The committee insisted, after examining Exercise Saif Sarea II in Oman last year, that exercises were a crucial means of maintaining military capability ‘and the full cost or resources consumed should be taken into account and balanced against other calls on the Defence budget’.
But the Ministry of Defence said decisions on resource options for activity ‘are based on net additional costs, which provide a common comparator with operations and other military activity’.
A Treasury minute replying to the PAC said: ‘Identification of full costs would not, in the view of the Department, improve the process of establishing the cost-effectiveness of an activity. It would also be very costly and time-consuming to produce.’
The MoD claimed the Treasury agreed to this accounting treatment of exercises in 1999.
The committee’s report accused the MoD of using false accounting logic, which priced the cost of sending planes on the exercise half way round the world considerably less than using tanks.
The clash follows the MoD’s shock discovery that under resource, instead of cash accounting, scrapping Harrier jets earlier to make a saving actually resulted in overspending in the year concerned because the value of assets was being written off sooner than expected.
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