The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:
"The Ministry of Defence has gone ahead with cuts to its military and civilian workforce without a proper understanding of what skills it will need in the future.
W recognise that the MOD must make tough financial decisions if it is to reduce its spending by 7.5 per cent a year by 2015, and that it has acted decisively. But we are concerned that these cuts have been determined by the need to cut costs in the short term rather than by considering the MOD's strategic objectives in the long term and the skills it will need to deliver them successfully.
If the Department loses key skills, it may have to spend even more money on replacing them, perhaps by buying them in from external consultants. Spending on consultants is already soaring, from £6 million in 2006-07 to £270 million in 2010-11. This would not represent value for money.
We welcome the Department's candour about how these cuts are affecting staff morale. That morale is low when jobs are threatened is unsurprising, but it is encouraging to see the Department take active steps to improve the way it communicates with its staff on the need for change."
Margaret Hodge was speaking as the Committee published its 88th Report of this Session which, on the basis of evidence from the Ministry of Defence, examined the Department's plans for reducing its workforce.
The Ministry of Defence announced in the summer of 2010 that it had a funding gap of £38 billion over the next ten years. As part of the Government's efforts to reduce the deficit, the Department also needs to reduce its annual spending by 7.5% in real terms by 2015. It intends to achieve a significant proportion of its required savings by reducing its civilian personnel by 29,000 and its military personnel by 25,000, which it estimates will save £4.1 billion between 2011 and 2015. In October 2010 the Government published the Strategic Defence and Security Review which set out its future priorities and plans in the context of the need to balance its budget. The Department is currently enacting a transformation programme to change its way of working in order to deliver on these priorities with fewer staff.
The Department has acted decisively to put plans in place to implement reductions in its workforce. However, it has done this before it has finalised its new operating model. The operating model will set out the detail of how the Department will meet its objectives in the future, but its reductions in workforce will be well advanced before the model is agreed. We are concerned that the Department’s plans to reduce the workforce have been determined more by the need to cut costs than by considering how to deliver its strategic objectives in the future.
A lack of clarity about the Department's future workforce requirements and the skills it therefore needs to retain means there is a risk of further skills gaps developing. This could make the Department increasingly reliant on external expertise. The Department’s consultancy expenditure through the Framework Agreement for Technical Support has grown from £6 million in 2006-07 to £270 million in 2010-11 indicating a greater reliance on external expertise. We are not convinced that the Department has considered how its consultancy budget will be affected by reductions in staff with key skills.
We welcome the Department's candour about staff morale. Given the scale of change in the Department it is not surprising morale is low and we are encouraged that the Department is taking active steps to improve internal communications on its transformation programme.
Image: Ministry of Defence