The Ministry of Defence has been fined due to procedural failings.

The Ministry of Defence was fined £31,6m as it “had not appropriately sought nor gained necessary approval from HM-Treasury prior to the placement of some contracts”. The Ministry of Defence was also fined £1 million for failing to seek assurances that high-paid off-payroll appointees had arrangements in place to pay income tax and national insurance.

The information came to light when clarification was sought over an entry in the Department’s Annual Report and Accounts 2013 to 2014.

“With reference to page 109 of his Department’s Annual Report and Accounts 2013 to 2014 and page 17 of his Department’s Annual Report and Accounts 2014 to 2015, if for what reasons his Department was fined (a) £31.6 million and (b) £1 million by HM Treasury.”

Jeremy Quin, Minister for Defence Procurement, responded:

“ARAc 2013-14 – £31.6 million Fine from HMT

There were no fines of this value reported in the MOD ARAc 2013-2014 publication. A fine of this amount however was reported in the MOD ARAc for 2015-16 and it is this entry that we assume is being referenced in the question.

This fine related to instances where the Department had not appropriately sought nor gained necessary approval from HM-Treasury prior to the placement of some contracts. As a result of this procedural failure, HM Treasury imposed a £31.6million fine upon the Department. The Department undertook extensive action to address the procedural weaknesses, no further fines of this nature have been imposed upon Defence in the subsequent years.

ARAc 2014-15 – £1 million Fine from HMT

This HM Treasury fine was imposed for failures by the Department to seek assurance from a number of high-paid off-payroll appointees that they were paying the correct tax and National Insurance. This relates to procedural failures to seek assurance as part of the onboarding process for off-payroll staff to confirm the arrangements in place for those individuals to pay income tax and national insurance. The Department has implemented revised processes for the management of off-payroll employees including the new responsibilities placed on employers by changes to IR35 legislation. As a result, no further fines of this type have been imposed since.”

George Allison
George Allison
George has a degree in Cyber Security from Glasgow Caledonian University and has a keen interest in naval and cyber security matters and has appeared on national radio and television to discuss current events. George is on Twitter at @geoallison
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57 COMMENTS

    • Hardly surprising when a 4 star decides to spend…wait for it 85k, yes eighty five thousand pounds on a projector because the original one was “too noisy” for him. Easiest thing doing, spend some one else money.

      • Really? When, where was that? Seems a little unlikely that would be authorised no matter the number of stars. Quite shocking of true.

    • I don’t think so. MoD placing contracts without Treasury authorisation is very rare – in fact I had not heard of a single case before this story. The MoD will not be in financial trouble due to a £36m fine – that is exceptionally ‘small beer.’

  2. So – A Government department is fined and the money goes to.. The Government. Remind me how this acts as any kind of deterrent or punishment?

  3. Fiscal control is necessary, but not when that fine could be spent on much needed Army procurement. It’s nonsense when all said and done.

    • Wouldn’t let Army lose in a sweet shop.

      However, that fine needs to relate / be connected to the annual performance reviews of the individuals concerned so that they do not receive any pay rises. Harsh? It’s gone on too long and an example needs to be set.

        • BB85 But,as its the Civil Service it equates too an early retirement with all perks intact ie a well earned taxpayers funded guilt edge pension but no Luncheon Vouchers

      • “Wouldn’t let the Army lose in a sweet shop”
        How about RN Type 45 destroyers that love nothing more than breaking down and RAF Chinooks that sat in hangers for years unable to fly. Two quick examples from the other services. All three services have had procurement issues, AJAX is just the hot topic right now.

        • To a certain extent, yes, the Army is certainly the whipping boy of the moment. I’ve not doubt that the Navy and RAF are glad for the breather.
          But, to be fair, the Army have consistently failed to manage their existing fleets of equipment through life in any appreciable way over the last 15-20 years at least; two of their three current major programmes (Warrior CSP and Ajax) are in such a bad way that they’ve already cancelled at least one of them; most commentators (ex-military and civilian alike) don’t see their future force plans as fit for purpose or realistic in any way.
          Yes, the T45s have propulsion issues and took a long time to build, but those were both government decisions based upon domestic content and cashflow- not caused by the Navy itself. Frankly, I don’t know anything about the Chinooks in the RAF, but I do know that they came in handy in Afghanistan and currently in Mali too- and they’re being upgraded through their service life (something the Army doesn’t seem to believe in).
          Absolutely, the Army has bourne the brunt of having to physically do more with less in both Iraq and Afghanistan. That is certainly a cashflow challenge for them, as well as wear and tear on equipment and manpower. But the problems they seem to be having are mismanagement and incompetence within the resources they have, which broadly speaking does not seem to be the case with the other services.

