fruitless payments

Ministry of Defence wasted £9m on ‘fruitless payments’

The Ministry of Defence (MoD) has wasted £9 million on tax fines, contract errors and other “fruitless payments”, according to an official list.

The MoD paid rent on over 180 houses that had been demolished and fees for consultants when they were not working. It bought ration packs and software that were not needed.

The Scottish National Party (SNP) has condemned the losses as “completely unforgivable” and called on the UK government to “get a grip”. The MoD said it had improved its procedures to try and prevent future mistakes.

The MoD released lists of its “fruitless payments” over £30,000 for 2016-17, 2017-18 and 2018-19 in response to a freedom of information request.

Such payments were “where the department receives nothing useful in return and should not have incurred the liability, or could have taken appropriate action to avoid incurring the liability,” it said.

Over these three years, 64 fruitless payments are listed amounting to £8.93 million. None of them resulted in any disciplinary action being taken.

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The largest payment was £3.28m in 2017-18 for “leased gas canisters not returnable to contractor”. The loss “could have been avoided,” according to the MoD.

The MoD had to pay 47 interest penalties totalling £3.11m to HM Revenue & Customs because of “underpaid VAT”. It was fined £149,000 by HM Treasury for “process omissions” in a contract.

In 2017-18 and 2018-19 the MoD paid more than £1m for renting over 180 houses that had been knocked down. The money was “contractually due” despite the MoD having “no beneficial use of the properties”.

One fruitless payment was £363,000 for ration packs. “Minimum order quantity was higher than requirement, but it was not possible to procure a smaller quantity,” the MoD said.

In 2018-19 the MoD paid management consultants, McKinsey, £157,500 after failing to notify them when a contract ended. This “resulted in McKinsey being contractually entitled to payment for two weeks where they did not perform any work,” the MoD said.

Over £115,000 was wasted on new software that was “no longer needed due to changes in delivery timescales.” More than £39,000 had to be paid to a leasing company after one of its land rovers was stolen from a Royal Air Force base.

The SNP accused the MoD of a “litany of budgeting disasters” in recent years. “This is yet another example of the Tories’ fundamental inability to manage the finances of the MoD with basic competence and accountability,” said SNP defence spokesperson, Stewart McDonald MP.

He highlighted a report from the UK National Audit Office in January that blamed the MoD’s “poor management” of three nuclear projects for contributing to a £1.35 billion cost overrun. The MoD’s budget management had been “shambolic”, he told The Ferret.

“This government needs to get an urgent grip on the flagrant costly errors in over-spending and mismanagement – and worse, the completely unforgivable misspending of millions of pounds that have been completely squandered,” McDonald added.

David Cullen from the research group, Nuclear Information Service, pointed out that the coronavirus pandemic had prompted debate about public spending priorities. “These revelations suggest that, whatever the outcome of that debate, the MoD is not fit to be trusted with large sums of public money,” he said.

The international peace group, Pax Christi, campaigns for military spending to be diverted to healthcare and sustainability. “How galling then to hear of public resources being wasted on this scale by the Ministry of Defence,” said the group’s director, Theresa Alessandro.

The Scottish Campaign for Nuclear Disarmament argued that MoD spending on the Trident nuclear weapons system got nothing useful in return. “Its spiralling out-of-control costs must surely contribute to the culture of everyday careless spending that mount up as fruitless payments,” said the campaign’s chair, Lynn Jamieson.

The Ministry of Defence promised to do better in the future. “We are committed to delivering value for money and have strengthened our processes including providing additional training, employing more specialist finance staff and installing better technology to help prevent this happening again,” said an MoD spokesperson.

“We have implemented a number of measures to tackle the interest being charged by HM Revenue & Customs for VAT owed by the department.”

They included a new contract system and additional training to help determine the correct VAT code to ensure “lessons are learned from any previous mis-coding”. There were specialist finance staff available to advise on VAT issues, and appeals could be made.

The Ministry of Defence’s list of fruitless payments

Fruitless Payments by the Ministry of Defence 2016-2019 (Text)

This story was edited at 17.10 on 9 June 2020 at the request of Nuclear Information Service to change its description from campaign to research group. Photo thanks to Ministry of Defence.

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