The Report of the Iraq Inquiry

to re‑invent the non‑cash and near‑cash split in TLBs budgets, having made the

transition to full RAB.”274

465. Mr Lester identified the main reasons behind the increase in the MOD’s cash

requirement from £490m to £870m:

• “late technical refinements” by MOD TLBs (£200m);

• a reassessment by FLEET (the Royal Navy’s operational Command) of its

requirements (£122m); and

• policy decisions (£40m).

466. The main reason behind the increase in the MOD’s cash requirement from

£870m to £1,152m was the discovery that the MOD had issued its TLBs with over

£200m more near‑cash than it had available. That error had been caused by the

absence of a near‑cash control total in the 2002 Spending Review settlement.

467. Lord Boateng told the Inquiry that he doubted that Mr Hoon and Sir Kevin Tebbit

had been aware of the particular opportunities created by full RAB for the MOD when

they had welcomed the MOD’s 2002 settlement:

“I think this was an opportunity that became available later, and they saw the

opportunity and they took it …

“A fair enough wheeze perhaps, if not one that could be tolerated.”275

468. Mr Hoon told the Inquiry that the imposition of cash controls “caused quite a lot of

problems”, because the MOD had been spending at a rate which assumed an unlimited

flexibility to transfer non‑cash to cash, and had made plans which assumed this

unlimited flexibility.276

469. Mr Hoon also told the Inquiry that although the MOD’s forward equipment

programmes, including its helicopter programmes, had been affected, he doubted

whether this had “immediate consequences” for the UK’s operations in Iraq:

“I don’t believe that it was relevant to helicopters in Iraq … I suppose it is reasonable

to assume that by now [January 2010], had that budget have been spent in the

way that we thought we should spend it, then those helicopters would probably be

coming into service any time now.”277

274 Email Lester to PS/PUS [MOD], 18 June 2004, ‘Non‑Cash Chronology’ attaching Paper, [undated],

‘Chronology of Non‑Cash Debate with the Treasury in 2003’.

275 Public hearing, 14 July 2010, page 52.

276 Public hearing, 19 January 2010, page 195.

277 Public hearing, 19 January 2010, pages 196-197.

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