          • Joe, that’s a great answer and not half as knee jerk as my initial response. I think you make some good points, to continue our conversation;
            I do not think it is the Army who are at total fault with AJAX. It was rejected by the Army during trials which highlighted vibration amongst other issues. It is back with the manufacturer to sort,(If possible) although to get this far has indeed cost the Army a lot financially. The dropping of WR CSP was pure cost. WR hulls have been in service for a very long time, and lots of them have developed cracks and fractures which make the fitting of a 40mm turret, not as cost effective as people may think. Procurement, with regards to defence is not easy to comment on with any real depth of knowledge outside of someones KSE. It is too complex, and media reporting often misses much of the real detail.

          • I believe we bought a number of chinooks to add to the force and the spec wasnt workable with our forces, they sat in a warehouse and had to be downgraded and it cost millions. Please feel free to correct me if u can remember the story as its bit vague to me.

          • If I recall correctly, the chinooks in question were purchased without the appropriate agreements in place relating to software integration to fuse our bespoke kit to the installed controls. Meaning they could only fly in clear weather, daytime only. The use of bespoke kit was an attempt to save money which spectacular backfired.

  4. How about personal accountability, instead of fining the MoD? You know, fine the individuals who signed off those incorrect decisions. Ridiculous idea, I know. Next I’ll be wishing for unicorns.

    • Personal accountability is a dirty word in many areas of the public sector unfortunately.

      It’s far too easy for incompetent individuals to hide inside monolithic organisations like the MOD, in much the same way as the teaching profession.

      You have Unions fighting the case for anyone who’s a paid up member, no matter how useless. In the teaching community, it’s often easier to allow a contract to naturally terminate, than it is to take on the fury of the teaching Unions and sack someone.

      The private sector would come as a very rude shock indeed…

      • John,

        I dont agree with what you say about incompetent teachers being able to hide away and evade detection.
        I’m a former primary school teacher and I still do the odd bit of supply now. Teachers are observed constantly, their childrens academic levels are scrutinised monthly and parents are more on the ball with their childs progress than before.

        Yes the Unions are there to act for teachers should they be hauled over the coals for their performance. They dont protect them from evidence gained from the above. They do however provide an ally for the teacher, who often is up against Year Group Leader, Head Teacher and Executive Head Teacher. Outnumbered to say the least. If this an NQT (newly qualified teacher), they will already be under stress and uncertainty as they try to learn the ropes in what can be a difficult classroom. Difficult due to the complex needs of children in order to learn the prescribed curriculum.

        Where the teaching is at fault, then a plan is approved by all to try to improve that teaching. It is only after a period of time, that dismissal may occur.
        But I do know of many teachers who have suddenly left the classroom, never to return. Senior leaders would have decided to limit the damage and replace immediately rather than let contracts run their course or even allow time to improve. But even this would not be out of the blue. Signs would have been there. Whether they were read or not is not for me to say.

        But I would argue that teachers are far more personally responsible for their work than an MOD procurement officer, and probably have invested more of themselves in their role, than a civil servant ever would.

        Its easier to be found another role as a disgraced civil servant, than it is as a disgraced teacher. And that, is based on fact.

        • Hi Jon,

          Thanks for your input.

          I would offer an observation that you might be able to answer.

          Has there ever been a single occasion that teaching Unions have called for strike action that wasn’t directly related to pay and pensions?

          Have they ever (even once) in 50 years, called for industrial action over poor school resourcing or overcrowding in classrooms etc?

          It seems that the two main teaching Unions are unreformed dinosaurs, cut from the same cloth as the old NUM, calling for strike action at the drop of a hat, actions that never appear to be in the interests of the students.

          I think the answer to this is unfortunately very telling….

          • Yep, John, absolutely agree. Money, pensions etc are the mainstay for teaching unions. I guess because they are controlled directly by the government.

            Resources and equipment, right down to pencil sharpeners are the schools responsibility, or the individual academies of which many schools are part of now.

