As part of any future review, this review therefore contends that the UK needs to address the above issues squarely. To ensure that the MoD, and indeed the rest of government, is not able to will the ends but not the means, the Review team proposes that the outputs of the Periodic Defence Reviews should include, under a statutory requirement, detailed and audited long-term budgets which are consistent with realistic overall funding assumptions.
These budgets should include not only the cost of manning, training, equipping, maintaining and housing our Armed Forces over a 10-year period, but also a 20-year plan of our new defence equipment spending plans. All of these plans should be subject to critical external audit, ideally by a large accounting firm, in addition to the proper attentions of the National Audit Office, and these plans should be submitted to Parliament for scrutiny and approval.
How then to ensure that the long-term plans created by the Defence Review, and the associated annual plans, are affordable, not just over a short period but through the life of the plans, audited, and represent good value for money? The obvious person to do this is the Permanent Under Secretary ("PUS"), in his guise as Accounting Officer of the MoD, in which case a legal duty could arguably appropriately be placed on that role. The major advantage of this is that this provides the PUS the strongest possible framework to balance the department's budgets and force realism.
In addition, to give the MoD some chance of success, it is the second recommendation of this Review that the MoD's budgeting should be moved from the current short-term cycles to a 10-year rolling budget. The deal across government should be that the MoD's programme should be brought into a genuine and transparent long-term balance, reported to Parliament and externally audited, and in return the MoD should be funded on a long-term basis that allows it to manage effectively.
Parenthetically, the Review Team would also assert that this move to long-term budget control should also be used to reduce the excessive accuracy of in-year cash targets. The MoD, in trying to manage multi-billion pound, decade long programmes, is also required to hit short-term cash targets that would be considered impossibly precise in capital intensive industries in the private sector. Whilst the MoD is skilled at it, this targeting produces damaging programme management impacts and is extremely wasteful, both in terms of economic use of the available budget and processing/management effort, over the medium term.
A debate and a rebalancing is therefore needed in the MoD, and this should be conducted on a regular basis, with 5 yearly scale Strategic Defence Reviews and annual strategy update processes to ensure that the Department's priorities remain well adjusted from now on. Given that the system currently seems significantly out of balance, this review anticipates that the first of these adjustments would be notably challenging.