The Ministry of Defence have spent £9 million on “fruitless payments” between 2016 and 2019, including developing unused software, paying rent on demolished properties and paying contractors to do nothing.
The very interesting Freedom of Information request looking for the following information was lodged on the 8th of January this year, it asks:
- The number of fruitless payments (payments for which liability not to have been incurred or whether the demand for the goods and services in questions could have been cancelled in time to avoid liability) in excess of £30,000 made by or paid for by your department or its predecessor in the following financial years: 2016/17, 2017/18 and 2018/19
- What each payment was for
- The value of each payment
- The reason why the payment was made
- The reason why the payment was classified as fruitless
- Whether any disciplinary action was taken as a result of the payment (if there was any disciplinary action, please specify what the action was)
What are ‘Fruitless Payments’?
As defined in the Ministry of Defence Financial Accounting & Reporting Manual:
“Fruitless payments – Payments where the Department receives nothing useful in return and: should not have incurred the liability; or could have taken appropriate action to avoid incurring the liability. For example: the cost of repairing incorrectly packed equipment damaged in transit, the cost of rectifying design faults arising from poor specification, failure to cancel travel, accommodation and training bookings in time to obtain a refund.”
What are the biggest payments for?
Here are the top 5 payments as per the Ministry of Defence information.
| What the payment was for | Value of payment | Reason for payment | Why the payment was Fruitless | Disciplinary action taken | Year |
| Contractual payment | £3,274,704.00 | Leased gas cannisters not returnable to contractor. | Payment could have been avoided | No | 17/18 |
| Rental on MoD houses | £539,859.71 | Payments contractually due rental for 182 demolished properties for a 12 month period | MoD has no beneficial use of the properties | No | 17/18 |
| Rental on MoD houses | £515,203.59 | Contractually due rental for 184 demolished properties for a 12-month period. | MoD has no beneficial use of the properties | No | 18/19 |
| Minimum Order Quantity | £363,000.00 | Contractor had minimum order quantity for operational ration packs | Minimum order quantity was higher than requirement, but it was not possible to procure a smaller quantity | No | 17/18 |
| VAT Interest/penalty | £184,423.20 | Interest on underpaid VAT to HMRC | Payment could have been avoided | No | 18/19 |
Notably, many payments relate to interest charged by HMRC or are late payment fees. The Ministry of Defence have outlined measures being taken to tackle this.
“Please note there are a number of measures being taken by the MOD to tackle the Interest being charged by HMRC for VAT owed by the department which include:
- The new Contract, Purchasing and Finance system has a tax engine to help determine the correct VAT code.
- Additional training is being provided to assist MOD management group staff in determining the correct VAT codes, and lessons are learned from any previous mis-coding, reviewing existing contracts to ensure compliance and making the appropriate corrections where necessary.
- Specialist finance staff are also available to advise on VAT issues, arranges reviews and ensures corrections are processed.
- Guidance is available from the specialist MOD VAT central team who may themselves contact HMRC if it is required.
- Where the MOD believe the HMRC ruling does not take full account of an exemption or a new category of exemption is required, an appeal may be raised.”
Raw Data
It is important to note for the sake of perspective that the Ministry of Defence budget for the same time period was £35.3bn in 2016/17, £35.9 billion in 2017/18 and £36.7bn in 2018/19, that’s around £107.9bn in defence spending in total over the period covered above.
The total wastage outlined in the response to the Freedon of Information request is £9,086,480, That’s 0.00842120481927711% of £107,900,000,000.
If you’d like to see the full table with the raw data, I created this table from the information and sorted it by value. If you’d like like to see it exactly as presented by the Ministry of Defence, see here.
I’m actually stunned that it’s only £9 million would of thought with the finger pointing from many successive Cabinets slagging off the MOD, there should be 1 or 2 zeros after the £9.
You are absolutely correct. £9 million is a lot to me and you but out of a budget of £32 billion minimal. I’m not defending it but it could be much worse. Where the MOD does waste a lot of money is in procurement where often they extend a contract over time so as to pay less per year but more in total – think Typhoon, QE class, T45, Astute etc…
I agree Rob procurement wastage is in a different league. I’m just stunned the utterly pointless payments don’t add up to more.
It’s not just the MOD it happens in big business too.
