The Report
of the Iraq Inquiry
445.
Mr Heywood
wrote to Mr Hoon’s Private Secretary on 23
October:
“The Prime
Minister shares the Chancellor’s – and Sir Andrew Likierman’s
– concern
about
recent financial developments within MOD …
“However,
given the late stage of the financial year and so as to minimise
the
disruption
to front line defence and morale at this critical time, the Prime
Minister and
Chancellor
are prepared to agree a one‑off cash uplift of £400m for 2003/04
…”261
446.
That uplift
was conditional on MOD agreement to an externally led review
of
its
financial control arrangements, and an assurance it would make
maximum use
of savings
generated by its efficiency programme to ensure that cash and
resource
spending
were properly controlled. Once the review had made its
recommendations and
any changes
to the MOD financial controls had been implemented, the Treasury
would
look again
at Mr Hoon’s request for extra cash for 2004/05 and
2005/06.
447.
Sir Kevin
Tebbit told the Inquiry that it was the MOD’s normal practice to
appeal
to Mr Blair
on funding issues:
“… given
the particular nature of the Blair Government, the MOD tended to
look
to …
the Prime Minister for understanding and support in the
budgetary context.
Some other
departments went direct to the Chancellor. We usually tried to
operate
through
Number 10 because we were always coping with the problem of
a policy
ambition
which the Prime Minister subscribed to, which was never quite
matched
by the
financial attitude of the Chancellor.”262
448.
The external
review of the MOD’s cash management arrangements (the
Likierman
review), which was undertaken by Cap Gemini Ernst and Young,
issued
449.
Mr Woolley
forwarded the review to Mr Hoon and Sir Kevin Tebbit the
following
“While not
a report we would ourselves have written … [it] provides only very
limited
support to
the criticisms levelled at the department [the MOD] by the
Chancellor and
the Chief
Secretary.”
450.
Mr Woolley
said that the review confirmed that RAB did not require
departments
to control
net cash or near cash, which was “the kernel of our
case”.
261
Letter
Heywood to Watkins, 21 October 2003 [sic], ‘Defence
Budget’.
262
Private
hearing, 6 May 2010, pages 40‑41.
263
Report Cap
Gemini Ernst and Young, 25 November 2003, ‘Review of MOD
Cash
Management
Arrangements’.
264
Minute
Woolley to Hoon, 26 November 2003, ‘PSX 26 November – CGEY
Report’.
516