            But senior civil servants wasting millions, then waltzing off into the sunset has got to be addressed. Making each manager personally responsible what happens under him would perhaps force a change.

    • It would simply be pinned on a lower ranking person in the MOD rather than the Senior management. The Senior manager would then be promoted.

      You know who is ultimately responsible for these decisions as the head of the MOD? The Defence Minister! But getting Ministers to take responsibility is like forcing a boulder through a keyhole…

  5. So money is spent on money going around and around government departments. This really is insanity. What about if there is a procedure breach they solve the problem not waste taxpayers money by pointlessly moving money around departments.

      • Hi graham, it depends I’m not keen on disciplining individuals who are just working as part of a system as a first step ( most errors are forced by a system, such as lack of clarity of process, poor training, to much work, impossible goal setting etc) for me you need to hold the leaders to account for what happens in their services, making sure that they make sure everything works properly, processes are clear, staff are trained, correct resources are in place and clear goals are set. If leaders don’t do that after it’s been made clear there are issues in a service they run they should be gone. You very rarely improve a service by punishing the foot soliders.

  6. Why does HMT have control over individual MoD contracts? Is that a control freak thing. MoD contracts are made against MoD budgets. That’s an MoD thing. End of. Let the people who know about defence things be responsible for defence things. HMT should only get involved in the overall picture. Anything else is having fingers in other peoples pies.

  7. Reminds me of the good old days when you saw one of your mates tapping the boards for going into the red with his bank. (I once received a warning letter from mine stating that they would write a letter to my unit because I had gone into the red, I concerned looked into the matter and found that the pay office hadn’t paid me that month, and so I wrote them a nice polite letter stating just that and that, if they did write such a letter, that I would take the person who had signed that letter to court for a breach of confidentiality, for some reason the bank never did write a letter to my unit)
    Anyway I digress, so one of the lads in front of Oscar Charlie for being in the red and what does the army do, they fine him. 

  9. Oh what a tangled Web these Cival servants weave and which one will be held too account ,forced to retire and then given a gilt edge pension

  13. It’s madness, surely the people, if mistakes were made and it does wiff of judge and jury, then they should lose their jobs ? The fine maybe small, but it would make difference if say spent on poor houseing some of our troops live in. No 11 needs to be held to account in Parliament and justify how this makes the UK safer? Are they saying it’s corrupt or just someone not doting the TS or ticking the right boxes. Any taxes that should have been paid needs to be recovered by IR.

  15. This is just stupid. How does it help for the treasury to take money away from defence…? The treasury has too much power and autonomy.

  16. IMHO that’s why there was the big uplift to the Defence Budget in the last Spending Review. Made the Government look good and shut up the Tri-Service Chiefs about lack of funding, all because the Chancellor knew they were going to get a big chunk of change back in the coffers by way of fines! SR just a paper exercise as normal, never a real commitment to provide desperately needed investment.

    • The defence budget increased by £16.5 billion over 4 years. The fine was £31.6 million for 1 year. even at £4.125 billion per year the fine is ~0.7% of the increase. given there be 95 million wasted looking at a new missile, that is now not going to be purchased

      • I get the mathematical breakdown provided however, my point is MoD were getting one of the biggest SR budget increases I can remember. Now a lot of that extra funding is going back into Central Government coffers so no actual physical increase to the amount promised, just numbers moving on the Chancellor’s ledger.
        As for wasting £95M on a new single use weapon, I would sooner see that money invested in developing forward operating troop vehicles that neither roll over on a bit of a slope killing it’s passengers, nor creates so much noise it destroys their hearing, potentially ending careers and creating huge (deserved) personal injury compensation claims. And this is what is happening just during the proving trials, not in theatre.

  17. Just my 10 bobs worth, If you look at establishments like Abby Wood it was built to house 5000 people but now there are over 10,000 people trying to use the place so that over half have no access to the a secure terminal, very little parking, no accommodation.
    It is not fit for propose, I think the Civil service should be disbanded and have the relevant wings of the armed forces run there own budgets, if they need civilian help then they should be free to enlist that help directly.
    Too many fat cats getting fatter in the CS.

