Fox says 'fantasy' defence equipment spending must end

Media caption, Liam Fox responds to criticisms from the Commons public accounts committee

Liam Fox has called for to an end to "fantasy" defence projects which are unaffordable and cannot be delivered.

The defence secretary attacked the "culture of optimism" about procurement costs and said no projects would begin without the funds to complete them.

His comments came after MPs said a "cycle of failure" had beset the UK's military equipment-buying programme.

Labour said there were problems with the system but the coalition's "rushed" defence review had made things worse.

In a speech to the Civitas think tank, Dr Fox said "unrealistic" budgets and time scales for delivering key defence equipment would no longer be tolerated at the Ministry of Defence.

Ministers are to set up a new Defence Review Board to "name and shame" contractors not delivering projects on time and budget after a series of high-profile problems.

'Culture of optimism'

According to a National Audit Office report published in October, the "black hole" in MoD procurement increased by £3.3bn in Labour's final year in office to reach about £36bn.

And the cross-party Public Accounts Committee, in a critical report published on Tuesday, said the 2008 contract to build two new aircraft carriers was "a new benchmark in poor corporate decision-making".

The two ships are being built at a cost of £5.2bn but, as a result of decisions made in October's defence review, one carrier will be mothballed almost immediately and there will be no fast jets to fly off the vessels until 2019.

Dr Fox said there was a need to tackle what he called "the culture of optimism" where projects were priced too too cheaply before costs "mushroomed" later.

The cumulative effect of such decisions was particularly damaging, he said, at a time when budgets were being squeezed across government and "every penny counted".

"I've asked the new chief of defence materiel in the MoD to ensure that no projects begin unless we're sure that there's a budget for development, procurement and deployment because otherwise we end up with fantasy projects which are not much more than a wish list - that has to stop," he told the BBC.

'Cycle of failure'

MPs said MoD officials must end the "cycle of failure" over procurement, urging them to provide the forecast for implementing government money-saving demands by the start of the financial year in April.

Last autumn's Strategic Defence and Security Review urged savings of billions of pounds by cutting back on warships, fast jet fighters and thousands of soldiers, sailors and airmen.

As well as mothballing a yet-to-be-built aircraft carrier, it cancelled the Nimrod MRA4 plane and withdrew the Sentinel surveillance aircraft

The committee said the cutbacks, which involved writing off nearly £5bn of taxpayers' money, demonstrated the "compelling" need to get the procurement budget "under control".

"The MoD must demonstrate the same discipline in its defence procurement that our forces demonstrate in the field." the committee's chairman, Labour MP Margaret Hodge, said.

'Serious mistakes'

Labour, whom Dr Fox has accused of leaving a "toxic legacy" in procurement costs, said all governments had been affected by problems when it came to defence spending.

Media caption, Lord West: 'This has been a problem with successive governments'

"We welcome reform to MoD procurement," shadow defence secretary Jim Murphy said, adding that that the party was conducting its own review of procurement policy.

"While we support Liam Fox's words, we will judge him by his actions. His rushed defence review was not properly costed and is being reopened to find an additional £1bn cuts in the equipment programme.

"We are worried that in making cuts that are too deep and fast, there is a real danger that serious mistakes are being made."

Separately, Dr Fox said the UK should seek to retain a "healthy slice" of the Middle East defence market.

He was responding to criticism of the number of British defence firms accompanying David Cameron on his trip to Kuwait - at a time when the Libyan and Bahrain governments have been condemned for violent crackdowns on pro-democracy protests.

The UK's trade relationships had to be considered on a "case-by-case basis", the defence secretary said, but he argued that the UK should continue to do business "within the limits that we set ourselves ethically on defence exports".

More on this story