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Carrier jet accounting errors cost £74m

4th Sep 2013
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Plans to change the fighter planes on new aircraft carriers wasted up to £74m through “basic accounting errors”, MPs have claimed in a new report.

MPs on the Public Accounts Committee said estimates were rushed through and based on wrong costings, not taking into account increases in inflation or VAT.

Margaret Hodge, chairman of the PAC, said: “The MoD has admitted that the 2010 decision was based on deeply flawed information. Officials also made incredibly basic errors such as forgetting to include the costs of VAT and inflation.

“This about turn, which will cost the taxpayer at least £74 million, is the latest in a saga that has seen billions of pounds of taxpayers’ money down the drain.”

The cost of converting the carriers for new aircraft is expected to be up to £2bn, rather than £500m to £800m, in part because officials thought that VAT would not apply.

The committee also criticised Ministry of Defence (MoD) officials for rushing into a decision to change the type of aircraft before the defence spending review in 2010.

In its 2010 Strategic Defence and Security Review, the coalition changed to the F-35C version, which has a longer range and can carry more weapons.

However last year defence secretary Philip Hammond said the MoD was reverting to the jump jet version amid fears that the cost of fitting the necessary equipment was out of control. It said it had adopted the carrier variant of the Joint Strike Fighter, dropping a jump jet version of the same plane which was chosen by the previous Labour government, on cost and operational grounds.

Hammond said the MoD had “acted swiftly” to revert to the jump jets: “We did incur some costs, but we did so in order to save £1.2  billion, a clear demonstration of our commitment to safeguard taxpayers’ money.”

The MPs also found that an early warning radar system to protect the carrier would not be ready until two years after the first carrier and aircraft were delivered.

Replies (14)

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By jonnybennett
06th Sep 2013 11:59


am i missing something here?  how can VAT be a cost to the govt?  the mod will pay it but surely it will then be paid over to hmrc.

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Replying to EnglishRose:
By The Black Knight
06th Sep 2013 12:17

it's no wonder we are in a pickle

jonnybennett wrote:

am i missing something here?  how can VAT be a cost to the govt?  the mod will pay it but surely it will then be paid over to hmrc.

it's no wonder we're in a pickle

and other taxes they believe the government workers and secondary employees contribute.

it works thus (numbers for illustrative purposes only)

Salary 12,000 tax recovered 5,000 to pay for salary borrow 7,000 (less some recovery from real business, shrinking)


Outsource, and supplement with crime figures to massage figures for more lending and secure on an over inflated property market.

Why should government be any different from Enron and the banks.

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Replying to EnglishRose:
By tomriv801
06th Sep 2013 22:16

never fear.

do not worry, the vat will be a useful contribution to the cost of replacing the natural underground aquifers hs2 will be devastating. it will be a useful supplement towards the cost of the water being piped from Siberia. putin is playing this card close to his chest, that is assured. he is determined to increase his exports seems very odd after the fiasco of not budgeting for vat in building the facilities for the Olympics the same mistake has occurred.if I have a doubt re vat, I just make a short call to the vat office!

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Replying to gnpw:
By tomriv801
07th Sep 2013 13:21

a clever lot these Russians - all they will to do is turn the tap off and............. 

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Replying to gnpw:
Small Dog's RAT Return
By Oldmanwetmix
10th Sep 2013 13:27

The VAT office!!

It was probably the VAT helpline that told them VAT wouldn't apply in the first place, then denied any responsibility when some-one at HMRC read Tolleys and decided VAT did apply after all.

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Replying to EnglishRose:
By plummy1
07th Sep 2013 13:01

Maybe the HMRC had already taken into account future receipt of the Vat whilst the MOD did not take account of the payment of it. This would lead to a hole in the Governments overall budget.

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By David Trangnar
06th Sep 2013 12:35

Accounting Errors in MOD Purchasing


And once again we pick up the bill. Will these people ever learn, or are they institutionally and systemically wasteful? Certainly sloppy with other peoples' (our) money. 

I dont recall (does anyone) ANYONE in authority carrying the can for these recurring failings. 

Isnt it about time? maybe it might sharpen up their concentration a bit.

Absolutely inexcusable (and I'm an Accountant).



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By pawncob
06th Sep 2013 12:45
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Replying to ohgoodgodno:
By The Black Knight
06th Sep 2013 15:31

tis interesting

pawncob wrote:

Do they intend to use them for recreational purposes? 

Is it commercial either? Perhaps it needs a payment for the protection of oil reserves, or a sale and lease back with the cayman Islands LOL

Or they could take it to a tribunal like the car parking fees debacle and waste some more money throwing buns between government departments.

Don't fall in either category so its Std rate applies?

How did they rate the supply of the carrier in the first place? as this is only the modification.


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By pauljohnston
06th Sep 2013 13:13

Another govenrnent management decision

Yesterday is was £34million from DWP and today a mere £74 from MOD.

Duncan-Smith said yesterday that the "Civil Service" management was not up to the job so he had to bring in some one from ourside (ie a real businessman).  It does beg the question is management in the Civil Service up to scratch.

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By berniec
06th Sep 2013 13:44

VAT Treatment

"The cost of converting the carriers for new aircraft is expected to be up to £2bn, rather than £500m to £800m, in part because officials thought that VAT would not apply"

Do we know on what grounds the "officials" thought VAT would not apply but the VATman says it does?

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By Tom 7000
06th Sep 2013 14:33

meanwhile overheard at the treasury





can you zero rate weapons for vat purposes




we have blown the budget on the aircraft carrier and the media will have a field day and this will fix it....


Who is the secretary of state for defence?


Phillip Hammond....


He was ghastly to me at Oxford and he got a 1st in PPE and I only got a 2.1 in History and he had me drummed out of the Bullingdon club.....let the little  $£&#er    rot.


So now you know....


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By pauljohnston
10th Sep 2013 14:53

Thanks Oldmanwetmix

For making me laugh on a depressing afternoon

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By David Trangnar
13th Sep 2013 09:57

Government Purchasing Messes

All very well this - amusing etc, but where does it get us? 

Does anyone in Gov't give a ****? (apart from being caught doing it)

Govt will be gone in two years, few of them get to stay long enough to face the consequences of their failures, and Civil Servants ("not up to the job"?) get their pension anyway. 

And isnt it strange how these failures are NEVER in our favour? Statistically 50% of them should be.

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