13.1 |
Resources
responsible
for refining the guidelines over this transitional phase [of
RAB
implementation].
Equally, we need to be able to trust departments to work
within
the spirit
of RAB and check with us wherever clarification is obviously
required.
If we
cannot trust departments to behave in a co‑operative manner, we
will have
to consider
tighter controls – undoubtedly a backward step.”245
417.
The official
summarised the MOD’s position:
•
It was
working within the RAB framework, which rewarded lower non‑cash
costs.
•
It claimed
that the Treasury had focused it on DEL totals, and had told it
that
cash
management was irrelevant.
•
The MOD’s
settlement letter in the 2002 Spending Review specified that it
had
unlimited
flexibility to move funds between sub‑programmes.
418.
The official
also set out the Treasury’s arguments against the MOD
position:
“•
These
switches [from non‑cash to cash] are not affordable …
•
MOD have
generated this improved cash flow from a mixture of
accounting
charges,
exploitation of the transitional phase between RAB Stage I and II,
and
ineffective
management of procurement contracts. Thus this cash windfall
has
nothing to
do with the RAB principles of efficiency or improved asset
utilisation
…
•
MOD has
consistently reassured us … that non‑cash forecasts in SR2002
were
understated,
not overstated. It would appear that they have misled
us.
•
… it was
always understood (although admittedly not put in writing)
that
significant
movements in cash/non‑cash would have to be agreed with
HMT
[the Treasury].
•
The quality
of MOD’s forecasting remains poor and does not instil confidence
…
•
It is not
credible that MOD can really have believed that cash was
not
relevant …”
419.
The Treasury’s
analysis of the MOD’s planned £2bn transfer indicated
that:
•
35 percent
was the result of changes in accounting treatment which had
been
designed to
produce non‑cash savings.
•
23 percent
was the result of delays in procurement.
•
33 percent
was the result of exceptional write‑offs.
•
10 percent
could not be accounted for.246
420.
The Treasury
judged that only the second category (delays in
procurement)
represented
legitimate non‑cash savings.
245
Minute
Treasury [junior official] to Chief Secretary, 19 August 2003,
‘c£2bn MOD Cash Increase
over SR2002’.
246
Figures sum
to 101 percent due to rounding.
511