The Carrier strike u-turn will cost the taxpayer at least Ap74 million. When this programme got the green light in 2007, we were supposed to get two aircraft carriers, available from 2016 and 2018, at a cost to the taxpayer of Ap3.65 billion. We are now on course to spend Ap5.5 billion and have no aircraft carrier capability for nearly a decade. The MOD rushed into a decision in the 2010 Strategic Defence and Security Review. Just 18 months later they were forced to admit they had got it wrong and revert to the original choice of aircraft. At the time of the SDSR the Department believed the cost of converting the carriers for the new aircraft would be between Ap500 million and Ap800 million. By May 2012 it had realised that the true cost would be as a high as Ap2 billion. Officials also made basic errors such as forgetting to include the costs of VAT and inflation. There are still concerns now. According to current plans, the early warning radar system essential for protecting the carrier will not be available for operation until 2022, two years after the first carrier and aircraft are delivered and initially operated. And the MOD does not yet have the funding to replace the shipping needed to support the new carrier. To avoid making the same mistakes again the MOD needs to start planning now for the next SDSR in 2015, including making sure that this time it has the right information on which to base decisionsThat effectively gives us some smoothing, but ultimately, if there was a significant move in the dollar-pound exchange rate, that would affect us at some point. ... Bernard Gray: The point I am making is that all hedging does is average it over time, fundamentally. ... We are exposed to significant dollar costs in the programme, and we therefore do have foreign exchange risk. ... It will not leave much for little things like frigates and destroyers to chug round the world and be used in battle.
|Title||:||House of Commons - Committee of Public Accounts: Carrier Strike: The 2012 Reversion Decision - HC 113|
|Author||:||Great Britain: Parliament: House of Commons: Committee of Public Accounts|
|Publisher||:||The Stationery Office - 2013-09-03|