Treasury to Cut UOR Funding

Discussion in 'Current Affairs, News and Analysis' started by jim30, Feb 27, 2009.

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  1. Heres an interesting one.

    http://www.defencemanagement.com/feature_story.asp?id=11327

    From Defence Management.com

    The Treasury has taken steps to reduce the MoD's urgent operational requirement budget by up to 30 per cent next year in a move that will surely cause additional strains and pains in the ministry's budget writes Patrick Macgill.

    The MoD is facing a potential budget "time bomb" in the coming years after defence ministers quietly admitted that the Treasury had slashed urgent operational requirement (UOR) funding by nearly 30 per cent for the coming year.

    In a discrete written answer in January, Defence Secretary John Hutton revealed that the UOR budget for 2009-10 would only be £635m. Last year the UOR budget was £900m.

    The Treasury has funded the UOR budget as part of the reserve fund going to finance the wars in Iraq and Afghanistan. The fund allows for the MoD to procure urgently needed equipment such as newly armoured vehicles and bring them up to operational standards very quickly.

    Given the rapidly changing nature of the Taliban's tactics, the MoD has taken advantage of the UOR fund on numerous occasions in order to adapt to new threats. So far in the current year 2008-09, the MoD has spent over £1bn on UORs.

    Based on MoD estimates for the next financial year beginning in April, the total cost of UOR projects is expected to also top £1bn.

    However, in the current year all of the costs exceeding £900m are expected to be covered by the Treasury.

    This is not expected to be the case in the coming financial year. Under new Treasury rules, the MoD will have to pay back any costs exceeding the £635m fund two years from now.

    If the projections on UOR spending are correct, the MoD would therefore owe the Treasury £365m in the 2011-2012 budget. With the department's budget already stretched thin by minimal spending increases, two wars and a massive procurement budget, repaying the Treasury hundreds of millions of pounds that could be used for urgent priorities or operations will be problematic.

    It is not known how long MoD officials knew about the payback clause and whether they began to formulate their UOR spending requests for the coming financial year before or after the Treasury revealed the spending limits.

    The problem stems from the fact that the MoD's own budget is severely limited. Even high profile programmes such as the new aircraft carriers and FRES (Future Rapid Effects System) have not been immune to delays and in some cases, cuts. Funding for new programmes is hard to come by and often takes years from concept to delivery.

    Procurement officials as a result have formed a dependence almost exclusively on the Treasury's contingency and reserve funds for new equipment. If it can be used in current operations, the equipment can be procured under the UOR process.

    The UOR fund has produced a number of mainstays and highly regarded upgrades in the Armed Forces. Mastiffs and Jackals along with other armoured vehicles have been procured, up-armoured and introduced to operations in months in order to better protect troops from mines and improvised explosive devices. The Harrier force has received a number of engine modifications and new weapons systems to help it operate more effectively in the Afghan conditions. The vast landscape has also produced a need for airbourne surveillance. MoD officials as a result have procured a number of unmanned aerial vehicles (UAVs) to improve surveillance and intelligence for ground operations.

    Now however it appears that procurement officials became overly reliant on the UOR fund. The gloomy economic outlook has forced the Treasury to tighten spending across the entire government. Despite the intensity of operations in Afghanistan and a possible troop surge of several thousand troops, the Treasury's rule will apply to the MoD as well.

    "This is a deeply worrying development," Liberal Democrat shadow Defence Secretary Nick Harvey stated. "The MoD relies hugely on UORs to meet the operational needs in Afghanistan."

    As a result the MoD faces a number of tough choices, none of which are desirable. Either the MoD will have to further delay high profile procurement programmes and continue to make cuts to current programmes in order to account for the £365m payback, or UORs for Afghanistan will have to be limited. The latter option could ultimately affect troops on operations and limit their access to new equipment designed to improve capabilities and safe lives.

    The reactions to the Treasury's new limits on UOR spending were largely negative.

    "Salami slicing of UOR funding is the very last thing that should be permitted or even contemplated - to do so is to gamble with the lives of our serving men and women," said Commander John Muxworthy, CEO of UKNDA, an organisation that lobbies for higher spending on defence.

    He labeled the affair as "defence on the cheap," pointing out the while Treasury is in the process of launching a multi-billion pound bank rescue deal that will see tens of billions of pounds of taxpayers money injected into the financial institutions, it is demanding a few hundred million pounds back from the MoD.

    "Defence, as politicians of all parties often recite, is the first priority of any government. If the will were there they could save our Armed Forces - for they are in need of saving," he added.

    With a troop surge pending in the coming months, Harvey questioned where additional funds would come from to safeguard them and give them the needed capabilities.

    "The Government has no choice but to make decisions as where its priorities lie, but the operation must surely come first. Parliament must be allowed to scrutinise any funding choices," Harvey stated, adding "without the resources to meet our obligations, success in already difficult conditions in Afghanistan will be that much harder."

    With the success of the government's long term policy in Afghanistan tied directly to defeating the Taliban, reduced funding will force troops to either do more with less, or increasingly rely on both the US who is already rumoured to be sceptical of Britain's capabilities and commitment in Afghanistan, or NATO countries who Hutton has gone out of his way to criticise in recent weeks.

    Either way, the MoD faces more uncomfortable financial decisions in the year.
     
  2. Again, that is only part of the problem and it all comes back to funding, lack thereof. The Defence Select Committee third report published yesterday is well worth reading through. It all points to a a future crisis in the making.

