The Ministry of Defence’s accounts have been hit by a GBP 6.1 billion error linked to misclassified spending, MPs were told during a Public Accounts Committee session on 23 March.
The issue contributed to the National Audit Office qualifying the department’s 2024–25 accounts and centres on historic expenditure at the Atomic Weapons Establishment. Permanent Secretary Jeremy Pocklington said “historic expenditure, dating back as far as 2007, was misclassified as capital expenditure. It did not meet the capital recognition criteria”, adding that much of the spending related to early-stage feasibility work on major nuclear programmes.
The department stressed that the problem does not relate to operational nuclear assets. Pocklington told MPs “it does not relate to the operational assets or to nuclear material”, while Director General of Finance Aneen Blackmore clarified that the GBP 6.1 billion figure reflects missing audit evidence rather than wholly unjustified spending, saying “it was our ability to provide the evidence in the time available rather than the totality of the balance not being justifiable”.
MPs challenged how the discrepancy remained undetected for years, with Committee Chair Sir Geoffrey Clifton-Brown describing the situation as “extraordinary”. Blackmore pointed to weaknesses following AWE’s return to direct MoD control in 2021, citing “misunderstandings and accountability weaknesses” between organisations responsible for financial reporting.
The hearing also examined a separate GBP 2.56 billion breach of parliamentary spending limits. Blackmore said the issue related to provisions for legal claims and resettlement schemes rather than overspending, explaining “it is not a finding of in-year expenditure” but a technical accounting issue tied to insufficient budget cover for prior-year adjustments.
The department acknowledged growing pressure from legal claims, particularly around noise-induced hearing loss, though declined to provide detailed forecasts due to ongoing cases. Pocklington said “we have seen an increase in the number of personal injury claims, in particular around noise-induced hearing loss”, adding that estimates remain sensitive while litigation continues.
Beyond the accounting issues, MPs raised concerns about wider pressures on the department, including delays to the Defence Investment Plan and rising costs within the Defence Nuclear Enterprise. Pocklington said nuclear spending is expected to rise to between 20% and 25% of the defence budget, driven by new programmes, scope changes and inflation.
On equipment safety, officials addressed concerns over the Ajax armoured vehicle following reports of troop illness during trials. Lieutenant General Anna-Lee Reilly said “when maintained and operated as designed, [Ajax] presents no safety concerns”, though she confirmed further work is under way before a return to service is approved by ministers.
The Public Accounts Committee is expected to publish a report with recommendations following the session.
