You hit the nail on the head by mentioning waste, Leon. I've never understood why our society accepts it so readily. Lack of accountability invariably leads to waste and government departments are perfect examples of this. The State should do minimum necessary for its citizens and enable and private business to do the rest (suitablyregulated) If you put the output of the MoD on one side your balance sheet and the cost on the other side you'd see how little you were getting for your money. I'd fund a small R & D department to ensure the UK retained/developed skills and inventions and let UK defence industries go to the wall if they weren't internationally competitive. We'd save a fortune.
By the way, I'd also look closely at charitable staus for all sorts of enterprises....private education being one of them!