MoD budget 'black hole' revealed

Opposition parties have warned that the Ministry of Defence had a "black hole" in its budget after a secret internal report found that it was facing cost-overruns of £35 billion on its equipment programme.

The devastating report by Bernard Gray, a businessman and former adviser to Labour defence ministers, said that the problems were so severe they were "harming our ability ... to conduct difficult current operations", according to a leaked copy obtained by The Sunday Times.

It said that the MoD's equipment programme was £35 billion over budget, five years behind schedule and was unaffordable in the long-term.

The Tories and the Liberal Democrats accused ministers of trying to suppress the report which they said must now be published in full.

Shadow defence secretary Liam Fox said it had exposed the "serial incompetence" of the Labour Government and the MoD.

"There is a catastrophic black hole, so much so that the defence budget is little more than a con-trick at the present time where the Government pretend that they have procured equipment for the future when they have never actually set aside the money to do so," he said.

Liberal Democrat defence spokesman Nick Harvey said it "beggars belief" that the Government had tried to keep the report's findings secret.

"It is essential to the success of our current and future operations abroad, and to the safety of our troops that Labour faces up to the procurement and spending shambles over which it has presided," he said. "We need a completely honest, fully informed review of defence spending and MoD projects."

In an unsparing assessment of the MoD's performance, Mr Gray concluded that the procurement process was so incompetent and inefficient the only solution was to privatise it.

The report was originally commissioned by the former Defence Secretary John Hutton and was supposed to have been published before Parliament broke for the summer recess last month. However, ministers have now said that it will "feed in" to the forthcoming defence green paper, to be published early next year, which will pave the way for a full-scale strategic defence review once the general election is out of the way.