The Ministry of Defence is "reasonably confident" it can cut more than £4bn from its equipment support costs over the next decade, the department's permanent secretary has said.
The MoD's procurement arm - Defence Equipment & Support - has asked outside consultants to help it find savings in the amount it spends on maintaining and repairing military equipment, a budget it wants to see fall by £4.1bn over 10 years. Under a deal agreed with the Treasury in 2013, the MoD's equipment budget gets a 1% annual real-terms increase, but funding for support costs and manpower stays flat.
Permanent secretary Jon Thompson told MPs on the Public Accounts Committee this evening that he was in "a more confident place" than at any time during the Parliament about making the necessary reductions.
"I feel reasonably confident that we can deliver the £4bn," he told PAC chair Margaret Hodge. "I wouldn't have agreed to the spending review in 2013 if we didn't think there was a reasonable prospect."
Chief of defence materiel Bernard Gray said the department had already "booked and... locked in" measures to cut some £2.3bn of the £4.1bn.
"So we have already sentenced that, already agreed it with the frontline commands," he added.
As well as the agreed reductions, Gray said he would "confidently expect" to save about one-third of a further £1bn towards that £4.1bn, based on the work of the ongoing review.
"That leaves us looking for about £800m over the ten-year period," he added. "And importantly the period for which the savings start is at the beginning of the next financial year in a month's time. So before we've even entered a ten-year period we have already either actually actioned or are in the process of actioning three-quarters of the total."
'Cut people or the estate'
Hodge opened the session by praising the MoD for overseeing a "step-change in improvement and performance", contrasting it with a culture of "torn-up pound notes" which she said had previously defined the department.
But the committee chair also pressed the officials on how the MoD would cope if the Treasury sought to undo the 2013 deal, asking whether a less generous settlement could lead the ministry to start "eating into people or the estate".
"You'd have to cut the equipment plan, or the people, or the estate," Gray replied.
And he added: "If the budget did not follow this plan then we would expect the strategy to be redone in a balanced way. So that might mean after efficiency that you would have to balance both people and equipment."