MPs warn over £1.2bn MoD underspend

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MPs have raised renewed concerns over the long-term affordability of the Ministry of Defence's 10-year equipment plan.

The Commons Public Accounts Committee said the MoD still did not fully understand the workings of the £164 billion procurement and support programme.

It highlighted an unexpected £1.2 billion underspend in last year's budget which officials had still not accounted for.

"Its information is not good enough to provide a clear view of the extent to which the underspend has resulted from slower than expected progress by suppliers, genuine cost savings through contract negotiations, or the effect of risks that were factored in to cost forecasts but did not materialise," the committee said.

"It is therefore not clear whether this year's underspend will lead to higher spending in future years."

Committee chairman Margaret Hodge warned that unless the MoD came up with an explanation, the Treasury could try to claw back the money.

"If the department does not address this underspending it will be tempting for the Treasury, in seeking further public expenditure reductions, to take these underspends as savings at the expense of the defence equipment capabilities our armed services need," she said.

Defence minister Philip Dunne said: "I am pleased that the PAC has recognised the radical changes that have taken place to bring spending and procurement under control.

"We are confident that the £164 billion 10-year equipment plan is not only affordable, but sustainable, meaning we no longer have to make short-term cuts that delay programmes.

"By balancing the budget for the first time in a generation, we are now able to prudently protect our underspend thanks to an exceptional agreement with the Treasury so we are ready to fund future priority projects and ensure our armed forces get the equipment they need at the best value for the taxpayer."

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