Warning issued on risk of UK military procurement errors

Britain's next government risks making flawed decisions in spending its £34bn military budget because of a dearth of official data on the value of the UK defence industry to the economy.

The warning comes in an independent report by defence experts at the Policy Institute of King's College, London.

"Without [official] data, government procurement choices may be substandard, with potential implications for the nation's . . . defence," the report argues.

The report's aim was to examine how a domestic defence industry underpins the country's security and whether, as in most other countries, its contribution to the wider economy should be assessed in making procurement decisions.

The authors conclude that a robust and flexible defence supply chain, which might include spare capacity and skills, is vital to maintaining the flexibility needed to defend the nation's interests.

"We are not criticising the way the MoD conducts weapons acquisition," said Matthew Uttley, professor of defence studies at KCL and one of the authors. "But there are questions around the long-term implications of certain choices and we were not able to identify conclusive answers. There needs to be a rigorous, evidence-based review of this area."

The critique comes amid concerns in industry and the armed forces that an already constrained defence budget faces further cuts even as geopolitical tensions rise.

Defence industry executives and military officers are particularly frustrated that, despite lobbying, the Conservative and Labour parties refuse to commit to Nato's mandated spending target of 2 per cent of gross domestic product ahead of next month's general election.

New cuts could be avoided if the government accepted that the economic benefits of buying British offset the price tag, rather than seeking cheaper off the shelf options abroad, said Lord Sterling, former industry adviser to Margaret Thatcher's government, who with Nick Butler, a former adviser to Gordon Brown, commissioned the report. "We feel most strongly that no decision should be taken until the government can explain the full impact on the economy and armed forces of its spending," Lord Sterling said. "We consider the armed forces have already been cut too far. In defending the realm, these decisions are of crucial importance."

The authors acknowledge that the UK cannot afford to source all its equipment domestically, but choices about which areas to focus on have been hampered by the decision in 2009 to reduce the collection of official data about the industry's economic contribution. The report warns of the government's "worrying reluctance to recognise the role of the domestic industrial base in providing and maintaining the armed forces freedom of action and military advantage". In 2012, the Ministry of Defence said it did "not consider wider employment, industrial or economic factors in its value-for-money assessments."

Existing data rely on information provided by the industry which could be open to challenge, said Prof Uttley. Using figures from a decade ago, Oxford Economics, a consultancy, estimates that for every £100m invested in the defence industry, a further £130m is generated in the wider economy. For every job created in defence manufacturing, 1.8 jobs were created elsewhere.

One MoD insider rejected the suggestion that procurement was made in a data vacuum. The Treasury took factors such as jobs into account, he said, although this had to be done carefully to avoid breaching EU rules on state aid.

Procurement was also done with an eye to preserving skills and technological expertise in the UK, he said. But with scarce funds, choices had to be made. "In a world where there is not enough money, we have to reserve it for areas where we can make a critical difference," he said.

Still, he acknowledged that equipping the military is becoming increasingly difficult. "Spending 2 per cent of GDP would . . . allow us a more stable base."

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