

Amyas Morse, head of the National Audit Office, said: "In the current economic climate where the department is striving to make savings, it can ill-afford to use resources to buy and hold unnecessary levels of stock, and it clearly does so.

"The root cause of excess stock, which the Department is seeking to address, is that management and accountability structures currently fail to provide the incentives for cost-effective inventory management."

Kevan Jones, shadow armed forces minister, said: "Ministers should be cutting from the backroom not the frontline.

"This is unacceptable waste at a time of deep defence cuts. Past profligacy must be replaced with persistent prudence. We need reform, not rushed cuts.

"Unfortunately ministers' decisions, such as the aircraft carrier shambles, have increased costs to the taxpayer.

"This is yet another example of where ministers could be making real savings through reform of the MoD, but they are failing to do so due to the flawed, rushed defence review."

Labour's Margaret Hodge, who chairs the public accounts committee, described the "staggering waste" in stock.

She said: "The Government simply cannot afford waste on this monumental scale. And yet the Ministry is continuing to order items for which they already hold five years-worth of stock.

"With the planned return of armed forces and their inventory from Afghanistan by 2015 and from Germany by 2020, the Ministry needs to act quickly to resolve its problems.

"But the Ministry's strategy does not fully address the issues and they lack suitably qualified staff. My committee will want officials to stop wasting taxpayers' money and implement a more cost-effective management system as soon as possible."

Defence Equipment Minister Peter Luff said: "Appropriate reserves of equipment are essential to be able to deploy our armed forces at short notice and sustain them on operations across the world.

"Afghanistan is our top priority and to ensure commanders are not constrained, we have rightly increased the amount of kit and spares available to support the front line.

"The challenge of managing and maintaining vast amounts of equipment, including explosive materials, around the world should not be underestimated but I know that the MoD's assets must be more efficiently managed.

"That is why we are undertaking a number of initiatives to address this long-standing issue.

"We are changing the way we buy, store and dispose of equipment stocks and investing in IT systems to help us record the hundreds of thousands of items in our inventory. We are pleased the NAO recognises these changes are already making a difference."

PA