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Former Defence Chiefs Challenge Gordon Brown Over Iraq

Also covered by The Times here: Defence chiefs attack Brown's Chilcot evidence

All the equipment procured under UORs since 2001 has placed an additional burden on the Defence budget for staffing, training and maintenance while equipment procured under normal funding has been consumed or worn out much faster than planned under original assumptions owing to nine years of continuous conflict in hostile environments.

Another objection is that the Defence Budget was predicated on the 1998 Strategic Defence Review but the Government then proceeded to double the commitments on which it was based. Until then, a 1.5% increase in Defence spending didn't look too bad even though 'defence inflation' was running at a much higher rate.

There was a triple whammy in that Resource Accounting & Budgeting (RAB) was also implemented in the MoD in 2001. As this imposed an initial 6% penalty (now 3.5%) per annum on all capital items (real estate, storage facilities, equipment, etc) owned by the MoD, there was a rush to dispose of many of its assets including come-in handy items (e.g. equipment and infrastructure only needed in war). The MoD then banked on clawing back the cash savings it had accrued in disposing of these assets but this was easier said than done.

Government-wide RAB is singularly unsuited for Defence because it is so difficult to measure tangible outputs against costs. Do you count wars averted, shipping lanes protected, intelligence gathered, bang per buck or maybe the number of enemy KIA? More info here:

Resource Accounting and Budgeting
HM Treasury said:
Resource Accounting and Budgeting (RAB) is a system of planning, controlling and reporting on public spending for government.

RAB was launched in 1993, with a commitment to introduce resource accounting. This was followed by a White Paper in 1995 (Cm2929), which gave a commitment to use resource accounting as the basis of public expenditure planning and control.

Resource Accounting is the application of accruals accounting for reporting on the expenditure of central government and a framework for analysing expenditure by departmental aim and objectives, relating these to outputs where possible.

UK Defence Statistics 2009
MOD DASA said:
Transition of Cash to Resource Accounting & Budgeting (RAB)

Up until financial year 1998/99, Government expenditure was accounted for on a cash basis. In April 1999 the introduction of Resource Accounting and Budgeting (RAB) brought in an accruals-based accounting system, although Government departments were still controlled on a cash basis. This transitional accounting regime remained for two financial years. Government expenditure has been accounted for on a resource basis only since 2001/02.

The main difference arising from the adoption of RAB is that costs are accounted for as they are incurred (the principle of accruals), rather than when payment is made (the principle of cash). This gives rise to timing differences in accounting between the cash and RAB systems and also to the recognition of depreciation, which expends the cost of an asset over its useful economic life, and the cost of capital charge, equivalent to an interest charge on the net assets held on the Balance Sheet. At the time that RAB was introduced the cost of capital charge was 6% of the net value of assets; although this was reduced to 3.5% in 2003/04.

Control regime


Under Resource Accounting, Government Departments are accountable for their spending against Resource and Capital Departmental Expenditure Limits (DELs). Spending against the Resource DEL includes current items, which are explained in the following two paragraphs. The Capital DEL, whilst part of the overall DEL, reflects investment spending that will appear on the Department's balance sheet and be consumed over a number of years, net of the receipts from sale of assets. Departments are also responsible for Annually Managed Expenditure (AME). This spending is demand led (for example, payment of War Pensions) and therefore cannot be controlled by Departments in the same way.

In Stage 1 of RAB, which was introduced at the start of financial year 2001/02, the Resource DEL covered current costs such as in year personnel costs, equipment, maintenance of land and buildings. Non cash costs such as depreciation and the cost of capital charge fell within Annually Managed Expenditure (AME) and were not controlled to the same degree as DELs. This allowed departments an interim period to gain experience of managing the new non-cash costs and to review their holdings of stocks and fixed assets, which impact the non-cash costs, prior to the charge impacting on the more tightly controlled DELs.

Stage 2 of RAB was introduced at the start of the financial year 2003/04. This involved the movement of the primary non-cash costs (depreciation and the cost of capital charge) from AME into the Resource DEL, and reduced the cost of capital charge to 3.5% of the net value of assets.

The change in definition of the DELs combined with volatile non-cash costs over the Stage 1 period make time series comparisons over the period 2001/02 - 2003/04 complex.

From 2006/07, the MOD has transferred ownership of fixed assets into two TLBs: Defence Estates (DE) for Land and Buildings; and Defence Equipment & Support (DE&S) for Plant and Machinery, Transport, IT and Communications equipment, and Single Use Military Equipment (SUME).

Factors affecting Cash to RAB data consistency

* There are timing differences as to when payments are recognised.

* The movement of Non-Cash items of expenditure from AME into the Resource DEL from 2003/04 onwards has the 'apparent' effect of inflating the Resource DEL.

* In financial year 2003/04 the rate of interest used to calculate the cost of capital charge was reduced from 6% to 3.5%.

* The discount rate for provisions was changed from 3.5% real to 2.2% real with effect from 1 April 2005.

* The discount rate for pensions liabilities was changed from 2.8% real to 1.8% real with effect from 1 April 2007.

Further information on the introduction of RAB can be found in Chapter 1 of UK Defence Statistics 2002 in the "Resource Accounting & Budgeting" section. Alternatively, more information can be found on the HM Treasury website at: http://www.hm-treasury.gov.uk/about/resourceaccounts/resourceaccounts_index.cfm
 
It's amazing that these generals and spooks having now retired on a huge pension are happy to 'gob off', pity they had not done so at the time. Monty stood up to Churchill in WW11 when he wanted him to get stuck into the Germans in North Africa, Monty's response was that he would go when he was ready.
 
finknottle said:
It's amazing that these generals and spooks having now retired on a huge pension are happy to 'gob off', pity they had not done so at the time. Monty stood up to Churchill in WW11 when he wanted him to get stuck into the Germans in North Africa, Monty's response was that he would go when he was ready.


TTM062101CC-copy-14_693666a.jpg
 
Excellent depiction of Blair (That would be the journey to hell would it?) and what is that hovering in the rear? How you know when a politician is lying. His/Her lips are moving.
 

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