Spending Spending Spending.
The comments above about Resource Accounting and Budgeting (RAB) are partially correct. The budget is indeed split into Capital and Resource, with Resource further split into Programmes and Administration. The important points to note are these:
1. Not all bits of the Budget are equal. Admin funding is magic (ask “Admin Guru”): Admin can be converted into Programme spending, and all Admin and Programme (Resource) spending can be converted into Capital spending. The reverse is NOT true; Capital has to be spent on Capital, and Programme cannot be spent on Admin. The reason for this is that faced with the choice of employing more people (admin) and doing stuff (programme) or buying or building something, historically the UK public sector as a whole – and defence wasn’t too different – employed lots of people and under invested in capital. Hence the Treasury set up rules to ensure that Departments were forced to invest in capital by not letting them spend investment money on resource / programme; hey presto, investment increased.
2. RAB was introduced in two stages – and in both stages Departments worked with Treasury to establish what the baseline was. If MOD messed up the figures, they’ve only got themselves to blame.
3. The equipment programme in SDR was overly ambitious and never funded – it couldn’t have been as the Spending Reviews only cover three years at a time (the next one conducted next year will be superseded in April 2007). As a result, everyone has been assuming that all the new toys are funded; now that the bill is becoming due, there’s insufficient cash to pay for it. It looks to me like MOD has run all of these projects in the hope that the Treasury would bail them out; if Treasury haven’t then MOD has a procurement cash crisis. Again, MOD to explain.
4. Project management? MOD procurement disasters? (Err… Astute, Nimrod MRA4, Bowman etc etc etc)
So think that there are lots reasons for the current cash crunch; and looking around we can all see things that are being done badly or aren’t necessary. Lots of opportunity for the new S of S to make a difference!