    • Sorry but not all of us Civil Servants are fat cats.
      R&R across all wings is getting harder to achieve especially when Government want to reduce the overall headcount of SP’s meaning their skills have to be channeled into the combat functions of the particular wing. CS’s are required to fill the skills gaps this creates and yet Government wants to reduce the CS headcount too which makes our workload more demanding; working in the CS is not the cushy number some seem to believe it to be. It’s a symbiotic relationship without which a lot of functions that specialist CS’s do would have a devastating effect for Tri-Service personnel; there isn’t enough of them to cover all the work that keeps the Services operating. Keeping some functions outside of Service control also helps reassure the taxpayer (which also includes CS’s remember) that HM Forces are ‘kept honest’ – Rank cannot be used to ‘encourage’ a CS to ‘overlook’ or ‘sidestep’ regulations. Also, the whole purpose of having a Tri-Service Military was so ideas, development and resulting resources could be shared, preventing one thing being created 3 ways at triple the cost and conversely mistakes only costing a third. There will always be rivalry between the 3 Armed Forces but they are better skilled in cooperation when called to theatre through being combined. As for estate vs headcount needs such as your Abbeywood example this is being addressed through the rollout of new IT to all MoD staff which will offer more freedom to work from home depending on what their duties entail. Some jobs are now even advertised as Remote working. This new way of working has been in development for a while as a way to reduce estate and personnel costs, and address the overcrowding you highlight at places such as Abbeywood. Covid brought forward its introduction and proved that it can work effectively as a future business model.
      The military has operated with civilians in support throughout history. It’s a pity that a minority fail to remember that, question the reason for our existence then wonder why we sometimes feel unvalued or unappreciated for our contribution. Maybe it’s just because we don’t need to wear a uniform and throw up salutes to prove we do a respectable job.

      • Hello Dusty, Is good to see some one fighting the CS corner, but unfortunately the lack of accountability makes the whole process in the CS not particularly cost affective and in some cases bordering on criminal.

        If you look at the USMC and how they operate, which has a similar budget to the UKs armed forces and they are also a Tri service. When they need equipment they appoint a senior officer as well as SNCOs who are experts in the feild of the required equipment or the equipment being replaced, then if they need civilian expertise they then recruit them directly, they are then held accountable for the budget and the delivery of the new equipment.

        We also used this system back in the 1st and 2nd world wars the first under Admiral Fisher who was also responcible for the design and build of the original HMS Dreadnought from paper to putting the ship in the water was just 102 days, a feet which has never been replicated.

        Covid has made a lot of people work from home but the private sector is now encouraging most people to come back to the office as the productivity of people working from home is a lot less than people who work from the office and when you are dealing with state secrets I would have thought a little supervision would be in order.

        So until the CS personnel can be held accountable for the decisions then there will be zero trust in the CS by lesser humans who can only aspire to join the armed forces and have to use the faulty and substandard equipment recommended by the CS.

        • Hiya. Think we might have crossed wires here a bit. You seem to be referencing more to the Senior Civil Service hence the fat cats reference. I’m focussing on the Civil Service I work for, the worker bees that SP’s are more likely to know and work with. To me SCS and CS are two distinct and separate businesses bundled together under one title. The SCS being referred to as mandarins in the media doesn’t help define this. I’ve no desire to offend or argue with you or your remarks, nor be scooped up into the often negative reports that may have helped form your opinions that I respect your right to hold because yes, often the SCS are the ones clutching the purse strings making the big decisions and rightly should be held to higher account. This is why I should have stressed I was responding from my personal CS perspective. Us minions who work hard in often less than perfect environments with lower standard yet equally expensive supplies with little to no thanks from uniformed superiors who have no idea how to do our work, would be stuffed without us yet still treat their dog better than us. Bit like JNCO’S really I suppose, but at least I get a guaranteed hot shower when I get home from work.
          I am proud of the work I do in the CS because I am supporting directly to the best of my abilities the people who are prepared to fight those who mean to harm us, our country and the basic human rights and liberty I enjoy. I’m married to a Veteran. These are who I am accountable to along with the taxpayer whos money I deal with literally every day. Because of these reasons and my lacking the requisite selfishness and backstabbing skills needed to succeed I could never be tempted to go over to the Dark Side that is the SCS.
          Kind regards
          Dusty

          • Hello Dusty, We come to a similar conclusion (well on the same page) but it is not just the CS that treats the junior ranks as “pee-ones”
            As Churchill said “power corrupts and absolute power corrupts absolutely”
            All people involved in decision making should be held accountable for their decisions Politician, SC and Military.

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