Published at 12:01, Saturday, 26 July 2008

MINISTRY of Defence officials concealed the full cost of Barrow’s new Astute class nuclear submarines by switching £227m of costs to another account.

That’s according to the House of Commons Public Accounts Committee, which found around £1bn of costs for major weapons and equipment purchases had been reallocated or “juggled” around to disguise their full cost, over the past two years.

In its latest report it said the MoD was attempting to make projects appear cheaper by transferring some of their costs.

On the Astute class submarine, the cost of maintaining sovereign capability by subsidising production capacity to build such subs were lowered by £227m by shifting the costs to a different budget, the report found. The committee, which includes members from the three main Parliamentary parties, has accused the MoD of “juggling its budgets” because it is struggling to afford all the equipment it wants to buy.

The report said a “conspiracy of optimism” in the MoD and the defence industry led to unrealistically low estimates of the cost of major pieces of kit, which have to be revised upwards during production.

But the Public Accounts Committee report does explain the Astute juggling. General Sir Kevin O’Donoghue said in answer to questions that the money was overhead costs of keeping shipyard facilities.

Rather than put them all on the Astute sub programme, some overheads had been put into a separate budget to associate them with the future Successor programme.

That is the future programme to replace Vanguard class Trident missile boats for which Barrow facilities have to be retained and maintained. The total forecast cost of the 19 largest military projects excluding the Typhoon aircraft, now stands at £28bn – 11 per cent up from the expected price-tag when they were ordered.

The committee was also critical of the MoD’s slow decision-making in major procurement projects, such as the Royal Navy’s two new aircraft carriers, which were approved after five and a half years’ consideration despite being crucial to the viability of the UK’s shipbuilding industry.

Committee chairman Edward Leigh said: “The Ministry of Defence is trying to persuade Parliament that the forecast costs of major defence equipment projects are under control – by moving expenditure from those projects to other defence budgets. This is not acceptable.”

Mr Leigh said of the delay in the aircraft carrier order – now placed and now includes £300m of work for Barrow’s shipyard: “It is a well-established principle that delaying major equipment projects leads to higher costs in the long run.

“The Department should identify lessons from the five and a half years it took to award the contract for the aircraft carriers.”

BAE in Barrow currently has a £3.8bn contract for three Astute submarines, an initial contract for a fourth, and permission to order long terms items for a fifth.

It hopes to build at least seven Astute submarines.

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