    "44. We are concerned that the MoD appears to have made little progress with regard to its examination of the impact of current operations on equipment. While the MoD appears to have robust data on the cost of equipment procured through the Urgent Operational Requirement process, it does not have information on the cost of recuperating equipment returning from current operations nor on the impact of those costs on other areas of its budget.

    Such costs must be substantial given the length of
    time that UK Armed Forces have been involved in current operations in Afghanistan and Iraq. The MoD must identify accurately the costs to date of recuperating equipment and the likely future costs of recuperation. Without such information, there is a real risk that these costs will fall on the Defence Budget, which is already under pressure, rather than on the Reserve as they rightly should be."


    http://www.parliament.the-stationery-office.com/pa/cm/cmdfence.htm
     
  3. If this is the first step in combining both MoD 'normal' procurement and UOR under one roof, and one paymaster, with the understanding that procurement must be more 'today' focussed for the threats we 'actually face' rather than 'next decade' focussed for the threats that 'may never occur' - it may prove to have some positive outcomes.

    On the otherhand, if it is just a simple case of the Treasury making spending cuts, then.... :x
     
  4. Seeing the process from the UOR end, I think its a case of HMT unsubtley reminding us that we need to consider our EP and whether we have our priorities right. Its all very well buying super gucci kit, but if after 7 years of continuous ops, we're having to go begging for extra kit, then something is possibly broken in the EP. I don't think the 2 processes should merge - the UOR can move very fast, but this does come at a penalty in terms of long term support and suitability for employment outside one theatre, while the EP is slower, but does (allegedly) deliver a better supported and more employable piece of kit. Merge the two and it all goes wrong.
     
  5. How about we cut the Treasury?

    The way it is going all the Armed Forces will be fit for soon is sitting in barracks for a few years with a single working weapon and stitching up old uniforms.

    ´bout time a chally gun was shoved through the window ofthe chancellor.
     
  6. Most kit has a lifespan measured in useage rates not calendar years. Moreover, the nature and location of the usage have a direct impact on the speed of kit deterioration.

    So, if HMT is concerned tht kit is wearing out a little too quick for its budget, then it should have a quiet word in Cyclops' shell-like and request him to avoid sending HMAF on operations and especially on operations in dry, hot, rocky and sandy places.

    Once again, peacetime mentality is kicking in: value-for-money being measured by its length of inuse in the inventory rather than its efficacy in use.

    How do you define "employable": a piece of kit that is proving to be very effective in the role for which it was purchased; or, a piece of kit looking good in the stores that could be employed moderately effectively in a range of roles that may never occur?
     
  7. Sorry Whitecity, I wasn't being as clear as I could have been there. My first point was regarding the fact that we are buying kit for the wider EP and not reprioritising our procurement programs to support current ops - instead we seem to be relying on the UOR process as the means of supporting these ops. Fine for a couple of years, not so fine after 7. We need to consider whether we need to restructure the EP accordingly.

    By employable I mean, a piece of kit designed for use in a wider range of environments and roles than a UOR. By definition a UOR is for a sole theatre (unless we take it into core) and to meet a specific threat or challenge - wider EP procurement meets these criteria in a way that UOR kit doesnt. Thats not to say we shouldn't buy UOR kit - its that it has longer term implications if we want to bring it into core.
     
  8. Then we are having and heated agreement. :)

    And why I suggested that if this is first step in reforming EP (the process, the mentality and the politics), then it may prove to be a blessing in disguise.

    I suggest that the current narrowly-defined thought process behind UOR procurement is deliberate to keep it separate from EP; to keep peacetime procurement practices wholly distinct from UOR. A conflation of the two could well bring benefits all round.
     
  9. Blimey. Cutting the UOR budgey just weeks before 12 Sqn (Tornados) are to deploy and replace the Harriers in the 'Stan. The Tornados aren't yet brought up to spec, and a big chunk of last year's budget was used getting the Harriers fit for ops. Something to consider...
     
  10. The UOR and CPF budgets are the only reason why we have managed to stay reasonably effective in theatre. Cut them and we are back to where we were = shit kit, limited capability and at the mercy of the usual budget nazis.

    Browncunt. If you want to cut the UOR budget then cut the commitments accordingly.
     
  11. This has been on the cards for some time and, I think, we have tried to ignore it! There is an almighty squeeze on the way!

    Litotes
     
  12. Would we have a suitable round ?? or would a tankie be on the end going BANG ????

    I agree the cuts should be implemented......just which politician do we kill first ??? :twisted:
     
  13. Or alternately; we've managed to bluff more funding out of the treasury to support 2x major ongoing operations despite the peace time budget they've provided and its caught up with us.


    Again, some options;

    1 Increase the real budget to reflect the long term Op requirement (vote loser)
    2. Reduce the Op commitment to reflect the budget (not possible due to commitment - vote loser)
    3. Accept the risk of reducing the UOR/CPF budget and the following reduction in capability without reducing the workload (the only option that will be taken. Thus ensuring that the job cant be completed effectively and more blokes are put at risk due to lack of kit)

    We just knew the cash available would be slashed due to pulling out of Iraq didn't we. Money will be far better spent on failed banks and their directors.
     
  14. I'm starting to get the feeling that the military should start acting like liverpool council did in the 80's, spend what's needed regardless of government advice, then worry about getting the politicos to pay for it.

    Hell they couldn't run up debt faster than cyclops does
     
  15. A very good idea! I'm not sure it would work in reality sadly.

    Shooting politicians sounds the best idea on the thoughts posted so far!