13.1 |
Resources
405.
Sir Nicholas
Macpherson told the Inquiry that negotiations on the MOD’s
2002
settlement
had not appeared to be acrimonious:
“… I didn’t
get the sense that the MOD was being starved of resource. Indeed,
the
2002
settlement gave them small real increases …
“… it is
open to the Secretary of State, it is indeed open to the Chief of
Defence
Staff …
to approach the Prime Minister and raise concerns. The Secretary of
State
could have
taken it to Cabinet and he could have held out. They didn’t
…”238
406.
Sir Kevin
Tebbit told the Inquiry that the MOD had welcomed the 2002
settlement
because it
had been done on a resource accounting basis, rather than on a cash
basis:
“The
problem … for the Treasury was that, whereas in most departments
the
transition
from cash to accruals [RAB] didn’t make very much difference, in
the
case of
defence it made a huge difference, because our asset base was
something
between 70
and 90 billion pounds, a massive amount of money.
“Now, the
amount of … depreciation, capital charging, write‑off allowance
that was
in [the
MOD’s] settlement, was a prudent figure …
“But it did
mean, as it transpired, that we had the headroom to achieve what I
felt
we had
always failed to achieve before in my previous three years there,
to actually
fund the
defence programme properly …”239
407.
Mr Woolley
told the Inquiry that Mr Boateng’s letter of 10 July 2002
had:
“… made no
reference to there being a separate limit on the non‑cash element
of
the overall
resource budget …
“So we made
the assumption that there was no separate limit within our budget
for
non‑cash,
that we were to regard all resource budgets as available for
whatever
resource
purpose it was required and … we planned on a full resource basis
without
making any
distinction between non‑cash and near cash spend.”240
408.
Mr Woolley
agreed with the Inquiry that, in practice, the change to RAB
meant
that by
bearing down on non‑cash costs the MOD would be able to increase
cash
expenditure.
409.
Mr Woolley
also drew attention to the “volatility” of MOD non‑cash costs,
resulting
from
periodic revaluation of assets, the number of write‑offs of assets
and stocks in a
particular
year, and delays in bringing new equipment into service (which
would reduce
the charge
for depreciation).
238
Public
hearing, 22 January 2010, page 37.
239
Public
hearing, 3 February 2010, pages 4-6.
240
Public
hearing, 2 July 2010, pages 59‑61.
509