I’ve watched an engineer at work get his part numbers muddled on a order list, long story short he ordered 60 complete fibre optic routers (£900k each), 2 spare input cards and 60 spare output cards (£34k each). Director of operations laughed it off, told him to order the spare inputs and store the rest of the routers for the next 20-30 new kits.
Yeap seen similar things too. Another large cock up is the defence estate management. Land in the UK is a resource and the MOD still have way more than they need. Now some surplus is needed in case the balloon goes up but if that happens the government could just requisition the land, so all these little used training areas, airfields etc… WHY?
I’d like to see some land go but I suspect a lot of it has to do with the way it’s sold to developers so gets buried in houses, also strangely a lot of training areas have become nature reserves or are very close to 1.
I once called HMS Broadsword (in a Broadsword to Danny boy moment) for an imaginary fire mission during an impossible platoon attack on Braugnton Burrows in Devon (and got royally bollocked for it). So glad it survived and is now a nature reserve and that it didn’t get through to the real HMS Broadsword who might have ended it. Ooops!
Yes I like the nature reserve stuff but keeping dilapidated housing, like in Aldershot is a bit stupid really.
I doubt it would have ended it.
She didnt have a gun .
Exocet and Seawolf and the 20mm and 30mm (Possibly40mm if it was a long time ago) guns wouldn’t have done much!
🙂 Yes! A batch 1. Batch 3’s only had the main gun.
The 9 million is just the stuff that is ‘fruitless’ and doesn’t cover all the stuff the MOD pays well over the odds for. Even stuff like accommodation, places like Barrow in Furness where the mob pays well over the going rate for private houses for the guys taking out boats from build. There’s a LOT of money gets wasted across the MOD that technically won’t be ‘fruitless’ just stupidly expensive.
That’s chicken feed!
Still waste and incompetence though.
The bulk of that money is a pure ‘money go round’ though. All washes through into the same HMG pot when taken back as fines and penalties.
The entire MOD needs to be scrapped and replaced with a new department worked from the ground up to better monitor and manage its resources. I bet the MOD still use fax machines and old computers with XP still installed.
I now work in the MOD supply chain (RN Navy Surface Ship & Submarines) and the amount of times we have to supply the MOD & or their own sub-tier suppliers with their own engineering drawings is mind boggling.
The disorganisation at every level is staggering really.
Start with the NHS first.
“Govt announces extra 500m for NHS” …that’s a new pencil for everyone then!
Nothing wrong with XP. Lots of back end GUI use XP. They are not on the internet and are standalone touch screens so its not an issue.
Two things do jump out from the list, the first is payments for properties that have been demolished.Can sme one explain to me how that works, if there is no building then what is the rent for. Not sure but to me it smells a bit. The second is the amount of payments to HMRC in the form of fines for incorrect or late payments/VAT etc. Surely it would make sense to have a HMRC team enbedded in MoD to make sure this does not happen. Also I find it a bit strange in that some of the problems with… Read more »
You would have to dig into the complexities of the Annington deal to derive rent on demolished buildings. The land was subsequently transferred to MOD freehold
I don’t know for certain but could be on long-term leases.
I work for a university accommodation department and we have leases on properties in the city centre we use for extra student accommodation. They’re 25 year leases and we’re tied into them, even though they actually lose us money.
Could be something like that. If they have a long-term lease on a property that’s been condemned and knocked down, but someone in MoD can’t be bothered to challenge the lease contract.
Gobsmacked that much of it was avoidable. Such as late payments. And the stolen landrover!!!!!
Thanks UKDJ for both the FOI and compiling the data!
It’s amazing that govt depts have to pay VAT to HM Treasury, and they even get charged interest on underpayments…
Slightly off topic, as it’s not exactly “fruitless payments”, but may involve additional expenditure to add to the £10bn procurement black hole: Jane’s is reporting that there’s problems with the first batch of Ajax vehicles and the MOD are reassessing the programme…
I saw that, its a bit worrying. Maybe its teething problems if they rushed the first batch out to meet a deadline, but its not like the contractor hasn’t had plenty of time to get things right. Although the manufacturing site pretty much had to start off from scratch as armoured manufacturing died out in the UK 10 years earlier thanks to government dithering and delaying.
Disciplinary action taken – NO
And we wonder why much bigger mistakes are made in procurement. If is no repercussions is no deterrent.
Thank you, most of all, for putting the raw number in the context of the whole defence budget- it is so rarely done now that I was almost surprised!